Comprehensive Review Page 290 Chapter 8
ACTIVITY 105 TEST YOUR UNDERSTANDING – CHIPOTLE
Purpose: • Analyze the income statement, the balance sheet, and the statement of cash flows
• Prepare a statement of retained earnings
Chipotle Mexican Grill (CMG) BALANCE SHEET ($ in millions)
ASSETS
12/31/2011
12/31/2010
12/31/2009
12/31/2008
Cash and cash equivalents
$ 401
$ 225
$ 220
$ 88
Short-term investments
55
125
50
100
LIABILITIES
Accounts payable
$ 46
$ 34
$ 25
$ 24
Short-term debt
Accrued expenses
Other current liabilities
0
4
0
TOTAL Current liabilities
157
123
102
Long-term debt
0
4
4
4
Deferred income taxes
Other noncurrent liabilities
160
133
113
TOTAL Noncurrent liabilities
224
188
156
125
381
TOTAL Liabilities
STOCKHOLDERS‘ EQUITY
Preferred stock
0
0
0
0
Common stock
677
594
540
502
Retained earnings
Other stockholders’ equity
TOTAL Stockholders’ equity
811
704
623
TOTAL L & SE
Accounts receivable
Inventories
Other current assets
TOTAL Current assets
501
406
298
211
Property, plant, and equipment
Accumulated depreciation
PPE, net
752
677
636
586
Goodwill and other intangibles
Long-term investments
0
0
0
0
Other noncurrent assets
TOTAL Noncurrent assets
924
716
664
614
Comprehensive Review Page 291 Chapter 8
Chipotle Mexican Grill (CMG) INCOME STATEMENT ($ in millions)
For the years ended December 31,
2011
2010
2009
2008
Revenue
$
2,270
$
1,836
$
1,518
$
1,332
Cost of goods sold (COGS)
1,680
1,347
1,139
1,045
Chipotle Mexican Grill (CMG) STATEMENT OF CASH FLOWS ($ in millions)
For the years ended December 31,
2011
2010
2009
2008
Cash flows from (for) operating activities
Net income (loss)
$
215
$
179
$
127
$
78
Depreciation and amortization
69
53
Deferred income tax
10
8
13
Operating (gains) losses
13
21
Changes in working capital
18
33
Cash flows from (for) investing activities
Sale of property, plant, and equipment
0
0
0
0
Sale of investments
125
50
100
20
Purchase of property, plant, and equipment
(151)
(113)
(117)
(152)
Purchase of investments
(183)
(127)
(50)
(100)
Other investing cash flow items
(1)
0
0
0
Net cash from (for) investing activities
(210)
(190)
(67)
(232)
Cash flows from (for) financing activities
Issuance of debt
0
0
0
0
Issuance of capital stock
0
0
0
0
Repayment of debt
0
0
0
0
Repurchase of capital stock
(109)
(72)
Cash dividends paid
0
0
0
0
Other financing cash flow items
14
0
Net cash (for) financing activities
(95)
(62)
Effect of exchange rate changes
0
0
0
0
Net change in cash
176
5
132
+ Beginning cash and cash equivalents
225
220
= Ending cash and cash equivalents
$
401
$
225
$
220
$
88
Supplemental information
$
260
$
176
$
144
$
47
Gross profit
590
489
379
287
Selling, general, and admin expense (SGA)
158
126
108
101
Depreciation and amortization expense
69
Other operating expenses
6
6
6
9
Total operating expenses
239
201
175
163
Operating income
351
288
204
124
Interest income (expense) and other
(1)
1
0
3
Income before income tax
289
204
127
Provision for income tax
135
110
Income from continuing operations
215
0
0
0
Nonrecurring items / Minority interest
0
0
0
0
Net income
$
215
$
179
$
127
$
Refer to the financial statements presented for Chipotle on the previous two pages to answer the following
questions.
BALANCE SHEET
Q1 Review the following accounts, subtotals, and totals; (1) describe your observations; and then (2)
identify what your observations indicate. A response is given for Cash and Cash Equivalents to help
with understanding.
a. Cash and Cash Equivalents… more than tripled from $88 million in 2008 to $401 million in
2011 and from being 10% of total assets in 2008 to more than 25% of total assets in 2011,
indicating this company is cash rich!
Q2 Compute the ratios requested in the chart below. For ratio formulas and explanation refer to
Appendix B – Ratios.
* Industry: Restaurants —Industry ratio averages from money.msn.com
For each ratio, (a) compare the two years of ratios and circle the ratio indicating lower financial
risk, (b) cross out any ratio indicating greater financial risk than the industry norm, and (c) comment
on the results.
Q3 Overall, the balance sheet and related ratios indicate a (strengthening / steady / weakening)
financial position. Why? List observations that support your conclusion and explain why.
Comprehensive Review Page 293 Chapter 8
INCOME STATEMENT
Q5 Compute the ratios requested in the chart below. For ratio formulas and explanation refer to
Appendix B – Ratios.
Chipotle
Industry Norm*
12/31/2011
12/31/2008
ROS
14.0 %
9.5%
5.9%
ROE
37.8 %
20.6%
Gross profit margin
26.0%
Accounts receivable turnover
333
Inventory turnover
209
Asset turnover
* Industry: Restaurants —Industry ratio averages from money.msn.com
For each ratio, (a) circle the stronger company ratio, (b) cross out any company ratio that is weaker
than the industry norm, and (c) comment on the results.
Answers will vary, but should include variations of the following:
Q6 The income statement and related ratios indicate (strengthening / steady / weakening) earnings
potential. Why? List observations that support your conclusion and explain why.
Comprehensive Review Page 294 Chapter 8
STATEMENT OF CASH FLOWS
Q7 During 2011, the primary source of cash was (operating activities / issuing debt / issuing capital
Q8 Compute the ratios requested in the chart below. For ratio formulas and explanation refer to
Appendix B – Ratios.
Chipotle RATIOS
Industry Norm
2011
2008
For each ratio, (a) circle the company ratio indicating the least amount of risk and (b) comment on
the results.
The statement of cash flows and related information report a
STATEMENT OF RETAINED EARNINGS
Q10 a. Complete the statement of retained earnings below.
Chipotle STATEMENT OF RETAINED EARNINGS ($ in millions)
For the years ended December 31,
2011
2010
2009
2008
OTHER
Q11 Based on the financial statements presented for Chipotle, would you invest in this company?
(Yes / No) Why? Support your response with at least five good observations.
Comprehensive Review Page 296 Chapter 8
ACTIVITY 106 TEST YOUR UNDERSTANDING—CARNIVAL CORPORATION
Purpose: • Analyze the income statement, the balance sheet, and the statement of cash flows.
• Prepare a statement of retained earnings.
Carnival Corporation (CCL) BALANCE SHEET ($ in millions)
ASSETS
11/30/Year 5
11/30/Year 4
11/30/Year 3
11/30/Year 2
Cash and cash equivalents
$ 1,178
$ 643
$ 610
$ 667
Short-term investments
9
17
461
39
Property, plant, and equipment
25,331
24,184
20,073
12,103
Accumulated depreciation
(4,019)
(3,361)
(2,551)
(1,987)
PPE, net
21,312
20,823
17,522
10,116
Goodwill and other intangibles
4,488
4,627
4,355
681
Long-term investments
0
0
0
0
Other noncurrent assets
417
458
482
406
$ 28,432
$ 12,335
LIABILITIES
Accounts payable
$ 690
$ 631
$ 634
$ 269
Short-term debt
583
981
94
0
Current portion of long-term debt
1,042
681
392
155
Accrued expenses
832
721
568
290
Other current liabilities
2,045
2,020
1,622
906
TOTAL Current liabilities
5,192
5,034
3,310
1,620
Long-term debt
5,727
6,291
6,918
3,014
Deferred income taxes
0
0
0
0
Other noncurrent liabilities
541
551
470
283
TOTAL Noncurrent liabilities
6,268
6,842
7,388
3,297
TOTAL Liabilities
11,460
11,876
10,698
4,917
STOCKHOLDERS’ EQUITY
Preferred stock
0
0
0
0
Common stock, par
359
359
355
6
Additional paid-in capital
7,381
7,311
7,163
1,089
Retained earnings
10,233
8,623
7,191
6,326
Other stockholders’ equity
143
525
142
Treasury stock
0
TOTAL Stockholders’ equity
16,972
15,760
13,793
7,418
TOTAL L & SE
$ 28,432
$ 24,491
$ 12,335
Accounts receivable
408
409
403
108
Inventories
250
240
171
91
Other current assets
370
419
487
227
TOTAL Current assets
2,215
1,728
2,132
1,132
Comprehensive Review Page 297 Chapter 8
Carnival Corporation (CCL) INCOME STATEMENT ($ in millions)
For the years ended November 30,
Year 5
Year 4
Year 3
Year 2
Revenue
$
10,735
$
9,427
$
6,459
$
4,244
Cost of goods sold (COGS)
4,822
4,244
2,880
1,764
Interest income (expense) and other
(330)
(284)
(195)
(111)
Total nonoperating revenue (expense)
21
12
(755)
28
Income before income tax
959
Provision for income tax
73
47
29
Income from continuing operations
1,016
Nonrecurring items / Minority interest
0
0
0
Net income
$
$
$
$
1,016
Outstanding shares (in millions)
806
802
718
587
Carnival Corporation(CCL) STATEMENT OF CASH FLOWS ($ in millions)
For the years ended November 30,
Year 5
Year 4
Year 3
Year 2
Cash flows from (for) operating activities
Net income (loss)
$
2,257
$
1,854
$
1,194
$
1,016
Depreciation and amortization
902
812
585
382
Operating (gains) losses
45
28
22
54
Changes in working capital
206
522
132
17
Cash flows from (for) investing activities
Sale of property, plant, and equipment
0
0
0
0
Sale of investments
0
0
0
0
Purchase of property, plant, and equipment
(1,977)
Purchase of investments
0
0
0
0
Other investing cash flow items
7
497
83
Net cash (for) investing activities
Cash flows from (for) financing activities
Issuance of debt
910
881
1,751
232
Issuance of capital stock
50
112
42
7
Repayment of debt
(912)
(736)
(898)
(190)
Repurchase of capital stock
(305)
0
0
0
Cash dividends paid
(566)
(400)
(292)
(246)
Other financing cash flow items
64
Net cash from (for) financing activities
(892)
(198)
Effect of exchange rate changes
Net change in cash
535
33
(795)
+ Beginning cash and cash equivalents
643
610
667
1,462
= Ending cash and cash equivalents
$
1,178
$
643
$
610
$
667
Supplemental information
Cash interest paid
$
314
$
250
$
156
$
110
Cash taxes paid
15
20
0
Free cash flow
867
(770)
(875)
(763)
Gross profit
5,913
5,183
3,579
2,480
Selling, general, and admin expense (SGA)
2,474
2,288
1,680
1,067
Depreciation and amortization expense
902
812
585
382
Other operating expenses
(102)
Total operating expenses
3,274
3,010
2,196
1,438
Operating income
1,042
Comprehensive Review Page 298 Chapter 8
Refer to the financial statements presented for Carnival Corporation on the previous two pages to answer
the following questions.
BALANCE SHEET
Q1 Review the following accounts, subtotals, and totals; (1) describe your observations; and then (2)
identify what your observations indicate. A response is given for PPE, net to help with
understanding.
a. Property, plant, and equipment, net… increased from $10,116 million in Year 2 to $21,312
million in Year 5, an increase of 111%, indicating purchases of additional cruise ships for
expansion. The greatest increase was in Year 3, when PPE increased by more than 50%.
Q2 Compute the ratios requested in the chart below. For ratio formulas and explanation refer to
Appendix B—Ratios.
* Industry: Resorts and Casinos—Industry and S&P 500 ratio averages from money.msn.com
For each ratio, (a) compare the two years of ratios and circle the ratio indicating lower financial
risk, (b) cross out any ratio indicating greater financial risk than the industry norm, and (c) comment
on the results.
financial position. Why? List observations that support your conclusion and explain why.
Comprehensive Review Page 300 Chapter 8
Q5 Compute the ratios requested in the chart below. For ratio formulas and explanation refer to
Appendix B—Ratios.
* Industry: Resorts and Casinos—Industry and S&P 500 ratio averages from money.msn.com
For each ratio, (a) circle the stronger company ratio, (b) cross out any company ratio that is weaker
than the industry norm, and (c) comment on the results.
Answers will differ, but should include variations of the following:
potential. Why? List observations that support your conclusion and explain why.
Answers will differ, but should include variations of the following: