ACCT1501 Lecture Notes - Lecture 10: Financial Statement Analysis, Earnings Before Interest And Taxes, Profit Margin

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21 Jul 2018

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Measures a company"s ability to earn profits. Determines how well the company performed and is likely to perform in the future. Indicates how much return a company is generating on historically accumulated shareholder"s equity. Determines the after tax return the managers are earning on the assets under their control. Determines the return earned on assets under management control. Measures performance of managers in converting sales to net profit. Measures the ability of managers to generate profit from sales. Determines the company"s ability to generate cash resources relative to the company"s size. Relates earnings attributable to ordinary shares to the number of shares outstanding. Relates the accounting earnings to the market price per share to reflect present company performance with market expectations. Measures the portion of earnings paid to shareholders: activity(turnover) ratios. Measures the efficiency of a company"s operations. Measures asset turnover, inventory turnover and accounts receivable. Determines the amount of sales volume associated with each dollar of assets.

Related Questions

Required - Using the attached- below- financial statements for Coca-Cola calculate the following ratios for 2014 - Hint: use excel to set up the formulas and amounts to calculate (see below chart)

https://www.sec.gov/Archives/edgar/data/21344/000002134415000005/a2014123110-k.htm

Liquidity ratio
Current assets	92023
Current liabilities	32374
Current ratio is current asset/current liabilities	92023/32374= 2.84
Quick assets=current assets- inventory + prepaid expenses	92023-3100+3066= 91989
Quick ratio is quick assets/current liabilities	91989/32374= 2.84
Calculate debt to equity ratio= Total liabilities/ total stockholder equity
Times interest earned= Earnings before interest and taxes (EBIT)/interest expense
Return on Net Operating Assets â RNOA Net Operating assets RNOA= NPOAT/Average NOA
Net Operating Profit After Taxes â NOPAT Net operating profit after taxes= net income- (nonperatinge revenues-nonoperating expenses)x(1-marginal tax rates)
Net Operating Profit Margin â NOPM NPOM= NOPAT/Sales Revenue
Net Operating Asset Turnover â NOAT NOAT= Sales/Average NOA


Note 1	*Coca-Cola*
	Operating Assets
	Total assets - Non-operating assets
	(ie NOA = Total assets less Short-term investments + Other investments

	Operating Liabilities
	Total liabilities - Non-operating liabilities
	ie NOL = Total liabilities - Loans and notes payable + Current maturities of long-term debt+Long-term debt)


The Clark W Grizwald Holiday Company reported thefollowing financial information for its most recent fiscalyear:


Income Statement, for Fiscal Year 2013		Complete the following table:
(in millions)
Revenues	$2,500	Return on assets
Cost of goods sold	$1,000	Return on equity
Selling, general, and administrative expenses	$255	Gross profit margin
Earnings before interest and taxes	$1,245	Net profit margin
Interest expense	$75	Equity multiplier
Earnings before taxes	$1,170	Dividend yield
Taxes	$75	Debt-equity ratio
Net income	$1,095	Days sales outstanding
		Inventory turnover
Balance Sheet, as of December 31, 2013		Receivables turnover
(in millions)
Cash and cash equivalents	$65
Accounts receivable	$55
Inventory	$195
Net plant, property, and equipment	$1,250
Intangible assets	$100
Total assets	$1,665

Current liabilities	$165
Long-term debt	$500
Shareholders' equity	$1,350
Total liabilities and shareholders' equity	$2,015

Additonal information available for the company isalso available:
(in millions)
Market value of equity	$700
Market value of debt	$400
Dividends	$30
Number of shares outstanding	10

lavenderdinosaur371


20 Points	The Clark W Grizwald Holiday Company reported thefollowing financial information for its most recent fiscalyear:


	Income Statement, for Fiscal Year 2013		Complete the following table:
	(in millions)
	Revenues	$2,500	Return on assets
	Cost of goods sold	$1,000	Return on equity
	Selling, general, and administrative expenses	$255	Gross profit margin
	Earnings before interest and taxes	$1,245	Net profit margin
	Interest expense	$75	Equity multiplier
	Earnings before taxes	$1,170	Dividend yield
	Taxes	$75	Debt-equity ratio
	Net income	$1,095	Days sales outstanding
			Inventory turnover
	Balance Sheet, as of December 31, 2013		Receivables turnover
	(in millions)
	Cash and cash equivalents	$65
	Accounts receivable	$55
	Inventory	$195
	Net plant, property, and equipment	$1,250
	Intangible assets	$100
	Total assets	$1,665

	Current liabilities	$165
	Long-term debt	$500
	Shareholders' equity	$1,350
	Total liabilities and shareholders' equity	$2,015

	Additonal information available for the company isalso available:
	(in millions)
	Market value of equity	$700
	Market value of debt	$400
	Dividends	$30
	Number of shares outstanding	10

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ACCT1501 Lecture Notes - Lecture 10: Financial Statement Analysis, Earnings Before Interest And Taxes, Profit Margin

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