NAME____________________________________________________________

NAME_____________________________________________________________

Financial Statement Analysis

Exam 1

1. The 2011 financial statements for Leggett & Platt, Inc. report the following information:

Year ended December 31,	2011	2010
(In millions)
Depreciation and amortization expense	$ 98.1	$ 103.0
Property and equipment, net	580.6	624.2
Land	45.2	48.5
Accumulated depreciation and amortization	1,193.2	1.173.9

a. By what percentage are the assets ‘used up’ at the year-end 2011? What implication does this ratio have for future cash flows at Leggett & Platt?

b. Estimate the useful life on average for the Leggett & Platt depreciable assets.

2. Leggett & Platt, Inc. reported net sales of $3,636.0 million in 2011 and $3,359.1 million in 2010. The asset side of the balance sheet follows, below. Use this information to answer the required.

LEGGETT & PLATT, INCORPORATED
Consolidated Balance Sheets
December 31	2011	2010
(in millions)
Cash and cash equivalents	$ 236.3	$ 244.5
Accounts and other receivables, net of allowance of $24.3 and $22.1	503.6	478.9

Finished goods	261.3	241.1
Work in process	41.5	47.7
Raw materials and supplies	223.9	218.2
LIFO reserve	(85.7)	(71.7)
Total inventories, net	441.0	435.3

Other current assets	43.1	60.4
Total current assets	1,224.0	1,219.1

Machinery and equipment	1,120.1	1,136.6
Buildings and other	608.5	613.0
Land	45.2	48.5
Total property, plant and equipment	1,773.8	1,798.1
Less accumulated depreciation	1,193.2	1,173.9
Net property, plant and equipment	580.6	624.2
Goodwill	926.6	930.3
Other intangibles, less accumulated amortization of $76.9 and $65.9 at December 31, 2008 and 2007, respectively	116.6	152.3
Sundry	67.3	75.1
TOTAL ASSETS	$2,915.1	$3,001.0

Required:

a. What is the company’s gross amount of receivables at the end of 2011 and 2010?

b. Compute the common-sized gross accounts receivable, for both years. Interpret the year-over-year change in this ratio.

c. Compute the allowance for doubtful accounts to gross accounts receivable, for both years. Interpret the year-over-year change in this ratio.

d. Based on the ratios you calculated, form an opinion about the quality of the company’s accounts receivable.

3. Use the following selected balance sheet and income statement data for Mattel Inc. (in $ thousands) to compute:

a. return on equity

b. profit margin (PM)

c. asset turnover (AT)

d. financial leverage (FL) for fiscal 2011. Show that ROE = PM × AT × FL.

(in thousands)	2011	2010
Net sales	$ 6,266,037	$ 5,856,195
Operating income	1,041,101	901,902
Interest expense	75,332	64,839
Net income	768,508	684,863
Total assets	5,671,638	5,417,733
Total liabilities	3,061,035	2,789,149

4. Income statements and balance sheets follow for Snap-On Incorporated. Refer to these financial statements to answer the requirements.

Snap-On Incorporated Consolidated Statements of Earnings

(Amounts in millions)	For the fiscal year ended
	2011	2010
Net sales	$ 2,854.2	$ 2,619.2
Cost of goods sold	(1,516.3)	(1,408.1)
Gross profit	1,337.9	1,211.1
Operating expenses	(953.7)	(894.1)
Operating earnings before financial services	384.2	317.0

Financial services revenue	124.3	62.3
Financial services expenses	(51.4)	(47.9)
Operating income from financial services before arbitration settlement	72.9	14.4
Arbitration settlement	18.0	--
Operating income from financial services	90.9	14.4
Operating earnings	475.1	331.4
Interest expense	(61.2)	(54.8)
Other income (expense) -- net	(1.0)	0.8
Earnings before income taxes and equity earnings	412.9	277.4
Income tax expense	(133.7)	(87.6)
Earnings before equity earnings	279.2	189.8
Equity earnings, net of tax	4.6	3.2
Net earnings	283.8	193.0
Net earnings attributable to noncontrolling interests	(7.5)	(6.5)
Net earnings attributable to Snap-on Incorporated	$ 276.3	$ 186.5

Snap-On Incorporated Consolidated Balance Sheets
	Fiscal Year End
(Amounts in millions)	2011	2010

Cash and cash equivalents	$ 185.6	$ 572.2
Trade and other accounts receivable - net	463.5	443.3
Finance receivables - net	277.2	215.3
Contract receivables - net	49.7	45.6
Inventories - net	386.4	329.4
Deferred income tax assets	92.6	87.0
Prepaid expenses and other assets	75.7	72.7
Total current assets	1,530.7	1,765.5
Property and equipment - net	352.9	344.0
Deferred income tax assets	125.2	91.5
Long-term finance receivables - net	431.8	345.7
Long-term contract receivables - net	165.1	119.3
Goodwill	795.8	798.4
Other intangibles - net	188.3	192.8
Other assets	83.1	72.2
Total assets	$ 3,672.9	$ 3,729.4

Notes payable and current maturities of long-term debt	$ 16.2	$ 216.0
Accounts payable	124.6	146.1
Accrued benefits	48.8	45.0
Accrued compensation	91.0	86.7
Franchisee deposits	47.3	40.4
Other accrued liabilities	255.9	346.9
Total current liabilities	583.8	881.1
Long-term debt	967.9	954.8
Deferred income tax liabilities	108.1	94.4
Retiree health care benefits	52.8	59.6
Pension liabilities	317.7	246.1
Other long-term liabilities	95.3	89.0
Total liabilities	2,125.6	2,325.0

Preferred stock	–	–
Common stock	67.3	67.3
Additional paid-in capital	181.4	169.2
Retained earnings	1,843.7	1,644.1
Accumulated other comprehensive income (loss)	(174.6)	(104.8)
Treasury stock at cost	(386.9)	(387.3)
Total shareholders’ equity attributable to Snap-on Inc.	1,530.9	1,388.5
Noncontrolling interests	16.4	15.9
Total shareholders’ equity	1,547.3	1,404.4
Total liabilities and shareholders’ equity	$ 3,672.9	$ 3,729.4

Required:

a. Compute net operating profit after tax (NOPAT) for 2011 and 2010. Assume that combined federal and state statutory tax rates are 37.7% for fiscal 2011 and 37.5% for fiscal 2010.

b. Compute net operating assets (NOA) for 2011 and 2010.

c. Compute return on net operating assets (RNOA) for 2011 and 2010. Net operating assets are $1,673.0 million in 2009.

d. Disaggregate RNOA into profitability and asset turnover components (NOPM and NOAT, respectively). Remember to include both net sales and financial services revenue in total revenue. What explains the year-over-year change in RNOA?

5. Income statements and balance sheets follow for Microsoft Corporation. Refer to these financial statements to answer the requirements.

Microsoft Corporation Income Statements
	Year ended June 30,
(in millions)	2011	2010
Revenue	69,943	62,484
Cost of revenue	15,577	12,395
Research and development	9,043	8,714
Sales and marketing	13,940	13,214
General and administrative	4,222	4,063
Total operating expenses	42,782	38,386
Operating income	27,161	24,098

Other income	910	915
Income before income taxes	28,071	25,013
Provision for income taxes	4,921	6,253
Net income	23,150	18,760

Microsoft Corporation Balance Sheets
	As of June 30,
($ millions)	2011	2010
Cash and cash equivalents	$ 9,610	$ 5,505
Short-term investments	43,162	31,283
Accounts receivable, net	14,987	13,014
Inventories	1,372	740
Deferred income taxes	2,467	2,184
Other current assets	3,320	2,950
Total current assets	74,918	55,676

Property plant and equipment, net	8,162	7,630
Equity and other investments	10,865	7,754
Goodwill	12,581	12,394
Intangible assets, net	744	1,158
Other long-term assets	1,434	1,501
Total assets	$108,704	$86,113

Table continued next page

Microsoft Corporation Balance Sheets (continued)
	As of June 30,
($ millions)	2011	2010
Accounts payable	$ 4,197	$ 4,025
Short-term debt	0	1,000
Accrued compensation	3,575	3,283
Income taxes	580	1,074
Short-term unearned revenue	15,722	13,652
Securities lending payable	1,208	182
Other	3,492	2,931
Current liabilities	28,774	26,147
Long-term debt	11,921	4,939
Long-term unearned revenue	1,398	1,178
Deferred income taxes	1,456	229
Other long-term liabilities	8,072	7,445
Total liabilities	51,621	39,938

Common stock and paid-in capital	63,415	62,856
Retained deficit	(6,332)	(16,681)
Total equity	57,083	46,175
Total liabilities and equity	$108,704	$ 86,113

Required:

a. Compute net nonoperating expenses (NNE) for 2011 and 2010. Assume that combined federal and state statutory tax rates are 35% for both years.

b. Compute net nonoperating obligations (NNO) for 2011 and 2010.

c. Compute Spread for 2011 and 2010. Return on net operating assets (RNOA) is 136.9% and 117.0% in 2011 and 2010, respectively. NNO were $(24,017) million in 2009.

d. Compute FLEV for 2011 and 2010. In 2009, net nonoperating obligations (assets) were $(24,017) million and shareholders’ equity was $39,558 million.

e. Calculate return on equity (ROE) for both years. Show that ROE = RNOA + (FLEV × Spread). Interpret the year-over-year change in ROE.)

2. Apply a force from 0 to 400N to 0 on the side of the model. Set the time to 0 to 5 seconds to measure the change in spinal displacement.

blog10

Get help from top-rated tutors in any subject.