1. The 2011 financial statements for Leggett & Platt, Inc. report the following information:
|
Year ended December 31,
|
2011
|
2010
|
|
(In millions)
|
|
|
|
Depreciation and amortization expense
|
$ 98.1
|
$ 103.0
|
|
Property and equipment, net
|
580.6
|
624.2
|
|
Land
|
45.2
|
48.5
|
|
Accumulated depreciation and amortization
|
1,193.2
|
1.173.9
|
a. By what percentage are the assets 'used up' at the year-end 2011? What implication does this ratio have for future cash flows at Leggett & Platt?
b. Estimate the useful life on average for the Leggett & Platt depreciable assets.
2. Leggett & Platt, Inc. reported net sales of $3,636.0 million in 2011 and $3,359.1 million in 2010. The asset side of the balance sheet follows, below. Use this information to answer the required.
|
LEGGETT & PLATT, INCORPORATED
|
|
Consolidated Balance Sheets
|
|
December 31
|
2011
|
2010
|
|
(in millions)
|
|
|
|
Cash and cash equivalents
|
$ 236.3
|
$ 244.5
|
|
Accounts and other receivables, net of allowance of $24.3 and $22.1
|
503.6
|
478.9
|
|
|
|
|
|
Finished goods
|
261.3
|
241.1
|
|
Work in process
|
41.5
|
47.7
|
|
Raw materials and supplies
|
223.9
|
218.2
|
|
LIFO reserve
|
(85.7)
|
(71.7)
|
|
Total inventories, net
|
441.0
|
435.3
|
|
|
|
|
|
Other current assets
|
43.1
|
60.4
|
|
Total current assets
|
1,224.0
|
1,219.1
|
|
|
|
|
|
Machinery and equipment
|
1,120.1
|
1,136.6
|
|
Buildings and other
|
608.5
|
613.0
|
|
Land
|
45.2
|
48.5
|
|
Total property, plant and equipment
|
1,773.8
|
1,798.1
|
|
Less accumulated depreciation
|
1,193.2
|
1,173.9
|
|
Net property, plant and equipment
|
580.6
|
624.2
|
|
Goodwill
|
926.6
|
930.3
|
|
Other intangibles, less accumulated amortization of $76.9 and $65.9 at December 31, 2008 and 2007, respectively
|
116.6
|
152.3
|
|
Sundry
|
67.3
|
75.1
|
|
TOTAL ASSETS
|
$2,915.1
|
$3,001.0
|
Required:
a. What is the company's gross amount of receivables at the end of 2011 and 2010?
b. Compute the common-sized gross accounts receivable, for both years. Interpret the year-over-year change in this ratio.
c. Compute the allowance for doubtful accounts to gross accounts receivable, for both years. Interpret the year-over-year change in this ratio.
d. Based on the ratios you calculated, form an opinion about the quality of the company's accounts receivable.
2. Use the following selected balance sheet and income statement data for Mattel Inc. (in $ thousands) to compute:
a. return on equity
b. profit margin (PM)
c. asset turnover (AT)
d. financial leverage (FL) for fiscal 2011. Show that ROE = PM × AT × FL.
|
(in thousands)
|
2011
|
2010
|
|
Net sales
|
$ 6,266,037
|
$ 5,856,195
|
|
Operating income
|
1,041,101
|
901,902
|
|
Interest expense
|
75,332
|
64,839
|
|
Net income
|
768,508
|
684,863
|
|
Total assets
|
5,671,638
|
5,417,733
|
|
Total liabilities
|
3,061,035
|
2,789,149
|
3. Income statements and balance sheets follow for Snap-On Incorporated. Refer to these financial statements to answer the requirements.
|
Snap-On Incorporated
Consolidated Statements of Earnings
|
|
|
|
|
(Amounts in millions)
|
For the fiscal year ended
|
|
|
2011
|
2010
|
|
Net sales
|
$ 2,854.2
|
$ 2,619.2
|
|
Cost of goods sold
|
(1,516.3)
|
(1,408.1)
|
|
Gross profit
|
1,337.9
|
1,211.1
|
|
Operating expenses
|
(953.7)
|
(894.1)
|
|
Operating earnings before financial services
|
384.2
|
317.0
|
|
|
|
|
|
Financial services revenue
|
124.3
|
62.3
|
|
Financial services expenses
|
(51.4)
|
(47.9)
|
|
Operating income from financial services before arbitration settlement
|
72.9
|
14.4
|
|
Arbitration settlement
|
18.0
|
--
|
|
Operating income from financial services
|
90.9
|
14.4
|
|
Operating earnings
|
475.1
|
331.4
|
|
Interest expense
|
(61.2)
|
(54.8)
|
|
Other income (expense) -- net
|
(1.0)
|
0.8
|
|
Earnings before income taxes and equity earnings
|
412.9
|
277.4
|
|
Income tax expense
|
(133.7)
|
(87.6)
|
|
Earnings before equity earnings
|
279.2
|
189.8
|
|
Equity earnings, net of tax
|
4.6
|
3.2
|
|
Net earnings
|
283.8
|
193.0
|
|
Net earnings attributable to noncontrolling interests
|
(7.5)
|
(6.5)
|
|
Net earnings attributable to Snap-on Incorporated
|
$ 276.3
|
$ 186.5
|
|
|
|
|
|
|
Snap-On Incorporated
Consolidated Balance Sheets
|
|
|
Fiscal Year End
|
|
(Amounts in millions)
|
2011
|
2010
|
|
|
|
|
|
Cash and cash equivalents
|
$ 185.6
|
$ 572.2
|
|
Trade and other accounts receivable - net
|
463.5
|
443.3
|
|
Finance receivables - net
|
277.2
|
215.3
|
|
Contract receivables - net
|
49.7
|
45.6
|
|
Inventories - net
|
386.4
|
329.4
|
|
Deferred income tax assets
|
92.6
|
87.0
|
|
Prepaid expenses and other assets
|
75.7
|
72.7
|
|
Total current assets
|
1,530.7
|
1,765.5
|
|
Property and equipment - net
|
352.9
|
344.0
|
|
Deferred income tax assets
|
125.2
|
91.5
|
|
Long-term finance receivables - net
|
431.8
|
345.7
|
|
Long-term contract receivables - net
|
165.1
|
119.3
|
|
Goodwill
|
795.8
|
798.4
|
|
Other intangibles - net
|
188.3
|
192.8
|
|
Other assets
|
83.1
|
72.2
|
|
Total assets
|
$ 3,672.9
|
$ 3,729.4
|
|
|
|
|
|
Notes payable and current maturities of long-term debt
|
$ 16.2
|
$ 216.0
|
|
Accounts payable
|
124.6
|
146.1
|
|
Accrued benefits
|
48.8
|
45.0
|
|
Accrued compensation
|
91.0
|
86.7
|
|
Franchisee deposits
|
47.3
|
40.4
|
|
Other accrued liabilities
|
255.9
|
346.9
|
|
Total current liabilities
|
583.8
|
881.1
|
|
Long-term debt
|
967.9
|
954.8
|
|
Deferred income tax liabilities
|
108.1
|
94.4
|
|
Retiree health care benefits
|
52.8
|
59.6
|
|
Pension liabilities
|
317.7
|
246.1
|
|
Other long-term liabilities
|
95.3
|
89.0
|
|
Total liabilities
|
2,125.6
|
2,325.0
|
|
|
|
|
|
Preferred stock
|
-
|
-
|
|
Common stock
|
67.3
|
67.3
|
|
Additional paid-in capital
|
181.4
|
169.2
|
|
Retained earnings
|
1,843.7
|
1,644.1
|
|
Accumulated other comprehensive income (loss)
|
(174.6)
|
(104.8)
|
|
Treasury stock at cost
|
(386.9)
|
(387.3)
|
|
Total shareholders' equity attributable to Snap-on Inc.
|
1,530.9
|
1,388.5
|
|
Noncontrolling interests
|
16.4
|
15.9
|
|
Total shareholders' equity
|
1,547.3
|
1,404.4
|
|
Total liabilities and shareholders' equity
|
$ 3,672.9
|
$ 3,729.4
|
Required:
a. Compute net operating profit after tax (NOPAT) for 2011 and 2010. Assume that combined federal and state statutory tax rates are 37.7% for fiscal 2011 and 37.5% for fiscal 2010.
b. Compute net operating assets (NOA) for 2011 and 2010.
c. Compute return on net operating assets (RNOA) for 2011 and 2010. Net operating assets are $1,673.0 million in 2009.
d. Disaggregate RNOA into profitability and asset turnover components (NOPM and NOAT, respectively). Remember to include both net sales and financial services revenue in total revenue. What explains the year-over-year change in RNOA?
e.
4. Income statements and balance sheets follow for Microsoft Corporation. Refer to these financial statements to answer the requirements.
|
Microsoft Corporation
Income Statements
|
|
|
Year ended June 30,
|
|
(in millions)
|
2011
|
2010
|
|
Revenue
|
69,943
|
62,484
|
|
Cost of revenue
|
15,577
|
12,395
|
|
Research and development
|
9,043
|
8,714
|
|
Sales and marketing
|
13,940
|
13,214
|
|
General and administrative
|
4,222
|
4,063
|
|
Total operating expenses
|
42,782
|
38,386
|
|
Operating income
|
27,161
|
24,098
|
|
|
|
|
|
Other income
|
910
|
915
|
|
Income before income taxes
|
28,071
|
25,013
|
|
Provision for income taxes
|
4,921
|
6,253
|
|
Net income
|
23,150
|
18,760
|
|
Microsoft Corporation
Balance Sheets
|
|
|
As of June 30,
|
|
($ millions)
|
2011
|
2010
|
|
Cash and cash equivalents
|
$ 9,610
|
$ 5,505
|
|
Short-term investments
|
43,162
|
31,283
|
|
Accounts receivable, net
|
14,987
|
13,014
|
|
Inventories
|
1,372
|
740
|
|
Deferred income taxes
|
2,467
|
2,184
|
|
Other current assets
|
3,320
|
2,950
|
|
Total current assets
|
74,918
|
55,676
|
|
|
|
|
|
Property plant and equipment, net
|
8,162
|
7,630
|
|
Equity and other investments
|
10,865
|
7,754
|
|
Goodwill
|
12,581
|
12,394
|
|
Intangible assets, net
|
744
|
1,158
|
|
Other long-term assets
|
1,434
|
1,501
|
|
Total assets
|
$108,704
|
$86,113
|
|
Microsoft Corporation
Balance Sheets (continued)
|
|
|
As of June 30,
|
|
($ millions)
|
2011
|
2010
|
|
Accounts payable
|
$ 4,197
|
$ 4,025
|
|
Short-term debt
|
0
|
1,000
|
|
Accrued compensation
|
3,575
|
3,283
|
|
Income taxes
|
580
|
1,074
|
|
Short-term unearned revenue
|
15,722
|
13,652
|
|
Securities lending payable
|
1,208
|
182
|
|
Other
|
3,492
|
2,931
|
|
Current liabilities
|
28,774
|
26,147
|
|
Long-term debt
|
11,921
|
4,939
|
|
Long-term unearned revenue
|
1,398
|
1,178
|
|
Deferred income taxes
|
1,456
|
229
|
|
Other long-term liabilities
|
8,072
|
7,445
|
|
Total liabilities
|
51,621
|
39,938
|
|
|
|
|
|
Common stock and paid-in capital
|
63,415
|
62,856
|
|
Retained deficit
|
(6,332)
|
(16,681)
|
|
Total equity
|
57,083
|
46,175
|
|
Total liabilities and equity
|
$108,704
|
$ 86,113
|
|
|
|
|
Required:
a. Compute net nonoperating expenses (NNE) for 2011 and 2010. Assume that combined federal and state statutory tax rates are 35% for both years.
b. Compute net nonoperating obligations (NNO) for 2011 and 2010.
c. Compute Spread for 2011 and 2010. Return on net operating assets (RNOA) is 136.9% and 117.0% in 2011 and 2010, respectively. NNO were $(24,017) million in 2009.
d. Compute FLEV for 2011 and 2010. In 2009, net nonoperating obligations (assets) were $(24,017) million and shareholders' equity was $39,558 million.
e. Calculate return on equity (ROE) for both years. Show that ROE = RNOA + (FLEV × Spread). Interpret the year-over-year change in ROE.)