FIN 401 Study Guide - Midterm Guide: Asset Turnover, Dividend Discount Model, Capital Structure
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Just need the last two questions answered A and B at the bottom of the document
Youâre the chief financial officer (CFO) of Worldwide
Widget Manufacturing, Inc. The company manufactures and
sells widgets at factories in the United States and internationally.
Listed below are partial financial statements for Worldwide
Widget Manufacturing, Inc. Fill in the missing information in
each of the following financial statements. Answer spaces are
given below.
Worldwide Widget Manufacturing, Inc.
Balance Sheet as of December 31, 2015 and 2014
(in millions of dollars)
2015 | 2016 | 2015 | 2016 | ||
Assets Current Assets: | Liabilities and Equity Current Liabilities: | ||||
Cash and markatable securities | $427 | $322 | Accured wages and taxes | $309 | $257 |
Accounts Receivable | a.? | 259 | Accounts payable | 381 | b.? |
Inventory | 815 | 797 | Notes Payable | $492 | $421 |
Total | $1,542 | $1,378 | Total | $1,182 | $997 |
Fixed Assets: | Long-term debt: | $1,934 | c.? | ||
Gross plant and equipment | d.? | $2,817 | Total | 3,116 | 2,956 |
Less:depreciation | 368 | 254 | Stockholder's equity: | ||
Net plant and equipment | $2,872 | $2,563 | Preferred stock ( 30 million shares) | $30 | $30 |
Other long term assets | 521 | 487 | Common stock and paid in surplus (250 million shares) | 300 | e.? |
Retained earnings | 1,489 | 1,142 | |||
Total FA | f.? | $3,050 | Total Equity | $1,819 | $1,472 |
Total Assets | $4,935 | $4,428 | Total liabilities and equity | $4,935 | $4,428 |
A. Accounts receivable for 2015_______300
B. Accounts payable for 2014_______319
C. Gross plant and equipment for 2015_______1959
D. Long-term debt for 2014_______3240
E. Common stock and paid-in surplus (250 million shares) for 2014_______300
F. Total FA for 2015_______3393
Worldwide Widget Manufacturing, Inc. Income Statement for Years Ending December 31, 2015 and 2014(in millions of dollars)
2015 | 2014 | |
Net Sales | g. | $2018 |
Less: Cost of Goods Sold | 753 | h.? |
Gross Profits | $1,623 | $1,189 |
Less: Other Operating Expense | 423 | 167 |
Earnings before interest, taxes, depreciation, and amortization (EBITDA) | $1,200 | $1,022 |
Less: Depreciation | 114 | 114 |
Earning before interest and taxes (EBIT) | $1,086 | $908 |
Less: Interest | i.? | 128 |
Earnings:before Taxes (EBT) | $949 | $780 |
Less:Taxes | j.? | 23 |
Net Income | $664 | $546 |
Less:Preferred stock dividends | 98 | 98 |
Net income available to common stock holders | $566 | $448 |
Less:Common stock dividends | 219 | 199 |
Addition to retained earnings Per common share data: | $347 | $249 |
Earnings per share (EPS) | k.? | $1.79 |
Dividends per share (DPS) | $0.88 | l. ? |
Book Value per share (BVPS) | m.? | $5.77 |
Market Value per share (MVPS) | $23.97 | $22.47 |
g. Net sales for 2015_______2376
h. Less: Cost of goods sold for 2014_______829
i. Less: Interest for 2015_______137
j. Less: Taxes for 2015_______285
k. Earnings per share (EPS) for 2015_______1.88
l. Dividends per share (DPS) for 2014_______.73
m. Book value per share (BVPS) for 2015_______7.16
Worldwide Widget Manufacturing, Inc.
Statement of Cash Flows for Year Ending December 31, 2015
(in millions of dollars)â
Section A: Cash Flows from operating activities | |
Net Income | n.? |
Additions (source of cash): Depreciation | 114 |
Increase in accrued wages and taxes | o.? |
Increase in accounts payable | 62 |
Subtractions (use of cash): Increase in accounts receivable | -41 |
Increase in inventory | p.? |
Net Cash flow from operating activities | q.? |
Section B: Cash Flows from investing activities subtractions: Increase in fixed assets | -$343 |
Increase in other long-term assests | r.? |
Net Cash flow from investing activities | s.? |
Section C. Cash flows from financing activities Additions: Increase in notes payable | t.? |
Increase in common and preferred stock | 0 |
Subtractions: Decrease in long-term debt | -25 |
Pay dividends | u.? |
Net Cash flow from financing activities Section D. Net Change in cash and marketable securities | v.? $105 |
n. Net income_______664
o. Increase in accrued wages and taxes_______52
p. Increase in inventory_______18
q. Net cash flow from operating activities_______833
r. Increase in other long-term assets_______34
s. Net cash flow from investing activities_______-377
t. Increase in notes payable_______71
u. Pay dividends_______317
v. Net cash flow from financing activities_______-271
Worldwide Widget Manufacturing, Inc.
Statement of Retained Earnings as of December 31, 2015
(in millions of dollars)
Balance of retained earnings, December 31,2014 | $1,142 | |
Plus: Net income for 2015 | w.? | |
Less: Cash dividends paid | 0 | 0 |
Preferred stock | x.? | |
Common Stock | 219 | |
Total cash dividends paid | 317 | |
Balance of retained earnings, December 31,2015 | $1,489 |
w. Plus: Net income for 2015 _______664
x. Preferred stock _______98
2. Youâll need to compare your companyâs ratios with the industryâs standards.
Worldwide Widget Manufacturing, Inc.
Company | Industy | Comparison | |
Current Ratio | 2.2 times | ||
Quick Ratio | 1.1 times | ||
Cash Ratio | 0.35 times | ||
Inventory turnover | 2 times or 1 time | ||
Days' sales in inventory | 135 days or 335 days | ||
Average payment period | 110 days | ||
Sales to working capital | 3 times | ||
Total asset turnover | 0.6 times | ||
Debt-to equity | 1.1 times | ||
Profit margin | 16.5% | ||
Gross profit margin | 48.13% | ||
ROA | 8.78% | ||
ROE | 19.45% | ||
Divident payout | 32% |
A. Use the information found in Worldwide Widget Manufacturingâs financial statements
to calculate all of the listed financial ratios in the above table for your
company. Then, for each ratio, provide a comparison of the companyâs result
with the industry standards, indicating if your companyâs results are lower than,
higher than, slower than, or faster than the industry standards.
B. Calculate your companyâs internal and sustainable growth rates.
NIKE:
Need the following ratios to be calculated using the financial sheets copied at the bottom. Each ratio needs to be calculated using the information from 2016. Each ratio also needs to be broken down and illustrated by the step by step process. Finally, please include any and all observations for each ratio and analysis.
1) Common Size analysis
2) Common size vertical analysis & graph
3) Current Ratio
4) Quick Ratio
5) Cash Ratio
6) Inventory Turnover
7) Receivables Turnover
8) Total Asset Turnover
9) Fixed Asset Turnover
10) Gross profit margin
11) Operating Profit margin
12) Net profit margin
13) Return on total assets
14) return on equity
15) basic earning power
16) Deb/net worth ratio
17) debt ratio
18) DuPont System
19) Times-interest-earned
Balance Sheet:
Consolidated Balance Sheets - USD ($) $ in Millions | May 31, 2017 | May 31, 2016 |
Current assets: | ||
Cash and equivalents | $ 3,808 | $ 3,138 |
Short-term investments | 2,371 | 2,319 |
Accounts receivable, net | 3,677 | 3,241 |
Inventories | 5,055 | 4,838 |
Prepaid expenses and other current assets | 1,150 | 1,489 |
Total current assets | 16,061 | 15,025 |
Property, plant and equipment, net | 3,989 | 3,520 |
Identifiable intangible assets, net | 283 | 281 |
Goodwill | 139 | 131 |
Deferred income taxes and other assets | 2,787 | 2,422 |
TOTAL ASSETS | 23,259 | 21,379 |
Current liabilities: | ||
Current portion of long-term debt | 6 | 44 |
Notes payable | 325 | 1 |
Accounts payable | 2,048 | 2,191 |
Accrued liabilities | 3,011 | 3,037 |
Income taxes payable | 84 | 85 |
Total current liabilities | 5,474 | 5,358 |
Long-term debt | 3,471 | 1,993 |
Deferred income taxes and other liabilities | 1,907 | 1,770 |
Commitments and contingencies | ||
Redeemable preferred stock | 0 | 0 |
Shareholdersâ equity: | ||
Capital in excess of stated value | 8,638 | 7,786 |
Accumulated other comprehensive (loss) income | (213) | 318 |
Retained earnings | 3,979 | 4,151 |
Total shareholdersâ equity | 12,407 | 12,258 |
TOTAL LIABILITIES AND SHAREHOLDERSâ EQUITY | 23,259 | 21,379 |
Class A Convertible Common Stock | ||
Shareholdersâ equity: | ||
Common stock at stated value | 0 | 0 |
Class B Common Stock | ||
Shareholdersâ equity: | ||
Common stock at stated value | $ 3 | $ 3 |
Income Statement:
Consolidated Statements of Income - USD ($) $ in Millions | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Income Statement [Abstract] | |||
Revenues | $ 34,350 | $ 32,376 | $ 30,601 |
Cost of sales | 19,038 | 17,405 | 16,534 |
Gross profit | 15,312 | 14,971 | 14,067 |
Demand creation expense | 3,341 | 3,278 | 3,213 |
Operating overhead expense | 7,222 | 7,191 | 6,679 |
Total selling and administrative expense | 10,563 | 10,469 | 9,892 |
Interest expense (income), net | 59 | 19 | 28 |
Other (income) expense, net | (196) | (140) | (58) |
Income before income taxes | 4,886 | 4,623 | 4,205 |
Income tax expense | 646 | 863 | 932 |
NET INCOME | $ 4,240 | $ 3,760 | $ 3,273 |
Earnings per common share: | |||
Basic (in dollars per share) | $ 2.56 | $ 2.21 | $ 1.90 |
Diluted (in dollars per share) | 2.51 | 2.16 | 1.85 |
Dividends declared per common share (in dollars per share) | $ 0.70 | $ 0.62 | $ 0.54 |
Cash Flow Sheet
Consolidated Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
May 31, 2017 | May 31, 2016 | May 31, 2015 | |
Cash provided by operations: | |||
Net income | $ 4,240 | $ 3,760 | $ 3,273 |
Income charges (credits) not affecting cash: | |||
Depreciation | 706 | 649 | 606 |
Deferred income taxes | (273) | (80) | (113) |
Stock-based compensation | 215 | 236 | 191 |
Amortization and other | 10 | 13 | 43 |
Net foreign currency adjustments | (117) | 98 | 424 |
Changes in certain working capital components and other assets and liabilities: | |||
(Increase) decrease in accounts receivable | (426) | 60 | (216) |
(Increase) in inventories | (231) | (590) | (621) |
(Increase) in prepaid expenses and other current assets | (120) | (161) | (144) |
(Decrease) increase in accounts payable, accrued liabilities and income taxes payable | (364) | (889) | 1,237 |
Cash provided by operations | 3,640 | 3,096 | 4,680 |
Cash used by investing activities: | |||
Purchases of short-term investments | (5,928) | (5,367) | (4,936) |
Maturities of short-term investments | 3,623 | 2,924 | 3,655 |
Sales of short-term investments | 2,423 | 2,386 | 2,216 |
Investments in reverse repurchase agreements | 0 | 150 | (150) |
Additions to property, plant and equipment | (1,105) | (1,143) | (963) |
Disposals of property, plant and equipment | 13 | 10 | 3 |
Other investing activities | (34) | 6 | 0 |
Cash used by investing activities | (1,008) | (1,034) | (175) |
Cash used by financing activities: | |||
Net proceeds from long-term debt issuance | 1,482 | 981 | 0 |
Long-term debt payments, including current portion | (44) | (106) | (7) |
Increase (decrease) in notes payable | 327 | (67) | (63) |
Payments on capital lease and other financing obligations | (17) | (7) | (19) |
Proceeds from exercise of stock options and other stock issuances | 489 | 507 | 514 |
Excess tax benefits from share-based payment arrangements | 177 | 281 | 218 |
Repurchase of common stock | (3,223) | (3,238) | (2,534) |
Dividends â common and preferred | (1,133) | (1,022) | (899) |
Cash used by financing activities | (1,942) | (2,671) | (2,790) |
Effect of exchange rate changes on cash and equivalents | (20) | (105) | (83) |
Net increase (decrease) in cash and equivalents | 670 | (714) | 1,632 |
Cash and equivalents, beginning of year | 3,138 | 3,852 | 2,220 |
CASH AND EQUIVALENTS, END OF YEAR | 3,808 | 3,138 | 3,852 |
Cash paid during the year for: | |||
Interest, net of capitalized interest | 98 | 70 | 53 |
Income taxes | 703 | 748 | 1,262 |
Non-cash additions to property, plant and equipment | 266 | 252 | 206 |
Dividends declared and not paid | $ 300 | $ 271 | $ 240 |