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Balance Sheet 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Assumptions: At the beginning of 2009, CanGo purchased the online gaming company. This purchase was for cash, paid for through the proceeds of the IPO and results in goodwill. 90% of the online book sales comes from JIT, the other 10% through the inventory which CanGo possesses. 100% of the CD/DVD/MP3 come through CanGo inventory. The result is that 80% of ALL sales is JIT and 20% is inventory. There is one warehouse for shipping of books and one plant for manufacturing. There are three divisions: a CD/DVD/MP3 division, an online gaming division and a books division. All manufacturing takes place in the CD/DVD/MP3 division. The IPO took place at the beginning of 2009. The CD/DVDs were customized beginning in 2008. The MP3 players were built beginning in the start of 2009. The online gaming company was purchased for $30,000,000 and both Elizabeth and Andrew initiated the process. The company began in 2006, has a VC infusion in 2007 and 2008. It showed a profit in 2008 and 2009. Its only profitable division is the online book sales division. It has some type of international operations, hence the need for a "translation gain or loss" in owner's equity. 18 19 It has an extraordinary loss from fire and a sale of a segment of its business in 2009. Balance Sheet ASSETS Cash Marketable Securities Accounts Receivable Less: Allowance for Bad Debts Net Accounts Receivable December 31, 2009 $20,900,000 $117,000,000 $33,000,000 $(880,000) $32,120,000 Inventory Raw Materials Work-in-process Finished Goods Inventory Purchased for Resale Total Inventory $2,000,000 $1,000,000 $5,000,000 $24,000,000 $32,000,000 Plant, Property and Equipment Less: Accumulated Depreciation Net Plant, Property and Equipment $6,700,000 $(320,000) $6,380,000 Prepaid Expenses $200,000 Goodwill and Other Purchased Intangibles $28,000,000 Less: Amortization $(700,000) Net Goodwill and Other Purchased Intangibles $27,300,000 Total Assets $235,900,000 LIABILITIES AND OWNERS' EQUITY Accounts Payable Accrued Advertising Other Liabilities and Accrued Expense Current Portion of Long-Term Debt $22,000,000 $11,800,000 $1,400,000 $2,300,000 Long Term Debt $57,400,000 Preferred Stock, $100 par value per share, 100,000 authorized, 0 shares issued and outstanding $0 Common Stock, $1 par value per share, 250,000,000 shares authorized, 13,000,000 shares issued, 12,900,000 outstanding $13,000,000 Additional Paid-in-Capital in excess of par value, Common Stock $117,000,000 Treasury Stock $(1,000,000) Retained Earnings (less Cash Dividends Paid) $12,000,000 Total Liabilities and Owner's Equity $235,900,000 $11,000,000 Income Statement Sales Revenues Less: Sales Returns Net Sales Revenues Less: Cost of Goods Sold Gross Profit December 31, 2009 $51,000,000 $(1,000,000) $50,000,000 $(9,000,000) $41,000,000 December 31, 2008 $10,300,000 $(300,000) $10,000,000 $(4,000,000) $6,000,000 Operating Expenses: Advertising and Sales $(26,000,000) Depreciation $(160,000) Salaries and Wages $(1,700,000) Product Development $(4,000,000) Merger and Acquisition Related Costs, including Amortization of Goodwill and Other Intangibles $(700,000) Total Operating Expenses $(32,560,000) Income from Continuing Operations Before Income Taxes $8,440,000 Less: Income Taxes at 35% Income from Continuing Operations $(2,954,000) $5,486,000 Discontinued Operations: Income from Operations of Discontinued Division (less applicable income taxes) Loss on Disposal of Discontinued Division (less applicable income taxes) $350,000 $(150,000) $(3,000,000) $(1,400,000) $(1,200,000) $0 Total Gain from Discontinued Operations $200,000 Extraordinary Items: Loss from fire (less applicable income taxes) $(200,000) Net Income $5,486,000 Divisional Revenues Books Online gaming Customized MP3/CD/DVD Customized MP3/CD/DVD Inventory at end of 2009 $15,000,000 $25,000,000 $10,000,000 $8,000,000 $7,000,000 $3,000,000 BUSN460 Individual Financial Analysis Project Student Name: Instructions: Go to the CanGo intranet found in the Report Guide tab under Course Home Use the financial statements from the most recent year to fill in the table below. You may find some formulae calling for an average, e.g., average inventory, average receivables. Because we only have the Balance sheet for one year, you can only use the one year number not an average. Assume interest expense is $0.00 Be careful of the Debt equity ratio. The review covers debt asset ratio as an example of how to calculate ratios and that is different from debt equity ratio, and that is different from the debt equity ratio so think about how you calculate the debt equity ratio using the debt asset ratio as an example. Be sure to cite your references Green boxes to be filled in by instructor Ratio Example: Formula Detailed Final number Explanation of why ratio is important Earned points (express the calculation (final result of (up to 3 points ratio in words) (actual numbers the detailed per "box"/cell) from financial calculation) statements used for the calculation) Term A/Term B (Term A divided by Term B) 1000/2000 Efficiency Ratio: Receivables Turnover Grade for above Net Credit Sales / Average Accounts $51,000,000 Receivable $33,000,000 Efficiency Ratio: Inventory Turnover Grade for above Cost of Goods Sold/Average Inventory Financial Total Leverage Ratio: Liabilities/Total Debt/Equity Ratio Equity Grade for above Liquidity Ratio: Current Ratio Grade for above Liquidity Ratio: Quick Ratio Grade for above Current Assets/Current Liabilities Cash + Short Term Investments+Acc ounts Receivable/Curre nt Liabilities $8,000,000/ $32,000,000 $94,900,000/ $141,000,000 $202,900,000/ $37,500,000 $170,900,000/ $37,500,000 Current Assets Liquidity: Working Minus Current Capital Liabilities Grade for above $235,900,000$235,900,000 Net Income/ Profitability Ratio: Average Total Return on Assets Assets Grade for above $5,486,000/ $235,900,000 Net Income Profitability Ratio: (Before Interest Return on Sales and Tax) / Sales Grade for above $5486/ $51,000,000 .50 / This is the explanation of the role of this In essence, the receivables turnover ratio ratio and why it is important indicates the efficiency with which a firm manages the credit it issues to customers and collects on that credit. 3 1.55 (rounded up from 1.545) Inventory turnover is a ratio showing how Debt/Equity Ratio is a debt ratio used to many times a company's inventory is measure replaced overfinancial leverage, sold and a company's a period. calculated by dividing a company's total The current ratio is a popular equity. liabilities by its stockholders' financial ratio used to test a company's liquidity 0.25 (also referred to as its current Definition | Read more: Debt/Equity Ratio or working capital position) by deriving the Investopedia proportion of current assets available to http://www.investopedia.com/terms/d/deb cover current liabilities tequityratio.asp#ixzz3rbZDZTxf The quick ratio - aka the quick assets Follow us: Investopedia on Facebook ratio or the acid-test ratio - is a liquidity 0.67 Read more: Liquidity Measurement indicator that further |refines the current Ratios: Current Ratio Investopedia ratio by measuring the amount of the http://www.investopedia.com/university/r most liquid current assets there are to atios/liquiditycover current liabilities. measurement/ratio1.asp#ixzz3rbcKzr1U Follow us: Investopedia on Facebook 5.41 Read more: Liquidity Measurement For investors, Ratio | Investopedia Ratios: Quick the strength of a company's balance sheet can be http://www.investopedia.com/university/r evaluated by examining three broad atios/liquiditycategories of investment quality: working measurement/ratio2.asp#ixzz3rbeR1TkQ capital adequacy, asset performance 4.56 (rounded up Follow us: Investopedia on Facebook and capitalization structure. from 4.557) Read more: The Working Capital Position http://www.investopedia.com/articles/basi cs/06/workingcapital.asp#ixzz3rbgdGD9C Follow us: Investopedia on Facebook 0.0 0.0 0.0 0.0 0.0 $0.00 0.0 This ratio indicates how profitable a 2.3% company is relative to its total assets. 0.0 Total Earned Points http://accountinge xplained.com/fina ncial/ratios/receiv http://www.investopedia.com/terms/ ables-turnover A ratio widely used to evaluate a 16.5% company's operational efficiency 0.0 0.0 Instructor feedback BUSN460 Individual Financial Analysis Project Student Name: Instructions: Go to the CanGo intranet found in the Report Guide tab under Course Home Use the financial statements from the most recent year to fill in the table below. You may find some formulae calling for an average, e.g., average inventory, average receivables. Because we only have the Balance sheet for one year, you can only use the one year number not an average. Assume interest expense is $0.00 Be careful of the Debt equity ratio. The review covers debt asset ratio as an example of how to calculate ratios and that is different from debt equity and that is different from the debt equity ratio so think about how you calculate the debt equity ratio using the debt asset ratio as an example. Be sure to cite your references Green boxes to be filled in by instructor Ratio Example: Formula (express the ratio in words) Detailed calculation (actual numbers from financial statements used for the calculation) Term A/Term B (Term A divided by Term B) 1000/2000 Final number Explanation of why ratio Earned points (final result of is important (up to 3 points the detailed per "box"/cell) calculation) .50 This is the explanation of the role of this ratio and why it is important 3 Efficiency Ratio: Receivables Turnover Grade for above 0.0 Efficiency Ratio: Inventory Turnover Grade for above 0.0 Financial Leverage Ratio: Debt/Equity Ratio Grade for above 0.0 Liquidity Ratio: Current Ratio Grade for above 0.0 Liquidity Ratio: Quick Ratio Grade for above 0.0 Liquidity: Working Capital Grade for above 0.0 Profitability Ratio: Return on Assets Grade for above 0.0 Profitability Ratio: Return on Sales Grade for above 0.0 Total Earned Points 0.0 and that is different from debt equity ratio, debt asset ratio as an example. 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