assignment

Questions and Problems Module 4

1. Gary Fisher owns five successful health clubs. He believes that he can put a health club in a new community that currently has no such facility. His research indicates that communities such as this can support two health clubs.

a. What type of information should Gary gather when selecting a specific site for his health club? (10 points) Some information that Gary should gather would be a name, location, lease, utilities and licenses

b. What is a forecasting model and should Gary use one? (10 points). A forecasting model is based on judgments, opinions, intuition, emotions, or personal experiences. I would use this method, because he can put it out there for people to use and get everyone’s opinions on his health facilities.

c. If so, what type of forecasting model should Gary use to determine the new location for a health club and why? (15 points) Judgmental model should be used to determine the location of the health club. He would specifically need to use the historical analogy to determine the specific sight.

2. Give one example of a qualitative forecast model (make sure you explain a different model than the one you used in question 1) and a quantitative forecast model and explain when and how you would use that model instead of another model. (15 points) Quantitative methods of forecasting are under most business condition superior to qualitative methods of forecasting. Primarily this is because quantitative methods use historical numerical data, and, there is always a logic behind the formula or algorithm that is employed to derive the result from this data. Qualitative methods are usually based on either the experience of some experts of field staff or sometimes on pure intuition. There is no numerical basis for the method and although they do draw from historical facts, these are mainly personal and many times undocumented. There is some degree of logic that is employed but that gain is quite personal and intuitive. But, there are circumstances where qualitative methods have proven to be superior to quantitative methods. Usually this is when there is no or very little historical data available or when the time is short and the data cannot be gathered and computer in time. A typical case is in the case of an invention or a revolutionary product or service. Since this product or service has never existed in the past, there is not data to make any projections or predictions on. Having said this, it is quite clear that quantitative methods of forecasting are preferred to qualitative methods, though there can be some exceptional circumstances to the contrary.

3. What is the difference between mean and mean absolute deviation and which one would you use? Please incorporate into your discussion how you would deal with negative numbers? (10 points) The mean is the average of all numbers. It is also called arithmetic mean. To calculate mean, add together all the numbers in set and divide the sum by total count of numbers. The mean absolute deviation of a date set is the average of the absolute deviation from a central

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point. This central point can be mean, mode or median etc… formulas for mean absolute deviation around a central point. Mean can be negative, but mean absolute deviation can’t be negative. To find mean absolute deviation about mean, find mean of date set, find sum of date value and divide the sum by number of data value, then find absolute value of differences between each data value and mean then put it in formula.

4. Using the financial statements for a public corporation:

a. Develop a basic pro forma income statement and balance sheet for this company. Feel free to use the templates available at www.score.org. (25 points) Please make sure that you detail what methodology you used to arrive at your numbers.

I really tried to understand what I was doing, but I am pretty sure I did it wrong.

b. What does the pro forma tell you? (15 points) Pro Forma in Latin means “For the sake of form” or “as a matter of form” It is to warn investors of any company’s pro forma financial statements that are not in compliance with general accounting principles. A Pro forma will show projected balance sheets, income statements and statements of cash flows.

https://www.merriam-webster.com/dictionary/pro%20forma

A. Samsung Income Statement

Income Statement All numbers in thousands

Revenue 12/31/2017 12/31/2016 12/31/2015 12/31/2014

Total Revenue 239,580,000,000 201,866,745,000 200,653,482,000 206,205,987,000

Cost of Revenue 129,290,000,000 120,277,715,000 123,482,118,000 128,278,800,000

Gross Profit 110,290,000,000 81,589,030,000 77,171,364,000 77,927,187,000

Operating Expenses

Research Development 16,360,000,000 14,111,381,000 13,705,695,000 14,385,506,000

Selling General and Administrative 40,280,000,000 37,235,161,000 36,081,636,000 37,446,184,000

Non Recurring - - - -

Others - - - -

Total Operating Expenses 185,930,000,000 172,626,073,000 174,240,040,000 181,180,916,000

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Operating Income or Loss 53,650,000,000 29,240,672,000 26,413,442,000 25,025,071,000

Income from Continuing Operations

Total Other Income/Expenses Net 2,550,000,000 1,472,980,000 -452,447,000 2,849,963,000

Earnings Before Interest and Taxes 53,650,000,000 29,240,672,000 26,413,442,000 25,025,071,000

Interest Expense - -587,831,000 -776,511,000 -592,940,000

Income Before Tax 56,200,000,000 30,713,652,000 25,960,995,000 27,875,034,000

Income Tax Expense 14,010,000,000 7,987,560,000 6,900,851,000 4,480,676,000

Minority Interest - 6,538,705,000 6,183,038,000 5,906,463,000

Net Income From Continuing Ops 42,190,000,000 22,726,092,000 19,060,144,000 23,394,358,000

Non-recurring Events

Discontinued Operations - - - -

Extraordinary Items - - - -

Effect Of Accounting Changes - - - -

Other Items - - - -

Net Income

Net Income 42,190,000,000 22,415,655,000 18,694,628,000 23,082,499,000

Preferred Stock And Other Adjustments - - - -

Net Income Applicable To Common Shares

42,190,000,000 22,415,655,000 18,694,628,000 23,082,499,000

Balance Sheet All numbers in thousands

Period Ending 12/31/2017 12/31/2016 12/31/2015 12/31/2014

Current Assets

Cash And Cash Equivalents 83,604,400,000 32,111,442,000 22,636,744,000 16,840,766,000

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Short Term Investments - 56,049,330,000 48,842,298,000 44,962,655,000

Net Receivables 27,696,000,000 27,800,408,000 28,520,689,000 28,234,485,000

Inventory 24,983,400,000 18,353,503,000 18,811,794,000 17,317,504,000

Other Current Assets - 3,612,938,000 2,832,568,000 4,444,023,000

Total Current Assets 136,283,800,000 141,429,704,000 124,814,725,000 115,146,026,000

Long Term Investments 16,644,200,000 12,642,160,000 13,608,828,000 17,899,970,000

Property Plant and Equipment 111,665,600,000 91,473,041,000 86,477,110,000 80,872,950,000

Goodwill - 1,343,580,000 910,539,000 739,576,000

Intangible Assets 14,760,500,000 2,819,822,000 2,788,227,000 2,805,964,000

Accumulated Amortization - - - -

Other Assets 22,398,000,000 12,466,017,000 13,580,092,000 12,958,472,000

Deferred Long Term Asset Charges - 5,321,450,000 5,589,108,000 4,526,595,000

Total Assets 301,752,100,000 262,174,324,000 242,179,521,000 230,422,958,000

Current Liabilities

Accounts Payable 9,083,900,000 6,485,039,000 6,187,291,000 7,914,704,000

Short/Current Long Term Debt 18,814,000,000 15,282,386,000 12,873,963,000 11,265,519,000

Other Current Liabilities 7,408,300,000 21,712,150,000 21,309,906,000 21,414,466,000

Total Current Liabilities 16,492,200,000 54,704,095,000 50,502,909,000 52,013,913,000

Long Term Debt 18,814,000,000 1,237,653,000 1,424,046,000 1,379,871,000

Other Liabilities 51,954,500,000 13,204,416,000 11,119,817,000 8,863,304,000

Deferred Long Term Liability Charges - 1,180,618,000 1,697,545,000 1,239,933,000

Minority Interest - 6,538,705,000 6,183,038,000 5,906,463,000

Negative Goodwill - - - -

Total Liabilities 87,260,700,000 69,211,291,000 63,119,716,000 62,334,770,000

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Stockholders' Equity

Misc. Stocks Options Warrants - - - -

Redeemable Preferred Stock - - - -

Preferred Stock - - - -

Common Stock 897,500,000 897,514,000 897,514,000 897,514,000

Retained Earnings - 193,086,317,000 185,132,014,000 169,529,604,000

Treasury Stock 213,593,900,000 -11,963,396,000 -17,556,654,000 -12,649,286,000

Capital Surplus - 4,403,893,000 4,403,893,000 4,403,893,000

Other Stockholder Equity 213,593,900,000 -2,213,070,000 -4,114,275,000 -4,219,973,000

Total Stockholder Equity 214,491,400,000 186,424,328,000 172,876,767,000 162,181,725,000

Net Tangible Assets 199,730,900,000 182,260,926,000 169,178,001,000 158,636,185,000

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