经济环境下的财务会计课后习题答案

1 CHAPTER 2 THE FINANCIAL STATEMENTS BRIEF EXERCISES BE2 1 2000 20022003 Beginning Ending Retained200320032003Retained Earnings Revenues Expenses Dividends Earnings 13 5 27 23 4 X 16 0 X 1 1 2003 Dividends as a percentage of 2003 net income 2003 Dividends 1 1 30 6 2003 Net income 27 23 4 3 6 BE2 2 1 Current Liabilities financed 18 billion of the assets Current Liabilities divided by Total assets 18 53 34 0 2 Long term debt financed 27 billion of the assets Long term debt divided by total assets 27 53 50 9 3 Stockholders equity financed 8 billion of the assets Stockholders equity divided by total assets 8 53 15 1 BE2 3 a Working capital current assets current liabilities Boeing s current assets total 17 billion less 18 billion of current liabilities gives the company negative working capital of 1 billion Another measure of solvency would be the current ratio The current ratio is current assets divided by current liabilities or 17 billion divided by 18 billion 0 94 Both measures indicate that Boeing appears to have a solvency problem Current assets are not sufficient to cover current liabilities Under existing circumstances the Company will have to look to other sources to pay its current obligations b No Boeing has 9 1 billion of liquid assets cash short term investments and accounts receivable but it has 18 billion of current liabilities c Boeing would be more solvent if accounts receivable were 5 3 billion and inventory was 4 5 billion Accounts receivable are closer to cash than inventory This means that accounts receivable are expected to be converted to cash in a shorter period of time than inventory BE2 4 2003 2002 2001 Net cash flow from operating activities 13 517 15 210 14 805 Net cash flow from investing activities 3 105 3 328 8 387 Net cash flow from financing activities 9 173 9 018 6 358 Net change in cash 1 239 2 864 60 Cash at beginning of period 3 567 703 643 Cash at end of period 4 806 3 567 703 SBC Communication s cash management activities over the three year period of 2003 2002 and 2001 appear to be extremely good They are generating significant amounts of cash flow from operating activities SBC Communications is then able to reinvest substantial amounts in its asset base At the same time SBC Communications is also able to fund its financing activities from its operating cash flow The large amount of funds being used in investing activities indicates that SBC Communications is growing its business EXERCISES E2 1 1 Financing Balance sheet Stockholders Equity 5 Financing Balance sheet 2 Operating Balance sheet Income statement 6 Financing S E Bal sheet 3 Operating Income statement Balance sheet 7 Investing Balance sheet 4 Investing Balance sheet 8 Operating Balance sheet E2 2 1 Financing Balance sheet 2 Operating Balance sheet 3 Operating Income statement Balance sheet 4 Operating Income statement Balance sheet 5 Investing Balance sheet 6 Investing Balance sheet Income statement 7 Financing Balance sheet 8 Operating Balance sheet E2 3 a Balance sheetg Balance sheetm Balance sheet b Income statementh Balance sheetn Balance sheet c Balance sheeti Balance sheeto Balance sheet d Income statementj Balance sheetp Income statement e Balance sheetk Income statementq Balance sheet f Income statementl Income statementr Balance sheet E2 4 2001 20012001 Beginning Ending Retained200120012001Retained Earnings Revenues Expenses Dividends Earnings 1 2 3 9 3 5 X 1 3 X 3 2002 20022002 BeginningEnding Retained200220022002Retained Earnings Revenues Expenses Dividends Earnings 1 3 4 1 X 3 1 4 X 3 7 2003 20032003 BeginningEnding Retained200320032003Retained Earnings Revenues Expenses Dividends Earnings X 4 4 3 9 3 1 6 X 1 4 you must calculate the 2003 equation before you can calculate the 2002 equation 200320022001 Sales growth 0 3 0 2N A Sales growth 7 3 5 1 N A Profits 5 4 4 Profits of sales 11 4 9 8 10 3 Dividends of net income 60 0 75 0 75 0 The company was able to grow sales successfully in 2002 but at the expense of profits Then in 2003 the company was again successful at growing sales but also managed to increase its profits Due to the increased profitability the constant dividend payments were less as a percentage of net income in 2003 E2 5 2001 2001 Ending Retained Earnings2001 Beginning Retained Earnings or Revenues for 2001 2002 Beginning Retained Earnings Expenses for 2001 Dividends for 2001 523 499 1 383 X 0 X 1 407 Expenses for 2001 are 1 407 2002 758 523 1 522 1 608 X X 149 Dividends declared for 2002 are 149 2003 596 758 X 1 550 5 X 1 717 Revenue for 2003 is 1 717 2001 2002 2003 Salesgrowth N A 10 0 12 8 Profits 24 86 167 Profits as a percentage of sales 1 7 5 7 9 7 Dividends 0 149 5 Dividends as a percentage of net income N AN A3 0 The advertising agency had modest sales growth from 2001 to 2003 However from 2002 to 2003 the Company was able to go from losses to a profit Even though the Company had a loss in 2002 the Company paid a healthy dividend Then in 2003 when the Company showed a profit it virtually eliminated the dividend There is reason to be optimistic going forward In 2003 the Company was able to show a nice growth in its sales while at the same time showing a reduction in its expenses E2 6 Solvency primarily indicates a company s ability to meet its debt payments as they come due Current liabilities are obligations that will be settled within one year or the company s operating cycle whichever is longer through the use of current assets or the creation of new current liabilities Current assets are those assets that will be consumed or converted to cash within one year or the company s operating cycle whichever is longer Consequently comparing current assets to current liabilities provides an indication of a company s ability to meet its short term debts In this case current assets were 3 16 and 2 96 times greater than current liabilities as of December 31 2003 and December 31 2002 respectively Although comparing current assets to current liabilities provides a measure of a company s solvency this measure is not perfect A true test of a company s short term solvency would be to compare the cash value of its current assets to the cash value of its current liabilities For current liabilities the book value is usually a good approximation of the cash value since a company cannot from a legal viewpoint unilaterally change its debts The situation is different for current assets though The book value may or may not bear any relation to the cash value Consequently comparing the book value of current assets to current liabilities may not give an accurate measure of a company s solvency E2 7 Method 1 Method 2 Working capital as of 12 31 2003 680 215 465 465 Impact of method on current assets 00 Impact of method on current liabilities 300 0 New working capital as of January 2004 165 465 It seems that only method 2 would be acceptable to the company in terms of maintaining the working capital covenant E2 8 2003 2002 2001 Beginning cash balance 9 484 Y 4 234 Net cash flow from operating activities 5 240 X6 392 Net cash flow from investing activities 5 436 807 X Net cash flow from financing activities X 1 169 1 250 Ending cash balance 3 925 9 484 4 873 X equals 5 363 6 587 7 003 Beginning cash balance for 2002 Ending cash balance for 2001 Cisco Systems cash management activities over the three year period of 2001 2002 and 2003 appear to be strong The Company is generating a significant amount of net cash flow from operations each year and then is investing in its business In 2003 Cisco s cash balances decreased due to heavy investing and financing activities The Company either repaid debt or returned cash to its shareholders E2 9 2003 2002 2001 Beginning cash balance Z 2 280 X Net cash flow from operating activities 1 3365201 485 Net cash flow from investing activities X 603 998 Net cash flow from financing activities 48 X1 270 Ending cash balance 1 865 1 815 Y X equals 1 238 382 523 2002 Beginning balance 2001 Ending balance 2003 Beginning balance 2002 Ending balance Southwest Airlines cash management activities appear to be very good for the years 2001 2002 and 2003 The company is consistently generating a net cash inflow from its operating activities A look at its investing activities reveals that the company is expanding its asset base probably for growth During 2002 and 2003 the company apparently had a cash outflow due to financing activities possibly in paying off debt or returning cash to shareholders Overall Southwest Airlines seems to be doing reasonably well in its cash management activities E2 10 Lana in addition the company would have focused on the interest payments which must be made until the debt is repaid By retiring the debt the company s cash flow would be freed for new uses including investing activities such as modernizing its manufacturing plants and improving its production technology Levi s determined that its Dockers brand would fetch a strong price when sold and would be the source of cash to repay the debt so the company could focus on its other businesses Selling the Dockers brand would have removed long term assets and inventory from the balance sheet and would have generated the 2 billion in cash Paying off the debt would have removed the cash and reduced the liabilities The statement of cash flow would have shown a cash inflow from investing activities when the Dockers brand was sold and then would have shown a cash outflow in financing activities when the debt was retired ID2 9 a 2004 2003 2002 Sales 64 816 58 247 53 553 Cost of merchandise Sold 44 236 68 2 40 139 68 9 37 406 69 8 Operating expenses 13 734 21 2 12 278 21 1 11 215 20 9 Interest expense 62 0 37 0 28 0 Taxes 2 539 3 9 2 208 3 8 1 913 3 6 Net income 4 304 6 6 3 664 6 3 3 044 5 7 From 2002 to 2004 sales increase dramatically 21 and net income increased by 41 During each of these years the cost structure of Home Depot changed very little The biggest component of costs cost of merchandise sold fluctuated by only 3 This would indicate that the increase in net income from 2002 to 2004 was driven by the increase in sales There was no improvement in the costs as a percentage of sales b 2004 2003 Current assets 13 328 38 7 11 917 39 7 Noncurrent assets 21 109 61 3 18 094 60 3 Total assets 34 437 30 011 From 2003 to 2004 there has been a significant increase in noncurrent assets 3 billion The ratio of current vs noncurren