Analyzing, Forecasting, and Interpreting Both Income Statement and Balance Sheet Following are the income statements and balance sheets of Best Buy Co., Inc. Revenue Cost of goods sold Income Statement, Fiscal Years Ended ($ millions) Feb. 26, 2011 Feb. 27, 2010 $50,272 $49,694 37,611 37,534 Restructuring charges cost of goods sold 24 Gross profit 12,637 12,150 Selling, general and administrative expenses 10,325 9,873 Restructuring charges 198 52 Goodwill and tradename impairment Operating income Other income (expenses) Investment income and other Interest expense Earnings before income tax expense and equity in income of affiliates Income tax expense Equity in income of affiliates Net earnings including noncontrolling interests Net (earnings) attributable to noncontrolling interests Net earnings attributable to Best Buy Co., Inc. 2,114 2,235 51 54 87 94 2,078 2,195 714 802 2 1 1,366 1,394 89 $1,277 77 $1,317 Balance Sheet (5 millions) Feb. 26, 2011 Feb. 27, 2010 $1,826 90 2020 5,486 1,144 10,566 757 2154 4,447 95 7,453 3,383 4,070 2,452 159 279 324 452 $18,302 |:|: $17,849 $17,849 Assets Cash and cash equivalents Short-term investments Receivables Merchandise inventories Other current asses Total current assets Property and equipment Land and buildings Leasehold improvements Fixtures and equipment Property under capital lease Gress property and equipment Less accumulated depreciation Net property and equipment Goodwill Tradenames, Net Customer Relationships, Net Equity and Other Investments Other assets Total assets Liabilities and Equity Accounts payable Unredeemed giftcard liabilities Accrued compensation and related expenses Accrued liabilities Accrued income taxes Short-term debt Current portion of long-term debt Total current liabilities Long-term liabilities Long-term debt Best Buy Co., Inc. Shareholders' Equity Preferred stock, $ 1.00 par value: Authorized-400,000 shares; Issued and outstanding-nonc Common stock $0.10 par value: Authorized 1.0 billion shares; Issued and outstanding 392,590,000 and 418,815,000 shares, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income Total Best Buy Co., Inc. shareholders' equity Noncontrolling interests Total equity Total liabilities and shareholders' equity $5,276 463 544 1,681 316 663 35 8,978 1,256 1,104 42 441 5,797 40 6.320 644 6,964 $18,302 Forecast Best Buy's fiscal 2012 income statement using the following relations (assume "no change" for accounts not listed). Revenue growth Cost of good sold/Revenue Restructuring charges - cost of good sold Selling, general and administrative expenses/Revenue Restructuring charges Goodwill and trademark impairment Investment income and other Investment impairment Interest expense Income tax expense/Pretax income 6% 74.8% 20.5% 5. $.. $51 S.. 587 34.4% $2 Equity in income of affiliates Net earnings attributable to noncontrolling interests/Net earnings including noncontrolling interests 6.5% Round all answers to the nearest whole number. Do not use negative signs with your answers in the income statement. Income Statement, Fiscal Years Ended ($ millions) 2012 Estimated Revenue $ 53.288 39,859 Cost of goods sold Restructuring charges-cost of goods sold Gross profit Selling, general and administrative expenses Restructuring charges Goodwill and tradename impairment Operating income 13.429 10.924 0 U 2.505 Other income/expenses Investment income and other 51 Interest expense 87 Earnings before income tax expense and equity in income of affiliates 2.469 Income tax expense 849 Equity in income of affiliates 2 Net earnings including noncontrolling interests 1,622 Net earnings attributable to noncontrolling interests $ 105 1517 Net earnings attributable to Best Buy Co., Inc. Forecast Best Buy's fiscal 2012 balance sheet using the following relations (assume "no change" for accounts not listed). Assume that all capital expenditures are purchases of property and equipment. Short-term investments Receivables/Revenue Merchandise inventories/Revenue Other current assets/Revenue CAPEX (Increase in grass Property and equipment/Revenue Goodwill Amortization expense for Tradenames Amortization expense for Customer relationships Equity and Other Investments Other Assets/Revenue Accounts payable/Revenue Unredeemed gift card liabilities/Revenue Accrued compensation and related expenses/Revenue Accrued liabilities/Revenue Accrued income taxes/Revenue Long-term liblities Noncontrolling interests Depreciation/Prior year gross PPE Amortization/Prior year intangible asset balance Dividends/Net income Long-term debt payments required in fiscal 2013 *increase by net income attributable to noncontrolling interests and assume no dividends No change Round all answers to the nearest whole number. Do not use negative signs with your answers in the balance sheet. Balance Sheet ($ millions) Assets Cash and cash equivalents Short-term investments Receivables Merchandise inventories Other current assets Total current assets Property and equipment Grass property and equipment Less accumulated depreciation Net property and equipment Goodwill Tradenames, Net Customer Relationships, Net Equity and Other Investments Other assets Total assets Liabilities and equity Accounts payable Unredeemed gift card liabilities Accrued compensation and related expenses Accrued liabilities Accrued income taxes Short-term debt Current portion of long-term debt. Total current liabilities Long-term liabilities Long-term debt Best Buy Co., Inc. Shareholders' Equity 2012 Estimated $ 536 x 22 2,505 6,235 1,172 11,106 x 766 x 0 x 0 x 0 x 0 x 0 x 0 x 0 x $ 0 x $ 0 x 0 x 0 x 0 x 0 x 0 x 0 x 0 x 0 x 0x Preferred stock, $1.00 par value: Authorized - 400,000 shares; Issued and outstanding-none 0~ Common stock, $0.10 par value: Authorized - 1.0 billion shares; Issued and outstanding - 392,590,000 and 0 x 418,815,000 shares, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income Total Best Buy Co., Inc. shareholders' equity Noncontrolling interests Total equity Total liabilities and Equity 18- 6,792 x 173 7,022 x 795 $ 7,817 x 18,314 x b. What does the forecasted adjustment to balance the accounting equation from part a reveal to us about the forecasted cash balance and related financing needs of the company? Explain. OBest Buy will generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust marketable securities, increasing total assets. Best Buy will generate sufficient cash for the coming year. The cash balance increases fairly significantly, we could adjust marketable securities, leaving total assets unchanged. OBest Buy will not generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust marketable securities, leaving total assets unchanged. OBest Buy will not generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust short-term debt, increasing total assets. Check