Assignment - Income Statement, Cash Flow Statement & Financial Statement Analysis
Problem 1 - Below is the account information for Stanley Black and Decker for the year ended December 28, 2013. ($ millions)
|
Cost of goods sold
|
$7,068.3
|
|
Sales
|
11,001.2
|
|
Other operating expenses
|
497.8
|
|
Selling, general and administrative expenses
|
2,700.9
|
|
Income tax expense
|
69.3
|
|
Interest and other nonoperating expenses, net
|
147.6
|
|
Net (loss) earnings from discontinued operations
|
(28.0)
|
|
Net (loss) attributable to noncontrolling interests
|
(1.0)
|
Required: Using the information above, prepare Black and Decker's Income Statement for the year ending December 28, 2013. Also, using that Income Statement, compute the company's (a) gross profit margin and (b) net profit margin. If the industry average gross margin is 38% and the industry average profit margin is 5.8%, discuss Black and Decker's ratios compared to the related industry averages.
Problem 2 - The partial balance sheets and income statements for Proctor & Gamble for fiscal years ending June 30, 2012 and 2011 follow:
|
Amounts in millions
|
2012
|
2011
|
|
Current assets
|
|
|
|
Cash and cash equivalents
|
$ 4,436
|
$ 2,768
|
|
Accounts receivable
|
6,068
|
6,275
|
|
Inventories
|
6,721
|
7,379
|
|
Deferred income taxes
|
1,001
|
1,140
|
|
Prepaid expenses and other current assets
|
3,684
|
4,408
|
|
Total current assets
|
21,910
|
21,970
|
|
|
|
|
Property, plant and equipment
|
40,233
|
41,507
|
|
Accumulated depreciation
|
(19,856)
|
(20,214)
|
|
Net property, plant and equipment
|
20,377
|
21,293
|
|
Goodwill and other intangible assets
|
4,761
|
90,182
|
|
Other noncurrent assets
|
5,196
|
4,909
|
|
Total assets
|
$132,244
|
$138,354
|
|
Amounts in millions Years ended June 30,
|
2012
|
2011
|
2010
|
|
Net sales
|
$83,680
|
$81,104
|
$77,567
|
|
Cost of products sold
|
42,391
|
39,859
|
37,042
|
|
Selling, general and administrative expense
|
26,421
|
25,750
|
24,793
|
|
Goodwill and indefinite lived intangible asset impairment charges
|
1,576
|
0
|
0
|
|
Operating income
|
13,292
|
15,495
|
15,732
|
|
|
|
|
|
Interest expense
|
769
|
831
|
946
|
|
Other non-operating income, net
|
262
|
333
|
82
|
|
Earnings from continuing operations before income taxes
|
12,785
|
14,997
|
14,868
|
|
|
|
|
|
Income taxes on continuing operations
|
3,468
|
3,299
|
4,017
|
|
Net earnings from continuing operations
|
9,317
|
11,698
|
10,851
|
|
Net earnings from discontinued operations
|
1,587
|
229
|
1,995
|
|
Net earnings
|
$10,904
|
$11, 927
|
$12,846
|
Required:
A. Calculate accounts receivable turnover (ART) for 2012 and 2011. Accounts receivable in 2010 totaled $5,335 million. Has ART improved during the year or worsened?
B. Calculate inventory turnover (INVT) for 2012 and 2011. Inventories in 2010 were $6,384 million. Has INVT improved during the year or worsened?
C. Calculate asset turnover (AT) for 2012 and 2011 considering that 2010 total assets are $128,172 million. Has AT improved during the year or worsened?
Problem 3 - The following information relates to Angela Company for 2013, in which the company reported a $132,000 net income.
|
Sales
|
$1,080,000
|
|
Cost of goods sold
|
632,000
|
|
Operating expenses and income taxes (other than depreciation and amortization)
|
176,000
|
|
Depreciation of plant assets
|
32,000
|
|
Amortization of intangible assets
|
16,000
|
|
Increase in accounts receivable
|
24,000
|
|
Decrease in inventory
|
22,000
|
|
Increase in accounts payable
|
12,000
|
|
Decrease in accrued liabilities
|
6,000
|
|
Increase in common stock
|
68,000
|
Required: Calculate the 2013 net cash flow from operating activities using the indirect method.
Problem 4 - Selected 20x1 balance sheet and income statement information for two manufacturing companies: Cummins, Inc. and Hewlett-Packard Corporation follows:
|
Cummins (in $ millions)
|
Hewlett-Packard (in $ millions)
|
|
Cash
|
$1,369
|
$11,301
|
|
Marketable securities
|
247
|
0
|
|
Accounts receivable
|
2,235
|
16,407
|
|
All other current assets
|
3,316
|
22,929
|
|
Total current liabilities
|
3,136
|
46,666
|
|
Total liabilities
|
5,574
|
85,935
|
|
Total equity
|
6,974
|
22,833
|
|
Pre-tax income (loss)
|
2,271
|
(11,933)
|
|
Interest expense
|
32
|
876
|
Required
a. Calculate the current ratio and quick ratios for both companies.
b. Which company is more liquid?
c. Calculate the times interest earned and debt-to-equity ratios for both companies.
d. Which company is more solvent?