(continued) Amazon.com
6. Evaluating stock as an investment
Student opinions and answers based on the market price of the stock
will vary. The following statistics will bolster their positions.
Ratio
Computation
2012
2011
Interpretation
Price
Market price
$251*
$173**
earnings
EPS
($0.09)
$1.39
worsened
ratio
= (2,788.89)***
= 124.46
Dividend
Div. per share
0
0
No
yield
Market price
dividends
paid
*market price on 12/31/2012
** market price on 12/30/2011
*** not a meaningful calculation
Ratio
Computation
2012
2011
Interpretation
Stockholders’
Book value
equity – pfd
equity
$8,192 – $0
$7,757 – $0
per share
Com.shares
454
455
outstanding
= $18.04
= $17.05
improved
Focus on Analysis: YUM! Brands, Inc.
(20 min.)
Req. 1
Trend analysis:
2012
2011
2010
Net sales …………………………………………….
120%
111%
100%
Cost of sales ………………………………………
125%
118%
100%
Gross profit (Net sales – Cost of sales) ..
$9,759
$8,993
$8,252
Gross profit rate ………………………………….
118%
109%
100%
Operating income ……………………………….
130%
103%
100%
Net income (net loss) …………………………..
138%
114%
100%
3% in 2011 over 2010, and then greatly in 2012 to 30% over 2010 levels.
Req. 2
(continued) Focus on Analysis: YUM! Brands, Inc.
and 5.0 = sell).
Copyright © 2015 Pearson Education Inc. Chapter 13 Financial Statement Analysis
13–77
Group Projects
(2-3 hours)
Student responses will vary on this assignment.
Comprehensive Financial Statement Analysis Project
(2-4 hours)
The following answers come from the February 2, 2013 year end 10-K of
liability is Long-term Debt.
e. Kohl’s has 800 million shares of common stock authorized, 360
million shares issued, and 222 million (360-138) shares outstanding
at February 2, 2013.
g. Kohl’s records revenue at the time of sale in stores, net of returns.
E-Commerce sales are recorded when the company estimates that
Req. 2 (in millions)
Ratio
Computation
2012
2011
a.
Return
Net income
$986
$1,167
on Sales
Net sales
$19,279
$18,804
= 5.11%
= 6.21%
b.
Asset
Net sales
$19,279
$18,804
Turnover
Avg. total assets
($13,905 +
$14,148)/2
($14,148 +
$14,891)/2
= 1.37
= 1.30
c.
Return
Return on sales
5.11% × 1.37
6.21% × 1.30
on Assets
× Asset turnover
= 7.00%
= 8.07%
d.
Leverage
Avg. total assets
($13,905 +
$14,148)/2
($14,148 +
$14,891)/2
Ratio
Avg. equity
($6,048 +
$6,508)/2
($6,508 +
$7,850)/2
= 2.23
= 2.02
e.
Return
Return on assets
7.00% × 2.23
8.07% × 2.02
on Equity
× Leverage ratio
= 15.61%
= 16.30%
f.
Gross
Gross margin
$6,990
$7,179
Margin
Net sales
$19,279
$18,804
= 36.26%
= 38.18%
Net income –
g.
Earnings
pfd. div.
$986– $0
$1,167 – $0
Per Share
Avg. shares
235*
270
outstanding
= $4.20
= $4.32
h.
Book
Total equity –
Value Per
preferred equity
$6,048 – $0
$6,508 – $0
Share
Number of. shares
360 – 138
358 – 111
outstanding at
year end
= $27.24
= $26.35
*From K-1
From 2011 to 2012, return on sales, return on assets, return on equity,
gross margin, and earnings per share all deteriorated. But the asset
turnover, leverage ratio, and book value per share all improved. The
Test) Ratio
investments + net
current receivables
Current liabilities
2,535
2,607
=0.21
=0.46
f. Debt Ratio
Total liabilities
7,857
7,640
Total assets
13,905
14,148
=0.57
=0.54
g. Times Interest
Income from operations
1,890
2,158
Earned
Interest expense
329
299
=5.74
=7.22
There were minimal changes to the inventory turnover, current ratio, and
debt ratio. The quick ratio and times interest earned both deteriorated
substantially. The current ratio is strong but the quick ratio is very low.
The times interest earned ratio has also declined which is another
negative sign about liquidity. Fortunately, the debt ratio is not extremely
Req. 4
a. The two main sources of cash for Kohl’s were Net Income and
in 2011, but in 2010 the primary source was proceeds from stock
option exercises.
Req. 5
a.
2012
2011
2010
2009
Net sales …………………….
100%
100%
100%
100%
Gross Margin ……………..
36.3%
38.2%
38.2%
37.8%
Operating Income ……….
9.8%
11.5%
11.4%
10.8%
Net Income …………………
5.1%
6.2%
6.1%
5.7%
2009 till 2011.
b.
2012
2011
2010
2009
Net sales ……………………
112.2%
109.5%
107.1%
100%
Net Income …………………
101.3%
119.9%
115.1%
100%
$10,037 million. Since the estimated value of the company of