Financial Statement Analysis – ACCT4445 Assignment 1 Due Date: February 7, 2017 This assignment is due at the start of class on the due date and is to be submitted in hardcopy. Assignment Problem 1 Use the accounts below for Delphi Corporation for Dece

Financial Statement Analysis – ACCT4445

Assignment 1

Due Date:  February 7, 2017

This assignment is due at the start of class on the due date and is to be submitted in hardcopy.

Assignment Problem 1

Use the accounts below for Delphi Corporation for December 31, 2013 to prepare an income statement and a balance sheet. 

($ millions)

Contributed capital$1,702

Cost of sales13,567

Cash1,393

Long-term liabilities3,719

Accounts receivable2,662

Other current assets604

Other long-term assets2,079

Other current liabilities1,299

Other operating expenses1,212

Other nonoperating expenses161

Inventory1,093

Accounts payable2,595

Property, net3,216

Retained earnings1,209

Sales16,463

Tax expense256

Equity income, net of tax34

Other equity523

Assignment Problem 2

The statement of cash flows for Snap-On Incorporated for the year ended December 28, 2013, includes the following items (excerpts only):

(in $ millions)20132012

Cash flows from operating activities:

Net earnings359.7314.6

Depreciation 51.250.2

Change in accounts receivable; (increase) decrease(42.0)(43.4)

Change in accounts payable; increase (decrease)8.416.6

Net cash provided by operating activities392.6329.3

a. Why does Snap-On add back depreciation to compute net cash provided by operating activities? Is depreciation a source of cash?

b. Snap-On reports cash flows associated with accounts receivable. In 2012, this item is a cash outflow of $43.4 million and in 2013 this item is a cash outflow of $42.0 million. Explain why this item is on the statement. 

c.Did Snap-On accounts payable increase or decrease during 2013? How do you know?

Assignment Problem 3

Income statements and balance sheets follow for Snap-On Incorporated. Refer to these financial statements to answer the requirements.

Required:

a. Compute net operating profit after tax (NOPAT) for 2013 and 2012. Assume that combined federal and state statutory tax rates are 37% for fiscal 2013 and 2012. (Hint:  Include “Equity earnings, net of tax” in your calculation of NOPAT.)

b. Compute net operating assets (NOA) for 2013 and 2012.

c. Compute return on net operating assets (RNOA) for 2013 and 2012. Net operating assets are $2,329.6 million in 2011.

d. Compute return on equity (ROE) for 2013 and 2012. (Stockholders’ equity attributable to Snap-On in 2011 is $1,530.9 million.)

e. What is nonoperating return component of ROE for 2013 and 2012?

f. Comment on the difference between ROE and RNOA. What inference do you draw from this comparison?

SNAP-ON INCORPORATED

Consolidated Statements of Earnings

(Amounts in millions)For the fiscal year ended

20132012

Net sales$  3,056.5$   2,937.9

Cost of goods sold (1,583.6)(1,547.9)

Gross profit 1,472.9 1,390.0

Operating expenses(1,012.4)(980.3)

Operating  earnings before financial services460.5409.7

Financial services revenue181.0161.3

Financial services expenses(55.3)(54.6)

Operating income from financial services125.7106.7

Operating earnings586.2516.4

Interest expense(56.1)(55.8)

Other income (expense) -- net(3.9)(0.4)

Earnings before income taxes and equity earnings 526.2460.2

Income tax expense(166.7)(148.2)

Earnings before equity earnings 359.5312.0

Equity earnings, net of tax 0.22.6

Net earnings359.7314.6

Net earnings attributable to noncontrolling interests (9.4)(8.5)

Net earnings attributable to Snap-on Incorporated$   350.3$   306.1

Continued next page

continued

SNAP-ON INCORPORATED

Consolidated Balance Sheets

Fiscal Year End

(Amounts in millions)20132012

Cash and cash equivalents$   217.6$214.5

Trade and other accounts receivable - net531.6        497.9

Finance receivables - net374.6323.1

Contract receivables - net68.462.7

Inventories - net        434.4        404.2

Deferred income tax assets        85.481.8

Prepaid expenses and other assets      84.2          84.8

Total current assets     1,796.2      1,669.0

Property and equipment - net        392.5        375.2

Deferred income tax assets57.1          110.4

Long-term finance receivables - net       560.6        494.6

Long-term contract receivables - net217.1194.4

Goodwill838.8807.4

Other intangibles - net        190.5        187.2

Other assets        57.2        64.1

Total assets$ 4,110.0$ 3,902.3

Notes payable and current maturities of long-term debt$  113.1$    5.2

Accounts payable155.6142.5

Accrued benefits          48.1          50.6

Accrued compensation     95.5          88.3

Franchisee deposits59.4          54.7

Other accrued liabilities        243.7        247.9

Total current liabilities        715.4        589.2

Long-term debt858.9        970.4

Deferred income tax liabilities          143.8          127.1

Retiree health care benefits          41.7          48.4

Pension liabilities        135.8          260.7

Other long-term liabilities        84.0        87.5

Total liabilities     1,979.6      2,083.3

Preferred stock – – 

Common stock 67.467.4

Additional paid-in capital225.1204.6

Retained earnings2,324.12,067.0

Accumulated other comprehensive income (loss)(44.8)(124.2)

Treasury stock at cost(458.6)(412.7)

Total shareholders’ equity attributable to Snap-on Inc.2,113.21,802.1

Noncontrolling interests17.216.9

Total shareholders’ equity2,130.41,819.0

Total liabilities and shareholders’ equity$ 4,110.0$ 3,902.3

Assignment Problem 4

Below is selected information for CariCorp. and Nick, Inc. for fiscal 2014.  Compute each company’s Z-score and provide an analysis of whether either company is expected to go bankrupt in the near future.

Cari Corp. Nick, Inc.

Current assets$683,140$488,974

Current liabilities445,691527,588

Total assets1,187,5981,027,966

Total liabilities632,855884,771

Shares outstanding211,000289,455

Retained earnings296,988-25,412

Stock price per share$47.86$9.56

Sales 1,254,110855,741

Earnings before interest and taxes288,97718,569

Assignment Problem 5

Refer to the fiscal 2014 income statement and balance sheet of Bobcats, Inc. provided below: 

Bobcats, Inc.

Income Statement

For the year ended December 31, 2014

Revenues$2,456,852

Cost of goods sold1,523,248

Gross profit 933,604

Operating expenses

Depreciation expense90,635

Salary expense270,254

Selling expense233,401

Administrative expense81,076

Interest expense51,200

Total operating expenses726,566

Income from operations207,038

Income tax expense63,787

Net income$143,251 

Dividends paid to common shareholders$58,963

Continued next page

Continued from prior page

BOBCATS, INC.

Balance Sheet

As of December 31, 20142013

Assets:

Cash and cash equivalents$354,000 $274,585 

Accounts receivable595,241419,546

Inventory518,543548,521

Current Assets1,467,7841,242,652

Property, plant and equipment1,085,741924,652

Less:  Accumulated depreciation-388,139-297,504

Property, plant and equipment-net697,602627,148

Intangible assets748,545698,545

Total assets$2,913,931 $2,568,345 

Liabilities

Accounts payable$452,484 $475,152 

Accrued expenses451,421373,650

Self-insurance liabilities255,854179,652

Income tax payable295,877221,236

Current Liabilities1,455,6361,249,690

Long-term note payable610,622555,270

Total Liabilities2,066,2581,804,960

Stockholders’ Equity:

Common stock51,20051,200

Capital in excess of par value458,000458,000

Retained earnings338,473254,185

Total liabilities and stockholders’ equity$2,913,931 $2,568,345 

Required:Compute the following liquidity, solvency and coverage ratios for 2014 and 2013 for Bobcats, Inc.:

•Current ratio

•Quick ratio

•Liabilities to equity ratio

•Long-term debt-to-equity ratio

•Times interest earned ratio (N/A for 2013)