Part A

Appendix A of your textbook describes several ratios as well as vertical analysis and horizontal analysis of financial statements. Using the annual report and excel file of financial statements for Carnival, prepare the following items. Use the spreadsheets provided and modify them with your calculations. You must use spreadsheets for this assignment.

Common Size Balance Sheet

Prepare a spreadsheet with common size balance sheets for the years ended December 31, 2016 and December 31, 2017. For 2017, each line item should be shown as a percentage of total assets on December 31, 2017. Likewise, for 2016, each item should be shown as a percentage of total assets on December 31, 2016. In your calculations, round each percentage to three digits. For example if cash as a percentage of total assets is .054029834, your answer should be shown as 5.4%. Remember, these numbers on the financial statements are rounded to the nearest million, so it is a bit silly to show calculations with more precision than the underlying data.

Common Size Income Statement

Prepare a spreadsheet with common size income statements for the 2017 and 2016 fiscal years. In this case, your denominator will be Net Sales. Again, remember to round.

Horizontal Analysis of both financial statements

Prepare a horizontal analysis of the balance sheet and income statement, showing the percentage change from 2016 to 2017 (the dollar amounts, not the percentages you calculated in the common size statements). This is calculated as follows:

2017 amount 2016 amount

2016 amount

Thus, each line item on the balance sheet and income statement should show a percentage increase or decrease. A negative number, or decrease, can be formatted to show in parentheses, which is the preferable notation in accounting circles.

Solvency Ratios

Calculate all of the solvency ratios listed in exhibit A.3 on page 510 for Fresh Del Monte Produce in 2017.

Calculate Accounts Receivable Turnover (note: this one is missing from your textbook but is calculated as Net Sales / Average Accounts Receivable)

In any place where the formula calls for an average, use the 2016 number plus the 2017 number divided by 2.

Helpful Hint: There are no marketable securities, so the acid test ratio is just (cash + receivables) / current liabilities. Use both lines of receivables in any ratio involving receivables.

Performance Ratios

Calculate the following performance ratios from exhibit A.3 for Fresh Del Monte Produce in 2017:

• Asset Turnover
• Return on Sales contains a typo in the book. The formula should say (Net Income + Net-of-tax interest expense)/Sales.
• Return on Assets
• Return on Equity
• Average Interest Rate
• Also calculate Gross Margin (this is also missing from your book but is a widely used ratio. It is gross profit divided by Net Sales)

For the tax rate used in the ROA, assume their effective income tax rate is 35% because tax reform did not take effect until 2018.

The listed items should be submitted in an Excel file, with separate tabs for the income statement (including common size 2016 and 2017, as well as the horizontal analysis in one tab), balance sheet (common size 2016 and 2017 plus horizontal analysis in another tab), and ratios in another tab (clearly labelled!).

Carnival 10-K data cleaned up.xlsx

Carnival Corporation & PLC Consolidated Statements of Income - USD ($)	12 Months Ended
	Nov. 30, 2018	Nov. 30, 2017	Nov. 30, 2016
Revenues
Revenues	$ 18,881	$ 17,510	$ 16,389
Cruise
Selling and administrative	2,450	2,265	2,197
Depreciation and amortization	2,017	1,846	1,738
Goodwill and trademark impairment	0	89	0
Operating costs and expenses	15,556	14,701	13,318
Operating Income	3,325	2,809	3,071
Nonoperating Income (Expense)
Interest income	14	9	6
Interest expense, net of capitalized interest	(194)	(198)	(223)
Gains (losses) on fuel derivatives, net	59	35	(47)
Other income, net	3	11	21
Nonoperating Income (Expense)	(118)	(143)	(243)
Income Before Income Taxes	3,207	2,666	2,828
Income Tax Expense, Net	(54)	(60)	49
Net Income	$ 3,152	$ 2,606	$ 2,779
Earnings Per Share
Basic (USD per share)	$ 4.45	$ 3.61	$ 3.73
Diluted (USD per share)	4.44	3.59	3.72
Dividends Declared Per Share (USD per share)	$ 1.95	$ 1.60	$ 1.35