Chapter 13: Q14DQ (page 614)
Refer to Apple’s financial statements in Appendix A. Compute its profit margin for the years ended September 26, 2015, and September 27, 2014.
| September 26, 2015 | 22.84% |
| September 27, 2014 | 21.61% |
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Why is working capital given special attention in the process of analyzing balance sheets?
Which items are usually assigned a 100% value on (a) a common-size balance sheet and (b) a common-size income statement?
Nintendo Company, Ltd., reports the following financial information as of, or for the year ended, March 31, 2015. Nintendo reports its financial statements in both Japanese yen and U.S. dollars as shown (amounts in millions).
Current assets . . . . . . . . . . . . . . ¥1,097,597 $ 9,110
Total assets . . . . . . . . . . . . . . . . 1,352,944 11,229
Current liabilities . . . . . . . . . . . . 144,232 1,197
Net sales . . . . . . . . . . . . . . . . . . 549,780 4,562
Net income . . . . . . . . . . . . . . . . 41,843 347
1. Compute Nintendo’s current ratio, net profit margin, and sales-to-total-assets ratio using the financial information reported in (a) yen and (b) dollars. Round amounts to two decimals.
Common-size and trend percents for Rustynail Company’s sales, cost of goods sold, and expenses follow. Determine whether net income increased, decreased, or remained unchanged in this three-year period.
| Common-Size Percents | Trend Percents | |||||
| 2017 | 2016 | 2015 | 2017 | 2016 | 2015 | |
| Sales | 100.0% | 100.0% | 100.0% | 105.4% 1 | 104.2% | 100.0% |
| Cost of goods sold | 63.4 | 61.9 | 59.1 | 113.1 | 109.1 | 100.0 |
| Total expenses | 15.3 | 14.8 | 15.1 | 106.8 | 102.1 | 100.0 |
Summary information from the financial statements of two companies competing in the same industry follows.
Barco Kyan Barco Kyan
Company CompanyCompanyCompany
Data from the current year-end balance sheets Data from the current year’s income statement Assets Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(770,000 \)880,200
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \( 19,500 \) 34,000 Cost of goods sold . . . . . . . . . . . . . . . . . . 585,100 632,500
Accounts receivable, net . . . . . . . . . . . . . 37,400 57,400 Interest expense . . . . . . . . . . . . . . . . . . . . 7,900 13,000
Current notes receivable (trade) . . . . . . . 9,100 7,200 Income tax expense . . . . . . . . . . . . . . . . . 14,800 24,300
Merchandise inventory . . . . . . . . . . . . . . . 84,440 132,500 Net income . . . . . . . . . . . . . . . . . . . . . . . . 162,200 210,400
Prepaid expenses . . . . . . . . . . . . . . . . . . . 5,000 6,950 Basic earnings per share . . . . . . . . . . . . . 4.51 5.11
Plant assets, net . . . . . . . . . . . . . . . . . . . . 290,000 304,400 Cash dividends per share . . . . . . . . . . . . . 3.81 3.93
Total assets . . . . . . . . . . . . . . . . . . . . . . . . \(445,440 \)542,450
Beginning-of-year balance sheet data
Liabilities and Equity Accounts receivable, net . . . . . . . . . . . . . \( 29,800 \) 54,200
Current liabilities . . . . . . . . . . . . . . . . . . . . \( 61,340 \) 93,300 Current notes receivable (trade) . . . . . . . 0 0
Long-term notes payable . . . . . . . . . . . . . 80,800 101,000 Merchandise inventory . . . . . . . . . . . . . . . 55,600 107,400
Common stock, \(5 par value . . . . . . . . . . 180,000 206,000 Total assets . . . . . . . . . . . . . . . . . . . . . . . . 398,000 382,500
Retained earnings . . . . . . . . . . . . . . . . . . 123,300 142,150 Common stock, \)5 par value.......... 180,000 206,000
Total liabilities and equity . . . . . . . . . . . . . \(445,440 \)542,450 Retained earnings . . . . . . . . . . . . . . . . . . . 98,300 93,600
Required
1. For both companies compute the
(a) current ratio,
(b) acid-test ratio,
(c) accounts (including notes) receivable turnover,
(d) inventory turnover,
(e) days’ sales in inventory, and
(f) days’ sales uncollected.
Identify the company you consider to be the better short-term credit risk and explain why. Round to one decimal place.
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