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Marking Scheme: PK [Write your answer in the boxes below]

Background: You are approached by recruitment agency to apply for a job as Finance Manager of KP. To assess your skill, you are given a set of Exhibits (Exhibits 1 9) of an anonymous firm PK to evaluate its financial performance. You must submit your works in the box below in Word Doc format.
Task 1: KPs ROE over the years (2000 2004) were much higher than industry average. Do you think PK is financially healthy why? Or why not? Type you answer below: [max 50 words]	Max: 50 Marks
Task 2: Do you think PK is ? / Star / Cashcow / Dog as described in your lecture note LN2 from your university days. What are the implications of being classified as star or dog etc.? Type your answer below: [Word limit: 50 words]	Max: 50 Marks

Note: You may attach appendices, tables, etc with different documents and send with your Marking Scheme.

PR Inc. Financial Analysis and Forecasting EXHIBIT 2 Balance Sheets Three Months Fiscal Year Ended Ended Jan. 30, 2000 Jan. 28, 2001 Feb. 3, 2002 Feb. 2, 2003 Feb. 1, 2004 May 2, 2004 Aug. 1, 2004 (In thousands) 20,300 13,71 19,309 3,183 0 7,026 18,103 17,965 1,608 794 0 0 9,979 3,148 861 3,500 19,855 2,699 2,279 0 12,031 1,909 21,904 15,292 26,894 9,017 2,771 0 16,159 2,591 2,584 4,607 32,203 22,976 34,373 11,062 884 0 24,365 3,478 1,963 9,824 ASSETS Current Assets: Cash and cash equivalents Short-term Investments Accounts receivable Accounts receivable, affiliates Other recolvables Notes receivable, affiliates Inventorles Prepaid expenses Income taxes refundable Deferred income taxes Assets hold for sale Total current assets Property and equipment, net Deferrod Income taxes Long-term investments Long-term notos recelvable, affilates Investments in unconsolidated joint ventures Reacquired franchise rights, goodwill other intangibles Other assets Total assets 45,203 47,434 20,482 20,740 2,383 3,169 458 4,404 28,573 32,974 5,399 4,675 7,946 - 7.449 6,453 13,280 36,856 3,374 174. 113 151,214 281.103 301,160 0 0 44,329 19,933 4,868 5,440 33,076 6,749 8,139 20,005 3,325 165.173 297,154 3,809 41.038 60,584 1,398 0 67.611 78,340 0 17,877 101.769 112,577 0 12,700 141,128 202,558 0 4,344 0 0 0 7,809 1,000 2.988 2,925 2,827 3,400 6,871 12,426 10,728 9,921 0 1,938 16,621 8,309 49,354 5.232 0 4,838 171,493 175,957 9,456 660,664 176,078 12,315 654,483 176,045 10,390 104,958 255,376 410,487 661,606 1 + PK Inc EXHIBIT 2 Balance Sheets (continued) Fiscal Year Ended Three Months Ended Feb. 3, 2002 Feb: 2, 2003 Feb. 1, 2004 Aug. 1, May 2, 2004 2004 12,095 9,107 26,729 0 3,871 14,055 11,375 20,981 9,075 0 18,784 8,123 23,744 0 0 18,866 12,670 27, 107 18,817 13,107 32,249 4,663 5,566 731 0 0 3,301 900 0 2,842 0 0 52,533 3,930 0 0 59.687 9,849 0 7,288 63.306 16,468 69.739 25,564 53,493 6,374 0 87,000 72,000 62,000 58,469 50,135 3,912 0 4,843 49,900 0 5,218 48,056 0 11,211 12.078 Jan. 30, Jan. 28, (in thousands) 2000 2001 LIABILITIES AND SHAREHOLDERS' EQUITY Current Llabilities: Accounts payable 13,106 8,211 Book overdraft 0 5,147 Accrued expenses 14,080 21,243 Arbitration award 0 0 Revolving line of credit 0 3,526 Current maturities of long-term debt 2,400 0 Short-term dobt 0 0 Income taxes payable 0 41 Total current liabilities 29.586 38.168 Deferred Income taxes 0 579 Compensation deferred (unpald) 990 1,106 Revolving lines of credit 0 0 Long-term debt, net of current portion 20,502 0 Accrued restructuring expenses 4,250 3,109 Other long-term obligations 1,868 1,735 Total long-term liabilities 27.617 6,529 Minority interest 1,117 SHAREHOLDERS' EQUITY: Common stock, no par value, 300,000 shares authorized: Issued and outstanding 85,060 Common stock, 10 par value, 1,000 shares authorized: issued and outstanding 4,670 Pald-in capital 10,805 Unearned compensation (188) Notes recevable, employees (2,547) (2,349) Nonqualified employee benefit plan assets (126) Nonqualified employee benefit plan liability 126 Accumulated other comprehensive Income (loss) 609 Retained earnings 34,827 42,547 Total shareholders' equity 47,755 125,679 Total liabilities and shareholders' equity 104,958 . 171,493 12.685 2,491 72,255 5,193 152,641 2.323 10,774 157,711 2,815 149,777 2,593 121,052 173,112 294,477 296,812 299,865 (186) (2,580) (119) (558) (62) (383) (47) (383) (31) (383) (138) (339) (369) (264) (264) 138 339 369 264 264 456 (1,486) 68,925 102,403 187,667 273,352 (1,315) 159,490 (783) 135,052 430,651 (768) 140,816 439,499 452,207 255,376 410,487 660,664 654,463 661,608 Source of data: Company filings with the Securities and Exchange Commission (SEC). 1 + PR Rato Fiscal Year Ended Jan. 30, 2000 Jan. 28, 2001 Feb. 3, 2002 Feb. 2, 2003 Feb. 1, 2004 Ratio definitions 1.05 1.39 1.46 1.77 1.63 1.94 1.96 2.36 2.72 3.25 (current assets-inventories)/curr.lab. current assets/curr.liab. 47.96% 32.41% 7.11 2.20 0.00% 0.00% 38.73 1.36 2.47% 2.41% 124.29 1.36 19.46% 16.29% 33.59 1.50 11.26% 10.12% 23.15 1.46 LT debt/shareholders' equity LT debt/(shareholders' equity + debt) EBIT interest expense total assets/shareholders' equity Liquidity ratios Quick (acid-test) ratio Current ratio Leverage ratios Debt-lo equity (book) Debt-to-capital Times interest earned Assets to equity Activity ratios Receivables turnover Inventory turnover Assel turnover Cash turnover Profitability ratios Return on assets Return on equity Operating profit margin Net profit margin 10.81 19.04 2.10 69.19 12.16 20.84 1.75 42.80 10.19 19.61 1.54 18.00 10.61 15.66 1.20 15.26 9.70 17.76 1.01 32.79 sales/accounts receivables cost of goods sold inventory sales/total assets sales/cash and cash equivalents 5.67% 12.47% 4.92% 2.70% 8.59% 11.72% 7.82% 4.90% 10.33% 14.06% 10.62% 6.69% 8.18% 12.25% 12.17% 6.81% 8.64% 12.62% 15.34% 8.58% net income/assets net income/shareholders' equity operating incomeet sales net income/sales $ pk Income Statement Three Months Ended May 5. 2003 May 2, 2004 Three Months Ended Aug. 3, Aug. 1, 2003 2004 159,176 177,448 120,573 145,633 148,660 112,480 184,356 141,383 8,902 10,664 9,060 11,845 6,130 4,536 4,101 (525) 6,328 EXHIBIT 1 | Income Statements (SUS thousands, except per-share amounts) Jan. 30, Jan. 28, Feb. 3, Feb. 2, Feb. 1, Income Statement 2000 2001 2002 2003 2004 Total revenues 220,243 300,715 394,354 491,549 665,592 Operating expenses 190.003 250,690 316,946 381,489 507,396 General and administrative expenses 14,856 20,061 27,562 28.897 36,912 Depreciation and amortization expenses 4,546 6,457 7.959 12.271 19,723 Arbitration award 9,075 (525) Provision for restructuring Impairment charges and closing costs Income from operations 10,838 23,507 41,887 59,817 102,086 Interest income 293 2,325 2,980 1,966 921 Interest expense (1,525) (607) (337) (1.781) Equity loss in joint ventures (4,409) (706) (602) (2,008) (1,836) Minority interest (716) (1,147) (2,287) (2,072) Other expense, net (20) (235) (934) (13) Income before income taxes 9,606 23,783 42,546 54,773 94,677 Provision for income taxes 3,650 9,058 16,168 21,295 37,590 Discontinued operations Net income 5.956 14,725 26,378 33,479 57,087 Diluted earnings per share 0.15 0.27 0.45 0.58 0.92 Share price (fiscal year close) 16.22 39.85 30.41 35.64 Number of shares outstanding (millions) 39.7 54.5 58.6 59.8 62.1 7,543 23,702 227 (866) (694) (616) (25) 18,638 176 (1.433) (575) (126) (156) 16,522 6,675 34,285 (24,438) (0.38) 25,007 205 (997) (802) (616) (343) 22,454 9,014 439 1,802 11,840 226 (1.366) (399) 267 114 10,682 4,438 480 21.728 8,588 13,140 13,001 5,764 0.22 0.21 0.09 60.7 63.6 82,1 63.4 + PR Inc. Financial Analysis and Forecasting EXHIBIT 2 Balance Sheets Three Months Fiscal Year Ended Ended Jan. 30, 2000 Jan. 28, 2001 Feb. 3, 2002 Feb. 2, 2003 Feb. 1, 2004 May 2, 2004 Aug. 1, 2004 (In thousands) 20,300 13,71 19,309 3,183 0 7,026 18,103 17,965 1,608 794 0 0 9,979 3,148 861 3,500 19,855 2,699 2,279 0 12,031 1,909 21,904 15,292 26,894 9,017 2,771 0 16,159 2,591 2,584 4,607 32,203 22,976 34,373 11,062 884 0 24,365 3,478 1,963 9,824 ASSETS Current Assets: Cash and cash equivalents Short-term Investments Accounts receivable Accounts receivable, affiliates Other recolvables Notes receivable, affiliates Inventorles Prepaid expenses Income taxes refundable Deferred income taxes Assets hold for sale Total current assets Property and equipment, net Deferrod Income taxes Long-term investments Long-term notos recelvable, affilates Investments in unconsolidated joint ventures Reacquired franchise rights, goodwill other intangibles Other assets Total assets 45,203 47,434 20,482 20,740 2,383 3,169 458 4,404 28,573 32,974 5,399 4,675 7,946 - 7.449 6,453 13,280 36,856 3,374 174. 113 151,214 281.103 301,160 0 0 44,329 19,933 4,868 5,440 33,076 6,749 8,139 20,005 3,325 165.173 297,154 3,809 41.038 60,584 1,398 0 67.611 78,340 0 17,877 101.769 112,577 0 12,700 141,128 202,558 0 4,344 0 0 0 7,809 1,000 2.988 2,925 2,827 3,400 6,871 12,426 10,728 9,921 0 1,938 16,621 8,309 49,354 5.232 0 4,838 171,493 175,957 9,456 660,664 176,078 12,315 654,483 176,045 10,390 104,958 255,376 410,487 661,606 1 + PK Inc EXHIBIT 2 Balance Sheets (continued) Fiscal Year Ended Three Months Ended Feb. 3, 2002 Feb: 2, 2003 Feb. 1, 2004 Aug. 1, May 2, 2004 2004 12,095 9,107 26,729 0 3,871 14,055 11,375 20,981 9,075 0 18,784 8,123 23,744 0 0 18,866 12,670 27, 107 18,817 13,107 32,249 4,663 5,566 731 0 0 3,301 900 0 2,842 0 0 52,533 3,930 0 0 59.687 9,849 0 7,288 63.306 16,468 69.739 25,564 53,493 6,374 0 87,000 72,000 62,000 58,469 50,135 3,912 0 4,843 49,900 0 5,218 48,056 0 11,211 12.078 Jan. 30, Jan. 28, (in thousands) 2000 2001 LIABILITIES AND SHAREHOLDERS' EQUITY Current Llabilities: Accounts payable 13,106 8,211 Book overdraft 0 5,147 Accrued expenses 14,080 21,243 Arbitration award 0 0 Revolving line of credit 0 3,526 Current maturities of long-term debt 2,400 0 Short-term dobt 0 0 Income taxes payable 0 41 Total current liabilities 29.586 38.168 Deferred Income taxes 0 579 Compensation deferred (unpald) 990 1,106 Revolving lines of credit 0 0 Long-term debt, net of current portion 20,502 0 Accrued restructuring expenses 4,250 3,109 Other long-term obligations 1,868 1,735 Total long-term liabilities 27.617 6,529 Minority interest 1,117 SHAREHOLDERS' EQUITY: Common stock, no par value, 300,000 shares authorized: Issued and outstanding 85,060 Common stock, 10 par value, 1,000 shares authorized: issued and outstanding 4,670 Pald-in capital 10,805 Unearned compensation (188) Notes recevable, employees (2,547) (2,349) Nonqualified employee benefit plan assets (126) Nonqualified employee benefit plan liability 126 Accumulated other comprehensive Income (loss) 609 Retained earnings 34,827 42,547 Total shareholders' equity 47,755 125,679 Total liabilities and shareholders' equity 104,958 . 171,493 12.685 2,491 72,255 5,193 152,641 2.323 10,774 157,711 2,815 149,777 2,593 121,052 173,112 294,477 296,812 299,865 (186) (2,580) (119) (558) (62) (383) (47) (383) (31) (383) (138) (339) (369) (264) (264) 138 339 369 264 264 456 (1,486) 68,925 102,403 187,667 273,352 (1,315) 159,490 (783) 135,052 430,651 (768) 140,816 439,499 452,207 255,376 410,487 660,664 654,463 661,608 Source of data: Company filings with the Securities and Exchange Commission (SEC). 1 + PR Rato Fiscal Year Ended Jan. 30, 2000 Jan. 28, 2001 Feb. 3, 2002 Feb. 2, 2003 Feb. 1, 2004 Ratio definitions 1.05 1.39 1.46 1.77 1.63 1.94 1.96 2.36 2.72 3.25 (current assets-inventories)/curr.lab. current assets/curr.liab. 47.96% 32.41% 7.11 2.20 0.00% 0.00% 38.73 1.36 2.47% 2.41% 124.29 1.36 19.46% 16.29% 33.59 1.50 11.26% 10.12% 23.15 1.46 LT debt/shareholders' equity LT debt/(shareholders' equity + debt) EBIT interest expense total assets/shareholders' equity Liquidity ratios Quick (acid-test) ratio Current ratio Leverage ratios Debt-lo equity (book) Debt-to-capital Times interest earned Assets to equity Activity ratios Receivables turnover Inventory turnover Assel turnover Cash turnover Profitability ratios Return on assets Return on equity Operating profit margin Net profit margin 10.81 19.04 2.10 69.19 12.16 20.84 1.75 42.80 10.19 19.61 1.54 18.00 10.61 15.66 1.20 15.26 9.70 17.76 1.01 32.79 sales/accounts receivables cost of goods sold inventory sales/total assets sales/cash and cash equivalents 5.67% 12.47% 4.92% 2.70% 8.59% 11.72% 7.82% 4.90% 10.33% 14.06% 10.62% 6.69% 8.18% 12.25% 12.17% 6.81% 8.64% 12.62% 15.34% 8.58% net income/assets net income/shareholders' equity operating incomeet sales net income/sales $ pk Income Statement Three Months Ended May 5. 2003 May 2, 2004 Three Months Ended Aug. 3, Aug. 1, 2003 2004 159,176 177,448 120,573 145,633 148,660 112,480 184,356 141,383 8,902 10,664 9,060 11,845 6,130 4,536 4,101 (525) 6,328 EXHIBIT 1 | Income Statements (SUS thousands, except per-share amounts) Jan. 30, Jan. 28, Feb. 3, Feb. 2, Feb. 1, Income Statement 2000 2001 2002 2003 2004 Total revenues 220,243 300,715 394,354 491,549 665,592 Operating expenses 190.003 250,690 316,946 381,489 507,396 General and administrative expenses 14,856 20,061 27,562 28.897 36,912 Depreciation and amortization expenses 4,546 6,457 7.959 12.271 19,723 Arbitration award 9,075 (525) Provision for restructuring Impairment charges and closing costs Income from operations 10,838 23,507 41,887 59,817 102,086 Interest income 293 2,325 2,980 1,966 921 Interest expense (1,525) (607) (337) (1.781) Equity loss in joint ventures (4,409) (706) (602) (2,008) (1,836) Minority interest (716) (1,147) (2,287) (2,072) Other expense, net (20) (235) (934) (13) Income before income taxes 9,606 23,783 42,546 54,773 94,677 Provision for income taxes 3,650 9,058 16,168 21,295 37,590 Discontinued operations Net income 5.956 14,725 26,378 33,479 57,087 Diluted earnings per share 0.15 0.27 0.45 0.58 0.92 Share price (fiscal year close) 16.22 39.85 30.41 35.64 Number of shares outstanding (millions) 39.7 54.5 58.6 59.8 62.1 7,543 23,702 227 (866) (694) (616) (25) 18,638 176 (1.433) (575) (126) (156) 16,522 6,675 34,285 (24,438) (0.38) 25,007 205 (997) (802) (616) (343) 22,454 9,014 439 1,802 11,840 226 (1.366) (399) 267 114 10,682 4,438 480 21.728 8,588 13,140 13,001 5,764 0.22 0.21 0.09 60.7 63.6 82,1 63.4 +