HW 5: Financial Ratios Using the income statements and balance sheets below: 1. Complete a cash flow statement for both companies for 2010. Hints: The balance sheets only give you net long term assets, but you can derive the change in gross long term assets (needed for the cash flow statement) by taking the change in net long term assets and adding to it current year depreciation, amortization or write-downs, When completing the cash flow statement: o only a subset of short term assets or liabilities go into cash from operations (no long term assets or liabilities). o Cash flow for investments would include change in gross long term assets and marketable securities (also called short term investments). It may also include change in other long term assets, (we will have to assume these are other type of strategic investments) o Cash flow from financing includes debt, equity, dividends and perhaps other long term liabilities (we will have to assume these may be debt items). 2. Calculate all of the ratios on the Answer sheet. If the answer is infinite, write "NM" (not meaningful). 3. For each ratio, write (on a separate page) a one-sentence comparison of the two companies and your conclustion about the relative performance or position of the two. Use numbers to support your points. (Eg. Company 1 is growing faster. It's year-over-year revenue growth is 52% compared to 10% at company 2.) Keep it short. 4. Write a one-paragraph summary of which you think is the better company, with supporting detail drawn from the IS, BS and ratios. ($ in millions) Company 1 2009 2010 $ 42,905 $ 65,225 Company 2 2009 2010 114,552 $ 126,033 Net Revenue $ COGS 24,213 37,611 83,687 92,085 Gross Profit $ 18,692 $ 27,614 $ 30,865 $ 33,948 1,333 4,149 1,782 5,517 2,819 11,613 2,959 12,585 Operating Expenses Research and Development Sales, General and Administrative Total Operating Expenses EBITDA Depreciation and Amortization Other Non-Cash Expenses (Goodwill Write down) 5,482 7,299 14,432 15,544 S $ 13,210 $ 20,315 734 1,027 16,433 4,780 18,404 4,820 736 903 635 668 11,740 0 (326) EBIT Interest Expenses (Income) Other Non-Operating Expenses (income) Net Income Before Taxes Tax Expense 18,385 0 (155) 11,018 0 721 12,916 0 505 12,066 3,831 18,540 4,527 10,297 1.755 12,411 2,213 Net Income 8,235 14,013 8,542 10,198 (S in millions) Company 1 2009 2010 Company 2 2010 2009 Assets $ S s 10,928 5,2635 18,201 5,057 455 2,579 11,261 14,359 9,924 1,051 5,083 13,279 55 19,212 6,128 13,865 21,467 6,466 15,317 $ 31,555 $ 41,678 $ Cash Short term Investments Accounts Receivable Inventory Other Current Assets Total Current Assets Property Plant and Equipment (Net) Goodwill (Net) Purchased Intangible Assets (Net) Other long-term assets (Net) Total Long Term Assets 52,539 $ 54,184 $ $ S 2.954 S 206 247 12.539 4,768 741 342 27 654 11,262 33,109 6,600 11,289 11,763 38,483 7,848 12,225 $ 15,946 S 33,505 $ 62,260 $ 70,319 Total Assets $ 47,501 S 75. 183 S 114,799 $ 124,503 $ $ $ Labilities Shareholders' Equity Accounts Payable Accrued Expenses Notes payable and short-term borrowings Deferred Revenue Other short-term liabilities 5,601 $ 3,852 0 2,053 0 12015 5,723 0 2,984 O 14,809 4,071 1,850 6,182 16,091 14,365 4,256 7,046 6,727 17,009 Total Current Liabilities $ 11,506 S 20,722 $ 43,003 S 49,403 0 4.355 0 6,670 13,980 17,052 15,258 19,061 s 15.861 $ 27,992 $ 74,035 $ 83,722 Long term Debt Other long-term liabilities Total Liabilities Preferred Stock Common Stock Additional pald-in capital Retained Earnings 0 8,210 0 23.430 0 10,665 0 37 123 0 24 14,051 26.689 0 22 11,901 28,858 Total Shareholders' Equity 531.640 $ 47291 5 40,764 $ 40.781 Total Liabilities and and Shareholders Equity $ 47.5015 75,183 $ 114.799 S 124,503 Note: These are net ass numbers. For the cash flow statement you will need to calculate the change in crossats Company 1 Company 2005 2010 2010 X Growth evenue Growth ATOA Growth X X X cash from Operation Growth Cath to trem mestment Total Annet Growth Gross Margin IN Pronaty TOA MIN encome Margin ROS) Cat Power Operations Margin IN ROA1 Returnement TROEN Current Rate Liquid Rati AR DISO ya utang nary AP Day Oulutanding Love Cover Derece HW 5: Financial Ratios Using the income statements and balance sheets below: 1. Complete a cash flow statement for both companies for 2010. Hints: The balance sheets only give you net long term assets, but you can derive the change in gross long term assets (needed for the cash flow statement) by taking the change in net long term assets and adding to it current year depreciation, amortization or write-downs, When completing the cash flow statement: o only a subset of short term assets or liabilities go into cash from operations (no long term assets or liabilities). o Cash flow for investments would include change in gross long term assets and marketable securities (also called short term investments). It may also include change in other long term assets, (we will have to assume these are other type of strategic investments) o Cash flow from financing includes debt, equity, dividends and perhaps other long term liabilities (we will have to assume these may be debt items). 2. Calculate all of the ratios on the Answer sheet. If the answer is infinite, write "NM" (not meaningful). 3. For each ratio, write (on a separate page) a one-sentence comparison of the two companies and your conclustion about the relative performance or position of the two. Use numbers to support your points. (Eg. Company 1 is growing faster. It's year-over-year revenue growth is 52% compared to 10% at company 2.) Keep it short. 4. Write a one-paragraph summary of which you think is the better company, with supporting detail drawn from the IS, BS and ratios. ($ in millions) Company 1 2009 2010 $ 42,905 $ 65,225 Company 2 2009 2010 114,552 $ 126,033 Net Revenue $ COGS 24,213 37,611 83,687 92,085 Gross Profit $ 18,692 $ 27,614 $ 30,865 $ 33,948 1,333 4,149 1,782 5,517 2,819 11,613 2,959 12,585 Operating Expenses Research and Development Sales, General and Administrative Total Operating Expenses EBITDA Depreciation and Amortization Other Non-Cash Expenses (Goodwill Write down) 5,482 7,299 14,432 15,544 S $ 13,210 $ 20,315 734 1,027 16,433 4,780 18,404 4,820 736 903 635 668 11,740 0 (326) EBIT Interest Expenses (Income) Other Non-Operating Expenses (income) Net Income Before Taxes Tax Expense 18,385 0 (155) 11,018 0 721 12,916 0 505 12,066 3,831 18,540 4,527 10,297 1.755 12,411 2,213 Net Income 8,235 14,013 8,542 10,198 (S in millions) Company 1 2009 2010 Company 2 2010 2009 Assets $ S s 10,928 5,2635 18,201 5,057 455 2,579 11,261 14,359 9,924 1,051 5,083 13,279 55 19,212 6,128 13,865 21,467 6,466 15,317 $ 31,555 $ 41,678 $ Cash Short term Investments Accounts Receivable Inventory Other Current Assets Total Current Assets Property Plant and Equipment (Net) Goodwill (Net) Purchased Intangible Assets (Net) Other long-term assets (Net) Total Long Term Assets 52,539 $ 54,184 $ $ S 2.954 S 206 247 12.539 4,768 741 342 27 654 11,262 33,109 6,600 11,289 11,763 38,483 7,848 12,225 $ 15,946 S 33,505 $ 62,260 $ 70,319 Total Assets $ 47,501 S 75. 183 S 114,799 $ 124,503 $ $ $ Labilities Shareholders' Equity Accounts Payable Accrued Expenses Notes payable and short-term borrowings Deferred Revenue Other short-term liabilities 5,601 $ 3,852 0 2,053 0 12015 5,723 0 2,984 O 14,809 4,071 1,850 6,182 16,091 14,365 4,256 7,046 6,727 17,009 Total Current Liabilities $ 11,506 S 20,722 $ 43,003 S 49,403 0 4.355 0 6,670 13,980 17,052 15,258 19,061 s 15.861 $ 27,992 $ 74,035 $ 83,722 Long term Debt Other long-term liabilities Total Liabilities Preferred Stock Common Stock Additional pald-in capital Retained Earnings 0 8,210 0 23.430 0 10,665 0 37 123 0 24 14,051 26.689 0 22 11,901 28,858 Total Shareholders' Equity 531.640 $ 47291 5 40,764 $ 40.781 Total Liabilities and and Shareholders Equity $ 47.5015 75,183 $ 114.799 S 124,503 Note: These are net ass numbers. For the cash flow statement you will need to calculate the change in crossats Company 1 Company 2005 2010 2010 X Growth evenue Growth ATOA Growth X X X cash from Operation Growth Cath to trem mestment Total Annet Growth Gross Margin IN Pronaty TOA MIN encome Margin ROS) Cat Power Operations Margin IN ROA1 Returnement TROEN Current Rate Liquid Rati AR DISO ya utang nary AP Day Oulutanding Love Cover Derece