Question

INSTRUCTIONS: I HAVE ALREADY ANSWERED QUESTION 1 AND 2. I NEED ASSISTANCE WITH QUESTIONS 3 AND 4. I HAVE FILLED OUT THE PERCENTAGE CHANGE FOR QUESTION 3, AND NEED HELP ON CALCULATING THE OPERATING, INVESTING, AND FINANCIAL SECTIONS. AS WELL AS, THE EQUATIONS FOR QUESTION 4. IF YOU CAN ANSWER QUESTIONS 3 & 4 I WILL AWARD CREDIT.

Question 1: Common size for income statement

Income Statement (Common Size) :

                                                                 Consolidated Income Statement

	2011	%	2010	%
Revenue	$19,176.1		$18,627.0	100
Cost of sales	( 10,571.7)	10571.7 / 19176.1 x 100 = 55.13%	( 10,239.6 )	54.97
Gross Profit	8,604.4	8604.4 / 19176.10 = 44.87%	8,387.4	45.03
Selling and administrative expenses	(   6,149.6)	6149.6 / 19176.1 = 32.07%	( 5,953.7)	0.00
Restructuring charges	(      195.0)	195 / 19176.1 = 1.017%	0.0	31.96
Goodwill impairment	(      199.3)	199.3 / 19176.1 = 1.04%	0.0	0.00
Intangible and other asset impairment	(     202.0)	202 / 19176.1 = 1.053%	0.0	0.00
Other income (expenses)	88.5	88.5 / 19176.1 = 0.46%	( 7.9 )	0.04
Operating Income	$ 1,947.0	1,947 / 19176.1 = 10.15%	$ 2,425.8	13.02
Interest and other income	49.7	49.7 / 19176.1 = 0.26%	115.8	0.62
Interest expense	(      40.2)	40.2 / 19176.1 = 0.21%	( 38.7)	0.21
Income before income taxes	$ 1,956.5	1,956.5 / 19176.1 = 10.20%	$ 2,502.9	13.44
Provision for income taxes	(     469.8)	469.8 / 19176.1 = 2.45%	( 619.8)	3.33
Net Income	$ 1,486.7	1486.7 / 19176.1 = 7.75%	$ 1,883.4	10.11

Gross margin Ratio: measures the gross profit margin on total net sales made by the company. Gross profit sales- cost of goods sold. The ratio measures the efficiency of the company’s operations. When everything is normal the gross margin ratio should reaming unchanged irrespective of the level of production of sales. An increase or decrease in the ratio could be due to the increase/decrease in selling price per unit or decrease/increase in direct variable cost per unit. The ratio for the company has reduced to 44.87% in 2011 from 45.03 in 2010 due to which the net income is lower in current year in spite of increase in revenue.

Operating income has reduced to 10.15 in 2015 from 13.02% in 2010 due to new expenditure on account of restricting charges and impairment expenses. This has also led to the decrease in net income percentage to 7.755% in 2011 from 10.11% in 2010.

Question 2: Comparative Analysis for balance sheet:

	2011	2010	Difference	% changed
ASSETS:
Current Assets
Cash and equivalents	$ 2,291.1	$ 2,133.9	157.2	7
Short-term investments	1,164.2	642.2	522	81
Account receivable	2,883.9	2,795.3	-88.6	-3
Inventory	2,357.0	2,438.4	81.4	3
Prepaid expenses and other assets	765.6	602.3	163.3	27
Deferred income taxes, net	272.4	227.2	45.2	20
Total Current Assets	$ 9,734.0	$ 8,839.3		0
Property and equipment, gross	4,255.7	4,103.0	152.7	4
Accumulated depreciation	(2,221.9)	(2,298.0)	76.1	-3
Property and equipment, net	$ 1,957.7	$ 1,891.1	66.6	4
Identifiable intangible assets	467.4	743.1	-275.7	-37
Good will	193.5	448.8	255.3	57
Deferred income taxes and other assets	897.0	520.4	376.6	72
Total Assets	$13,249.6	$12,442.7	806.9	6
Liabilities and Stockholders’ Equity
Current Liability :
Current portion of long-term debt	$        32.0	$          6.3	25.7	408
Note Payable	342.9	177.7	165.2	93
Account Payable	1,031.9	1,287.6	-255.7	-20
Accrued liabilities	1,783.9	1,761.9	22	1
Income taxes payable	86.3	88.0	-1.7	-2
Total Current Liabilities	$   3,277.0	$    3,321.5		0
Long term debt	437.2	441.1	-3.9	-1
Deferred taxes and other long-term liabilities	842.0	854.5	-12.5	-1
Total Liabilities	$ 4,556.2	$ 4,617.1		0
Redeemable preferred stock	$         0.3	$         0.3	0	0
Common Shareholders’ Equity
Common stock	2.8	2.8	0	0
Capital in excess of stated value	$ 2,781.4	$ 2,497.8	-283.6	11
Retained earnings	5,451.4	5,073.3	378.1	7
Accumulated other comprehensive income	367.5	251.4	116.1	46
Total Common Shareholders’ Equity	$ 8,693.1	$ 7,825.3	867.8	11
Total Liabilities and Shareholders’ Equity	$13,249.6	$12,442.7	806.9	6

Question 3 : Please create a statement of cash flow with indirect method

Statement of Cash Flow with Indirect method

	2011	2010	Difference	Operating	Investing	Financing
ASSETS:
Current Assets
Cash and equivalents	$ 2,291.1	$ 2,133.9	157.2
Short-term investments	1,164.2	642.2	522
Account receivable	2,883.9	2,795.3	-88.6
Inventory	2,357.0	2,438.4	81.4
Prepaid expenses and other assets	765.6	602.3	163.3
Deferred income taxes, net	272.4	227.2	45.2
Total Current Assets	$ 9,734.0	$ 8,839.3
Property and equipment, gross	4,255.7	4,103.0	152.7
Accumulated depreciation	(2,221.9)	(2,298.0)	76.1
Property and equipment, net	$ 1,957.7	$ 1,891.1	66.6
Identifiable intangible assets	467.4	743.1	-275.7
Good will	193.5	448.8	255.3
Deferred income taxes and other assets	897.0	520.4	376.6
Total Assets	$13,249.6	$12,442.7	806.9
Liabilities and Stockholders’ Equity
Current Liability :
Current portion of long-term debt	$       32.0	$          6.3	25.7
Note Payable	342.9	177.7	165.2
Account Payable	1,031.9	1,287.6	-255.7
Accrued liabilities	1,783.9	1,761.9	22
Income taxes payable	86.3	88.0	-1.7
Total Current Liabilities	$   3,277.0	$ 3,321.5
Long term debt	437.2	441.1	-3.9
Deferred taxes and other long-term liabilities	842.0	854.5	-12.5
Total Liabilities	$ 4,556.2	$ 4,617.1
Redeemable preferred stock	$         0.3	$         0.3	0
Common Shareholders’ Equity
Common stock	2.8	2.8	0
Capital in excess of stated value	$ 2,781.4	$ 2,497.8	-283.6
Retained earnings	5,451.4	5,073.3	378.1
Accumulated other comprehensive income	367.5	251.4	116.1
Total Common Shareholders’ Equity	$ 8,693.1	$ 7,825.3	867.8
Total Liabilities and Shareholders’ Equity	$13,249.6	$12,442.7	806.9

Answer:

Net income for 2011 is $ 1,486.7 since the Intangible and other asset impairment was negative it decreased the Net Income from $1,486.7 to $1,284.70

CASH FLOW FROM OPERATING ACTIVITIES:
Net Income 2011 $ 1,486.7
+ Depreciation, Amortization or Depletion (202.00)
+Accounts Receivable -88.6

+Inventory Decrease 81.4

Prepaid Expense increase 163.3

Accounts Payable Decrease -255.7

Income Tax payable decrease 1.7

CASH FLOW FROM INVESTING ACTIVITIES:
+ sell Long-term assets for cash
- buy (construct) Long-term assets for cash
= Cash Flow from Investing Activities

CASH FLOW FROM FINANCING ACTIVITIES:
+ Stock issued for cash
+ Cash borrowed with loans and bonds
- Treasury stock repurchased for cash
- Cash used to repay loans and bonds
- Cash dividends paid
=Cash Flow from Financing Activities

Total Cash Flow (Operating, Investing, Financing)
+ Beginning Cash
= Ending Cash

Question 4:

Ration Analysis:

Return on Asset

Debt to assets ratio

Profit margin

Account receivable turnover & accounting receivable turnover

Inventory turnover & days of inventory turnover

Answer 1

Question 3:

CASH FLOW FROM OPERATING ACTIVITIES:
Net Income 2011 $ 1,486.7
+ Depreciation, Amortization or Depletion (202.00)
+Accounts Receivable (-88.6)

+Inventory Decrease 81.4

Prepaid Expense increase 163.3

Accounts Payable Decrease -255.7

Income Tax payable decrease 1.7=1590.8

CASH FLOW FROM INVESTING ACTIVITIES:
+ sell Long-term assets for cash
- buy (construct) Long-term assets for cash
= Cash Flow from Investing Activities=(66.7)

CASH FLOW FROM FINANCING ACTIVITIES:
+ Stock issued for cash
+ Cash borrowed with loans and bonds
- Treasury stock repurchased for cash
- Cash used to repay loans and bonds
- Cash dividends paid
=Cash Flow from Financing Activities=49.7-40.2=9.5

Net cash flow=1533.6

Question 4:

Ratio Analysis:

Return on Asset-It is a financial ratio that shows the percentage of profit a company earns in relation to its overall resources. It is commonly defined as net income divided by total assets.

Return on assets=Net Income/Total assests= 1486.7/13,249.6=.11 or 11%

Debt to assets ratio- It is an indicator of financial leverage. It tells you the percentage of total assets that were financed by creditors, liabilities, debt. The debt to total assets ratio is calculated by dividing a corporation's total liabilities by its total assets.

Debt to assets ratio=Total liabilities/Total assets= 4,556.2/13249.6=.3438 or 34.38%

Profit margin-Profit margin is a profitability ratio calculated as net income divided by revenue, or net profits divided by sales

Profit margin= Net income/Revenue=1486.7/19,176.1= .0775 or 7.75%

Account receivable turnover & accounting receivable turnover-Accounts receivable turnover is the number of times per year that a business collects its average accounts receivable. The ratio is intended to evaluate the ability of a company to efficiently issue credit to its customers and collect funds from them in a timely manner.

Formula:Net Annual Credit Sales ÷ ((Beginning Accounts Receivable + Ending Accounts Receivable) / 2)

=10571.7 /((2795.3+2,883.9))/2= 3.722

Inventory turnover & days of inventory turnover-Inventory turnover is a ratio showing how many times a company's inventory is sold and replaced over a period of time.

Cost of Goods Sold ÷ Average Inventory Or Sales ÷ Inventory

=10571.7/2357=4.485