HW 5: Financial Ratios Using the income statements and balance sheets below: 1. Cash Flow practice: 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: only a subset of short term assets or liabilities go into cash from operations (no long term assets or liabilities) 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. Ratios Calculate all of the ratios on the Answer sheet. If the answer is infinite, write "NM" (not meaningful INCOME STATEMENT ($ 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 Operating Expenses: Research and Development Sales, General and Administrative 1,333 4,149 1,782 5,517 2,819 11,613 2,959 12,585 Total Operating Expenses 5,482 7,299 14,432 15,544 EBITDA $13,210 $20,315 $16,433 $18,404 Depreciation and Amortization Other Non-Cash Expenses (Goodwill Write down) 734 736 1,027 903 4,780 635 4,820 668 EBIT 11,740 18,385 11,018 12,916 Interest Expenses (Income) Other Non-Operating Expenses (income) 0 -326 0 - 155 o 721 0 505 Net Income Before Taxes 12,066 18,540 10,297 12,411 Tax Expense 3,831 4,527 1.755 2.213 Net Income 8.235 14.013 BALANCE SHEET (5 in millions) Company 1 2009 2010 Company 2 2 2009 2010 Assets Cash Short term Investments Accounts Receivable Inventory Other Current Assets $5,263 18, 201 5057 455 2579 S11261 14 359 9.920 1.05. 5.083 $13,279 55 19,212 6,128 13,865 $10.929 5 21,467 6.466 15 312 Total Current Assets $31.555 $41.678 S52,539 $54,184 Property Plant and Equipment (Net) Goodwill (Net) Purchased Intangible Assets (Net) Other long-term assets (Net) 52.954 206 267 12.539 $4,768 761 342 27 654 $11.262 33,109 6,600 11 289 $11.763 38,483 7,848 22.225 Total Long Term Assets $15.946 533 505 562,260 570,319 Total Assets $47 501 $75 183 $110299 $124 503 Uabilities 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 $12015 5,723 0 2,984 0 $14,809 4,071 1,850 6,182 16 09: $14,365 4,256 7.046 6,727 27.009 Total Current Uabilities $11506 $20,722 $43,003 $49,403 Long term Debt Other long-term liabilities 0 4.355 o 6,670 13,980 17.052 15 258 19,061 Total Liabilities $15 861 $27 392 $74,035 $83,722 Preferred Stock Common Stock Additional paid-in capital Retained Earnings 0 8,210 0 23,430 0 10,668 0 24 24.051 26.689 22 11901 28 858 37 122 Total Shareholders' Equity $31640 547,793 $40.764 $40,781 Total Liabilities and Shareholders Equity $47.501 $75 183 $114.799 $124.503 Company Company 2 2010 2010 2009 X X Growth 2009 X X Revenue Growth (96) EBITDA Growth (M) Profitability Gross Margin (%) JEBITDA Margin() Net Income (Profit) Margin (%) (ROS) Returns ROA (M) HOE (N) Liquidity Current Ratio Chuick Ratio ARDSO (Day Sales Outstanding) Inventory DOH Inventory Turnover JAP Days Outstanding Leverage interest Coverage Debt Service Coverage Debt/Equity x X HW 5: Financial Ratios Using the income statements and balance sheets below: 1. Cash Flow practice: Complete a cash flow statement for both companies for 2010. Hints: The balance sheets only give you net long term assets, but you can derive the change in gross long term assets (needed for the cash flow statement) by taking the change in net long term assets and adding to it current year depreciation, amortization or write downs. When completing the cash flow statement: only a subset of short term assets or liabilities go into cash from operations (no long term assets or liabilities) Cash flow for investments would include change in gross long term assets and marketable securities (also called short term investments), it may also include change in other long term assets, (we will have to assume these are other type of strategic investments) o cash flow from financing includes debt, equity, dividends and perhaps other long term liabilities (we will have to assume these may be debt items). 2. Ratios Calculate all of the ratios on the Answer sheet. If the answer is infinite, write "NM" (not meaningful INCOME STATEMENT ($ 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 Operating Expenses: Research and Development Sales, General and Administrative 1,333 4,149 1,782 5,517 2,819 11,613 2,959 12,585 Total Operating Expenses 5,482 7,299 14,432 15,544 EBITDA $13,210 $20,315 $16,433 $18,404 Depreciation and Amortization Other Non-Cash Expenses (Goodwill Write down) 734 736 1,027 903 4,780 635 4,820 668 EBIT 11,740 18,385 11,018 12,916 Interest Expenses (Income) Other Non-Operating Expenses (income) 0 -326 0 - 155 o 721 0 505 Net Income Before Taxes 12,066 18,540 10,297 12,411 Tax Expense 3,831 4,527 1.755 2.213 Net Income 8.235 14.013 BALANCE SHEET (5 in millions) Company 1 2009 2010 Company 2 2 2009 2010 Assets Cash Short term Investments Accounts Receivable Inventory Other Current Assets $5,263 18, 201 5057 455 2579 S11261 14 359 9.920 1.05. 5.083 $13,279 55 19,212 6,128 13,865 $10.929 5 21,467 6.466 15 312 Total Current Assets $31.555 $41.678 S52,539 $54,184 Property Plant and Equipment (Net) Goodwill (Net) Purchased Intangible Assets (Net) Other long-term assets (Net) 52.954 206 267 12.539 $4,768 761 342 27 654 $11.262 33,109 6,600 11 289 $11.763 38,483 7,848 22.225 Total Long Term Assets $15.946 533 505 562,260 570,319 Total Assets $47 501 $75 183 $110299 $124 503 Uabilities 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 $12015 5,723 0 2,984 0 $14,809 4,071 1,850 6,182 16 09: $14,365 4,256 7.046 6,727 27.009 Total Current Uabilities $11506 $20,722 $43,003 $49,403 Long term Debt Other long-term liabilities 0 4.355 o 6,670 13,980 17.052 15 258 19,061 Total Liabilities $15 861 $27 392 $74,035 $83,722 Preferred Stock Common Stock Additional paid-in capital Retained Earnings 0 8,210 0 23,430 0 10,668 0 24 24.051 26.689 22 11901 28 858 37 122 Total Shareholders' Equity $31640 547,793 $40.764 $40,781 Total Liabilities and Shareholders Equity $47.501 $75 183 $114.799 $124.503 Company Company 2 2010 2010 2009 X X Growth 2009 X X Revenue Growth (96) EBITDA Growth (M) Profitability Gross Margin (%) JEBITDA Margin() Net Income (Profit) Margin (%) (ROS) Returns ROA (M) HOE (N) Liquidity Current Ratio Chuick Ratio ARDSO (Day Sales Outstanding) Inventory DOH Inventory Turnover JAP Days Outstanding Leverage interest Coverage Debt Service Coverage Debt/Equity x X