A F: Using numbers 1, 2 and 3 on Exhibit 6.3 match the companies to the respective number.

G L: Using numbers 4, 5 and 6 on Exhibit 6.3 match the companies to the respective number.

M R: Using numbers 7, 8 and 9 on Exhibit 6.3 match the companies to the respective number.

S Z: Using numbers 10, 11 and 12 on Exhibit 6.3 match the companies to the respective number.

Exhibit 6-3 Common-size Financial Statements 1 2. 3 4 5 6 7 8 9 10 11 12 2.1% 20.0% 22.5% 37.9% 13.4% 11.7% 4.0% 30.8% 17.6% 19.9% 42.7% 14.1% 7.5 18.0 17.8 12.5 26.0 4.2 76.8 13.6 9.0 25.7 8.9 Balance sheet (year-end) Cash and marketable securities Receivables Inventories Property, plant, and equipment Accumulated depreciation Investments 4.8 2.1 17.7 7.3 8.6 8.1 0.9 0.1 2.4 3.7 301.5 0.1 94.5 22.5 67.9 182.6 51.3 79.0 34.4 26.9 47.5 6.1 24.8 76.3 (30.7) (16.6) (2.7) (25.4) (46.4) 28.8 (15.6) 2.6 70.6 (11.5) 1.3 8.5 8.8 5.2 104.8 Other assets 9.4 30.4 (99.7) (49.0) 7.0 47.2 13.1 269.3% 173.6% 40.4% 32.8% 76.3 26.0 17.8 (38.6) (16.3) 15.2 8.6 51.1 123.5 162.8% 235.5% 53.1% 50.4% 39.8 13.9 7.8 41.3 62.1 129.9 162.8% 235.5% (27.7) 7.5 33.8 100.4% 33.6% 103.5% 34.4% 14.4 3.2 15.8 53.6% 26.4% 13.4 136.8% 46.2% 192.1% 118.4% 30.3 5.2 47.2% 28.7% 100.9% 34.3% 0.1 186.3% 21.2% 28.2 1.0 4.3 73.4 24.8 13.8 8.7 16.5 12.4 8.0 46.4 81.0 5.5 71.6 109.3 269.3% 173.6% 2.4 11.4 53.6% 5.4 61.1 40.9 53.7 136.8% 66.9 26.9 192.1% 13.2 47.2% 103.5% 100.4% 100.9 186.3% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 0.7% 74.4 11.1 100.0% 1.4% 86.5 100.0% 100.0% 4.3% 73.8 74.9 58.7 75.4 98.3 45.1 80.9 31.6 33.1 Total assets Current liabilities Long-term debt Other noncurrent liabilities Shareholders' equity Total liabilities and shareholders' equities Income statement Operating revenues Other revenues Cost of goods sold (excluding depreciation) or operating expenses Depreciation and amortization Selling and administrative Interest expense Research and development Income taxes Other Total expenses Net income Cash flow from operations Free operating cash flow 11.4 6.6 7.8 9.7 4.3 5.6 2.9 3.2 4.7 0.7 2.8 21.2 15.9 16.2 8.7 31.0 16.2 1.3 4.6 1.1 1.4 0.7 2.5 32.2 0.7 14.4 5.1 5.2 36.0 1.3 1.6 25.1 0.1 13.6 7.9 2.8 4.1 0.6 2.5 (1.5) 91.6% 8.4% 25.2% 0.8 11.3 0.1 4.2 3.7 (1.0) 97.7% 6.6% 2.7 (7.0) 95.2% 4.8% 17.7% 2.2 11.5 97.0% 3.7% 7.9% 1.7 (1.8) 92.1% 9.0% 0.9 2.8 (0.2) 93.8% 6.2% 10.8% 1.2 1.8 97.7% 2.3% 5.8% 3.1 78.4% 21.6% 31.1% 108.7% (8.7) 7.1% 92.3% 7.7% 12.0% 10.1 (0.7) 82.6% 17.4% 24.3% 23.1 2.8 (4.0) 92.0% 8.0% 28.2% 18.5 10.6% 13.3% 10.6 (9.5) 5.9 25.6 5.5 4.7 4.8 7.6 9.7 6.1 Financial Statement Detective Exercise Exhibit 6.3 shows common-size balance sheets and income state- ments for 12 companies, described below. Your job is to match each company with its financial statements. Dell Dell is the world's #1 direct-sale computer vendor. In addition to a full line of desktop and notebook PCs (about 80% of total sales), Dell also offers workstations, storage systems, network servers, and Ethernet switches. Dell's direct-sales, built-to-order model allows for lower inventories and lower operating costs, a necessity for the PC price wars and the occasional slump in corporate IT spending. Accor One of the world's leading hotel operators, owning or managing almost 4000 properties throughout the world. It serves travelers in Europe through its flagship chains Mercure, Novotel, and Sofitel, and its economy chains Ibis and Formule 1. In the United States, it oper- ates budget brands Motel 6 and Red Roof Inns. Accor has embarked on a sale and leaseback strategy for its upscale properties to reduce exposure to slowdowns in the market and is working to transition many of its midscale hotel leases to variable cost arrangements. Deutsche Telekom The #1 telecom company in Europe. Deutsche Telekom is Ger- many's leading fixed-line phone operator, its T-Mobile unit serves millions of wireless phone customers, and T-Online is one of the Europe's leading internet service providers. Although privatized in the 1990s, the German government still holds a 15% stake and an additional 22% through a state-owned development bank. Arcelor Arcelor was formed by the combination of three European steel companies and is now the second largest steel manufacturer in the world. The company produces carbon steel and stainless steel for the automotive, construction, appliance, and packaging industries. The FPL Group The FPL Group is a holding company with operations across the United States. Most revenue comes from its utility subsidiary, the largest electricity provider in the state of Florida. The electricity is generated from the company's nuclear and fossil-fueled power plants. Carrefour Carrefour is the world's second largest retailer. Based in France, it operates more than 11 000 stores under two dozen brand names, including Carrefour (hypermarkets), Champion (supermarkets), and Shopi (convenience stores). Unable to build new stores in France, until recent changes in French law, Carrefour has expanded through acquisitions, at home and abroad. Interpublic Interpublic is one of the world's largest advertising and marketing services companies. Operating through offices in 130 countries, its flagship agencies include McCann Worldgroup, Lowe & Partners, and Hill Holliday. Like all of the global players in its industry, much of Interpublic's growth has come from acquisitions. Nestl customer base provides a steady stream of recurring licensing and service revenue. Southwest Airlines Nestl is the world's #1 food company. It is the world leader in cof- fee (Nescaf), and is also one of the largest bottled water (Perrier) and baby-food manufacturers. At last count, it is the owner of over 9000 branded products worldwide. Nestls recent purchase of Ralston-Purina has made it a top player in the pet food business. In addition to its food business, Nestl owns nearly 27% of cosmetic giant L'Oreal. Southwest Airlines offers low-cost, no-frills air travel to 60 cities in the United States. A model for low-fare upstarts the world over, the company has enjoyed over 30 straight years of profitability. Southwest's business model is simple: flights are short (most are under two hours), and the airline usually lands at small airports to avoid congestion at large hubs. Originally concentrated in the western part of the United States, Southwest has expanded into key eastern markets, such as Philadelphia. Pfizer Pfizer is the world's largest research-based pharmaceutical company. Its best-known products include Viagra, Zoloft, and Lipitor. In addi- tion to prescription drugs, Pfizer also makes a broad range of popular over-the-counter remedies, including Sudafed and Benadryl. SAP SAP is the world's leading provider of enterprise resource plan- ning software used to integrate corporate back-office functions such as human resources, accounting, distribution, and manu- facturing. The company also offers a range of products on sup- ply chain and customer relationship management. SAP's large Toyota Toyota is the world's #2 car maker (by sales) and its most profita- ble. In addition to longstanding core brands Camry, Land Cruiser, Celica, Corolla, and the luxury Lexus line Toyota has pioneered the market for hybrid-powered sedans (Prius). While most of its North American and European competitors are downsizing opera- tions, Toyota continues to pursue an aggressive growth strategy. Exhibit 6-3 Common-size Financial Statements 1 2. 3 4 5 6 7 8 9 10 11 12 2.1% 20.0% 22.5% 37.9% 13.4% 11.7% 4.0% 30.8% 17.6% 19.9% 42.7% 14.1% 7.5 18.0 17.8 12.5 26.0 4.2 76.8 13.6 9.0 25.7 8.9 Balance sheet (year-end) Cash and marketable securities Receivables Inventories Property, plant, and equipment Accumulated depreciation Investments 4.8 2.1 17.7 7.3 8.6 8.1 0.9 0.1 2.4 3.7 301.5 0.1 94.5 22.5 67.9 182.6 51.3 79.0 34.4 26.9 47.5 6.1 24.8 76.3 (30.7) (16.6) (2.7) (25.4) (46.4) 28.8 (15.6) 2.6 70.6 (11.5) 1.3 8.5 8.8 5.2 104.8 Other assets 9.4 30.4 (99.7) (49.0) 7.0 47.2 13.1 269.3% 173.6% 40.4% 32.8% 76.3 26.0 17.8 (38.6) (16.3) 15.2 8.6 51.1 123.5 162.8% 235.5% 53.1% 50.4% 39.8 13.9 7.8 41.3 62.1 129.9 162.8% 235.5% (27.7) 7.5 33.8 100.4% 33.6% 103.5% 34.4% 14.4 3.2 15.8 53.6% 26.4% 13.4 136.8% 46.2% 192.1% 118.4% 30.3 5.2 47.2% 28.7% 100.9% 34.3% 0.1 186.3% 21.2% 28.2 1.0 4.3 73.4 24.8 13.8 8.7 16.5 12.4 8.0 46.4 81.0 5.5 71.6 109.3 269.3% 173.6% 2.4 11.4 53.6% 5.4 61.1 40.9 53.7 136.8% 66.9 26.9 192.1% 13.2 47.2% 103.5% 100.4% 100.9 186.3% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 0.7% 74.4 11.1 100.0% 1.4% 86.5 100.0% 100.0% 4.3% 73.8 74.9 58.7 75.4 98.3 45.1 80.9 31.6 33.1 Total assets Current liabilities Long-term debt Other noncurrent liabilities Shareholders' equity Total liabilities and shareholders' equities Income statement Operating revenues Other revenues Cost of goods sold (excluding depreciation) or operating expenses Depreciation and amortization Selling and administrative Interest expense Research and development Income taxes Other Total expenses Net income Cash flow from operations Free operating cash flow 11.4 6.6 7.8 9.7 4.3 5.6 2.9 3.2 4.7 0.7 2.8 21.2 15.9 16.2 8.7 31.0 16.2 1.3 4.6 1.1 1.4 0.7 2.5 32.2 0.7 14.4 5.1 5.2 36.0 1.3 1.6 25.1 0.1 13.6 7.9 2.8 4.1 0.6 2.5 (1.5) 91.6% 8.4% 25.2% 0.8 11.3 0.1 4.2 3.7 (1.0) 97.7% 6.6% 2.7 (7.0) 95.2% 4.8% 17.7% 2.2 11.5 97.0% 3.7% 7.9% 1.7 (1.8) 92.1% 9.0% 0.9 2.8 (0.2) 93.8% 6.2% 10.8% 1.2 1.8 97.7% 2.3% 5.8% 3.1 78.4% 21.6% 31.1% 108.7% (8.7) 7.1% 92.3% 7.7% 12.0% 10.1 (0.7) 82.6% 17.4% 24.3% 23.1 2.8 (4.0) 92.0% 8.0% 28.2% 18.5 10.6% 13.3% 10.6 (9.5) 5.9 25.6 5.5 4.7 4.8 7.6 9.7 6.1 Financial Statement Detective Exercise Exhibit 6.3 shows common-size balance sheets and income state- ments for 12 companies, described below. Your job is to match each company with its financial statements. Dell Dell is the world's #1 direct-sale computer vendor. In addition to a full line of desktop and notebook PCs (about 80% of total sales), Dell also offers workstations, storage systems, network servers, and Ethernet switches. Dell's direct-sales, built-to-order model allows for lower inventories and lower operating costs, a necessity for the PC price wars and the occasional slump in corporate IT spending. Accor One of the world's leading hotel operators, owning or managing almost 4000 properties throughout the world. It serves travelers in Europe through its flagship chains Mercure, Novotel, and Sofitel, and its economy chains Ibis and Formule 1. In the United States, it oper- ates budget brands Motel 6 and Red Roof Inns. Accor has embarked on a sale and leaseback strategy for its upscale properties to reduce exposure to slowdowns in the market and is working to transition many of its midscale hotel leases to variable cost arrangements. Deutsche Telekom The #1 telecom company in Europe. Deutsche Telekom is Ger- many's leading fixed-line phone operator, its T-Mobile unit serves millions of wireless phone customers, and T-Online is one of the Europe's leading internet service providers. Although privatized in the 1990s, the German government still holds a 15% stake and an additional 22% through a state-owned development bank. Arcelor Arcelor was formed by the combination of three European steel companies and is now the second largest steel manufacturer in the world. The company produces carbon steel and stainless steel for the automotive, construction, appliance, and packaging industries. The FPL Group The FPL Group is a holding company with operations across the United States. Most revenue comes from its utility subsidiary, the largest electricity provider in the state of Florida. The electricity is generated from the company's nuclear and fossil-fueled power plants. Carrefour Carrefour is the world's second largest retailer. Based in France, it operates more than 11 000 stores under two dozen brand names, including Carrefour (hypermarkets), Champion (supermarkets), and Shopi (convenience stores). Unable to build new stores in France, until recent changes in French law, Carrefour has expanded through acquisitions, at home and abroad. Interpublic Interpublic is one of the world's largest advertising and marketing services companies. Operating through offices in 130 countries, its flagship agencies include McCann Worldgroup, Lowe & Partners, and Hill Holliday. Like all of the global players in its industry, much of Interpublic's growth has come from acquisitions. Nestl customer base provides a steady stream of recurring licensing and service revenue. Southwest Airlines Nestl is the world's #1 food company. It is the world leader in cof- fee (Nescaf), and is also one of the largest bottled water (Perrier) and baby-food manufacturers. At last count, it is the owner of over 9000 branded products worldwide. Nestls recent purchase of Ralston-Purina has made it a top player in the pet food business. In addition to its food business, Nestl owns nearly 27% of cosmetic giant L'Oreal. Southwest Airlines offers low-cost, no-frills air travel to 60 cities in the United States. A model for low-fare upstarts the world over, the company has enjoyed over 30 straight years of profitability. Southwest's business model is simple: flights are short (most are under two hours), and the airline usually lands at small airports to avoid congestion at large hubs. Originally concentrated in the western part of the United States, Southwest has expanded into key eastern markets, such as Philadelphia. Pfizer Pfizer is the world's largest research-based pharmaceutical company. Its best-known products include Viagra, Zoloft, and Lipitor. In addi- tion to prescription drugs, Pfizer also makes a broad range of popular over-the-counter remedies, including Sudafed and Benadryl. SAP SAP is the world's leading provider of enterprise resource plan- ning software used to integrate corporate back-office functions such as human resources, accounting, distribution, and manu- facturing. The company also offers a range of products on sup- ply chain and customer relationship management. SAP's large Toyota Toyota is the world's #2 car maker (by sales) and its most profita- ble. In addition to longstanding core brands Camry, Land Cruiser, Celica, Corolla, and the luxury Lexus line Toyota has pioneered the market for hybrid-powered sedans (Prius). While most of its North American and European competitors are downsizing opera- tions, Toyota continues to pursue an aggressive growth strategy