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business
financial statement analysis
Financial Statement Analysis And Valuation 5th Edition Peter D. Easton, Mary Lea McAnally, Gregory A. Sommers - Solutions
Direct Computation of Nonoperating Return Refer to the financial information of Mondelez International Inc. in P3-56 to answer the following requirements.Requireda. Assume that 2015 net nonoperating expenses (NNE) are $638 million and that NOA is $41,628 million and $42,878 million in 2015 and
Analysis and Interpretation of Profitability Balance sheets and income statements for Nordstrom Inc., follow. Refer to these financial statements to answer the requirements.NORDSTROM INC.Consolidated Statements of Earnings For Fiscal Years Ended ($ millions)Jan. 30, 2016 Jan. 31, 2015 Feb. 01, 2014
Use these financials to answer the requirements. For the 2015 fiscal year, Under Armour had a return on net operating assets(RNOA) of 15.17%.a. Compute ROE.b. Compute net nonoperating obligations (NNO).c. Compute FLEV and Spread.d. Show that ROE ???? RNOA 1 (FLEV ???? Spread).e. What is the
Compute ROE and Nonoperating Return Refer to the balance sheets and income statement for Under Armour Inc. in
Use these financial statements to answer the requirements.Requireda. Compute net operating profit after tax (NOPAT) for 2015. Assume that the combined federal and state statutory tax rate is 37%.b. Compute net operating assets (NOA) for 2015 and 2014.c. Compute RNOA and disaggregate it into net
Analysis and Interpretation of Profitability Balance sheets and income statements for Under Armour Inc. are found in
Direct Computation of Nonoperating Return Refer to the financial information of Costco Wholesale Corporation in P3-50 to answer the following requirements.Requireda. Compute Costco’s financial leverage (FLEV), Spread, and noncontrolling interest (NCI) ratio for 2016; recall, NNE ???? NOPAT ????
Analysis and Interpretation of Liquidity and Solvency Refer to the financial information of Costco Wholesale Corporation in P3-50 to answer the following requirements.Requireda. Compute Costco’s current ratio and quick ratio for 2016 and 2015. Comment on any observed trends.b. Compute Costco’s
Analysis and Interpretation of Profitability Balance sheets and income statements for Costco Wholesale Corporation follow.COSTCO WHOLESALE CORPORATION Consolidated Statements of Income For Fiscal Years Ended ($ millions)Aug. 28, 2016 Aug. 30, 2015 Aug. 31, 2014 Revenue Net sales . . . . . . . . . .
Direct Computation of Nonoperating Return Refer to the financial information of 3M Company in P3-46 to answer the following requirements.Requireda. Compute its financial leverage (FLEV), Spread, and noncontrolling interest (NCI) ratio for 2015.Recall that NNE ???? NOPAT ???? Net income.b. Assume
Analysis and Interpretation of Liquidity and Solvency Refer to the financial information of 3M Company in P3-46 to answer the following requirements.Requireda. Compute the current ratio and quick ratio for 2015 and 2014. Comment on any observed trends.b. Compute times interest earned and
Compute the DuPont Disaggregation of ROE Refer to the balance sheets and income statement below for Under Armour Inc.UNDER ARMOUR INC.Consolidated Statements of Income For 12 Months Ended ($ in 000s) Dec. 31, 2015 Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow.3M COMPANY Consolidated Statements of Income For Years Ended Dec. 31 ($ millions) 2015 2014 2013 Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $30,274
Compute NOPAT Using Tax Rates from Tax Footnote The income statement for TJX Companies follows.TJX COMPANIES Consolidated Statements of Income Fiscal Year Ended ($ thousands) January 30, 2016 Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compute and Interpret Solvency Ratios for Business Segments Selected balance sheet and income statement information from General Electric Company and its two principal business segments (Industrial and Financial) for 2015 follows.$ millions Pretax Income Interest Expense Total Liabilities
Compute and Interpret Liquidity and Solvency Ratios Selected balance sheet and income statement information from Verizon Communications Inc. for 2015 and 2014 follows ($ millions).Total Current Assets Total Current Liabilities Income Before Interest and Taxes Interest Expense, Gross Total
Compute and Interpret Liquidity and Solvency Ratios Selected balance sheet and income statement information from Comcast Corporation for 2015 and 2014 follows ($ millions).Total Current Assets Total Current Liabilities Income Before Interest and Taxes Interest Expense Total
a???? Compute return on equity (ROE).b???? Compute return on net assets (ROA).c???? Compute return on net operating assets (RNOA).d???? Compare the three return metrics and explain what each one measures.
Compute and Compare ROE, ROA, and RNOA Refer to the balance sheet and income statement information for Oracle Corporation in
Compute, Disaggregate and Interpret ROE and RNOA Selected balance sheet and income statement information from Macy’s Inc. follows ($ millions). (Perform the required computations from the perspective of Macy’s shareholders.)Company Ticker 2015 Sales 2015 Net Income 2015 Net Operating Profit
Disaggregate Traditional DuPont ROE Selected balance sheet and income statement information for Oracle Corporation follows. (Perform the required computations from the perspective of an Oracle shareholder.)$ millions May 31, 2015 May 31, 2014 Operating assets . . . . . . . . . . . . . . . . . . . .
Compute, Disaggregate, and Interpret RNOA of Competitors Selected balance sheet and income statement information for the clothing retailers Nordstrom Inc. and L Brands Inc. follows.Company ($ millions) Ticker 2015 Sales 2015 NOPAT 2015 Net Operating Assets 2014 Net Operating Assets Nordstrom . . .
Compute, Disaggregate, and Interpret RNOA of Competitors Selected balance sheet and income statement information for the clothing retailers, Abercrombie & Fitch Co. and The GAP Inc. follows.Company ($ millions) Ticker 2015 Sales 2015 NOPAT 2015 Net Operating Assets 2014 Net Operating Assets
Compute and Interpret RNOA, Profit Margin, and Asset Turnover of Competitors Selected balance sheet and income statement information for drug store retailers CVS Health Corp. and Walgreens Boots Alliance follows.Company ($ millions) Ticker 2015 Sales 2015 NOPAT 2015 Net Operating Assets 2014 Net
Compare GAAP and non-GAAP Measures FMC Corporation reports the following non-GAAP information in its 2016 form 10-K. Use this information to answer the requirements.Year Ended December 31 ($ in millions) 2016 2015 Net income attributable to FMC stockholders (GAAP). . . . . . . . . . . . . . . . . .
Compare GAAP and non-GAAP Measures FedEx Corporation reported the following in its 2016 earnings release.Dollars in millions, except EPS Net Income Diluted EPS Non-GAAP measure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,016 $10.80 Mark-to-market pension
Determine Marginal Tax Rate and the Tax on Operating Profit Amgen Inc. reported the following in its tax footnote to its 2016 financial statements. Use this information to answer the requirements.The reconciliations between the federal statutory tax rate applied to income before income taxes and
Compute ROA and adjusted ROA The following information was reported by RR Donnelley & Sons in its form 10-K. Use this information to answer the requirements.$ in millions December 31, 2015 December 31, 2014 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Compute ROA and adjusted ROA CSX Corporation reported the following in its tax footnote to its 2016 financial statements. Use this information to answer the requirements.$ in millions 2016 2015 2014 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compute and Interpret Measures for DuPont Disaggregation Analysis Refer to the 2015 fiscal year financial data of 3M Company from Problem 3-46 to answer the following requirements (perform these computations from the perspective of a 3M shareholder).a. Compute the DuPont model component measures
Compute NOPAT Selected income statement information for 2015 is presented below for Home Depot Inc. and Lowe’s Companies Inc.Company ($ millions) Ticker Net Operating Profit Before Tax Pretax Net Nonoperating Expense Tax Expense Statutory Tax Rate Sales Home Depot . . . . . . . . . . . . . . . HD
Compute and Interpret Liquidity and Solvency Ratios Selected balance sheet and income statement information from Verizon Communications Inc. follows.$ millions 2015 2014 Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,280 $ 29,499 Current
Compute RNOA, Net Operating Profit Margin, and NOA Turnover for Competitors Selected balance sheet and income statement information from Abercrombie & Fitch Co. and TJX Companies Inc. clothing retailers in the high-end and value-priced segments, respectively, follows.Company ($ millions) Ticker
Compute and Interpret Disaggregation of DuPont Analysis Ratios Selected balance sheet and income statement information for Macy’s Inc., a retailer, follows.Company ($ millions) Ticker 2015 Sales 2015 Net Income 2015 Assets 2014 Assets 2015 Stockholders’Equity 2014 Stockholders’Equity Macy’s
Identify and Compute NOPAT Following is the income statement for Lowe’s Companies Inc. Compute its 2016 net operating profit after tax (NOPAT) assuming a 37% total statutory tax rate.LOWE’S COMPANIES INC.CONSOLIDATED STATEMENTS OF EARNINGS Twelve Months Ended (In millions) Jan. 29, 2016 Jan.
Identify and Compute Net Operating Assets Following is the balance sheet for Lowe’s Companies Inc. Identify and compute its 2016 net operating assets (NOA).LOWE’S COMPANIES INC.Consolidated Balance Sheets$ millions, except par value Jan. 29, 2016 Jan. 30, 2015 Current assets Cash and cash
Compute RNOA, Net Operating Profit Margin, and NOA Turnover Selected balance sheet and income statement information for Nordstrom Inc., a department store retailer, follows.Company ($ millions) Ticker 2015 Sales 2015 NOPAT 2015 Net Operating Assets 2014 Net Operating Assets Nordstrom Inc. . . . . .
Compute ROE and RNOA with Disaggregation Refer to the balance sheet and income statement information for Home Depot from M3-18.a. Compute return on equity.b. Compute return on net operating assets (RNOA).c. Use ROE and RNOA to determine the nonoperating return for the year.d. Disaggregate RNOA into
Compute Net Operating Profit after Tax Refer to the income statement information for Home Depot, from M3-18.Compute net operating profit after tax for the year ended January 31, 2016. Assume a statutory tax rate of 37%.
Compute net operating assets for the years ended January 31, 2016 and February 1, 2015.
Compute Net Operating Assets (NOA)Refer to the balance sheet information for Home Depot, from
Apply DuPont Disaggregation of ROE Refer to the balance sheet and income statement information for Home Depot, from M3-18.a. Compute ROE and disaggregate the ratio into its DuPont components of ROA and financial leverage.b. Disaggregate ROA into profitability and productivity components.
Compute ROE Selected balance sheet and income statement information for Home Depot follows. Compute the return on equity for the year ended January 31, 2016.$ millions Jan. 31, 2016 Feb. 01, 2015 Operating assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What insights can be gained from a common-sized income statement or balance sheet?
What is meant by the term cash conversion cycle?
What is the chief difference between the traditional DuPont disaggregation of ROE and the disaggregation based on RNOA?
Define (1) net nonoperating obligations and (2) net nonoperating expense.
Identify at least two factors that limit the usefulness of ratio analysis.
Explain the concept of liquidity and why it is crucial to company survival.
What insights do we gain from the graphical relation between profit margin and asset turnover?
Why is it important to disaggregate RNOA into net operating profit margin (NOPM) and net operating assets turnover (NOAT)?
What is meant by the term “net” in net operating assets (NOA)?
Describe what is meant by the “tax shield.”
Discontinued operations are typically viewed as a nonoperating activity in the analysis of the balance sheet and the income statement. What is the rationale for this treatment?
Explain what it means when a company’s ROE exceeds its RNOA. What about when the reverse occurs?
Describe the concept of asset turnover. What does the concept mean and why is it so important to understanding and interpreting financial performance?
When might a reduction in operating expenses as a percentage of sales denote a short-term gain at the cost of long-term performance?
Gross profit margin (Gross profit/Sales) is an important determinant of NOPAT. Identify two factors that can cause gross profit margin to decline. Is a reduction in the gross profit margin always bad news?Explain.
Explain in general terms the concept of return on investment. Why is this concept important in the analysis of financial performance?Q3-2.A(a) Explain how an increase in financial leverage can increase a company’s ROE. (b) Given the potentially positive relation between financial leverage and
Comparing Income Statements and Balance Sheets of Competitors ADJUSTMENTS 2.1 and 2.3 Following are selected income statement and balance sheet data from two European grocery chain companies:Tesco PLC (UK) and Ahold (the Netherlands).Income Statements For Fiscal Year Ended Tesco February 27,
Analyzing Transactions Using the Financial Statement Effects Template Hanlon Advertising Company began the current month with the following balance sheet.Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,000 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . $ 70,000 Noncash
Analyzing Transactions Using the Financial Statement Effects Template Following are selected transactions of Mogg Company. Record the effects of each using the financial statement effects template.1. Shareholders contribute $10,000 cash to the business in exchange for common stock.2. Employees earn
Preparing Accounting Adjustments BensEx, a mailing service, has just completed its first year of operations on December 31. Its account balances before year-end adjustments follow; no adjusting entries have been made to the accounts at any time during the year. Assume all balances are normal.Cash .
Preparing Accounting Adjustments Pownall Photomake Company, a commercial photography studio, completed its first year of operations on December 31. Account balances before year-end adjustments follow; no adjustments have been made to the accounts at any time during the year. Assume that all
Journalizing and Posting Transactions and Adjustments D. Roulstone opened Roulstone Roofing Service on April 1. Transactions for April follow.Apr. 1 Roulstone contributed $11,500 cash to the business in exchange for common stock.2 Paid $6,100 cash for the purchase of a used truck.2 Purchased $6,200
Comparing Cash Flows Across Retailers Following are selected accounts from the income statement and the statement of cash flows for several retailers, for their fiscal years ended in 2016.$ millions Sales Net Income Cash Flows from Operating Investing Financing Macy’s ???? ???? ???? ???? ????
Comparing Operating Characteristics Across Industries Following are selected income statement and balance sheet data for companies in different industries.$ millions Sales Cost of Goods Sold Gross Profit Net Income Assets Liabilities Stockholders’Equity Target Corp. ???? ???? ???? ???? ???? ????
Gather and Use Additional Information from 10-K Use the SEC website (www.sec.gov/edgar/searchedgar/companysearch.html) to download the 2015 10-K for Facebook Inc., and answer the following questions.a. On what date did Facebook file its 2015 10-K with the SEC? Compare this date to the company’s
Use Additional Information from 10-K to Explain Linkages Among Financial Statements Community Health Systems operates general acute care hospitals in communities across the United States. The company reports the following information in Schedule II of its 2015 10-K.SCHEDULE II—VALUATION AND
Constructing and Analyzing Balance Sheet Amounts from Incomplete Data Selected balance sheet amounts for 3M Company, a manufacturer of consumer and business products, for three recent years follow.$ millions Current Assets Long-Term Assets Total Assets Current Liabilities Long-Term Liabilities
Applying Financial Statement Linkages to Understand Transactions Consider the effects of the independent transactions, a through ????, on a company’s balance sheet, income statement, and statement of cash flow. Complete the table below to explain the effects and financial statement linkages. Use
Comparing Financial Information Across Industries Use the data and computations required in parts a and b of exercises E2-40 and E2-41 to compare TJX Companies and Apple Inc.a. Compare gross profit and net income as a percentage of sales for these two companies. How might differences in their
Comparing Income Statements and Balance Sheets of Competitors Following are selected income statement and balance sheet data for two communications companies, Comcast and Verizon, for the year ended December 31, 2015.Income Statement ($ millions) Comcast Verizon Sales. . . . . . . . . . . . . . . .
Comparing Income Statements and Balance Sheets of Competitors Following are selected income statement and balance sheet data from two computer competitors, Apple and HP Inc., for the fiscal years ended September 26, 2015, and October 31, 2015, respectively.Income Statement ($ millions) Apple HP
Comparing Income Statements and Balance Sheets of Competitors Following are selected income statement and balance sheet data from two retailers, Abercrombie &Fitch (clothing retailer in the high-end market) and TJX Companies (clothing retailer in the value-priced market), for the fiscal year ended
Identifying and Classifying Balance Sheet and Income Statement Accounts Following are selected accounts for Target Corporation, for the fiscal year ended January 30, 2016.a. Indicate whether each account appears on the balance sheet (B) or income statement (I).b. Using the following data, compute
Identifying and Classifying Balance Sheet and Income Statement Accounts Following are selected accounts for Staples Inc. for the fiscal year ended January 30, 2016..a. Indicate whether each account appears on the balance sheet (B) or income statement (I).b. Using the following data, compute total
Constructing Financial Statements from Transaction Data Baiman Corporation commences operations at the beginning of January. It provides its services on credit and bills its customers $40,000 for January sales. Its employees also earn January wages of $12,000 that are not paid until the first of
Constructing Financial Statements from Account Data Barth Company reports the following year-end account balances at December 31, 2016. Prepare the 2016 income statement and the balance sheet as of December 31, 2016.Accounts payable. . . . . . . . . . . . . $ 16,000 Inventory . . . . . . . . . . .
Gather and Use Information from Form 20-F Nippon Telegraph and Telephone Corporation reports the following information in Schedule II of its 2016 Form 20-F. Accounts receivable represents the amount customers owe the company at year-end.The balance in the allowance for doubtful accounts is the
Gather and Use Information from Form 20-F Stock of Credit Suisse Group trades on the New York Stock Exchange as well as in various European stock markets. The company’s Form 20-F reported the following.Requireda. Why would Credit Suisse prepare its financial statements in accordance with U.S.
Analyzing and Reporting Financial Statement Effects of Transactions M. E. Carter launched Carter Company, a professional services firm on March 1. The firm will prepare financial statements at each month-end. In March (its first month), Carter executed the following transactions.Enter the
Preparing Financial Statements and Closing Process Beneish Company has the following account balances at December 31, the end of its fiscal year.Debit Credit Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,000 Accounts receivable. . . .
Inferring Transactions from Financial Statements Costco Wholesale Corporation operates membership warehouses selling food, appliances, consumer electronics, apparel, and other household goods at 721 locations across the United States as well as in Canada, the United Kingdom, Japan, Australia, South
Inferring Transactions from Financial Statements The GAP is a global clothing retailer for men, women, children, and babies. The following information is taken from The Gap’s fiscal 2015 annual report.Selected Balance Sheet Data ($ millions) 2015 2014 Inventories . . . . . . . . . . . . . . . . .
Financial Analysis Using Adjusted Account Data Selected T-account balances for Bloomfield Company are shown below as of January 31, which reflect its accounting adjustments. The firm uses a calendar-year accounting period but prepares monthly accounting adjustments.Supplies Supplies Expense Jan. 31
Computing and Comparing Income and Cash Flow Measures Penno Corporation recorded service revenues of $200,000 in 2017, of which $170,000 were on credit and $30,000 were for cash. Moreover, of the $170,000 credit sales for 2017, Penno collected $20,000 cash on those receivables before year-end 2017.
Inferring Transactions from Financial Statements Lowe’s is the second-largest home improvement retailer in the world, with 1,857 stores. During its 2015 fiscal year ended in January 2016, Lowe’s purchased merchandise inventory at a cost of $39,051($ millions). Assume all purchases were made on
Preparing Closing Journal Entries Selected financial information from General Mills as of May 29, 2016 follows.$ millions Debit Credit Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,563.1 Cost of sales. . . . . . . . . . .
Assessing Financial Statement Effects of Transactions and Adjustments Selected accounts of Portage Properties, a real estate management firm, are shown below as of January 31, before any accounts have been adjusted.Debit Credit Prepaid insurance. . . . . . . . . . . . . . . . . . . . $3,240
Reconciling Retained Earnings Following is financial information from Johnson & Johnson for the year ended January 3, 2016. Prepare the retained earnings reconciliation for Johnson & Johnson for the year ended January 3, 2016 ($millions).Retained earnings, Dec. 28, 2014 . . . . . . $97,245
Determining Missing Information Using the Accounting Equation Use knowledge of accounting relations to complete the following table for Boatsman Company.2016 2017 Beginning retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $189,089 $ ?Net income (loss) . . . . . . . .
Assigning Accounts to Sections of the Balance Sheet Identify each of the following accounts as a component of assets (A), liabilities (L), or equity (E).a. Cash and cash equivalentse. Long-term debtb. Wages payablef. Retained earningsc. Common stock g. Additional paid-in capitald. Equipment h.
Gather and Use Information from Form 8-K On February 5, 2016, Delta Airlines filed a Form 8-K Current Report with the SEC. What important announcement did Delta make that day? Hint: Use the SEC website (www.sec.gov/edgar/searchedgar/companysearch.html) to find the Form 8-K.
Identifying and Classifying Financial Statement Items For each of the following items, indicate whether they would be reported in the balance sheet (B) or income statement (I).a. Machinerye. Common stock i. Taxes expenseb. Supplies expensef. Factory buildings j. Cost of goods soldc. Inventories g.
Identifying and Classifying Financial Statement Items For each of the following items, indicate whether they would be reported in the balance sheet (B) or income statement (I).a. Net incomed. Accumulated depreciation g. Interest expenseb. Retained earningse. Wages expense h. Interest payablec.
Describe the linkage between the income statement and the equity section of the balance sheet. Describe the linkage between the statement of cash flows and the equity section of the balance sheet when a company pays dividends.
Identify three intangible assets that are likely to be excluded from the balance sheet because they cannot be reliably measured. Identify three intangible assets that are recorded on the balance sheet.
Why do companies “close” their books at the end of each accounting period?
Describe the flow of costs for the purchase of a machine. At what point do such costs become expenses?Why is it necessary to record the expenses related to the machine in the same period as the revenues it produces?
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