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SERIAL PROBLEM — SP 17
Serial Problem — SP 17, Business Solutions (45 minutes)
1. Gross margin with services revenue
Gross margin = Total revenue – Cost of goods sold
Gross margin without services revenue
Gross margin = Net (goods) sales – Cost of goods sold
Reporting in Action — BTN 17-1
1. Trend percents for selected income statement accounts
($ in millions) Fiscal
2013
Fiscal
2012
Fiscal
2011
Net Sales..............................................................157.9% 144.6% 100.0%
$170,910 $156,508 $108,249
Cost of sales.......................................................165.5% 136.3% 100.0%
$106,606 $87,846 $64,431
$37,037 $41,733 $25,922
2. Common-size percents for asset categories and accounts
($ in millions) Sep. 28, 2013 Sep. 29, 2012
Total current assets............................................ 35.4% 32.7%
$73,286 $57,653
$5,756 $5,359
Total assets as of September 28, 2013 and September 29, 2012 are $207,000 and $176,064, respectively.
3. For fiscal 2013, revenues grew at a lower rate than cost of sales,
however, for fiscal 2012, revenues grew at a higher rate than cost of
sales. Operating income grew at a higher rate than revenues for fiscal
The common-size percent figures in part 2 show an increase in current
4. Answers depend on the financial statement information obtained.
Comparative Analysis — BTN 17-2
1.
Key figures ($ millions) Apple Google
Cash and equivalents............ 6.9% $14,259 17.0% $18,898
2. Apple’s retained earnings make up a smaller percentage of its total
This implies that Apple has a lower gross margin ratio on sales of
4. Although Apple has almost twice as much inventory as a percent of
Ethics Challenge — BTN 17-3
1. The CEO appears to have selectively chosen from the 11 available
ratios to present only the ones that show trends that are favorable to
2. The consequences of this action by the CEO might be mixed. It is likely
that the analysts will ask other questions that may reveal some
Even if the CEO is able to succeed with this strategy in the short term,
Communicating in Practice — BTN 17-4
There is no set solution to this activity. Each team’s memorandum will vary
Taking It to the Net — BTN 17-5
($ thousands) As of 12/31/2012 As of 12/31/2013
1. Profit margin ratio................
$660,931/$6,644,252 = 9.9% $820,470/$7,146,079= 11.5%
*An acceptable alternative solution would be to include minority interest in equity.
**Taken from consolidated statement of income.
Analysis and Interpretation: Hershey’s performance generally improved in
all areas evaluated for the profitability metrics reported in the table above
with the exception of return on common equity.
Teamwork in Action — BTN 17-6
Part 1
Team reports should look something like the following:
Horizontal Analysis
Horizontal analysis is comparing a company’s financial statement amounts
across time. We compare data from comparative statements that are
We also determine the percent of increase or decrease in sales that this
Example: Assume that prior year sales equal $240,000, and current year
Teamwork in Action (Concluded)
If a horizontal comparison is made over a number of periods, the
comparisons are made to corresponding amounts in a selected period
Vertical analysis is comparing a company's financial statement amounts to
Example: Total assets for the period being analyzed = $500,000 (base
Part 2
Explanations of the four categories or areas of ratio analysis follow:
a. Liquidity analysis measures the availability of resources to meet
Note: Students will select various ratios to illustrate these categories. Use
Exhibit 17.16 to verify the category, measurement, and use of each ratio.
Part 3
Each team member presents results to the entire team.
Entrepreneurial Decision — BTN 17-7
1. No. Although the current ratio improved over the three-year period, the
acid-test ratio declined and accounts receivable and merchandise
3. No. Sales are increasing and accounts receivable are turning more
4. Yes. To illustrate, if sales are assumed to equal $100 in 2013, the sales
6. The dollar amount of selling expenses increased in 2014 and decreased
Hitting the Road — BTN 17-8
One possible strategy to fulfill the requirements of this assignment is:
Assume that a $37,500 salary will be earned upon graduation at age 25.
If the annual amount invested does not change and you earn 10% for 40
years, then the investment will grow to $1,327,779 ($3,000 x 442.593 from
Global Decision — BTN 17-9
Key figures (KRW in millions) Samsung
Cash and equivalents........................................ 7.6% 16,284,780 ₩
Accounts receivable, net.................................. 13.0% 27,875,934
Comparisons and comments:
Samsung’s cash and equivalents is greater than Apple and less than
Google as a percent of assets.
