ACCG106 Lecture Notes - Lecture 12: Opportunity Cost, Trade Credit, Preferred Stock

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beigeseal382

14 Aug 2018

School

Macquarie University

Department

ACCG - Accounting and Financial Management

Course

ACCG106

Professor

All

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Document Summary

Current assets assets the entity expects to convert to cash w/i the next 12 months. Current liabilities debts to be paid w/i the next 12 months. Working capital = current assets current liabilities. Hedging principle matching the maturity of the source of cash flows with its use. 3 different sources of finance: permanent sources funding with maturities > 1year (long-term debt, leases, shares, temporary sources short term finances (bank loans, commercial bills, spontaneous sources unplanned or unstructured funding (trade creditors, accrued expenses) Permanent assets should be financed with permanent and spontaneous sources. Managing cash: the need to have sufficient cash to meet financial obligations, the timing of cash flows, the cost of cash, the cost of not having enough cash. Cash inflows: cash sales, receipts from accounts receivable, proceeds from the sale of unwanted assets, capital injections, short-term loans. Cash outflows: purchase of inventories, purchase of labour, materials and other expenses, purchase of assess, payment of taxes.

Related Questions

What is the return on Invested Capital (ROIC) for the 2015 and 2016 financial data? Please show work. Thank you very much.

AMAZON.COM INC (AMZN) CashFlowFlag INCOME STATEMENT
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Revenue	107006	135987
Cost of revenue	71651	88265
Gross profit	35355	47722
Operating expenses
Sales, General and administrative	20411	27284
Other operating expenses	12711	16252
Total operating expenses	33122	43536
Operating income	2233	4186
Interest Expense	459	484
Other income (expense)	-206	190
Income before income taxes	1568	3892
Provision for income taxes	950	1425
Other income	-22	-96
Net income from continuing operations	596	2371
Net income	596	2371
Net income available to common shareholders	596	2371
Earnings per share
Basic	1.28	5.01
Diluted	1.25	4.9
Weighted average shares outstanding
Basic	467	474
Diluted	477	484
EBITDA	8308	12492

AMAZON.COM INC (AMZN) CashFlowFlag BALANCE SHEET
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Assets
Current assets
Cash
Cash and cash equivalents	15890	19334
Short-term investments	3918	6647
Total cash	19808	25981
Receivables	6423	8339
Inventories	10243	11461
Deferred income taxes
Total current assets	36474	45781
Non-current assets
Property, plant and equipment
Land	9770	13998
Fixtures and equipment	18417	25989
Other properties	1866	2454
Property and equipment, at cost	30053	42441
Accumulated Depreciation	-8215	-13327
Property, plant and equipment, net	21838	29114
Goodwill	3759	3784
Intangible assets
Deferred income taxes	1084
Other long-term assets	2289	4723
Total non-current assets	28970	37621
Total assets	65444	83402
Liabilities and stockholders' equity
Liabilities
Current liabilities
Accounts payable	20397	25309
Accrued liabilities	10384	13739
Deferred revenues	3118	4768
Total current liabilities	33899	43816
Non-current liabilities
Long-term debt	8235	7694
Capital leases	5948	7519
Deferred taxes liabilities		392
Other long-term liabilities	3978	4696
Total non-current liabilities	18161	20301
Total liabilities	52060	64117
Stockholders' equity
Common stock	5	5
Additional paid-in capital	13394	17186
Retained earnings	2545	4916
Treasury stock	-1837	-1837
Accumulated other comprehensive income	-723	-985
Total stockholders' equity	13384	19285
Total liabilities and stockholders' equity	65444	83402

AMAZON.COM INC (AMZN) Statement of CASH FLOW
Fiscal year ends in December. USD in millions except per share data.	2015-12	2016-12
Cash Flows From Operating Activities
Net income	596	2371
Depreciation & amortization	6281	8116
Investments losses (gains)	5
Deferred income taxes	81	-246
Stock based compensation	2119	2975
Accounts receivable	-1755	-3367
Inventory	-2187	-1426
Accounts payable	4294	5030
Accrued liabilities	913	1724
Other working capital	1292	1955
Other non-cash items	281	-689
Net cash provided by operating activities	11920	16443
Cash Flows From Investing Activities
Investments in property, plant, and equipment	-4589	-6737
Acquisitions, net	-795	-116
Purchases of investments	-4091	-7756
Sales/Maturities of investments	3025	4733
Net cash used for investing activities	-6450	-9876
Cash Flows From Financing Activities
Long-term debt issued	353	621
Long-term debt repayment	-4235	-4361
Excess tax benefit from stock based compensation	119	829
Repurchases of treasury stock
Net cash provided by (used for) financing activities	-3763	-2911
Effect of exchange rate changes	-374	-212
Net change in cash	1333	3444
Cash at beginning of period	14557	15890
Cash at end of period	15890	19334
Free Cash Flow
Operating cash flow	11920	16443
Capital expenditure	-4589	-6737
Free cash flow	7331	9706
Supplemental schedule of cash flow data
Cash paid for income taxes	273	412
Cash paid for interest	478	496

bronzecockroach710

NIKE:

Need the following ratios to be calculated using the financial sheets copied at the bottom. Each ratio needs to be calculated using the information from 2016. Each ratio also needs to be broken down and illustrated by the step by step process. Finally, please include any and all observations for each ratio and analysis.

1) Common Size analysis

2) Common size vertical analysis & graph

3) Current Ratio

4) Quick Ratio

5) Cash Ratio

6) Inventory Turnover

7) Receivables Turnover

8) Total Asset Turnover

9) Fixed Asset Turnover

10) Gross profit margin

11) Operating Profit margin

12) Net profit margin

13) Return on total assets

14) return on equity

15) basic earning power

16) Deb/net worth ratio

17) debt ratio

18) DuPont System

19) Times-interest-earned

Balance Sheet:

Consolidated Balance Sheets - USD ($) $ in Millions	May 31, 2017	May 31, 2016
Current assets:
Cash and equivalents	$ 3,808	$ 3,138
Short-term investments	2,371	2,319
Accounts receivable, net	3,677	3,241
Inventories	5,055	4,838
Prepaid expenses and other current assets	1,150	1,489
Total current assets	16,061	15,025
Property, plant and equipment, net	3,989	3,520
Identifiable intangible assets, net	283	281
Goodwill	139	131
Deferred income taxes and other assets	2,787	2,422
TOTAL ASSETS	23,259	21,379
Current liabilities:
Current portion of long-term debt	6	44
Notes payable	325	1
Accounts payable	2,048	2,191
Accrued liabilities	3,011	3,037
Income taxes payable	84	85
Total current liabilities	5,474	5,358
Long-term debt	3,471	1,993
Deferred income taxes and other liabilities	1,907	1,770
Commitments and contingencies
Redeemable preferred stock	0	0
Shareholdersâ equity:
Capital in excess of stated value	8,638	7,786
Accumulated other comprehensive (loss) income	(213)	318
Retained earnings	3,979	4,151
Total shareholdersâ equity	12,407	12,258
TOTAL LIABILITIES AND SHAREHOLDERSâ EQUITY	23,259	21,379
Class A Convertible Common Stock
Shareholdersâ equity:
Common stock at stated value	0	0
Class B Common Stock
Shareholdersâ equity:
Common stock at stated value	$ 3	$ 3

Income Statement:

Consolidated Statements of Income - USD ($) $ in Millions	12 Months Ended
Consolidated Statements of Income - USD ($) $ in Millions	May 31, 2017	May 31, 2016	May 31, 2015
Income Statement [Abstract]
Revenues	$ 34,350	$ 32,376	$ 30,601
Cost of sales	19,038	17,405	16,534
Gross profit	15,312	14,971	14,067
Demand creation expense	3,341	3,278	3,213
Operating overhead expense	7,222	7,191	6,679
Total selling and administrative expense	10,563	10,469	9,892
Interest expense (income), net	59	19	28
Other (income) expense, net	(196)	(140)	(58)
Income before income taxes	4,886	4,623	4,205
Income tax expense	646	863	932
NET INCOME	$ 4,240	$ 3,760	$ 3,273
Earnings per common share:
Basic (in dollars per share)	$ 2.56	$ 2.21	$ 1.90
Diluted (in dollars per share)	2.51	2.16	1.85
Dividends declared per common share (in dollars per share)	$ 0.70	$ 0.62	$ 0.54

Cash Flow Sheet

Consolidated Statements of Cash Flows - USD ($) $ in Millions	12 Months Ended
	May 31, 2017	May 31, 2016	May 31, 2015
Cash provided by operations:
Net income	$ 4,240	$ 3,760	$ 3,273
Income charges (credits) not affecting cash:
Depreciation	706	649	606
Deferred income taxes	(273)	(80)	(113)
Stock-based compensation	215	236	191
Amortization and other	10	13	43
Net foreign currency adjustments	(117)	98	424
Changes in certain working capital components and other assets and liabilities:
(Increase) decrease in accounts receivable	(426)	60	(216)
(Increase) in inventories	(231)	(590)	(621)
(Increase) in prepaid expenses and other current assets	(120)	(161)	(144)
(Decrease) increase in accounts payable, accrued liabilities and income taxes payable	(364)	(889)	1,237
Cash provided by operations	3,640	3,096	4,680
Cash used by investing activities:
Purchases of short-term investments	(5,928)	(5,367)	(4,936)
Maturities of short-term investments	3,623	2,924	3,655
Sales of short-term investments	2,423	2,386	2,216
Investments in reverse repurchase agreements	0	150	(150)
Additions to property, plant and equipment	(1,105)	(1,143)	(963)
Disposals of property, plant and equipment	13	10	3
Other investing activities	(34)	6	0
Cash used by investing activities	(1,008)	(1,034)	(175)
Cash used by financing activities:
Net proceeds from long-term debt issuance	1,482	981	0
Long-term debt payments, including current portion	(44)	(106)	(7)
Increase (decrease) in notes payable	327	(67)	(63)
Payments on capital lease and other financing obligations	(17)	(7)	(19)
Proceeds from exercise of stock options and other stock issuances	489	507	514
Excess tax benefits from share-based payment arrangements	177	281	218
Repurchase of common stock	(3,223)	(3,238)	(2,534)
Dividends â common and preferred	(1,133)	(1,022)	(899)
Cash used by financing activities	(1,942)	(2,671)	(2,790)
Effect of exchange rate changes on cash and equivalents	(20)	(105)	(83)
Net increase (decrease) in cash and equivalents	670	(714)	1,632
Cash and equivalents, beginning of year	3,138	3,852	2,220
CASH AND EQUIVALENTS, END OF YEAR	3,808	3,138	3,852
Cash paid during the year for:
Interest, net of capitalized interest	98	70	53
Income taxes	703	748	1,262
Non-cash additions to property, plant and equipment	266	252	206
Dividends declared and not paid	$ 300	$ 271	$ 240

ACCG106 Lecture Notes - Lecture 12: Opportunity Cost, Trade Credit, Preferred Stock

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