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Analysis of Changes in Profitability and Growth: Cisco Systems, Inc. 1 By any stretch of the imagination, Cisco System s (CSCO) has been a strong growth company. A darling of the Internet boom of the late 1990s, it was one of the few technology companies tied to the Internet and telecommunications that prospered during that era. Its products - networking and communications equipment such as router and sw itching devices - built the infrastructure of the Internet. While most Internet and telecommunications firms str uggled and failed, their supplier, Cisco, capitalized on the new technology. At one poi nt in 2000, its market capitalization was over half a trillion dollars, the largest market capitaliza tion of any firm ever. Its stock price increased from $10 in 1995 to $80 in 2000, supported by sales growth from $2.0 billion in 1995 to $18.9 billion 2000. In early 2000, Cisco’s P/E stood at 130 so investors saw plenty of room for more earnings growth. However, with the subsequent collapse of the technology bubble and the demise of telecommunications firm such as WorldCom, Qwes t, and AT&T, the anticipated growth failed to materialize. Indeed, in 2001 Cisco wrote down inventory by an astonish ing $2.3 billion (under the lower-of-cost-or-market rule), to reflect the dr op in demand for its products and the emergence of second-hand telecom equipment market. Exhibit 1 presents Cisco’s income statements fo r the fiscal years 2000-2002 and balance sheets for 1999-2002. The exhibit also includes the cash flow from operations a nd cash investing sections of the cash flow statements. The 2000 sales of $18 .9 billion were up from $12.2 billion in 1999 and $8.5 billion in 1998, a tremendous gr owth record. But subsequent sales growth was not as impressive, as you can see, and led to declini ng earnings. Indeed, Cisc o posted a loss for 2001. Lower earnings on increasing shareholders’ equity clea rly implies that residual income is declining. By the end of 2002, Cisco’s shares traded at $15, well down from the 2000 high of $80. Other information, most of the from the 10-K f ootnotes, that was useful in reformulating the financial statements is presented below. Note th at the cash flow statements from Exhibit 1 are particularly useful for identifying core income becau se some of the items in the reconciliation of net income to cash flow from operati ng activities involve unusual items. |
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Questions: 1. What adjustments are necessary to reformulate the income statements and balance sheets to properly separate financ ing from operations? 2. What adjustments are necessary to separate core operations from othe r sources of income? What items are identified as core in the Balance Sheet? 3. Calculate Core RNOA and decompose the ratio for Cisco for 2002 and 2001. |
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1. Long-term investments are comprised of the following: 2002 2001 2000 1999 Equity investments 567 1,529 6,225 877 Debt investments 8,233 8,817 7,463 6,155 8,800 10,346 13,688 7,032 All short-term investments ar e debt investments. Restri cted investments are debt investments. 2. $50 million of cash and equivalents is regarded as operating cash. 3. “Interest and other income” in the income statements is composed as follows. 2002 2001 2000 Interest income 895 967 577 Gain (loss) on investments (1,104) 163 531 (209) 1,130 1,108 The gain on investments applies mainly to debt and equity investments, but does include some derivative gains and losses and other small items. 4. The change in accumulated other comprehensiv e loss for all years was due almost entirely to unrealized gains and lo sses on debt investments. 5. Cisco’s income tax rate (combined federal and state) is 36.8 percent. |
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In: Accounting
Gwen Stefani makes the following charitable donations in the current year:
1. Inventory held for resale in Gwen Stefani’s business (a sole proprietorship)
Basis $ 8,000, Market Value $ 7,200
2. Stock in Driskoll, Inc., held as an investment (acquired two years ago)
Basis 16,000, Market Value 40,000
3. Coin collection held as an investment (acquired five years ago)
Basis 4,000, Market Value 20,000
The Driskoll stock and the inventory were given to Gwen Stefani’s church, and the coin collection was given to the Salvation Army. Both donees promptly sold the property for the stated fair market value. Disregarding percentage limitations, Gwen Stefani’s current charitable contribution deduction is:
In: Accounting
Two unmarried individuals, Albert and Bernia each earn adjusted gross income of $100,000 for tax purposes. Their personal income and professional activities are fundamentally identical. In each of the following independent cases, decide whether the pairs are "equal" who should pay the same amount if income tax or "unequals" who should pay different amounts of income tax.
a. Albert donates $6,000 to the church where he regularly worships and Benita is an atheist who does not make similar expenditures
b. Albert enjoys children and has three children that he supports, but Benita has no children
c. Albert incurs medical costs of $600, and Benita does not incur any medical costs
In: Accounting
5.Which of the following is NOT part of the key elements when considering designing an organisational structure?
(a) Direction of organisation
(b) Chain of command
(c) Span of control
(d) Formalisation
When the Hong Kong Police organises its forces according to the different regions of Hong Kong in which the forces work, this is an example of which type of organisational structure?
(a) Market structure
(b) Customer structure
(c) Product structure
(d) Geographic structure
The Catholic Church is famous for its very flat structure. One way organisations can keep their hierarchy flat is to __________.
(a) decrease the span of control
(b) increase the numbers of levels of management
(c) decentralise decision making
(d) enlarge job
In: Operations Management
Global Issues and Trends in Healthcare
Answer the essay question below and give your reasons and examples.
Create a brief disease profile on the disease known as Stroke (cerebrovascular disease). What sources provide trusted background information about the symptoms of the disease and ways to prevent and treat it? What sources provide good statistical information about how many people worldwide are affected by the condition? What can academic publications contribute to your profile?
In: Nursing
What is the difference between primary algae and secondary algae? Six major groups of algae. How are they classified into these groups, and what is unique about each group? What is the difference between diatoms and coccoliths found in algae? What is the difference between foraminiferans and radiolarians found in protozoa? What characteristics differentiate the protozoan groups (foraminiferans and radiolarians) from the algal groups (diatoms and coccoliths) from a microscopic examination? Of what economic and academic value are these organisms?
In: Biology
Part A - Discussion on the audit report
The audit report is the key product of the auditing and assurance process. Using an essay format, discuss the values, issues, and future of the audit report. You are required to cite at least three readings, and two of them must be academic articles from the literature (use the Google Scholar or UoN’s library/database). The textbooks such as Moroney, et al. (2017) do not qualify as an article. APA 6th is required with an appropriate reference list.
In: Accounting
"Creating A Guiding Coalition"
Read the article titled “Leading Change in Libraries: A Case Study”. Reflect on your academic career thus far. The decision to continue your formal education was a change that you implemented in your personal life. Whom did you place on your list as a guiding coalition and why? (Note: You do not have to list individual names. Substitute names for titles or positions are advised.)
NEEDED ANSWERING LIKE ASP!!!
In: Operations Management
Direction: Information must be 200 word count
Chapter 3 Speaking and Listening
Identify the key instructional and management moves that support student success.
1. What role does evidence-base reading and writing play in supporting students with academic conversations?
2. How do these practices affect student understanding and comprehension?
3. What role does assessment play in supporting students to achieve proficiency with speaking and listening standards?
In: Psychology
Design an experiment to determine the effect which commuting versus living on campus has on a college student's academic success and use it to answer the following questions:
1. What is your hypothesis?
2. Who will be in the sample? (Who will be the participants?)
3. How will you conduct the research? (What will be the treatment/experimental group versus the control group?)
4. What are the independent and dependent variables?
5. What do you need to do from an ethics standpoint?
In: Psychology