# exam on FINANCIAL STATEMENT ANALYSIS AND VALUATIONS (submission in 40 min)

I’m studying for my Accounting class and don’t understand how to answer this. Can you help me study?

Section 1

Question 1:

Walmart and Target have determined the following information for their recent fiscal year. (Comparison / 5 points)

 Walmart Target Days inventory outstanding 42.7 days 30 Days payable outstanding 56.8 days 110 Days sales outstanding 91.3 days 60

a) Compute the cash conversion cycle for both companies

• As a financial analyst, give your opinion on which company has better cash conversion cycle, and why.

 Walmart Target Cash conversion cycle Analysis

Question 2

Use the following selected balance sheet and income statement data for Mattel Inc. (in \$ thousands) to compute

a) Return on equity,

b) Profit margin (PM),

c) Asset turnover (AT),

d) Financial leverage (FL) for fiscal 2016.

e) Show that ROE = PM × AT × FL.

f) Evaluate the performance of the company

 (in thousands) 2016 2015 Net sales \$5,456,650 \$5,702,613 Operating income 519,233 540,922 Interest expense 95,118 85,270 Net income 318,022 369,416 Total assets 6,493,794 6,535,143 Total liabilities 4,086,012 3,901,889

 Return on equity, ROE b) Profit margin (PM), c) Asset turnover (AT), d) Financial leverage (FL) e) ROE = PM × AT × FL. f) Evaluation

Question 3:

In its fiscal 2016 annual report, Dunkin donuts, Inc. reported cash of \$4,238 million at year end. The statement of cash flows reports the following (in millions): ( 3 points)

 Net cash from operating activities \$3,700 Net cash from investing activities (1,134) Net cash from financing activities (2,376)

What was the balance in Dunkin donuts’ cash account at the start of fiscal 2016?

Section 2:

Question 4:

Selected financial data for NIKE Corporation is presented below.

 NIKE Corporation Balance Sheet As of December 31, 2017 Dec. 31, 2017 Dec. 31, 2016 Current Assets Cash and cash equivalents \$576,843 \$305,088 Marketable securities 166,106 187,064 Accounts receivable (net) 258,387 289,100 Inventories 424,493 391,135 Prepaid expenses 55,369 25,509 Other current assets 83,053 85,029 Total Current Assets 1,564,251 1,282,925 Property, plant and equipment 1,384,217 625,421 Long-term investment 568,003 425,000 Total Assets \$3,516,471 \$2,333,346 Current Liabilities Short-term borrowings \$306,376 \$170,419 Current portion of long-term debt 155,000 168,000 Accounts payable 254,111 286,257 Accrued liabilities 273,658 166,983 Income taxes payable 97,735 178,911 Total Current Liabilities 1,086,880 970,570 Long-term debt 500,000 300,000 Deferred income taxes 215,017 262,404 Total Liabilities 1,801,897 \$1,532,974 Common stock \$425,250 \$125,000 Additional paid-in capital 356,450 344,335 Retained earnings 932,874 331,037 Total Stockholders’ Equity 1,714,574 800,372 Total Liabilities and Stockholders’ Equity \$3,516,471 \$2,333,346

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 Selected Income Statement Data for the year ending December 31, 2017: Net sales \$4,885,340 Cost of goods sold (2,942,353) Selling expenses (884,685) Operating income 1,058,302 Interest expense (55,240) Earnings before income taxes 1,003,062 Income tax expense (401,225) Net income \$601,837 Selected Statement of Cash Flow Data for the year ending December 31, 2017: Cash flows from operations \$1,456,084 Capital expenditures \$745,862

Use the information given in the financial statements above to compute the following ratios for the two years with your analysis, ( 9 points )

a) Current ratio

b) Quick ratio

c) Total liabilities to equity ratio

d) Total debt to equity ratio

e) Times interest ratio

f) cash flow from operations to total debt ratio

g) free operating cash flow to total debt ratio