[SMG FE 323] - Final Exam Guide - Ultimate 89 pages long Study Guide!

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30 Mar 2017

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Document Summary

Goals of long-term financial planning: identify important linkages, analyze the impact of potential business plans, plan for future funding needs. 18. 2 forecasting financial statements: the percent of sales method. Percent of sales method assumes that as sales grow, many income statement and balance sheet items will grow remaining the same percent of sales. New new nancing is the amount of additional external nancing we will need to secure to pay for the planned increase in assets. Net new financing = projected assets projected liabilities and equity. The amount of dividends a company pays will affect the retained earnings it has to. Furthermore, any increases in debt or equity re ect structure decisions and require managers to actively raise capital. Bottom line is that we cannot simply assume debt and equity increase in line with sales. 2013 stckhldr equity + 2014 retained earnings = 2014 stckhlrds equity. Making the balance sheet balance: net new financing.

Related Questions

6. The Santa Fe Mutual Automobile Insurance Company has the following financial statements. 2016 2015

Net Premiums Written 48,612 47,398

-------------------------------------------------------------------------------

Income Statement ($ mils.)

Premiums Earned 37,094 36,297

Loss Expenses 25,379 23,771

Operating Expenses 15,921 15,484

Total Policy Expenses 41,300 39,255

Net Underwriting Gain/Loss (4,206) (2,958)

Net Investment Income 5,340 3,512

Operating Income before taxes 1134 554

Dividends to Policyholders 0 0

Income Tax Recovered (Plus) 1,003 492

Net Income $2,137 $1,046

Ave Investment Yield 6.29% 3.83%

Balance Sheet (mils.) 2016 2015

Assets

Cash & ST Investments 1,345 1,397

Bonds 41,766 43,834

Common & Preferred Stock 43,120 47,863

Equity in Insurance Subsidiaries 34,842 31,529

Other Assets 17,422 14,175

Total Assets $138,495 $138,798

Liabilities

Claims & Claim Expenses 28,566 28,534

Unearned Premiums 11,518 11,101

Other Liabilities 15,780 19,568

Total Liabilities 55,864 59,203

Equity Accounts 82,631 79,595

Total Liabs. & Equity 138,495 138,798

6a. Calculate and evaluate the Net Underwriting Margin (NUM); Loss Ratio

Expense Ratio; Combined Ratio; and Overall Profitability Ratio for each year

using the information in the income statement above. Also calculate the firmâs OPM, OROA, ROA, ROE, and equity multiplier (EM).

Recall NUM = (Premiums Earned â Total Policy Expenses) / Total Assets

NUM 2016 __________ NUM 2015 ______________

Recall: expense ratio = (operating expenses/net premiums written) and loss ratio = (loss expenses/premium earned), and combined ratio = (loss ratio + expense ratio), and overall profitability ratio = {[100% - Combined Ratio%] + (Investment Yield% } for the firm each year) Also calculate asset turnover (revenues/total assets), net profit margin [net income/revenues], OROA (operating income/total assets), return on assets (net income/total assets) and return on equity (net income/equity accounts) & equity multiplier (total assets / equity).

2016 2015

Expense ratio

Loss ratio

Combined ratio

Average Investment Yield

Overall Profitability

Dupont Analysis:

Asset Turnover

Net Profit Margin

OROA

ROA

ROE

Equity Multiplier (EM)

6b. Analyze the trends in all of the ratios, and the other financial information provided. What do they reveal for trends over time including trends as well on the firmâs balance sheet? What areas of strength & weakness are revealed? What advice for improvement would you give?

Part 5: Module 7: Mutual Funds & Security Firms (see Module 7 lecture notes, pp. 10 to 12)

7. a. Briefly discuss different types of mutual funds that mutual fund companies offer including: (1) index funds, (2) actively managed diversified funds; (3) mutual funds with a diversified allocation; (4) sector investing; (5) style investing including different types of style investing (value, growth, blend, aggressive growth); (6) hybrid asset allocation or balanced funds; (7) target date funds; (8) Socially Responsible Mutual funds (often called impact funds).; and (9) Multi-alternative Strategy Funds and Commodity Funds.

b. Why are index funds cheaper than actively managed funds?

pinkkoala157

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
Consolidated Statements of Income - USD ($) $ in Millions	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

Note: This problem is for the 2018 taxyear.

Janice Morgan, age 24, is single and has no dependents. She is afreelance writer. In January 2018, Janice opened her own officelocated at 2751 Waldham Road, Pleasant Hill, NM 88135. She calledher business Writers Anonymous. Janice is a cash basis taxpayer.She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her SocialSecurity number is 123-45-6789. Janice's parents continue toprovide health insurance for her under their policy. Janice wantsto contribute to the Presidential Election Campaign Fund.

During 2018, Janice reported the following income and expenseitems connected with her business.

Income from sale of articles	$85,000
Rent	16,500
Utilities	7,900
Supplies	1,800
Insurance	5,000
Travel (including meals of $1,200)	3,500

Janice purchased and placed in service the following fixedassets for her business. Janice wants to elect immediate expensingunder Â§ 179, if possible.

Furniture and fixtures (new) costing $21,000 on January10.
Computer equipment (new) costing $12,400 on July 28.

Janiceâs itemized deductions include:

State income tax	$2,950
Home mortgage interest paid to First National Bank	6,000
Property taxes on home	2,500
Charitable contribution to her alma mater, State College	1,200

Janice did not keep a record of the sales tax she paid. Theamount from the sales tax table is $437.
Janice reports interest income of $4,000 on certificates of depositat Second National Bank. She made estimated tax payments of $3,000for 2018.

Required:
Compute Janice Morganâs 2018 Federal income tax payable (or refunddue) by providing the following information that would be reportedon Form 1040 and Schedules A, B, C, and SE.

Make realistic assumptions about any missing data.
If an amount is zero, enter "0".
Enter all amounts as positive numbers.
When computing the tax liability, do not round your immediatecalculations.
If required, round your final answers to the nearestdollar.

Provide the following that would be reported on Janice's Form1040:

1. Filing status: The taxpayers' filingstatus:

2. Calculate taxable gross income.
$

3. Calculate the total adjustments forAGI.
$

4. Calculate adjusted gross income.
$

5. Calculate the greater of the standarddeduction or itemized deductions.
$

6. Calculate the qualified busies incomededuction.
$

7. Calculate total taxable income.
$

8. Calculate the income tax liability.
$

9 Calculate SE taxes due.
$

10. Calculate the total tax creditsavailable.
$

11. Calculate total withholding and taxpayments.
$

12. Calculate the amount overpaid(refund):
$

13. Calculate the amount of taxes owed:
$

Provide the following that would be reported on Janice'sSchedule A:

1. Calculate the deduction allowed for medicaland dental expenses.
$

2. Calculate the deduction for taxes.
$

3. Calculate the deduction for interest.
$

4. Calculate the charitable deductionallowed.
$

5. Calculate total itemized deductions.
$Provide the following that would be reported on Janice's ScheduleB:

1. Calculate the interest amount:
$

2. Calculate the ordinary dividends:
$

Provide the following that would be reported on Janice'sSchedule C:

1. Calculate income from sales:
$

2. Calculate total expenses:
$

3. Calculate net profit or loss
$ Provide the following that would be reported on Janice's Form4562.

Click here to access Exhibit 8.1 and the depreciation tables inthe textbook.

1. Calculate the total deprecation for thefurniture and fixtures:
$

2. Calculate the total depreciation for thecomputer equipment.
$

Provide the following that would be reported on Janice'sScheduled SE. When computing the self-employment tax liability, donot round your calculations. Round your final answers to thenearest dollar. Use rounded amount when determining the deductionfor self-employment tax.

1. Calculate the self-employmentliability:
$

2. Calculate the eduction for self-employmenttax:
$

2018 Tax Rate Schedules

Use the 2018 Tax Rate Schedules to compute the tax.

Note: Because the tax rate schedules are used instead of the taxtables, the amount of tax computed may vary slightly from theamount listed in the tables. This variation occurs because the taxfor a particular income range in the tax table is based on themidpoint amount.

2018 Tax Rate Schedules

SingleâSchedule X

Head of householdâSchedule Z

If taxable incomeis:
Overâ

But not
overâ

The taxis:

of the amount
overâ

If taxable incomeis:
Overâ

But not
overâ

The taxis:

of the amount
overâ

$9,525