Reduced legal liability for investors
is increased with a debit
sales under $1,000,000
debit to Cash of $1,020,000
The market interest rate
- (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.
|Ratio Name||Johnson & Johnson||Pfizer|
|Inventory turnover ratio||3.1||1.7|
|Average collection period||59.4 days||69.1 days|
|Cash debt coverage ratio||.27||.16|
|Debt to Total assets||46.6%||127.5%|
1) Please explain the meaning of each of the Pfizer ratios above.
2) Please state which company performed better for each ratio.
TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.”
Assuming the goal is to maximize net income, choose an accounting treatment from each of the following scenarios, and explain to your CEO why the choice will produce the desired effect on reported Net Income for the current year. Include in your answer the effect of the choice on both the income statement and balance sheet.
- Goforit carries significant electronics inventory in a competitive environment where prices are actually falling. Which inventory valuation method would you choose—LIFO, FIFO, or average cost? Assume that unit purchases exceed unit sales.b. Goforit has a large investment in warehouse equipment including conveyor belts, forklifts, and automated packaging systems. Which depreciation method would you choose: Straight line (SL) or double declining balance (DDB)?
. (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the 2 questions below:
|Cash flow from operating activities||In millions||In millions|
|For the year ended 2012||For the year ended 2011|
|Net (loss) earnings||$(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|
|Deferred taxes on earnings||(711)||166|
|Excess tax benefit from stock-based competition||(12)||(163)|
|Accounts and financing receivables||1,269||(227)|
|Taxes on earnings||(320)||610|
|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|
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.
(TCO B) The following selected data was retrieved from the Wal-Mart, Inc. financial statements for the year ending January 31, 2013:
|Cost of Goods Sold||352,488|
|Income Tax Expense||7,981|
|Operating, Selling and Administrative Expenses||88,873|
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)