value of common equity
+ Net effect of transactions with common shareholders
+ Capital contributions (share issues)
- Share repurchases
- Dividends
= Net cash contribution (negative net dividends)
+ Effect of operations and non-equity financing
+ Netincome (from income statement)
+ Other comprehensive income
- Preferred dividends
= Comprehensive income (available to
value is adjusted at the end of the period to a bad debt expense.
5. When Xerox posted the entry in “3)” for some of its subsidiaries in Mexico and throughout Latin America, what was its effect on Xerox’s assets? Netincome?
When Xerox posted the journal entry for “exposed receivables” after they have admitted it, it would have meant a decrease in the book value of account receivab
from affiliate 159 48 1 1 2
gross profit 2 161 219 93 53
As you can see above, loss from affiliate in 2009 increased a lot compare to 2008. It means that there is insufficient information to evaluate operating performance just by income statements. Thus investigation of cash flow statements is needed. Further analysis regarding cash flow statement will be dealt in problem D.
E. Check the main accounting policies of NHN. Choose one interesting/doubtful accounting policy. Then, comment on the chosen accounting policy. More specifically, is it too aggressive, too conservative or reasonable in terms of the effects on the related accounting information, such as netincome, ending balance of account receivable, etc.?
(1) revaluation of fixed assets
[as of 30.9.2009]
income were less than those of 2007. Moreover, Interest expense of 2008 is more than that of 2007. The reason of 2000 was same as 2008. In 2000 & 2008, therefore, EBIT decreased without the decrease in Revenue.
Compared with EBIT of Coca-cola, we can know that EBIT of Coca-cola had been greater than that of PepsiCo except for 2006. We will see the case of 2006 in the part of Netincome. However
valuate the performance of SK energy, we analyzed the activity they have done with sales revenue, gross profit, operating profit, and netincome for 3years by using income statement. Before we check, we need to know the numbers about their performance. The important thing is to see the meaning behind the numbers. Because seemingly, it looks good, but the problem we don’t think maybe exists.
Net credit sales / average accounts receivable
Year 2009 2008 2007
turnover 3.75 4.78 3.40
Account receivable turnover shows portion of account receivables to sales revenue. The account receivable turnover ratio goes up and down during last 3 years so the liquidity looks like instable.
(4) Inventory turnover
Inventory turnover = COGS / Average inventory
Year 2009 2008 2007
turnove
The estimate of Ideko’s continuation value
can be combined with the forecasts for free
x
cash flow through 2010 to estimate Ideko’s
value today using the APV valuation model.
If firm’s sales are expected to grow at a nominal rate g and the firm’s operating expenses remain a fixed percentage of sales, then its unlevered netincome will also grow at rate g.
Similarly, the firm
can make a high profit and give that profit to investors.
5. Quality of Income
If quality of income is above 1, it is considered to indicate high-quality earnings. If this ratio is below 1, it is considered as lower-quality earnings.
'Quality of Income' is computed (Cash flows from Operating Activity/NetIncome). Revenue and Expense in income statement is recorded when they are generated
CASE 4
Part 1:
A. Describe the cost flow assumptions used in average cost, FIFO and LIFO methods of inventory valuation.
-The average cost method assumes cost of goods sold and ending inventory consist of a mixture of all the goods available for sale. The average unit cost applied to goods sold or to ending inventory is not simply an average of the various unit costs of purchases during the pe