Week8 Final Exam Part 2 - - 1. (TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report

Week8 Final Exam Part 2

1. (TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report:

Income Taxes Payable	$471
Short-term Investments and Marketable Securities	8,109
Cash	8,442
Other non-current Liabilities	10,449
Common Stock	1,760
Receivables	4,812
Other Current Asset	2,973
Long-term Investments	10,448
Other Non-current Assets	3,585
Property, Plant and Equipment	23,486
Trademarks	6,527
Other Intangible Assets	20,810
Allowance for Doubtful Accounts	53
Accumulated Depreciation	9,010
Accounts Payable	8,680
Short Term Notes Payable	17,874
Prepaid Expenses	2,781
Other Current Liabilities	796
Long-Term Liabilities	14,736
Paid-in-Capital in Excess of Par Value	11,379
Retained Earnings	55,038
Inventories	3,264
Treasury Stock	35,009

 Other information taken from the Annual Report:

Sales Revenue for 2012	$48,017
Cost of Goods Sold for 2012	19,053
Net Income for 2012	9,019
Inventory Balance on 12/31/11	3,092
Net Accounts Receivable Balance on 12/31/11	4,920
Total Assets on 12/31/11	79,974
Equity Balance on 12/31/11	31,921

Required:
1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each.

2. Using the Balance Sheet from your answer above, calculate the Current Ratio and Return on common stockholders’ equity ratio. (Make sure to show all your work). (Points : 36)

2 (TCO B) The following selected data was retrieved from the Walmart, Inc. financial statements for the year ending January 31, 2013:

Accounts Payable	$38,080
Accounts Receivable	6,768
Cash	7,781
Common Stock	3,952
Cost of Goods Sold	352,488
Income Tax Expense	7,981
Interest Expenses	2,064
Membership Revenues	3,048
Net Sales	466,114
Operating, Selling and Administrative Expenses	88,873
Retained Earnings	72,978

 

Required:
Using the information provided above:

1. Prepare a multiple-step income statement

2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results. (Points : 36)

3 (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the two questions below:

Cash flow from operating activities	In millions	In millions
	For the year ended 2012	For the year ended 2011
Net (loss) earnings	$(12,650)	$7,074
Depreciation and amortization	5,095	4,984
Impairment of goodwill and purchased intangible assets	18,035	885
Stock-based compensation expense	635	685
Provision for doubtful accounts	142	81
Provision for inventory	277	217
Restructuring charges	2,266	645
Deferred taxes on earnings	(711)	166
Excess tax benefit from stock-based competition	(12)	(163)
Other, net	265	(46)
Accounts and financing receivables	1,269	(227)
Inventory	890	(1,252)
Accounts payable	(1,414)	275
Taxes on earnings	(320)	610
Restructuring	(840)	(1,002)
Other assets and liabilities	(2,356)	(293)
Net cash provided by operating activities	10,571	12,639
Cash flows from investing activities:
Investment in property, plant, and equipment	(3,706)	(4,539)
Proceeds from sale of property, plant, and equipment	617	999
Purchases of available-for-sale securities and other investments	(972)	(96)
Maturities and sales of available-for-sale securities and other investment	662	68
Payments in connection with business acquisitions, net of cash acquired	(141)	(10,480)
Proceeds from business divestiture, net	87	89
Net cash used in investing activities	(3,453)	(13,959)
Cash flow from financing activities:
(Payments) issuance of commercial paper and notes payable, net	(2,775)	(1,270)
Issuance of debt	5,154	11,942
Payment of debt	(4,333)	(2,336)
Issuance of common stock under employee stock plans	716	896
Repurchase of common stock	(1,619)	(10,117)
Excess tax benefit from stock-based compensation	12	163
Cash dividends paid	(1,015)	(844)
Net cash used in financing activities	(3,860)	(1,566)
Increase (decrease) in cash and cash equivalents	3,258	(2,886)
Cash and cash equivalents at beginning of period	8,043	10,929
Cash and cash equivalents at end of period	$11,301	$8,043

Required:

1) Please calculate the percentage increase or decrease in cash for the total line of the operating, investing, and financing sections bolded above and explain the major reasons for the increase or decrease for each of these sections.

2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio. (Points : 36)

4 (TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.”

Assuming the goal is to maximize net income, choose an accounting treatment from each of the following scenarios, and explain to your CEO why the choice will produce the desired effect on reported Net Income for the current year. Include in your answer the effect of the choice on both the income statement and balance sheet.

Required:

Goforit carries significant electronics inventory in a competitive environment in which prices are actually falling. Which inventory valuation method would you choose—LIFO, FIFO, or average cost? Assume that unit purchases exceed unit sales.

b. Goforit has a large investment in warehouse equipment, including conveyor belts, forklifts, and automated packaging systems. Which depreciation method would you choose: straight line (SL) or double declining balance (DDB)?

5. (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.

Ratio Name	Johnson & Johnson	Pfizer
Profit margin	16.1%	24.7%
Inventory turnover ratio	3.1	1.7
Average collection period	59.4 days	69.1 days
Cash debt coverage ratio	.27	.16
Debt to Total assets	46.6%	127.5%

Required:

1) Please explain the meaning of each of the Pfizer ratios above.

2) Please state which company performed better for each ratio.

Ratio Name	Johnson & Johnson	Pfizer
Profit margin	16.1%	24.7%
Inventory turnover ratio	3.1	1.7
Average collection period	59.4 days	69.1 days
Cash debt coverage ratio	.27	.16
Debt to Total assets	46.6%	127.5%

(Points : 36)

TUTORIAL PREVIEW

	For the year ended 2012	For the year ended 2011	Absolute change	% age change
Cash flow from operating activities
Net (loss) earnings	($12,650)	$7,074	($19,724)	(278.8%)
Depreciation and amortization	5,095	4,984	$111	2.2%
Impairment of goodwill and purchased intangible assets	18,035	885	$17,150	1937.9%

 

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