1) Comparative Analysis Case
The Coca-Cola Company and Pepsi Co.
Intructions:
Go to the book's companion's website and use information found there to answer the following questions related to The Coca-Cola Company and Pepsi Co.
a) How much working capital do each of these companies have at the end of 2011?
b) Compute each company's (a) current cash debt coverage, (b) cash debt coverage, (c) current ratio, (d) acid-test ratio, (e) accounts receivable turnover for 2011. Comment on each company's overall liquidity.
c) In Pepsi Co's financial statements, it reports in the long-term debt section "short-term borrowings, reclassified". How can short-term
borrowings be classified as long-term debt?
d) What type of loss or gain contingencies do these two companies have at the end of 2011?
2) Financial Statement Analysis Cases
Case 1 Kellogg Company
Kellogg Company is the world's leading producer of ready-to-eat cereal products. In recent years, the company has taken numerous steps aimed at improving its profitability and earnings per share. Presented below are some basic facts for Kellogg.
Instructions:
a) What are some of the reasons that management purchases its own stock?
b) Explain how earnings per share might be affected by treasury stock transactions
c) Calculate the ratio of debt to assets for 2010 and 2011, and discuss the implications of change.
3) Accounting, Analysis, and Principles
On January 1, 2014, Agassi Corporation had the following stockholder's equity accounts.
Common stock ($10 par value, 60,000 shares issued and outstanding) ___ $600,000
Paid-in-capital in excess of par - common stock _____________________ $500,000
Retained earnings _____________________________________________ $620,000
During 2014, the following transactions occurred.
Jan 15 - Declared and paid a $1.05 cash dividend per share to stockholders.
Apr 15 - Declared and paid a 10% stock dividend. The market price of the stock was $14 per share.
May 15 - Reacquired 2,000 common shares at a market price of $15 per share
Nov 15 - Reissued 1,000 shares held in treasury at a price of $18 per share.
Dec 31 - Determined that net income for the year was $370,000.
Accounting: Journalize the above transactions. (Include entries to close net income to Retained earnings.) Determine the ending balances for Paid-in-capital, Retained earnings, and stockholders' equity.
Analysis: Calculate the payout ratio and return on common stock equity.
Principles: R. Federer is examining Agassi's financial statements and wonders whether the "gains" or "losses" on Agassi's treasury stock transactions should be included in income for the year. Briefly explain whether, and the conceptual reasons why, gains or losses on treasury stock transactions should be recorded in income.