I will send the attachments shortly - there are that I will upload. The first three pages are the questions a - j. Then the other pages is the information needed to answer these questions. The assignment is called Merck & Co., Inc. and GlaxoSmithKline plc - Shareholders' Equity. The book is Cases in Financial Reporting 8e. Please let me know if any of the pages I am attaching are not legible. Thank you.

Running head: MERCK & Co INC. And GLAXOSMITHKLINE INC.

1 Merck & Co. Inc. and GlaxoSmithKline Inc.

Student's Name

Institution MERCK & Co. INC AND GLAXOSMITHKLINE INC.

2 Merck &

Current Ratio = Current Assets / Current liabilities *100 =773000/240000 = 3.221 Quick Ratio = cash +Accounts Receivable+marketable Securities / Current liabilities *100 =(52000+198000+80000)/240000 = 1.375 Debt to Assets = Debt / Total Assets = (240000+400000)/1630000 = 0.393 Receivable turnover = Net sales /Average receivables =1640000/(198000+80000)/2 = 11.799 Inventory turnover = Net sales /Average Inventory =1640000/(440000+360000)/2 = 4.1 Net profit margin = Net Income / net sales =360000 / 1640000 = 0.220 Assets turnover = Net Sales / Average Total Assets =1640000/(1630000+1400000)/2 = 1.083 Return on Assets =Net Income / Total Assets =360000/1630000*100 = 22.086 Return on Equity =Net Income / Total Shareholders' Equity =360000/990000*100 = The above ratios are for 2014 Cash flow statement is a statement explaining the changes in cash in hand figure during the year. At the begining of the year cash in hand is differing from the end cash flow balance. It is due to inflow of cash from different sources and its corresponding outflows. Cash flows take place from three different sources. They are: 1. Cash flow from operating activities: It is the actual trading operation of the business. It will indicate net cash flowing in or out from such activities. Normally it is believed that net profit causes cash inflow and net loss is responsible for cash outflow. However, cash flow and profit are not same. There are many components of revenue statement which do ot cause any cash flow. Also many cash flows are not linked with operating activities. Hence you have to adjust them for getting cash flow from operating activities. 2. Investing activity: Second important cash flow is from investment in capital project. If you buy long term assets then cash will outflow. Also it will inflow if you sale such asset. 3. Financing activities: Last element is financing sources. If you issue new stock or take loan, then cash inflow will occur. You can also repay loan, buy back already issued stock or pay dividednd, interest etc. These are cash outflows from financing activities. Adding cash flows of these three sources will give you total cash flow of the year. add it with opening cash in hand balance to get closing cash in hand balance. ------------------------------------------------------------------------------------------------------------------------------------------------Now consider cash flow statement of Wal-Mart.com for the year 2007. It has a positive cash flow of $1,405 million in year 2007 from operating activities. This amount can be calculated by direct or indirect method. In direct method, cash deposited inflow elements ( ex: collection from accounts receivables, subsidy received, cash sale etc.) are identified and totalled. Also cash outflow elements like payment for purchase, labor service, electricity, rent etc. are identified. They are totalled to get total cash outflow. Finally outflows are deducted from cash inflows to get cash flows from operating activities. In Wal-Mart.com cash flow, indirect method has been used. Here you have to consider the net revenue from the revenue statement, From this statement first adjust non cash flow items.It includes following items: 1. Depreciation 2. Stock based compensation 3. Gain from marketable securities Amount Reasons $246 No cash outflow $185 Non cash flow item $1 Investing cash flow 4. Other non operating expenses $12 5. Deferred income tax 6. Excess tax benfit from stock-based comensation 7. Total -$99 Non operating outflow Non cash flow item -$257 Financing cash flow $99 Now consider cash flow adjustment for current asset and liabilities. It is ascertained by comparing current account balances at the begining and at the end of the year. If current asset figures are increasing then it will mean increase in working capital other than cash. It implies that decrease in cash flow is taking place. Similarly decrease in current asset will mean a portion of the working capital is converted to cash balance. Now consider current liabilities. if it is going up, then less amount will be neede for working capital. Hence cash inflow will increase. In oposite situation it will decrease. These adjustments are shown below: Amount 1. Decrease in current asset: a. Additions to unearned revenue b. Amortization of previously unearned income c. Total; (a+b) Amount $244 $211 $455 2. Increase in current liabilities: a. Account payable b. accrued expenses Total (a+b) Total increase in cash flow [1+2] $928 $429 $1,357 $1,812 3. Increase in current assets: a. Inventories b. accounts receivable Total [a + b] 4. Net adjustment [ 1+2 - 3] $303 $255 $558 $1254 ------------------------------------------------------------------------------------------------------------------------------------------------In 2007 financing are made from following sources: 1. Cash inflow from stock-based compensation $257 2. Issue of new debt Total cash inflow from financing [ $257 + $115] $115 $372 3. Cash outflow for buy back of stock $248 4. Repayment of long term debt $ 74 total cash outflow from financing [ $248 + $74] 5. Net cash inflow from financing activities {$372 - $322] $322 $50 Note: Referred sites caanot be opened. 2006 cash flow sttement is not found