In: Finance
Question text
Analyzing, Forecasting, and Interpreting Both Income Statement
and Balance Sheet
Following are the income statements and balance sheets of Macy's,
Inc.
Consolidated Statement of Income Fiscal Years Ended ($ millions) |
February 2, 2013 |
January 28, 2012 |
January 29, 2011 |
---|---|---|---|
Net sales | $ 27,686 | $ 26,405 | $ 25,003 |
Cost of goods sold | 16,538 | 15,738 | 14,824 |
Gross margin | 11,148 | 10,667 | 10,179 |
Selling, general and administrative expenses | 8,482 | 8,281 | 8,260 |
Impairments, store closing costs and (gain) on sale of leases | 5 | (25) | 25 |
Operating income | 2,661 | 2,411 | 1,894 |
Interest Expense | 425 | 447 | 513 |
Premuim on early retirement debt | 137 | -- | 66 |
Interest income | 3 | 4 | 5 |
Income before income taxes | 2,102 | 1,968 | 1,320 |
Federal, state and local income tax expense | 767 | 712 | 473 |
Net Income | $ 1,335 | $ 1,256 | $ 847 |
Consolidated Balance Sheets ($ millions) |
Feb. 2, 2013 | Jan. 28, 2012 |
---|---|---|
Assets | ||
Current Assets | ||
Cash and cash equivalents | $ 1,836 | $ 2,827 |
Receivables | 371 | 368 |
Merchandise inventories | 5,308 | 5,117 |
Prepaid expenses and other current assets | 361 | 465 |
Total current assets | 7,876 | 8,777 |
Property and equipment--net accumulative depreciation 5,947 and 5,986 | 8,196 | 8,420 |
Goodwill | 3,743 | 3,743 |
Other intangible assets--net | 561 | 598 |
Other assets | 615 | 557 |
Total assets | $ 20,991 | $ 22,095 |
Liabilities and Shareholders Equity | ||
Current Liabilities | ||
Short-term debt | $ 124 | $ 1,103 |
Merchandise accounts payable | 1,579 | 1,593 |
Accounts payable and accrued liabilities | 2,610 | 2,788 |
Income Taxes | 355 | 371 |
Deferred income taxes | 407 | 408 |
Total current liabilities | 5,075 | 6,263 |
Long-term debt | 6,806 | 6,655 |
Deferred income taxes | 1,238 | 1,141 |
Other liabilities | 1,821 | 2,103 |
Shareholders' equity | ||
Common stock (387.7 and 414.2 shares outstanding) | 4 | 5 |
Additional paid-in capital | 3,872 | 5,408 |
Accumulated Equity | 5,108 | 4,015 |
Treasury Stock | (2,002) | (2,434) |
Accumulated other comprehensive loss | (931) | (1,061) |
Total shareholders' equity | 6,051 | 5,933 |
Total liabilities and shareholders' equity | $ 20,991 | $ 22,095 |
Forecast Macy's fiscal 2014 income statement using the following
relations.
Net sales growth | 5% |
Cost of sales/Net sales | 59.7% |
Selling, general and administrative expenses/Net sales | 30.6% |
Impairments, store closing costs and gain on sale of leases | $0 |
Interest expense | no change |
Premium on early retirement of debt | $0 |
Interest income | no change |
Income tax expense/Income before income taxes | 36.5% |
Round all answers to the nearest whole number.
Do not use negative signs with your answers in the income statement.
Income Statement, Fiscal Years Ended ($ millions) | 2014 Estimated |
---|---|
Net Sales | Answer |
Cost of sales | Answer |
Gross Margin | Answer |
Selling, general and administrative expenses | Answer |
Impairments, store closing costs and gain on sale of leases | Answer |
Operating income | Answer |
Interest expense | Answer |
Premium on early retirement of debt | Answer |
Interest Income | Answer |
Earnings before income tax expense | Answer |
Income tax expense | Answer |
Net Income | Answer |
Forecast Macy's fiscal 2014 balance sheet using the following
relations ($ in millions). Assume that all capital expenditures are
purchases of property and equipment.
Receivables/Net sales | 1.3% |
Merchandise inventories/Net sales | 19.2% |
Prepaid expenses and other current assets/Net sales | 1.3% |
CAPEX (Increase in gross Property and equipment)/Net sales | 0.9% |
Goodwill | no change |
Other intangible assets | no change |
Other assets/Net sales | 2.2% |
Mechandise accounts payable/Net sales | 5.7% |
Accounts payable and accrued liabilities/Net sales | 9.4% |
Income taxes/Net sales | 1.3% |
Current deferred income taxes/Net sales | 1.5% |
Noncurrent deferred income taxes/Net sales | 4.5% |
Other liabilities | 6.6% |
Depreciation expense/Prior year gross PPE | 7.3% |
Common stock and APIC | no change |
Treasury stock | no change |
Dividends/Net income | 24.3% |
Long-term debt payments required in fiscal 2014 | $461 |
Long-term debt payments required in fiscal 2015 | $481 |
Short-term debt | $0 |
HINTS for forecasting 2014 Long-term debt balances:
Forecasted Current maturities of L-T debt = Feb. 02, 2013 Short-term debt balance minus Long-term debt payments required in fiscal 2014 plus Long-term debt payments required in fiscal 2015.
Forecasted L-T debt = Feb. 02, 2013 Long-term debt balance minus Long-term debt payments required in fiscal 2015.
Instructions:
Round answers to the nearest whole number.
Do not use negative signs with your answers in the balance sheet.
Balance Sheet ($ millions) |
2014 Estimated |
---|---|
Assets | |
Cash and cash equivalents | Answer |
Receivables | Answer |
Merchandise inventories | Answer |
Prepaid expenses and other current assets | Answer |
Total current assets | Answer |
Property and equipment, net | Answer |
Goodwill | Answer |
Other intangible assets, net | Answer |
Other assets | Answer |
Total assets | Answer |
Current Liabilities | |
Current maturities of L-T debt | Answer |
Merchandise accounts payable | Answer |
Accounts payable and accrued liabilities | Answer |
Income taxes | Answer |
Deferred income taxes | Answer |
Total current liabilites | Answer |
Long-term debt | Answer |
Deferred income taxes | Answer |
Other liabilites | Answer |
Shareholders' equity | |
Common Stock | Answer |
Additional paid-in-capital | Answer |
Accumulated equity | Answer |
Treasury stock | Answer |
Accumulated other comprehensive loss | Answer |
Total shareholders' equity | Answer |
Total Liabilities and Equity |
Answer |
b. What does the forecasted adjustment to balance the accounting equation from part a reveal to us about the forecasted cash balance and related financing needs of the company? Explain.
Macy's will generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust marketable securities, increasing total assets.
Macy's will generate sufficient cash for the coming year. The cash balance increases fairly significantly, we could adjust marketable securities, leaving total assets unchanged.
Macy's will not generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust marketable securities, leaving total assets unchanged.
Macy's will not generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust short-term debt, increasing total assets.
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