Mystery Companies
Mystery Companies
MPAc 231A (Fall 2014), due October 13, 2014
EFFECT OF INDUSTRY CHARACTERISTICS
ON FINANCIAL STATEMENT RELATIONSHIPS
Effective financial statement analysis requires an understanding of a firm’s economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. The worksheet (also posted on EEE) presents common-size condensed balance sheets and income statements for 12 firms in different industries. These common-size balance sheets and income statements express various items as a percentage of sales.
(That is, the statement divides all amounts by sales for the year.) The worksheet also shows the ratio of cash flow from operations to capital expenditures. A dash for a particular financial statement item does not necessarily mean the amount is zero. It merely indicates that the amount is not sufficiently large for the firm to disclose it. A list of the 12 companies and a brief description of their activities follow.
Required: Use the ratios to match the companies in the worksheet with the firms listed below.
A. Abercrombie & Fitch: Sells retail apparel primarily through stores to the fashion-conscious young adult and has established itself as a trendy, popular player in the specialty retailing apparel industry. B. Allstate Insurance: Sells property and casualty insurance, primarily on buildings and automobiles. Operating revenues include insurance premiums from customers and revenues earned from investments made with cash received from customers before Allstate pays customers’ claims. Operating expenses include amounts actually paid or expected to be paid in the future on insurance coverage outstanding during the year.
C. Best Buy: Operates a chain of retail stores selling consumer electronic and entertainment equipment at competitively low prices.
D. E. I. du Pont de Nemours: Manufactures chemical and electronics products.
E. Hewlett-Packard: Develops, manufactures, and sells
MPAc 231A (Fall 2014), due October 13, 2014
EFFECT OF INDUSTRY CHARACTERISTICS
ON FINANCIAL STATEMENT RELATIONSHIPS
Effective financial statement analysis requires an understanding of a firm’s economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. The worksheet (also posted on EEE) presents common-size condensed balance sheets and income statements for 12 firms in different industries. These common-size balance sheets and income statements express various items as a percentage of sales.
(That is, the statement divides all amounts by sales for the year.) The worksheet also shows the ratio of cash flow from operations to capital expenditures. A dash for a particular financial statement item does not necessarily mean the amount is zero. It merely indicates that the amount is not sufficiently large for the firm to disclose it. A list of the 12 companies and a brief description of their activities follow.
Required: Use the ratios to match the companies in the worksheet with the firms listed below.
A. Abercrombie & Fitch: Sells retail apparel primarily through stores to the fashion-conscious young adult and has established itself as a trendy, popular player in the specialty retailing apparel industry. B. Allstate Insurance: Sells property and casualty insurance, primarily on buildings and automobiles. Operating revenues include insurance premiums from customers and revenues earned from investments made with cash received from customers before Allstate pays customers’ claims. Operating expenses include amounts actually paid or expected to be paid in the future on insurance coverage outstanding during the year.
C. Best Buy: Operates a chain of retail stores selling consumer electronic and entertainment equipment at competitively low prices.
D. E. I. du Pont de Nemours: Manufactures chemical and electronics products.
E. Hewlett-Packard: Develops, manufactures, and sells