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Financial Reporting Financial Statement Analysis And Valuation A Strategic Perspective 9th Edition James M. Wahlen, Stephen P. Baginski, Mark Bradshaw - Solutions
Exhibit 5.26 presents risk ratios for Walmart for 2014 and 2013. Exhibits 1.19, 1.20, and 1.21 in Chapter 1 present the financial statements for Walmart.REQUIREDa. Compute the values of each of the ratios in Exhibit 5.26 for Walmart for 2015. Walmart had 3,162 million common shares outstanding at
Microsoft Corporation (Microsoft) and Oracle Corporation (Oracle) engage in the design, manufacture, and sale of computer software. Microsoft sells and licenses a wide range of systems and application software to businesses, computer hardware manufacturers, and consumer retailers. Oracle sells
Nojiri Pharmaceutical Industries develops, manufactures, and markets pharmaceutical products in Japan. The Japanese economy experienced recessionary conditions in recent years. In response to these conditions, the Japanese government increased the proportion of medical costs that is the
Sunbeam Corporation manufactures and sells a variety of small household appliances, including toasters, food processors, and waffle grills. Exhibit 3.21 presents a statement of cash flows for Sunbeam for Year 5, Year 6, and Year 7. After experiencing decreased sales in Year 5, Sunbeam hired Albert
Exhibit 1.18 represents common-size income statements and balance sheets for seven firms that operate at various stages in the value chain for the pharmaceutical industry. These common-size statements express all amounts as a percentage of sales revenue. Exhibit 1.18 also shows the cash flow from
Effective financial statement analysis requires an understanding of a firm€™s economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. Exhibit 1.16 (pages 54€“55) presents common-size condensed
In this chapter, we evaluated shares of common equity in Starbucks using the value-to-book approach, market multiples, and reverse engineering. The Coca-Cola Company competes directly with Starbucks. The data in Chapter 12, Exhibits 12.14 through 12.16, include the actual amounts for 2015 and
The 3M Company is a global diversified technology company active in the following product markets: consumer and office; display and graphics; electronics and communications; health care; industrial; safety, security, and protection services; and transportation. At the consumer level, 3M is probably
Dick's Sporting Goods is a chain of fullline sporting goods retail stores offering a broad assortment of brand name sporting goods equipment, apparel, and footwear. Dick's Sporting Goods had its initial public offering of shares in fiscal 2003. Since then, Dick's Sporting Goods has grown its chain
In Integrative Case 10.1, we projected financial statements for Walmart Stores, Inc. (Walmart), for Years +1 through +5. The data in Chapter 12's Exhibits 12.17, 12.18, and 12.19 include the actual amounts for 2015 and the projected amounts for Year +1 to Year +5 for the income statements, balance
Exhibit 13.6 presents selected hypothetical data from projected financial statements for Steak 'n Shake for Year +1 to Year +11. The amounts for Year +11 reflect a long-term growth assumption of 3%. The cost of equity capital is 9.34%. Assume net income and comprehensive income will be
The Coca-Cola Company is a global soft drink beverage company (ticker: KO) that is a primary and direct competitor with Starbucks. The data in Chapter 12's Exhibits 12.14, 12.15, and 12.16 include the actual amounts for 2013, 2014, and 2015 and projected amounts for Year +1 to Year +6 for the
Refer to the financial statement data for Abercrombie & Fitch in Problem 4.25 in Chapter 4. Exhibit 5.15 presents risk ratios for Abercrombie & Fitch for fiscal Year 3 and Year 4.Data from 4.25Abercrombie & Fitch sells casual apparel and personal care products for men, women, and
Exhibit 5.24 presents balance sheets for Year 2 and Year 3 for Whole Foods Market, Inc.; Exhibit 5.25 presents income statements for Year 1 through Year 3.REQUIREDa. For Year 3, prepare the standard decomposition of ROCE into margin, turnover, and leverage. Use average balances for balance sheet
Exhibit 5.23 presents selected financial data for The Tribune Company and The Washington Post Company for fiscal 2006 and 2007. The Washington Post Company is an education and media company. It owns, among others, Kaplan, Inc.; Cable ONE Inc.; Newsweek magazine; and Washington Post Media. The
Exhibit 5.22 presents selected financial data for ABC Auto and XYZ Comics for fiscal Year 5 and Year 6. ABC Auto manufactures automobile components that it sells to automobile manufacturers. Competitive conditions in the automobile industry in recent years have led automobile manufacturers to put
Exhibit 5.21 presents selected financial data for Best Buy Co., Inc., and Circuit City Stores, Inc., for fiscal 2008 and 2007. Best Buy and Circuit City operate as specialty retailers offering a wide range of consumer electronics, service contracts, product repairs, and home installation.
Sun Microsystems, Inc., develops, manufactures, and sells computers for network systems. Exhibit 5.20 presents selected financial data for Sun Microsystems for each of the five years ending June 30, Year 1, to June 30, Year 5. The company did not go bankrupt, but instead was acquired in Year 6 by
Delta Air Lines, Inc., is one of the largest airlines in the United States. It has operated on the verge of bankruptcy for several years. Exhibit 5.17 presents selected financial data for Delta Air Lines for each of the five years ending December 31, 2000, to December 31, 2004. Delta Air Lines
Exhibit 5.16 presents risk ratios for Coca-Cola for Year 1 through Year 3.REQUIREDa. Assess the changes in the short-term liquidity risk of Coca-Cola between Year 1 and Year 3.b. Assess the changes in the long-term solvency risk of Coca-Cola between Year 1 and Year 3. Exhibit 5.16 Risk Ratios for
Refer to the financial statement data for Hasbro in Problem 4.24 in Chapter 4. Exhibit 5.14 presents risk ratios for Hasbro for Year 2 and Year 3.Problem 4.24Calculating and Interpreting Profitability Ratios. Hasbro is a leading firm in the toy, game, and amusement industry. Its promoted brands
Altman's bankruptcy risk model utilizes the values of the variables at a particular point in time (balance sheet variables) or for a period of time (income statement values). An alternative would be to use changes in balance sheet or income statement amounts. Why might the levels of values in
Starwood Hotels (Starwood) owns and operates many hotel properties under well-known brand names, including Sheraton, W, Westin, and St. Regis. Starwood focuses on the upper end of the lodging industry.Choice Hotels (Choice) is primarily a franchisor of several hotel chains, including Comfort Inn,
Kelly Services (Kelly) places employees at clients' businesses on a temporary basis. It segments its services into (1) commercial, (2) professional and technical, and (3) international. Kelly recognizes revenues for the amount billed to clients. Kelly includes the amount it pays to temporary
Abercrombie & Fitch sells casual apparel and personal care products for men, women, and children through retail stores located primarily in shopping malls. Its fiscal year ends January 31 of each year. Financial statements for Abercrombie & Fitch for fiscal years ending January 31, Year 3,
Hasbro is a leading firm in the toy, game, and amusement industry. Its promoted brands group includes products from Playskool, Tonka, Milton Bradley, Parker Brothers, Tiger, and Wizards of the Coast. Sales of toys and games are highly variable from year to year depending on whether the latest
Selected data for The Hershey Company for Year 1 through Year 3 appear in Exhibit 4.29. REQUIREDa. Compute ROA and its decomposition for Year 2 and Year 3. Assume a tax rate of 35%.b. Compute ROCE and its decomposition for Year 2 and Year 3.c. Interpret the trends in reported net income, EPS,
Selected financial data for Georgia-Pacific Corporation, a forest products and paper firm, appear in Exhibit 4.28. REQUIRED a. In which years did financial leverage work to the advantage of the common shareholders? In which years did it work to their disadvantage? Explain.b. Identify possible
JCPenney operates a chain of retail department stores, selling apparel, shoes, jewelry, and home furnishings. It also offers most of its products through catalog distribution. During fiscal Year 5, it sold Eckerd Drugs, a chain of retail drugstores, and used the cash proceeds, in part, to
Texas Instruments (TI) designs and manufactures semiconductor products for use in computers, telecommunications equipment, automobiles, and other electronics-based products. The manufacturing of semiconductors is highly capital-intensive. Hewlett-Packard Corporation (HP) manufactures computer
Nucor and AK Steel are steel manufacturers. Nucor produces steel in mini-mills. Mini-mills transform scrap ferrous metals into standard sizes of rolled steel, which Nucor then sells to steel service centers and distributors. Its steel falls on the lower end in terms of quality (strength and
Dell produces computers and related equipment on a made-to-order basis for consumers and businesses. Sun Microsystems designs and manufactures higher-end computers that function as servers and for use in computer-aided design. Sun Microsystems sells primarily to businesses. It also provides
Exhibit 4.22 presents selected operating data for three retailers for a recent year. Macy??s operates several department store chains selling consumer products such as brand-name clothing, china, cosmetics, and bedding and has a large presence in the bridal and formalwear markets (under store names
Firms often provide supplemental disclosures that report and discuss income figures that do not necessarily equal bottom-line net income from the income statement. For example, in Twitter’s initial public offering filings with the SEC, the company reported a net loss of $79.4 million, but
BTB Electronics Inc. manufactures parts, components, and processing equipment for electronics and semiconductor applications in the communications, computer, automotive, and appliance industries. Its sales tend to vary with changes in the business cycle because the sales of most of its customers
Flight Training Corporation is a privately held firm that provides fighter pilot training under contracts with the U.S. Air Force and the U.S. Navy. The firm owns approximately 100 Lear jets that it equips with radar jammers and other sophisticated electronic devices to mimic enemy aircraft. The
iRobot designs and manufactures robots for consumer, commercial, and military use. For the fiscal year ended January 2, 2016, the company reported the following on its balance sheet and income statement (amounts in thousands):Accounts receivable, net of allowance of $33 at January 2, 2016, and $67
Exhibit 3.25 presents common-size statements of cash flows for eight firms in various industries. All amounts in the common-size statements of cash flows are expressed as a percentage of cash flow from operations. In constructing the common-size percentages for each firm, reported amounts for each
Aer Lingus is an international airline based in Ireland. Exhibit 3.24 provides the statement of cash flows for Year 1 and Year 2, which includes a footnote from the financial statements. Year 2 was characterized by weakening consumer demand for air travel due to a recession and record-high fuel
The Apollo Group is one of the largest providers of private education and runs numerous programs and services, including the University of Phoenix. Exhibit 3.23 provides statements of cash flows for 2010 through 2012.Exhibit 3.23REQUIREDDiscuss the relations between net income and cash flow from
Montgomery Ward operates a retail department store chain. It filed for bankruptcy during the first quarter of Year 12. Exhibit 3.22 presents a statement of cash flows for Montgomery Ward for Year 7 to Year 11.The firm acquired Lechmere, a discount retailer of sporting goods and electronic products,
Sirius XM Radio Inc. is a satellite radio company, formed from the merger of Sirius and XM in 2008. Exhibit 3.20 presents a statement of cash flows for Sirius XM Radio for 2006, 2007, and 2008. Sirius XM and its predecessor, Sirius, realized revenue growth of 49% in 2007 and 81% in 2008. The merger
Gap Inc. operates chains of retail clothing stores under the names of Gap, Banana Republic, and Old Navy. Exhibit 3.19 presents the statement of cash flows for Gap for Year 0 to Year 4.REQUIREDDiscuss the relations between net income and cash flow from operations and among cash flows from
‘‘The ordering of the three sections of the statement of cash flows is ‘backwards’ for start-up firms, but it is more appropriate for businesses once they are up and running.’’ Explain.
Tesla Motors manufactures high-performance electric vehicles that are extremely slick looking. Exhibit 3.18 presents the statement of cash flows for Tesla Motors for 2010 through 2012.REQUIREDDiscuss the relations among net income, cash flows from operations, cash flows from investing activities,
The chapter demonstrates how to prepare a statement of cash flows from information on the balance sheet and income statement. If this is possible, why are managers required to provide a statement of cash flows?
Prime Contractors (Prime) is a privately owned company that contracts with the U.S. government to provide various services under multiyear (usually five-year) contracts. Its principal services are as follows:Refuse: Picks up and disposes of refuse from military bases.Shuttle: Provides parking and
Exhibit 3.32 presents a statement of cash flows for Walmart for fiscal 2015, 2014, and 2013. This statement matches the Walmart statement of cash flows in Appendix A, and is an expanded version of the statement of cash flows for Walmart shown in Exhibit 1.21.REQUIREDa. Explain why depreciation and
Exhibits 1.19€“1.21 of Integrative Case 1.1 (Chapter 1) present the financial statements for Walmart for 2012€“2015. In addition, the website for this text contains Walmart€™s December 31, 2015, Form 10-K. Use this information, especially Note 9,
Rock of Ages, Inc., a large North American integrated granite quarrier, manufacturer, and retailer of finished granite memorials, reported a net loss for 2004 of $3.2 million. In 2004, the firm reported a pretax litigation settlement loss of $6.5 million, and management stated that, in its opinion,
Exhibit 6.18 presents selected financial statement data for Enron Corporation as originally reported for 1997, 1998, 1999, and 2000. In 2001, Enron restated its financial statements for earlier years because it reported several items beyond the limits of U.S. GAAP. REQUIREDa. Use Beneish??s
Prior to Year 8, Cooper Corporation engaged in a wide variety of industries, including weapons manufacturing under government contracts, information technologies, commercial aircraft manufacturing, missile systems, coal mining, material service, ship management, and ship financing. During Year 8,
A sales-based ranking of software companies provided by Yahoo! Finance on November 5, 2008, places Oracle Corporation third behind sales leaders Microsoft Corporation and IBM Software. Typical of high-tech companies in the software industry, Oracle Corporation uses share-based compensation plans
New lease standards become effective January 1, 2019. These standards affect the accounting for operating leases. Assume Swift Company acquires a machine with a fair value of $100,000 on January 1 of Year 1 by signing a five-year lease. Swift must make payments of $16,275 each December 31. The
Financial reporting classifies derivatives as (a) speculative investments, (b) fair value hedges, or (c) cash flow hedges. However, firms revalue all derivatives to market value each period regardless of the firm's reason for acquiring the derivatives. In addition to increasing or decreasing the
Ford Motor Credit Company discloses the following information with respect to finance receivables (amounts inmillions).Notes to Financial StatementsThe Company periodically sells finance receivables in securitization transactions to fund operations and to maintain liquidity. The securitization
It is common practice for retail outlets to lease their store locations and distribution centers. Walmart is no exception. Note 11 to Walmart's consolidated financial statements for the fiscal year ending January 31, 2016 (found online at the text website or available for download in the investor
Exhibit 7.17 includes a footnote excerpt from the annual report of The Coca-Cola Company for 2004. The beverage company offers stock options to key employees under plans approved by stockholders. REQUIRED Review Exhibit 7.17 and answer the following questions.a. Coca-Cola reports both pretax and
Exhibits 7.17 and 7.18 provide footnote excerpts to the financial reports of The Coca-Cola Company and Eli Lilly and Company that discuss the stock option grants given to the employees of the two firms. Each firm uses options extensively to reward employees for their performance.Exhibit 7.17The
Walmart makes significant investments in operating capacity, primarily via investments in property, plant, and equipment, but also via investments in wholly and partially owned subsidiaries. Walmart also has significant non-U.S. operations in its Walmart International segment. The Chapter 8 online
In August 2009, The Walt Disney Company announced that it would acquire Marvel Entertainment, Inc., in a $4 billion cash and common stock deal. On a per-share basis, the consideration given by Disney to Marvel shareholders represents a 29% premium over Marvel's share price at the date of
Choosing the functional currency is a key decision for translating the financial statements of foreign entities of U.S. firms into U.S. dollars. Qing Corporation, a U.S. firm that sells car batteries, formed a wholly owned subsidiary in Mexico to manufacture components needed in the production of
On December 31, 2017, Pace Co. paid $3,000,000 to Sanders Corp. shareholders to acquire 100% of the net assets of Sanders Corp. Pace Co. also agreed to pay former Sanders shareholders$200,000 in cash if certain earnings projections were achieved over the next two years. Based on probabilities of
Stebbins Corporation established a wholly owned Canadian subsidiary on January 1, Year 1, by contributing US$500,000 for all of the subsidiary's common stock. The exchange rate on that date was C$1:US$0.90 (that is, one Canadian dollar equaled 90 U.S. cents). The Canadian subsidiary invested
’Exhibits 1.26-1.28 of Integrative Case 1.1 present the financial statements for Walmart for 2012-2015. In addition, the website for this text contains Walmart's December 31, 2015, Form 10-K. You should read the management discussion and analysis (MD&A), financial statements, and notes
Bookman Co. develops digital accounting systems and provides accounting-related consulting services.a. On January 1, 2017, Bookman signs a contract with Brock Florists to install a system and provide consulting services over a two-year period ending in late December 2018. The contract calls for an
HeavyEQ produces large conveyor belt systems for heavy manufacturing. HeavyEQ signs a $2 million fixed-price contract under which it makes three promises:Install a conveyor belt system: fair value $1.6 millionService the system over a five-year period: fair value $0.6 millionProvide a warranty
On January 1, 2017, assume that Turner Construction Company agreed to construct an observatory for Dartmouth College for $120 million. Dartmouth College must pay $60 million upon signing and $30 million in 2018 and 2019. Expected construction costs are $10 million for 2017, $60 million for 2018,
The following information relates to a firm's pension plan.Prior service cost due to 2017 amendment .................................. $ 60,000PBO, January 1, 2017 ...................................................................... 1,000,000FMV, January 1, 2017
Since the early 1990s, woodstove sales have declined from 1,200,000 units per year to approximately 100,000 units per year. The decline has occurred because of (1) stringent new federal EPA regulations, which set maximum limits on stove emissions beginning in 1992; (2) stable energy prices, which
The Home Depot is a leading specialty retailer of hardware and home improvement products and is the second-largest retail store chain in the United States. It operates large warehouse-style stores. In 2014 and 2015, The Home Depot invested in five new stores. The following table provides summary
Sony Corporation manufactures and markets consumer electronics products. Assume the following are selected income statement data for 2014 and 2015 (amounts in billions of yen): REQUIREDa. Estimate the variable cost as a percentage of sales for the cost of goods sold by dividing the amount of the
Hasbro designs, manufactures, and markets toys and games for children and adults in the United States and in international markets. Hasbro's portfolio of brands and products contains some of the most well-known toys and games under famous brands such as Playskool, Tonka Trucks, Milton Bradley, and
Barnes & Noble sells books, magazines, music, and videos through retail stores and online. For a retailer like Barnes & Noble, inventory is a critical element of the business, and it is necessary to carry a wide array of titles. Inventories constitute the largest asset on Barnes &
Integrative Case 10.1 involves projecting financial statements for Walmart for Years +1 through +5. The following data for Walmart include the actual amounts for 2015 and the projected amounts for Years +1 through +5 for comprehensive income and common shareholders' equity, assuming it will use
Assume Southern Copper Corporation (SCCO) acquired mining equipment for $100,000 cash on January 1, 2016. The equipment had an expected useful life of four years and zero salvage value. SCCO calculates depreciation using the straight-line method over the remaining expected useful life in all cases.
Refer to Problem 2.12. Assume that Walmart has accounted for the value of the land at acquisition cost and sells the land on December 31, 2018,for a two-year note receivable with a present value of $180,000 instead of for cash.Data from 2.12Assume Walmart acquires a tract of land on January 1,
Assume Boeing sold a 767 aircraft to American Airlines on January 1, 2016. The sales agreement required American Airlines to pay $10 million immediately and $10 million on December 31 of each year for 20 years, beginning on December 31, 2016. Boeing and American Airlines judge that 8% is an
Nike, Inc.€™s principal business activity involves the design, development, and worldwide marketing of athletic footwear, apparel, equipment, accessories, and services for serious and recreational athletes. Nike boasts that it is the largest seller of athletic footwear and apparel in the
The first case at the end of this chapter and numerous subsequent chapters is a series of integrative cases involving Wal-Mart Stores, Inc. (Walmart). The series of cases applies the concepts and analytical tools discussed in each chapter to Walmart€™s financial statements and notes. The
Effective financial statement analysis requires an understanding of a firm’s economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. Exhibit 1.15 (pages 52–53) presents common-size condensed balance sheets and
Use the following hypothetical data for Walgreens in 2014 and 2015 to project revenues, cost of goods sold, and inventory for Year +1. Assume that Walgreens's Year +1 revenue growth rate, gross profit margin growth rate, and inventory turnover will be identical to 2015. Project the average
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