Refer to Problem 6.1 in the textbook: Exhibit 6.3 shows common-size balance sheet and income statements for 12 companies, described on page 141 & 143. Your job is to match each company with its financial statements. Using the first letter of your last name, answer the question below for which the letter of your name falls in the range.

M - R: Using numbers 7, 8 and 9 on Exhibit 6.3 match the companies to the respective number.

6.1 Financial Statement Detective Exercise

Exhibit 6.3 shows commonsize balance sheets and income statements for 12 companies, described below. Your job is to match each company with its financial statements.

EXHIBIT 6-3

Commonsize Financial Statements

1 2 3 4 5 6 7 8 9 10 11 12

Balance sheet (yearend)

Cash and marketable securities 2.1% 20.0% 22.5% 37.9% 13.4% 11.7% 4.0% 30.8% 17.6% 19.9% 42.7% 14.1%

Receivables 7.5 4.8 18.0 17.8 12.5 26.0 4.2 76.8 13.6 9.0 25.7 8.9

Inventories 3.7 2.1 0.1 17.7 22.5 7.3 8.6 8.1 0.9 0.1 2.4

Property, plant, and equipment 301.5 182.6 94.5 51.3 67.9 79.0 34.4 26.9 47.5 6.1 24.8 76.3

Accumulated depreciation (99.7) (49.0) (38.6) (16.3) (30.7) (46.4) (16.6) (15.6) (27.7) (2.7) (11.5) (25.4)

Investments 7.0 15.2 8.6 8.5 28.8 3.2 2.6 7.5 8.8 1.3 5.2

Other assets 47.2 13.1 51.1 123.5 9.4 30.4 15.8 70.6 33.8 5.2 17.8 104.8

Total assets 269.3% 173.6% 162.8% 235.5% 103.5% 136.8% 53.6% 192.1% 100.4% 47.2% 100.9% 186.3%

Current liabilities 40.4% 32.8% 53.1% 50.4% 34.4% 46.2% 26.4% 118.4% 33.6% 28.7% 34.3% 21.2%

Longterm debt 76.3 26.0 39.8 13.9 14.4 28.2 13.4 30.3 12.4 1.0 0.1 73.4

Other noncurrent liabilities 81.0 5.5 7.8 41.3 13.8 8.7 2.4 16.5 8.0 4.3 5.4 24.8

Shareholders' equity 71.6 109.3 62.1 129.9 40.9 53.7 11.4 26.9 46.4 13.2 61.1 66.9

Total liabilities and shareholders' equities 269.3% 173.6% 162.8% 235.5% 103.5% 136.8% 53.6% 192.1% 100.4% 47.2% 100.9 186.3%

Income statement

Operating revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Other revenues 0.7% 1.4% 4.3%

Cost of goods sold (excluding depreciation) or operating expenses 58.7 75.4 74.4 11.1 86.5 73.8 74.9 98.3 45.1 80.9 31.6 33.1

Depreciation and amortization 11.4 6.6 7.8 9.7 4.3 5.6 2.9 3.2 4.7 0.7 2.8 21.2

Selling and administrative 15.9 16.2 32.2 11.3 16.2 36.0 8.7 25.1 31.0

Interest expense 4.6 1.3 1.1 0.7 1.4 0.1 0.7 2.5 1.3 0.1 7.9

Research and development 14.4 4.2 1.6 0.9 13.6

Income taxes 2.5 2.7 2.2 5.1 1.7 3.7 1.2 4.1 2.8 2.8 10.1 2.8

Other (1.5) (7.0) 11.5 5.2 (1.8) (1.0) 1.8 0.6 0.8 (0.2) (0.7) (4.0)

Total expenses 91.6% 95.2% 97.0% 78.4% 92.1% 97.7% 97.7% 108.7% 92.3% 93.8% 82.6% 92.0%

Net income 8.4% 4.8% 3.7% 21.6% 9.0% 6.6% 2.3% (8.7) 7.7% 6.2% 17.4% 8.0%

Cash flow from operations 25.2% 17.7% 7.9% 31.1% 10.6% 13.3% 5.8% 7.1% 12.0% 10.8% 24.3% 28.2%

Free operating cash flow 10.6 (9.5) 5.9 25.6 5.5 4.7 3.1 4.8 7.6 9.7 23.1 18.5

Accor

One of the world's leading hotel operators, owning or managing almost 4000 properties throughout the world. It serves travelers in Europe through its flagship chains Mercure, Novotel, and Sofitel, and its economy chains Ibis and Formule 1. In the United States, it operates budget brands Motel 6 and Red Roof Inns. Accor has embarked on a sale and leaseback strategy for its upscale properties to reduce exposure to slowdowns in the market and is working to transition many of its midscale hotel leases to variable cost arrangements.

Arcelor

Arcelor was formed by the combination of three European steel companies and is now the second largest steel manufacturer in the world. The company produces carbon steel and stainless steel for the automotive, construction, appliance, and packaging industries.

Carrefour

Carrefour is the world's second largest retailer. Based in France, it operates more than 11 000 stores under two dozen brand names, including Carrefour (hypermarkets), Champion (supermarkets), and Shopi (convenience stores). Unable to build new stores in France, until recent changes in French law, Carrefour has expanded through acquisitions, at home and abroad.

Dell

Dell is the world's #1 directsale computer vendor. In addition to a full line of desktop and notebook PCs (about 80% of total sales), Dell also offers workstations, storage systems, network servers, and Ethernet switches. Dell's directsales, builttoorder model allows for lower inventories and lower operating costs, a necessity for the PC price wars and the occasional slump in corporate IT spending.

Deutsche Telekom

The #1 telecom company in Europe. Deutsche Telekom is Germany's leading fixedline phone operator, its TMobile unit serves millions of wireless phone customers, and TOnline is one of the Europe's leading internet service providers. Although privatized in the 1990s, the German government still holds a 15% stake and an additional 22% through a stateowned development bank.

The FPL Group

The FPL Group is a holding company with operations across the United States. Most revenue comes from its utility subsidiary, the largest electricity provider in the state of Florida. The electricity is generated from the company's nuclear and fossilfueled power plants.

Interpublic

Interpublic is one of the world's largest advertising and marketing services companies. Operating through offices in 130 countries, its flagship agencies include McCann Worldgroup, Lowe & Partners, and Hill Holliday. Like all of the global players in its industry, much of Interpublic's growth has come from acquisitions.

Nestl

Nestl is the world's #1 food company. It is the world leader in coffee (Nescaf), and is also one of the largest bottled water (Perrier) and babyfood manufacturers. At last count, it is the owner of over 9000 branded products worldwide. Nestl's recent purchase of RalstonPurina has made it a top player in the pet food business. In addition to its food business, Nestl owns nearly 27% of cosmetic giant L'Oreal.

Pfizer

Pfizer is the world's largest researchbased pharmaceutical company. Its bestknown products include Viagra, Zoloft, and Lipitor. In addition to prescription drugs, Pfizer also makes a broad range of popular overthecounter remedies, including Sudafed and Benadryl.

SAP

SAP is the world's leading provider of enterprise resource planning software used to integrate corporate backoffice functions such as human resources, accounting, distribution, and manufacturing. The company also offers a range of products on supply chain and customer relationship management. SAP's large customer base provides a steady stream of recurring licensing and service revenue.

Southwest Airlines

Southwest Airlines offers lowcost, nofrills air travel to 60 cities in the United States. A model for lowfare upstarts the world over, the company has enjoyed over 30 straight years of profitability. Southwest's business model is simple: flights are short (most are under two hours), and the airline usually lands at small airports to avoid congestion at large hubs. Originally concentrated in the western part of the United States, Southwest has expanded into key eastern markets, such as Philadelphia.

Toyota

Toyota is the world's #2 car maker (by sales) and its most profitable. In addition to longstanding core brands - Camry, Land Cruiser, Celica, Corolla, and the luxury Lexus line - Toyota has pioneered the market for hybridpowered sedans (Prius). While most of its North American and European competitors are downsizing operations, Toyota continues to pursue an aggressive growth strategy.