To help familiarize you with the financial reporting of a real company in order to further your

Question:

To help familiarize you with the financial reporting of a real company in order to further your understanding of the chapter material.

This case focuses on the financial statement analysis of Columbia Sportswear. Recall from this chapter that stakeholders use numerous ways to analyze and so better understand the financial position and results of a company’s operations. Tools such as vertical and horizontal analyses are available; in addition, financial ratios can be used to gain further insight into areas such as liquidity and profitability. Other measures include earnings per share and ratios that consider the share price of a company’s stock. Finally, nonfinancial information provides additional insights into the performance and financial position of a company. We will now apply some of the analytical tools described in the chapter. Refer to the Columbia Sportswear annual report found in Appendix A.

Requirements

1. Perform a vertical analysis on the income statements (Consolidated Statements of Operations) for all three years. Discuss your results. What benefit do you see in performing this analysis?

2. Perform a horizontal analysis of the balance sheets (Consolidated Balance Sheets) for both years. Discuss your results. What benefit do you see in performing this analysis?

3. Look at the income statements (Consolidated Statements of Operations). Can you find the Basic EPS for each fiscal year presented? Has the Basic EPS increased or decreased each year? Why do you think the Basic EPS has been changing?

4. Determine the liquidity of Columbia Sportswear by computing the net working capital, current ratio, and quick ratio at December 31, 2016, and December 31, 2015. Has Columbia Sportswear’s liquidity improved or deteriorated? Compute the return on sales and the return on equity ratios for 2016 and 2015. Has Columbia Sportswear’s profitability improved or deteriorated?

5. The market price for a share of Columbia Sportswear’s common stock was $58.30 on December 31, 2016. Using this price, determine the PE ratio and the dividend yield at December 31, 2016 (the DPS can be found on the Consolidated Statements of Stockholders’ Equity). What do your results mean? Assume that the industry average PE ratio was 20 times earnings and the dividend yield was 1.1 percent. Evaluate your results against the industry averages.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Stakeholders
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A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Financial Ratios
The term is enough to curl one's hair, conjuring up those complex problems we encountered in high school math that left many of us babbling and frustrated. But when it comes to investing, that need not be the case. In fact, there are ratios that,...

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