In this project, you will review the financial statements for the three companies provided in the course. Use the skills and concepts you covered in this course to analyze the three and make some decisions about which is in the strongest financial health. Imagine that you are serving as a consultant to your board of directors, and you’ve been asked to give your opinion about which of the three companies is in the best financial health.
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INCOME STATEMENT
Net Sales
Cost of Goods Sold
Gross Profit
Selling, General and Administrative Expenses
Depreciation and Amortization Expenses
Operating Income
Interest Income (Expense)
Other Non-Operating Income (Expense)
Income Before Income Taxes
Income Tax Expense
Net Income After Taxes
Gain (Loss) from Non-Recurring Activities
Net Income
Year 2
Jan 1 – Dec 31
$ 491,549
381,489
110,060
37,972
12,271
59,817
(749)
(4,295)
54,773
21,295
33,478
0
$ 33,478
Year 1
Jan 1 – Dec 31
$ 394,354
316,946
77,408
27,562
7,959
41,887
2,408
(1,749)
42,546
16,168
26,378
0
$ 26,378
(In thousands)
STATEMENT OF CASH FLOWS
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income
Items not requiring cash:
Depreciation and Amortization
Deferred Income Taxes
Changes in Assets and Liabilities:
Inventories
Accounts Receivable
Other Current Assets
Accounts Payable
Short-Term Debt
Other Current Liabilities
Net cash provided by (used in) operating activities
CASH FLOW FROM INVESTING ACTIVITIES:
Net additions to property, plant, and equipment
Net additions to other long-term assets
Net cash provided by (used in) investing activities
CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds from common stock transactions
Net proceeds from long-term debt
Net proceeds from other long-term liabilities
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
CASH AND CASH EQUIVALENTS, END OF PERIOD
Year 2
Jan 1 – Dec 31
$ 268,346
237,807
10,721
(79,770)
(16,875)
46,489
32,990
12
113,106
612,826
(356,953)
(244,822)
(601,775)
90,892
(722)
9
90,179
101,230
99,677
$ 200,907
(In thousands)
[Type text] [Type text] [Type text]
HAME5
1
3: Understanding Financial Statements
The Hotel School, Cornell University
Make Your Recommendation Course Project
In this project, you will review the financial statements for the three companies provided in the course. Use the skills and concepts you covered in this course to analyze the three and make some decisions about which is in the strongest financial health. Imagine that you are serving as a consultant to your board of directors, and you’ve been asked to give your opinion about which of the three companies is in the best financial health.
Be sure to cite specific information from the income statements, balance sheets, and cash flow statements to strengthen your case.
Your goal is to demonstrate that you know how to read each of these statements and can make some reasonable analysis from them.
Complete the grid below to make your brief recommendation to the board.
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Make Your Recommendation
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Which of the three companies is in the strongest financial shape? Which of the three businesses is performing the best? How do you know that?
Try to support your answer with specific financial information.
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What can you infer about these companies from looking at their financial statements? Try to show that you can analyze the financial statements.
|
1
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INCOME STATEMENT
Net Sales
Cost of Goods Sold
Gross Profit
Selling, General and Administrative Expenses
Depreciation and Amortization Expenses
Operating Income
Interest Income (Expense)
Other Non-Operating Income (Expense)
Income Before Income Taxes
Income Tax Expense
Net Income After Taxes
Gain (Loss) from Non-Recurring Activities
Net Income
Year 2
Jan 1 – Dec 31
$ 116,727
67,716
49,011
31,560
4,330
13,121
56
(1,666)
11,511
5,245
6,266
0
$ 6,266
Year 1
Jan 1 – Dec 31
$ 100,000
57,134
42,866
28,105
4,081
10,680
(30)
(542)
10,108
4,138
5,970
0
$ 5,970
(In thousands)
PERCENTAGE OF NET SALES
INCOME STATEMENT
Net Sales
Cost of Goods Sold
Gross Profit
Selling, General and Administrative Expenses
Depreciation and Amortization Expenses
Operating Income
Interest Income (Expense)
Other Non-Operating Income (Expense)
Income Before Income Taxes
Income Tax Expense
Net Income After Taxes
Gain (Loss) from Non-Recurring Activities
Net Income
Year 2
Jan 1 – Dec 31
100.0%
58.0%
42.0%
27.0%
3.7%
11.2%
0.0%
-1.4%
9.9%
4.5%
5.4%
0.0%
5.4%
Year 1
Jan 1 – Dec 31
100.0%
57.1%
42.9%
28.1%
4.1%
10.7%
0.0%
-0.5%
10.1%
4.1%
6.0%
0.0%
6.0%
- Income Statement
- % of Net Sales
BALANCE SHEET
ASSETS
Current Assets:
Cash and Cash Equivalents
Accounts Receivable, Net
Inventories
Other Current Assets
Total Current Assets
Long-Term Assets:
Property, Plant, and Equipment
Less Accumulated Depreciation & Amortization
Net Property, Plant, and Equipment
Other Long-Term Assets
Total Long-Term Assets
Total Assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable
Short-Term Debt
Other Current Liabilities
Total Current Liabilities
Long-Term Liabilities:
Long-Term Debt
Deferred Income Taxes
Other Long-Term Liabilities
Total Long-Term Liabilities
Total Liabilities
Stockholders’ Equity:
Preferred Stock
Common Stock
(shares: 100,093 in Year 2; 66,615 in Year 1)
Additional Paid-In Capital
Retained Earnings
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
Dec 31, Year 2
$ 38,169
46,319
24,365
38,241
147,094
252,77
0
(56,178)
196,592
66,801
263,393
$ 410,487
$ 14,055
15,576
30,056
59,687
57,188
9,849
10,411
77,448
137,135
0
173,259
0
100,093
273,352
$ 410,487
Dec 31, Year 1
$ 21,904
38,682
16,159
25,024
101,769
156,484
(43,907)
112,577
41,030
153,607
$ 255,376
$ 12,095
4,602
35,836
52,533
3,912
3,930
7,334
15,176
67,709
0
121,052
0
66,615
187,667
$ 255,376
(In thousands)
STATEMENT OF CASH FLOWS
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income
Items not requiring cash:
Depreciation and Amortization
Deferred Income Taxes
Changes in Assets and Liabilities:
Inventories
Accounts Receivable
Other Current Assets
Accounts Payable
Short-Term Debt
Other Current Liabilities
Net cash provided by (used in) operating activities
CASH FLOW FROM INVESTING ACTIVITIES:
Net additions to property, plant, and equipment
Net additions to other long-term assets
Net cash provided by (used in) investing activities
CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds from common stock transactions
Net proceeds from long-term debt
Net proceeds from other long-term liabilities
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
CASH AND CASH EQUIVALENTS, END OF PERIOD
Year 2
Jan 1 – Dec 31
$ 6,266
4,330
1,813
(1,589)
(3,576)
(74)
81
(70)
1,577
8,758
(5,809)
1,117
(4,692)
1,817
(6,301)
120
(4,364)
(298)
800
$ 502
(In thousands)
STATEMENT OF CASH FLOWS
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income
Items not requiring cash:
Depreciation and Amortization
Deferred Income Taxes
Changes in Assets and Liabilities:
Inventories
Accounts Receivable
Other Current Assets
Accounts Payable
Short-Term Debt
Other Current Liabilities
Net cash provided by (used in) operating activities
CASH FLOW FROM INVESTING ACTIVITIES:
Net additions to property, plant, and equipment
Net additions to other long-term assets
Net cash provided by (used in) investing activities
CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds from common stock transactions
Net proceeds from long-term debt
Net proceeds from other long-term liabilities
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
CASH AND CASH EQUIVALENTS, END OF PERIOD
Year 2
Jan 1 – Dec 31
$ 33,478
12,271
5,919
(8,206)
(7,637)
(13,217)
1,960
10,974
(5,780)
29,762
(96,286)
(25,771)
(122,057)
52,207
53,276
3,077
108,560
16,265
21,904
$ 38,169
(In thousands)
BALANCE SHEET
ASSETS
Current Assets:
Cash and Cash Equivalents
Accounts Receivable, Net
Inventories
Other Current Assets
Total Current Assets
Long-Term Assets:
Property, Plant, and Equipment
Less Accumulated Depreciation & Amortization
Net Property, Plant, and Equipment
Other Long-Term Assets
Total Long-Term Assets
Total Assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable
Short-Term Debt
Other Current Liabilities
Total Current Liabilities
Long-Term Liabilities:
Long-Term Debt
Deferred Income Taxes
Other Long-Term Liabilities
Total Long-Term Liabilities
Total Liabilities
Stockholders’ Equity:
Preferred Stock
Common Stock
(shares: 393,692,536 in Year 2; 388,328,592 in Year 1)
Additional Paid-In Capital
Retained Earnings
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
Dec 31, Year 2
$ 200,907
114,448
342,944
265,73
0
924,029
2,434,712
(1,049,810)
1,384,902
420,815
1,805,717
$ 2,729,746
$ 168,984
722
438,997
608,703
4,354
33,217
1,045
38,616
647,319
0
973,351
39,393
1,069,683
2,082,427
$ 2,729,746
Dec 31, Year 1
$ 99,677
97,573
263,174
312,219
772,643
2,077,759
(812,003)
1,265,756
175,993
1,441,749
$ 2,214,392
$ 135,994
710
325,891
462,595
5,076
22,496
1,036
28,608
491,203
0
882,459
39,393
801,337
1,723,189
$ 2,214,392
(In thousands)
BALANCE SHEET
ASSETS
Current Assets:
Cash and Cash Equivalents
Accounts Receivable, Net
Inventories
Other Current Assets
Total Current Assets
Long-Term Assets:
Property, Plant, and Equipment
Less Accumulated Depreciation & Amortization
Net Property, Plant, and Equipment
Other Long-Term Assets
Total Long-Term Assets
Total Assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable
Short-Term Debt
Other Current Liabilities
Total Current Liabilities
Long-Term Liabilities:
Long-Term Debt
Deferred Income Taxes
Other Long-Term Liabilities
Total Long-Term Liabilities
Total Liabilities
Stockholders’ Equity:
Preferred Stock
Common Stock
(shares: 8,156,491 in Year 2; 7,956,872 in Year 1)
Additional Paid-In Capital
Retained Earnings
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
Dec 31, Year 2
$ 502
12,708
7,465
1,937
22,612
41,768
(19,455)
22,313
15,065
37,378
$ 59,990
$ 6,352
3,123
3,879
13,354
8,908
2,460
120
11,488
24,842
0
816
21,589
12,743
35,148
$ 59,990
Dec 31, Year 1
$ 800
9,132
5,876
1,863
17,671
35,959
(15,125)
20,834
16,182
37,016
$ 54,687
$ 6,271
3,193
2,302
11,766
15,209
647
0
15,856
27,622
0
795
19,793
6,477
27,065
$ 54,687
(In thousands)
INCOME STATEMENT
Net Sales
Cost of Goods Sold
Gross Profit
Selling, General and Administrative Expenses
Depreciation and Amortization Expenses
Operating Income
Interest Income (Expense)
Other Non-Operating Income (Expense)
Income Before Income Taxes
Income Tax Expense
Net Income After Taxes
Gain (Loss) from Non-Recurring Activities
Net Income
Year 2
Jan 1 – Dec 31
$ 4,075,522
1,685,928
2,389,594
1,765,470
237,807
386,317
0
50,018
436,335
167,989
268,346
0
$ 268,346
Year 1
Jan 1 – Dec 31
$ 3,288,908
1,350,011
1,938,897
1,450,447
205,557
282,893
0
56,106
338,999
126,313
212,686
0
$ 212,686
(In thousands)
PERCENTAGE OF NET SALES
INCOME STATEMENT
Net Sales
Cost of Goods Sold
Gross Profit
Selling, General and Administrative Expenses
Depreciation and Amortization Expenses
Operating Income
Interest Income (Expense)
Other Non-Operating Income (Expense)
Income Before Income Taxes
Income Tax Expense
Net Income After Taxes
Gain (Loss) from Non-Recurring Activities
Net Income
Year 2
Jan 1 – Dec 31
100.00%
41.37%
58.63%
43.32%
5.84%
9.48%
0.00%
1.23%
10.71%
4.12%
6.58%
0.00%
6.58%
Year 1
Jan 1 – Dec 31
100.00%
41.05%
58.95%
44.10%
6.25%
8.60%
0.00%
1.71%
10.31%
3.84%
6.47%
0.00%
6.47%
- Income Statement
- % of Net Sales
