Question :
107) Divide the class into teams of three or four : 1253050
107) Divide the class into teams of three or four people. Each team member should work the following problem separately outside of class. Then give the students time in class to compare answers with their teammates and put together a final, correct copy of the problem. Each team should turn in only one copy of the problem for grading. All team members will receive the same grade.
Required:
Use the adapted financial statements from Microsoft Corporation to answer the following questions:
1.Calculate the current ratio for 2005.
2.Calculate the current ratio for 2006.
3.Did the current ratio improve in 2006?
4.Calculate the cash from operations to current liabilities for 2005.
5.Calculate the cash from operations to current liabilities for 2006.
6.Did the cash from operations to current liabilities improve in 2006?
7.Calculate the inventory turnover ratio for 2005.
8.Calculate the inventory turnover ratio for 2006.
9.Did the inventory turnover ratio improve in 2006?
10.Calculate the accounts receivable turnover ratio for 2005.
11.Calculate the accounts receivable turnover ratio for 2006.
12.Did the accounts receivable turnover ratio improve in 2006?
13.Use the liquidity ratios you have just calculated to discuss Microsoft’s liquidity.
14.Calculate the debt-to-equity ratio for 2005.
15.Calculate the debt-to-equity ratio for 2006.
16.Did the debt-to-equity ratio improve in 2006?
17.Calculate the return on assets for 2005.
18.Calculate the return on assets for 2006.
19.Did the return on assets improve in 2006?
20.Calculate the asset turnover ratio for 2005.
21.Calculate the asset turnover ratio for 2006.
22.Did the asset turnover ratio improve in 2006?
23.Calculate the return on equity for 2005. (Microsoft has no preferred stock)
24.Calculate the return on equity for 2006. (Microsoft has no preferred stock)
25.Did the return on equity improve in 2006?
26.Calculate the gross profit ratio for 2005.
27.Calculate the gross profit ratio for 2006.
28.Did the gross profit ratio improve in 2006?
29.Calculate earnings per share for 2005. (Microsoft has no preferred stock)
30.Calculate earnings per share for 2006. (Microsoft has no preferred stock)
31.Did earnings per share improve in 2006?
32.Use the profitability ratios you have just calculated to discuss Microsoft’s profitability.
33.Calculate the price-earnings ratio for 2005.
34.Calculate the price-earnings ratio for 2006.
35.Did the price-earnings ratio improve in 2006?
36.Calculate the dividend yield ratio for 2006.
37.Based on ALL of the ratios you have just calculated, do you consider Microsoft to be a good investment? Why?
The following information has been adapted from the 2004 and 2005 annual reports of Amazon.com’s worldwide operations, available online at
http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-reportsAnnual
AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
Year Ended December 31,
2005 2004 2003
Net sales$8,490$6,921$5,264
Cost of sales 6,451 5,319 4,007
Gross profit2,0391,6021,257
Operating expenses
Fulfillment745601495
Marketing198162128
Technology & content451283257
General & administrative166124104
Other operating expense (income) 47 (8) 3
Total operating expenses 1,607 1,162 987
Income from operations432440270
Interest income442822
Interest expense(92)(107)(130)
Other income (expense), net 44 (6) (123)
Total non-operating expense (4) (85) (231)
Income before income taxes42835539
Income tax expense 95 (233) 4
Net income$ 333$ 588$ 35
Additional information that might be useful:
Weighted average shares outstanding412406395
AMAZON.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Year Ended December 31,
2005 2004 2003
Net cash provided by operating activities$ 733$566$393
Net cash (used in) provided by investing activities (830)(268)303
Net cash used in financing activities (193) (97) (332)
Net (decrease) increase in cash$( 290)$201$364
AMAZON.COM, INC.
CONSOLIDATED BALANCE SHEETS
(in millions)
December 31,
ASSETS 2005 2004 2003
Current assets:
Cash$1,013$1,303$ 1,102
Short-term investments987476293
Inventories566480294
Accounts receivable274199131
Other current assets 89 81 1
Total current assets2,9292,5391,821
Property, plant & equipment (net)348246224
Goodwill15913969
Other assets 260 324 48
Total assets$3,696$3,248$2,162
LIABILITIES & SHAREHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable$1,366$1,142$ 820
Accrued expenses & other current liabilities 563 478 433
Total current liabilities1,9291,6201,253
Long-term debt & other 1,521 1,855 1,945
Total liabilities3,4503,4753,198
Shareholders’ equity (deficit)
Common stock444
Additional paid-in capital2,2632,1231,896
Retained earnings (deficit)(2,021) (2,354) (2,936)
Total shareholders’ equity (deficit) 246 (227) (1,036)
Total liabilities & shareholders’ equity (deficit) $3,696$3,248$2,162
