week3. 5020

Week 3

Saturday, March 25 (12:01 a.m.) to Friday, March 31 (11:59 p.m.)

Topics to research and review:

 The Income Statement o Chapters 14-20 o Depreciation o Interest Expense o Gains and Losses o Income Before Tax o Income Taxes Paid o Net Earnings o Per-Share Earnings

Summary of Assignments, Due Dates, and Points

 Bi-Weekly Assignment 2 o Due by 11:59 pm on Friday, March 31. o Submit your file in Word in the correct Dropbox. o 25 points

 Discussion 2 o Original comment on the topic must be posted by 11:59 pm on Tuesday, March 28. Replies to a

minimum of two other students’ original posts or to other students’ replies must be posted by 11:59 pm on Friday, March 31.

o 25 points

 Research Project Part 3 o Due by 11:59 pm on Friday, March 31. o 5 points

Bi-Weekly Assignment 2 Requirement

 Read Chapters 14 through 20.

 Answer the following questions. On your file put the question first (by number and in bold) and then answer the question in full.

Listed below are data for five companies, for their 2021 fiscal years. Obtain their market price per share of

common stock. All amounts, except for shares outstanding, are in millions. The shares outstanding number is

the weighted average number of shares outstanding the company used to compute basic earnings per share.

Company Net Earnings

(Loss)

Stockholders’ Equity

Shares Outstanding Market Price per Share

Amazon.com 33,364 138,245 509,000,000

Berkshire Hathaway 4,322 428,563 Class A: 643,931 Class B: 1,350,043,471

ExxonMobile (22,440) 164,130 9,000,000,000

PepsiCo 7,679 16,151 1,383,000,000

1. Compute the basic earnings per share for each company. (Net Earnings/Shares Outstanding) 2. Compute the P/E ratio for each company. The P/E (price-earnings ratio) is the most commonly

reported measure of a company’s value. The P/E ratio is the company’s market price per share of stock divided by the company’s earnings per share.

3. Using the companies’ P/E ratios, rank the companies’ stock in the order that the stock market appears to value the companies, from the most valuable to least valuable. Explain your rankings. Explain why rankings based on P/E ratios may not represent the market’s optimism for some companies.

Discussion 2 Requirement

Read the article from Fortune, “Years after calling Bitcoin ‘rat poison,’ Warren Buffett just invested $1 billion in

a crypto-friendly bank.”

https://fortune.com/2022/02/16/warren-buffett-invested-1-billion-crypto-

bank/#:~:text=Berkshire%20Hathaway%20made%20its%20crypto,its%20kind%20in%20Latin%20America.

Research any additional material that would help you better understand what the article is talking about. Do

you think the recent crypto events would have affected his decision? In your opinion, what are the possible

repercussions of this investment? How do you think this will affect Bershire-Hathaway? (I am not asking you

to question Warren Buffett—he is obviously a wise investor.  )

Research Project Part 3:

 Using the Income Statement and Notes for your company, answer the questions below:

1. What percentage is depreciation of gross profit for each company? How can a company manipulate this?

2. Compare the ratio of interest payments (expense) to operating income for your two companies.

3. What is the amount of income before taxes? How much income taxes were reported as an expense for the year? (We will see later if this is the amount actually paid.)

4. What is net income for the year?

5. What is diluted earnings per share for 2022?