MGMT S 2600 Midterm Exam Study Guide FINAL

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HARVARD UNIVERSITY EXTENSION SCHOOL
MGMT S-2600: FINANCIAL STATEMENT ANALYSIS
STUDY GUIDE FOR MIDTERM EXAM
1). On October 2, 2011, Starbucks Corporation reported, on its Form 10-K, the following (in millions):

Total expenses
Operating income
Net earnings

2011
$10,452.4
1,728.5
1,248.0

2010
$9,759.1
1,419.4
948.3

What amount of revenues did Starbucks report for the year ending October 2, 2011? A) $10,452.4
B) $ 8,723.9
C) $11,700.4
D) $12,180.9
E) None of the above
Answer: C
Rationale: Revenues – Total expenses = Net earnings. Revenues – $10,452.4 = $1,248.0. Therefore, Revenues were $11,700.4

2). On October 2, 2011, Starbucks Corporation reported, on its Form 10-K, the following (in millions):

Operating income
Net earnings

2011
$ 1,728.5
$ 1,248.0

2010
$1,419.4
$ 948.3

Calculate year-over-year increase in Net earnings, in percentage terms. A) 22%
B) 32%
C) 72%
D) 67%
E) None of the above
Answer: B
Rationale: During the year, Net earnings increased compared to the prior year. This increase is calculated as ($1,248.0 – $948.3) / $948.3 = 32%.

HARVARD UNIVERSITY EXTENSION SCHOOL
MGMT S-2600: FINANCIAL STATEMENT ANALYSIS
STUDY GUIDE FOR MIDTERM EXAM
3). The Goodyear Tire & Rubber Company’s December 31, 2011, financial statements reported the following (in millions).
Cash December 31, 2011
Cash from operating activities
Cash from investing activities
Cash from financing activities

$ 2,772
773
(902)
896

What did Goodyear report for Cash on its December 31, 2010 balance sheet? A) $2,772 million
B) $3,539 million
C) $767 million
D) $2,005 million
E) None of the above
Answer: D
Rationale: Cash, beginning of year + Cash from operating activities + Cash from investing activities + Cash from financing activities = Cash at end of year Cash, beginning of year + $773 – $902 + $896 = $2,772. Cash, beginning of year = $2,005

4). Sales for the year = $108,229, Net Income for the year= $13,144, Income from equity investments = $3,309, and average Equity during the year = $47,556. Return on equity (ROE) for the year is: A) 12.1%

B) 27.6%
C) 43.9%
D) 227.6%
E) There is not enough information to answer the question.
Answer: B
Rationale: Return on equity = Net income / Average Equity = $13,144 / $47,556 = 27.6%.

5). Sales for the year = $82,229, Net Income for the year= 8,186, and average Assets during the year = $52,445. Return on Assets (ROA) for the year is:
A) 63.8%
B) 10.0%
C) 15.6%
D) There is not enough information to calculate ROA.
E) None of the above
Answer: C
Rationale: ROA = Net Income /Average assets. Therefore ROA equals $8,186 / $52,445 = 15.6%.

HARVARD UNIVERSITY EXTENSION SCHOOL
MGMT S-2600: FINANCIAL STATEMENT ANALYSIS
STUDY GUIDE FOR MIDTERM EXAM
6). During 2010, Skechers U.S.A., Inc. had Sales of $2,006.9 million, Gross profit of $911.9 million and Selling, general, and administrative expenses of $719.7 million. What was Skechers’ Cost of sales for 2010?

A) $ 375.3 million
B) $1,095.0 million
C) $ 192.2 million
D) $2,918.8 million
E) There is not enough information to calculate the amount.
Answer: B
Rationale: Sales – Cost of sales = Gross profit
$2,006.9 – Cost of sales = $911.9. Cost of sales = $1,095.0 million 7). In 2011, Kohl’s Corporation reports the following (in $ millions): net income 2011 of $1,167, retained earnings at the end of the year of $10,195 and retained earnings at the beginning of the year of $9,301. Assume that there were no other retained earnings transactions during fiscal 2011. What dividends did the firm pay in fiscal 2011?

A) $ 273 million
B) $2,061 million
C) $ 546 million
D) $ 0
E) There is not enough information to calculate the amount.
Answer: A
Rationale: Retained earnings, 2011 = Retained earnings, 2010 + Net Income – Dividends. Dividends = Retained earnings, 2010 + Net Income - Retained earnings, 2011 Dividends = $9,301 + $1,167 – $10,195 = $273

8). In its fiscal 2010...
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