AFF 210 Lecture Notes - Lecture 2: Nopat, Economic Value Added, Ordinary Income

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rubyrat622

25 Mar 2016

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Annual report: chairman"s description of the firm"s operating results & future operations. Market value is the price at which a firm can resell an asset. Depreciation applies to tangible assets like property, plant, equipment amortization applies to intangible assets like patents & copyrights. Operating activities: net income + depreciaiton +/- changes in current assets. & liabilities other than cash, short-term investments & short-term debt. Investing activities: investments in or proceeds from sales of fixed assets & Financing activities: raising cash by issuing short-term debt, long-term debt, stock (includes dividend payments, stock repurchases & principal payments on debt) Net cash flow = net income + depreciation + amortization. Return on invested capital (roic) = nopat/operating capital. Market value added (mva) measures the effects of managerial actions since the very inception of a firm. Mva = shares outstanding x stock price total common equity. Economic value added (eva) focuses on managerial effectiveness in a given year.

Related Questions

What are the Market Value Leverage Ratios (Value of Debt to Value of Equity, Value of Debt to Value of Assets)) for the following 2015 and 2016 financial data? (PLEASE SHOW WORK SO I CAN UNDERSTAND HOW THIS WAS DONE. Thank you)

AMAZON.COM INC (AMZN) CashFlowFlag INCOME STATEMENT
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Revenue	107006	135987
Cost of revenue	71651	88265
Gross profit	35355	47722
Operating expenses
Sales, General and administrative	20411	27284
Other operating expenses	12711	16252
Total operating expenses	33122	43536
Operating income	2233	4186
Interest Expense	459	484
Other income (expense)	-206	190
Income before income taxes	1568	3892
Provision for income taxes	950	1425
Other income	-22	-96
Net income from continuing operations	596	2371
Net income	596	2371
Net income available to common shareholders	596	2371
Earnings per share
Basic	1.28	5.01
Diluted	1.25	4.9
Weighted average shares outstanding
Basic	467	474
Diluted	477	484
EBITDA	8308	12492

AMAZON.COM INC (AMZN) CashFlowFlag BALANCE SHEET
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Assets
Current assets
Cash
Cash and cash equivalents	15890	19334
Short-term investments	3918	6647
Total cash	19808	25981
Receivables	6423	8339
Inventories	10243	11461
Deferred income taxes
Total current assets	36474	45781
Non-current assets
Property, plant and equipment
Land	9770	13998
Fixtures and equipment	18417	25989
Other properties	1866	2454
Property and equipment, at cost	30053	42441
Accumulated Depreciation	-8215	-13327
Property, plant and equipment, net	21838	29114
Goodwill	3759	3784
Intangible assets
Deferred income taxes	1084
Other long-term assets	2289	4723
Total non-current assets	28970	37621
Total assets	65444	83402
Liabilities and stockholders' equity
Liabilities
Current liabilities
Accounts payable	20397	25309
Accrued liabilities	10384	13739
Deferred revenues	3118	4768
Total current liabilities	33899	43816
Non-current liabilities
Long-term debt	8235	7694
Capital leases	5948	7519
Deferred taxes liabilities		392
Other long-term liabilities	3978	4696
Total non-current liabilities	18161	20301
Total liabilities	52060	64117
Stockholders' equity
Common stock	5	5
Additional paid-in capital	13394	17186
Retained earnings	2545	4916
Treasury stock	-1837	-1837
Accumulated other comprehensive income	-723	-985
Total stockholders' equity	13384	19285
Total liabilities and stockholders' equity	65444	83402

AMAZON.COM INC (AMZN) Statement of CASH FLOW
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Cash Flows From Operating Activities
Net income	596	2371
Depreciation & amortization	6281	8116
Investments losses (gains)	5
Deferred income taxes	81	-246
Stock based compensation	2119	2975
Accounts receivable	-1755	-3367
Inventory	-2187	-1426
Accounts payable	4294	5030
Accrued liabilities	913	1724
Other working capital	1292	1955
Other non-cash items	281	-689
Net cash provided by operating activities	11920	16443
Cash Flows From Investing Activities
Investments in property, plant, and equipment	-4589	-6737
Acquisitions, net	-795	-116
Purchases of investments	-4091	-7756
Sales/Maturities of investments	3025	4733
Net cash used for investing activities	-6450	-9876
Cash Flows From Financing Activities
Long-term debt issued	353	621
Long-term debt repayment	-4235	-4361
Excess tax benefit from stock based compensation	119	829
Repurchases of treasury stock
Net cash provided by (used for) financing activities	-3763	-2911
Effect of exchange rate changes	-374	-212
Net change in cash	1333	3444
Cash at beginning of period	14557	15890
Cash at end of period	15890	19334
Free Cash Flow
Operating cash flow	11920	16443
Capital expenditure	-4589	-6737
Free cash flow	7331	9706
Supplemental schedule of cash flow data
Cash paid for income taxes	273	412
Cash paid for interest	478	496

maroonferret916

Please analyze the future of IBM with a company that does not have solid financials, such as Tesla. Qualitative measures will be required. What are tthe likelihoods of success and how could that be determined (for Tesla) if current numbers do not provide promise. Tesla is breaking into an emerging market of hybrid vehicle technology, and though the technology has not fully evovled, will it? How do Telsa's finaincial compare to IBM as they compare to success or failre?

Thank you

TESLA INC (TSLA) CashFlowFlag INCOME STATEMENT
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Revenue	4046	7000
Cost of revenue	3123	5401
Gross profit	924	1599
Operating expenses
Research and development	718	834
Sales, General and administrative	922	1432
Total operating expenses	1640	2267
Operating income	-717	-667
Interest Expense	119	199
Other income (expense)	-40	120
Income before taxes	-876	-746
Provision for income taxes	13	27
Net income from continuing operations	-889	-773
Other		98
Net income	-889	-675
Net income available to common shareholders	-889	-675
Earnings per share
Basic	-6.93	-4.68
Diluted	-6.93	-4.68
Weighted average shares outstanding
Basic	128	144
Diluted	128	144
EBITDA	-334	400

TESLA INC (TSLA) Statement of CASH FLOW
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Cash Flows From Operating Activities
Net income	-889	-773
Depreciation & amortization	423	947
Amortization of debt discount/premium and issuance costs	72	87
Stock based compensation	198	334
Accounts receivable	46	-217
Inventory	-1574	-2466
Prepaid expenses	-30	57
Accounts payable
Accrued liabilities
Other working capital	1064	1932
Other non-cash items	165	-26
Net cash provided by operating activities	-524	-124
Cash Flows From Investing Activities
Investments in property, plant, and equipment	-1635	-1440
Acquisitions, net	-12	214
Purchases of investments
Sales/Maturities of investments		17
Other investing activities	-26	-206
Net cash used for investing activities	-1674	-1416
Cash Flows From Financing Activities
Debt issued	319	2853
Debt repayment	-204	-1904
Warrant issued
Common stock issued	750	1702
Other financing activities	658	1094
Net cash provided by (used for) financing activities	1524	3744
Effect of exchange rate changes	-34	-7
Net change in cash	-709	2196
Cash at beginning of period	1906	1197
Cash at end of period	1197	3393
Free Cash Flow
Operating cash flow	-524	-124
Capital expenditure	-1635	-1440
Free cash flow	-2159	-1564

TESLA INC (TSLA) CashFlowFlag BALANCE SHEET
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Assets
Current assets
Cash
Cash and cash equivalents	1197	3393
Total cash	1197	3393
Receivables	169	499
Inventories	1278	2067
Prepaid expenses	125	194
Other current assets	23	106
Total current assets	2792	6260
Non-current assets
Property, plant and equipment
Gross property, plant and equipment	5766	12920
Accumulated Depreciation	-571	-1018
Net property, plant and equipment	5195	15037
Intangible assets		376
Other long-term assets	106	991
Total non-current assets	5301	16404
Total assets	8092	22664
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt		1150
Capital leases	633
Accounts payable	916	1860
Taxes payable	101	153
Accrued liabilities	322	1005
Deferred revenues	707	1427
Other current liabilities	137	232
Total current liabilities	2816	5827
Non-current liabilities
Long-term debt	2082	118
Capital leases
Deferred taxes liabilities
Accrued liabilities		150
Deferred revenues	446	852
Minority interest		785
Other long-term liabilities	1659	10179
Total non-current liabilities	4187	12084
Total liabilities	7004	17911
Stockholders' equity
Common stock	0	0
Additional paid-in capital	3415	7774
Retained earnings	-2322	-2997
Accumulated other comprehensive income	-4	-24
Total stockholders' equity	1089	4753
Total liabilities and stockholders' equity	8092	22664


INTERNATIONAL BUSINESS MACHINES CORP (IBM) CashFlowFlag INCOME STATEMENT
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Revenue	81741	79919
Cost of revenue	41057	41625
Gross profit	40684	38294
Operating expenses
Research and development	4565	4120
Sales, General and administrative	19894	20479
Other operating expenses	535	590
Total operating expenses	24994	25189
Operating income	15690	13105
Interest Expense	468	630
Other income (expense)	723	-145
Income before taxes	15945	12330
Provision for income taxes	2581	449
Net income from continuing operations	13364	11881
Net income from discontinuing ops	-174	-9
Net income	13190	11872
Net income available to common shareholders	13190	11872
Earnings per share
Basic	13.48	12.43
Diluted	13.42	12.38
Weighted average shares outstanding
Basic	979	955
Diluted	983	959
EBITDA	20268	17341

INTERNATIONAL BUSINESS MACHINES CORP (IBM) Statement of CASH FLOW
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Cash Flows From Operating Activities
Net income	13190	11872
Depreciation & amortization	3855	4381
Deferred income taxes	1387	-1132
Stock based compensation	468	544
Inventory	133	-14
Accounts payable	81	197
Accrued liabilities
Other working capital	-2658	1048
Other non-cash items	552	62
Net cash provided by operating activities	17008	16958
Cash Flows From Investing Activities
Investments in property, plant, and equipment	-3579	-3567
Property, plant, and equipment reductions	370	424
Acquisitions, net	-3750	-6133
Purchases of investments	-3073	-5917
Sales/Maturities of investments	2842	5692
Purchases of intangibles	-572	-583
Other investing activities	-397	-892
Net cash used for investing activities	-8159	-10976
Cash Flows From Financing Activities
Debt issued	5540	9132
Debt repayment	-5622	-6395
Common stock issued	322	204
Common stock repurchased	-4609	-3502
Dividend paid	-4897	-5256
Other financing activities	100	26
Net cash provided by (used for) financing activities	-9166	-5791
Effect of exchange rate changes
Net change in cash	-317	191
Cash at beginning of period	8476	7686
Cash at end of period	8159	7877
Free Cash Flow
Operating cash flow	17008	16958
Capital expenditure	-4151	-4150
Free cash flow	12857	12808

INTERNATIONAL BUSINESS MACHINES CORP (IBM) CashFlowFlag BALANCE SHEET
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Assets
Current assets
Cash
Cash and cash equivalents	7686	7826
Short-term investments	508	701
Total cash	8194	8527
Receivables	1201	1057
Inventories	1551	1553
Deferred income taxes
Prepaid expenses	4205	4564
Other current assets	27353	28187
Total current assets	42504	43888
Non-current assets
Property, plant and equipment
Gross property, plant and equipment	29341	60267
Accumulated Depreciation	-18616	-38606
Net property, plant and equipment	10725	21661
Equity and other investments	5187	4585
Goodwill	32021	36199
Intangible assets	3486	4689
Deferred income taxes	4822	5224
Prepaid pension benefit
Other long-term assets	11747	12055
Total non-current assets	67988	84413
Total assets	110492	128301
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt	6461	7513
Accounts payable	6028	6209
Taxes payable	2847	3235
Accrued liabilities	7913	8282
Deferred revenues	11021	11035
Other current liabilities	-1	1
Total current liabilities	34269	36275
Non-current liabilities
Long-term debt	33428	34655
Deferred taxes liabilities
Accrued liabilities
Deferred revenues	3771	3600
Pensions and other benefits	16504	17070
Minority interest	162	146
Other long-term liabilities	8099	7478
Total non-current liabilities	61964	62949
Total liabilities	96233	99224
Stockholders' equity
Common stock	53262	53935
Retained earnings	146124	152759
Treasury stock	-155518	-159050
Accumulated other comprehensive income	-29606	-29398
Total stockholders' equity	14262	18246
Total liabilities and stockholders' equity	110495	117470

ivorypig770

7. Preparing a cash budget

Dan and June started to create a budget (based on last yearâsincome and expense statement) but got stuck. They know that youhave learned how to create budgets and are asking for your help.They would like you to input the correct values for the first threemonths of next year.

Income and Expense Statement

Name(s): Dan and June Kuryaki
For the year ending:	As of December 31
		Dollars
Income
Wages and salaries	Name: Dan Kuryaki	$ 20,000
	Name: June Kuryaki	18,000
Bonuses and commissions	Danâs bonus	2,000
(1) Total Income:		$40,000
Expenses
Housing		$6,756
Utilities	Dallas Power & Light	756
	U.S. Cellular	372
Food	Groceries	1,356
Transportation	Auto loan	4,320
	Public transportation	3,000
Insurance		1,126
Taxes		9,500
Fun money	Cruise to Mexico	3,000
Parentsâ loan		875
(2) Total Expenses:		$31,061
Surplus (Deficit):		$8,939

In addition to the statement, you will need to know thefollowing information:

â¢	They estimated their net annual income (after taxes andemployer deductions) at $15,000 for Dan and $13,500 for June
â¢	Insurance is paid at the end of each calendar quarter
â¢	June purchases her commuter pass on the first of eachmonth
â¢	The parentsâ loan is money they borrowed from Juneâs parents topay off their student loans. How much they pay each month isdetermined by them
â¢	The fun money listed on the statement is the money spent for acruise to Mexico. They didnât keep track of any other entertainmentexpenses (such as dinners out and movies) incurred during theyear.

Note: Enter a value in each blank cell to get full credit forthis exercise, and round all dollar amounts to the nearest wholedollar.

Three-Month Cash Budget (By Month)
Name(s): Dan and June Kuryaki
For: Three months		Ending: March 31
	January	February	March	Total for Three Months
Income
Danâs salary
Juneâs salary
Total income
Expenses
Rent
Utilities:
Dallas Power & Light
U.S. Cellular
Food
Automobile
Public transportation
Insurance
Parentsâ loan
Fun money
Total expenses
Cash surplus (deficit)
Cumulative surplus (deficit)

Looking at the completed budget, what single item would yourecommend that they add to their budget?

Dividend and interest income

Pensions and annuities

Savings and investments

This is because:

The couple needs to increase their distributions from theirretirement plans.

The couple needs to budget for contingencies and save for futuregoals.

The couple needs to increase their taxable income.

peardinosaur795

AFF 210 Lecture Notes - Lecture 2: Nopat, Economic Value Added, Ordinary Income

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