6e Balance Sheet Page 56 Chapter 2
ACTIVITY 19 ANALYSIS: COMMON–SIZE STATEMENTS
Purpose: • Prepare common-size statements and understand the information provided.
The Common-Size Balance Sheet compares all amounts to total assets of that same year. The analysis
measures each item as a percentage of total assets.
Q1 For DineEquity and Nathan’s Famous listed below, complete the common-size statements by
dividing each item on the balance sheet by the amount of total assets. Record the resulting
common-size percentage in the shaded area provided.
(Hint: Percentages for CA + PPE, net + Goodwill + Other = 100% and CL + LTD + Other NCL + CS + RE + Other = 100 %.)
2010
DineEquity
(DIN)
Darden Restaurants
(DRI)
Nathan’s Famous
(NATH)
($ in millions)
$
CS%
$
CS%
$
CS%
* Note: The percentages may not sum to 100% due to rounding error.
Refer to the information above to answer the following questions.
Q4 Which company finances assets primarily with amounts invested by shareholders?
(275.0)
6e Balance Sheet Page 57 Chapter 2
Q6 Review the balance sheet information presented above for the three restaurant chains and
comment on at least two items of significance that the common-size statements help to reveal.
Answers will vary and may include two of the following:
statements. Why?
6e Balance Sheet Page 58 Chapter 2
ACTIVITY 20 ANALYSIS OF YUM! BRANDS
Purpose: • Understand and interpret amounts reported on the balance sheet.
YUM! BRANDS (YUM) BALANCE SHEET ($ in millions)
ASSETS
12/25/2010
12/26/2009
12/27/2008
12/29/2007
Cash and cash equivalents
$ 1,426
$ 353
$ 216
$ 789
Accounts receivable
256
239
229
225
Inventories
189
122
143
128
Other current assets
442
494
363
339
Property, plant, and equipment
7,103
7,247
6,897
7,132
Accumulated depreciation
(3,273)
(3,348)
(3,187)
(3,283)
PPE, net
3,830
3,899
3,710
3,849
Goodwill and other intangibles
1,134
1,102
940
1,026
Long-term investments
154
144
65
153
Other noncurrent assets
885
795
861
679
TOTAL ASSETS
$8,316
$7,148
$6,527
$7,188
LIABILITIES
Accounts payable
$ 540
$ 499
$ 508
$ 519
Short-term debt
673
59
25
288
Other current liabilities
1,235
1,095
1,189
1,255
Long-term debt
2,915
3,207
3,564
2,924
Other noncurrent liabilities
1,377
1,263
1,349
1,063
STOCKHOLDERS’ EQUITY
Contributed capital (CC)
86
253
7
0
Retained earnings (RE)
1,717
996
303
1,119
Other stockholders’ equity (SE)
(227)
(224)
(418)
20
TOTAL L & SE
$8,316
$7,148
$6,527
$7,188
YUM! BRANDS (YUM) Classified Balance Sheet / Common-Size Statements ($ in millions)
12/25/2010
12/26/2009
12/27/2008
12/29/2007
$
CS%
$
CS%
$
CS%
$
CS%
Current assets
20.6%
PPE, net
53.5%
Goodwill +Intang.
14.3%
Other assets
11.6%
C liabilities
28.7%
NC liabilities
55.5%
TOTAL LIAB
CCapital
0.0%
0
0.0%
15.5%
Other SE
0.3%
6e Balance Sheet Page 59 Chapter 2
YUM! BRANDS (YUM) RATIOS
Industry Norm
12/25/2010
12/26/2009
12/27/2008
12/29/2007
Refer to the series of balance sheets for Yum! Brands (on the previous page) to answer the following
questions.
Q1 YUM! Brands is the largest restaurant chain (larger than McDonald’s) when measured by
(Hint: Refer to company descriptions in Appendix A—Featured Corporations).
Which is your favorite YUM! Brands restaurant?
Q4 This company distributed dividends and other amounts to shareholders of $322 million in 2008,
$362 million in 2009, and $412 million in 2010. Use this information to compute net income for:
Q5 For 12/26/2009 and 12/25/2010 complete the classified balance sheet by adding the items within
each classification. Record your results in the area provided on the previous page. Classified
balance sheets for 12/29/2007 and 12/27/2008 have already been completed.
(Remember CA + PPE, net + Goodwill + Other = Total Assets and CL + NCL + CS + RE + Other = Total L + SE)
6e Balance Sheet Page 60 Chapter 2
Q6 For 12/26/2009 and 12/25/2010 complete the common-size statements by dividing each item on
the classified balance sheet by the amount of total assets for the same year. Record your results in
the area provided on the previous page. Common-size statements for 12/29/2007 and 12/27/2008
have already been completed. Comment on the trends in Total Liabilities and Total Stockholders’
Equity and what this indicates.
Q7 For 12/26/2009 and 12/25/2010 compute the current ratio and the debt ratio. Record your results
in the area provided above. Ratios for 12/29/2007 and 12/27/2008 have already been computed.
Comment on the results.
Support your response with at least three good reasons.
Either choice may be correct if supported with good reasons.
6e Balance Sheet Page 61 Chapter 2
ACTIVITY 21 ANALYSIS OF MCDONALD’S
Purpose: • Understand and interpret amounts reported on the balance sheet.
McDONALD’s (MCD) BALANCE SHEET ($ in millions)
ASSETS
12/31/2010
12/31/2009
12/31/2008
12/31/2007
Cash and cash equivalents
$ 2,387.0
$ 1,796.0
$ 2,063.4
$ 1,981.3
Accounts receivable
1,179.1
1,060.4
931.2
1,053.8
Inventories
109.9
106.2
111.5
125.3
Other current assets
692.5
453.7
411.5
421.5
LIABILITIES
Accounts payable
$ 943.9
$ 636.0
$ 620.4
$ 624.1
Short-term debt
0.0
0.0
0.0
1,126.6
Other current liabilities
1,980.8
2,352.7
1,917.5
2,747.8
Long-term debt
11,497.0
10,560.3
10,186.0
7,310.0
Other noncurrent liabilities
2,919.3
2,642.0
2,355.0
2,303.4
STOCKHOLDERS’ EQUITY
Common stock, par
16.6
16.6
16.6
16.6
Additional paid-in capital
5,196.4
4,853.9
4,600.2
4,226.7
Retained earnings
33,811.7
31,270.8
28,953.9
Treasury stock
(25,143.4)
(22,854.8)
(20,289.4)
Other stockholders’ equity
752.9
747.4
101.3
1,337.4
TOTAL L & SE
McDONALD’s Classified Balance Sheet / Trend Analysis ($ in millions)
12/31/2010
12/31/2009
12/31/2008
12/31/2007
$
Trend
$
Trend
$
Trend
BASE YEAR
Current assets
PPE, net
Goodwill
Other assets
TOTAL Assets
Current liabilities
NC Liabilities
TOTAL Liab
Contributed capital
Retained earnings
Other SE
Property, plant, and equipmt
$34,482.4
$33,440.5
$31,152.4
$32,203.7
Accumulated depreciation
(12,421.8)
(11,909.0)
(10,897.9)
(11,219.0)
PPE, net
22,060.6
21,531.5
20,254.5
Goodwill
2,586.1
2,425.2
2,237.4
2,301.3
Long-term investments
1,335.3
1,212.7
1,222.3
1,156.4
Other noncurrent assets
1,624.7
1,639.2
1,229.7
1,367.4
TOTAL ASSETS
6e Balance Sheet Page 62 Chapter 2
McDONALD’s (MCD) RATIOS
Industry Norm
12/31/2010
12/31/2009
12/31/2008
12/31/2007
Refer to McDonald’s balance sheets on the previous page to answer the following questions.
more than 32,000 restaurants in more than 120 countries.
Hint: Refer to company descriptions in Appendix A—Featured Corporations.
Q5 This company distributed dividends of $1,823.4 million in 2008, $2,235.5 million in 2009, and
$2,408.1 million in 2010. Use this information to compute net income for:
Q7 For 12/31/2009 and 12/31/2010 complete the classified balance sheet by adding the accounts
within each classification. Record your results in the area provided on the previous page. Classified
balance sheets for 12/31/2007 and 12/31/2008 have already been completed.
(Remember CA + PPE, net + Goodwill + Other = Total Assets and CL + NCL + CS + RE + Other = Total L + SE)
Q8 Refer to the Classified Balance Sheet. The assets of this company are primarily financed with
Q9 For 12/31/2009 and 12/31/2010 complete the trend analysis by dividing each amount by the
amount for the base year of 12/31/2007, and then multiply by 100. Record the resulting trend
index in the area provided on the previous page. For 12/31/2007 and 12/31/2008 the trend indexes
have already been computed.
6e Balance Sheet Page 63 Chapter 2
Q11 For 12/31/2009 and 12/31/2010 compute the current ratio and the debt ratio. Record your results
in the area provided above. Ratios for 12/31/2007 and 12/31/2008 have already been computed.
Q12 Review the financial information of this company and comment on
a. signs of financial strength.
Over this three year period…
b. warning signs or signs of financial weakness.
Over this three year period…
Q13 If you had $10,000, would you consider investing in this company? (Yes / No) Why or why not?
6e Balance Sheet Page 64 Chapter 2
ACTIVITY 22 TEST YOUR UNDERSTANDING
Purpose: • Understand and interpret amounts reported on the balance sheet.
BALANCE SHEETS ($ in millions)
ASSETS
CORP A
6/30/2010
CORP B
5/31/2010
CORP C
12/31/2010
CORP D
12/31/2010
Cash and cash equivalents
$ 344.6
$ 3,079.1
$ 1,526.4
$ 27,972
Short-term investments
0.0
2,066.8
1,357.7
1,044,590
Accounts receivable
45.1
2,649.8
1,028.9
608,139
Inventories
26.7
2,040.8
0.0
0
Other current assets
84.6
1,122.7
432.6
0
Property, plant, and equipment
2,099.3
4,389.8
2,551.2
0.0
Accumulated depreciation
(970.3)
(2,457.9)
(897.8)
0.0
PPE, net
1,129.0
1,931.9
1,653.4
0
Goodwill + Intangibles
124.1
654.6
3,937.5
38,210
Long-term investments
0.0
0.0
4,803.0
0
Other noncurrent assets
98.0
873.6
188.6
194,991
TOTAL ASSETS
$1,852.1
$14,419.3
$14,928.1
$1,913,902
LIABILITIES
Accounts payable
$ 112.8
$ 1,254.5
$ 162.4
$ 51,749
Short-term debt
0.0
138.6
0.0
258,348
Other current liabilities
337.1
1,971.1
1,463.5
873,168
Long-term debt
524.5
445.8
142.8
362,983
Other noncurrent liabilities
149.0
855.3
601.3
204,186
STOCKHOLDERS’ EQUITY
Contributed capital
483.4
3,443.4
10,111.2
101,628
Retained earnings
1,923.6
6,095.5
1,942.7
79,559
Other stockholders’ equity
(1,678.3)
215.1
504.2
(17,719)
TOTAL L & SE
$1,852.1
$14,419.3
$14,928.1
$1,913,902
Classified Balance Sheets / Common-Size Statements ($ in millions)
A 6/30/2010
B 5/31/2010
C 12/31/2010
D 12/31/2010
$
CS%
$
CS%
$
CS%
$
CS%
Current assets
501.0
27.0
10,959.2
76.0
4,345.6
29.1
1,680,701
87.8
PPE, net
1,129.0
61.0
1,931.9
13.4
1,653.4
11.1
-0-
0.0
Goodwill+
124.1
6.7
654.6
4.5
3,937.5
26.4
38,210
2.0
Other assets
98.0
5.3
873.6
6.1
4,991.6
33.4
194,991
10.2
TTL Assets
1,852.1
100.0
14,419.3
100.0
14,928.1
100.0
1,913,902
100.0
C Liabilities
449.9
24.3
3,364.2
23.3
1,625.9
10.9
1,183,265
61.8
NC Liabilities
673.5
36.4
1,301.1
9.0
744.1
5.0
567,169
29.7
TTL Liab
1,123.4
60.7
4,665.3
32.3
2,370.0
15.9
1,750,434
91.5
Cont capital
483.4
26.1
3,443.4
23.9
10,111.2
67.7
101,628
5.3
R/Earnings
1,923.6
103.9
6,095.5
42.3
1,942.7
13.0
79,559
4.2
Other SE
(1,678.3)
(90.7)
215.1
1.5
504.2
3.4
(17,719)
(1.0)
TTL SE
728.7
39.3
9,754.0
67.7
12,558.1
84.1
163,468
8.5
6e Balance Sheet Page 65 Chapter 2
CORP A
CORP B
CORP C
CORP D
RATIOS
6/25/2010
5/31/2010
12/31/2010
12/31/2010
Current ratio
1.11
3.26
2.67
1.42
Debt ratio
61%
32%
16%
91%
Q1 Analyze the financial attributes of the four corporations on the previous page by placing an X in the box
when the company has the characteristics noted below.
Which corporation …
CORP A
CORP B
CORP C
CORP D
Q2 Use the descriptions below to match each corporation with its corresponding financial information. Then
comment on why you selected the match.
BRINKER INTERNATIONAL (EAT) owns, develops, operates, and franchises the Chili’s Grill & Bar (Chili’s), On
The Border Mexican Grill & Cantina (On The Border), Maggiano’s Little Italy (Maggiano’s), and Romano’s
Macaroni Grill (Macaroni Grill) restaurant brands.
CITIGROUP (C) is a diversified global financial services holding company whose businesses provide a range
of financial services to consumer and corporate customers. The company operates in five business
segments: Global Cards, Consumer Banking, Institutional Clients Group, Global Wealth Management, and
Other.
6e Balance Sheet Page 66 Chapter 2
NIKE (NKE) is engaged in the design, development, and worldwide marketing of athletic footwear, apparel,
equipment, and accessory products. It sells its products to retail accounts, through NIKE-owned retail,
including stores and Internet sales, and through a mix of independent distributors and licensees, in more
than 180 countries around the world.
YAHOO! (YHOO) is a global Internet brand. The Company’s offerings to users fall into six categories: Front
Doors, Communities, Search, Communications, Audience, and Connected Life. Yahoo! generates revenues
by providing marketing services to advertisers across a majority of Yahoo! Properties and Affiliate sites. The
majority of its offerings are available in more than 30 languages.