Tutorial Week 2a_fm_2018 - Solution.docx

MB 2203 FINANCIAL MANAGEMENT TUTORIAL WEEK 2A

Finance Detective (Financial Statement Analysis, A Strategic Perspective, Clyde P. Stickney/Amos Tuck School of Business Administration, Darthmouth College) Effective financial statement analysis requires an understanding of the economic characteristics of the firm being analyzed. Many of these economic characteristics are captured in the relationship between various financial statement items. The exhibit presents condensed financial statement information for firms in 13 different industries. Balance sheet and income statements items are expressed as a percentage of total revenues (that is, all amounts are divided by total revenues for the year). The 13 companies (all corporations except the professional basketball franchise) shown represent the following industries: A. B. C. D. E. F. G. H. I. J. K. L. M.

Advertising agency Aerospace manufacturer (significant government contracts) Beer brewery Computer manufacturer Department store chain Distiller of hard liquor Electric utility Finance company (also involved in leasing) Grocery store chain Life insurance company Pharmaceutical company Professional basketball franchise (a partnership) Steel manufacture

Use whatever clues that you can to match the companies in the exhibit with the industries listed above.

Exhibit - Data for Ratio Detective Exercise

Company Numbers Balance Sheet at End of Year

(1)

(2)

(3)

(4)

(5)

Cash and Marketable Securities

0.7%

Current Receivables

0.2%

19.1%

9.0%

0.9%

11.9%

4.5%

16.3%

4.9%

15.2%

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

1.6%

4.4%

36.2%

13.5%

22.7%

5.1%

14.4%

245.6%

1.0%

25.20%

21.3%

13.2%

70.6%

11.90%

7.8%

562.5%

Inventories

7.5%

-

11.9%

5.6%

13.2%

14.4%

21.7%

13.0%

10.5%

7.5%

-

11.4%

-

Property, Plant, and Equipment Cost

17.0%

0.8%

42.90%

79.40%

54%

37.50%

25.30%

65.90%

162.5%

18.40%

3.60%

398.4%

70.8%

Accumulated Depreciation

-5.5%

-1%

-21.0%

-21.7%

-26.9%

-12.0%

-11.8%

-27.4%

-80.5%

-9.3%

-1.8%

-109.6%

-21.4%

Net

11.5%

0.1%

21.9%

57.7%

27.1%

25.5%

13.5%

38.5%

82.0%

9.1%

1.8%

288.8%

49.4%

1.40%

23.20%

12.50%

6.90%

8.70%

2.20%

31.80%

16.7%

4.0%

22.1%

51.9%

8.7%

57.5%

21.3%

47%

71.6%

76.0%

76.1%

79.9%

84.9%

112.2%

114.8%

123.7%

311%

317.7%

694.6%

Current Liabilities

7.8%

21.0%

32.7%

13.2%

22.3%

35.1%

15.3%

43.6%

12.5%

87.1%

203.9%

30.4%

437.5%

Long-term Debt

3.6%

-

6.3%

14.7%

8.7%

11.6%

17.4%

3.3%

18.0%

4.3%

21.4%

126.0%

196.1%

Other Noncurrent Liabilities

1.4%

15.6%

5.5%

14.2%

4.9%

6.8%

10.8%

12.9%

5.0%

7.8%

8.4%

23.1%

12.2%

8.5%

10.3%

27.1%

33.9%

40.2%

26.4%

41.4%

52.4%

79.3%

24.5%

77.5%

138.2%

48.8%

21.3%

46.9%

71.6%

76.0%

76.1%

79.9%

84.9%

112.2%

114.8%

123.7%

311.2%

317.7%

694.6%

Other Assets Total Assets

Owners' Equity Total Equities

Company Numbers Income Statement for Year

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

76.9%

61.8%

74.8%

62.0%

71.1%

72.1%

46.5%

26.60%

86.10%

89.60%

86.60%

57.80%

21.80%

1.4%

0.1%

4.1%

3.6%

6.8%

2.6%

2.0%

4.20%

6.60%

2.60%

0.90%

10.20%

14.80%

Interest

0.4%

1.9%

0.7%

0.8%

0.5%

1.3%

2.0%

1.10%

1.80%

1.20%

3.40%

10.10%

47.30%

Advertising

3.6%

0.5%

-

8.0%

-

3.3%

11.2%

4.00%

-

-

-

-

-

-

-

3.5%

-

7.7%

-

-

11.20%

-

-

-

-

-

1.1%

-

4.5%

5.5%

2.8%

2.9%

6.6%

9.90%

-4.10%

3.90%

2.50%

8.20%

7.00%

Sales Cost of Goods Sold ( excluding depreciation ) or Operating Expenses Depreciation

Research and Development Income Taxes All Other Items (net)

15.5%

-0.7%

7.2%

13.4%

6.5%

13.5%

23.5%

25.10%

6.40%

-1.30%

-1.20%

-5.50%

-

98.9%

63.6%

94.8%

93.3%

95.4%

95.7%

91.8%

82.1%

96.8%

96.0%

92.2%

80.8%

90.9%

Net Income

1.1%

36.4%

5.2%

6.7%

4.6%

4.3%

8.2%

17.9%

3.2%

4.0%

7.8%

19.2%

9.1%

Cash Flow from Operations + Capital Expenditures

1.22%

-

2.95%

1.17%

1.09%

1.09%

5.20%

5.20%

1.36%

3.06%

44.80%

0.95%

0.80%

Total Expenses