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

 

 

 

 

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