Question 1.1. (TCO A) An advantage of the corporate form of business is _____. (Points : 5)
(TCO B) The following selected data was retrieved from the Walmart, Inc. financial statements for the year ending January 31, 2013:
Cost of Goods Sold
Income Tax Expense
Operating, Selling and Administrative Expenses
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)
Question 3.3. (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the two questions below:
Cash flow from operating activities
For the year ended 2012
For the year ended 2011
Net (loss) earnings
Depreciation and amortization
Impairment of goodwill and purchased intangible assets
Stock-based compensation expense
Provision for doubtful accounts
Provision for inventory
Deferred taxes on earnings
Excess tax benefit from stock-based competition
Accounts and financing receivables
Taxes on earnings
Other assets and liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Investment in property, plant, and equipment
Proceeds from sale of property, plant, and equipment
Purchases of available-for-sale securities and other investments
Maturities and sales of available-for-sale securities and other investment
Payments in connection with business acquisitions, net of cash acquired
Proceeds from business divestiture, net
Net cash used in investing activities
Cash flow from financing activities:
(Payments) issuance of commercial paper and notes payable, net
Issuance of debt
Payment of debt
Issuance of common stock under employee stock plans
Repurchase of common stock
Excess tax benefit from stock-based compensation
Cash dividends paid
Net cash used in financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
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.
(Points : 36)
Question 4.4. (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.
a. Goforit carries significant electronics inventory in a competitive environment in which 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)?
(Points : 36)
Question 5.5. (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.
Johnson & Johnson
Inventory turnover ratio
Average collection period
Cash debt coverage ratio
Debt to Total assets
1)Please explain the meaning of each of the Pfizer ratios above.
2)Please state which company performed better for each ratio.