Wednesday October 5th Chapter 5 ANSWERS TO QUESTIONS E5 2 Information Release C 1 Form 10 Q B 2 Quarterly report D 3 Press release F 4 Annual report E 5 Form 10 K A 6 Form 8 K Definitions A Report of special events e g auditor changes mergers filed by public companies with the SEC B Brief unaudited report for quarter normally containing summary income statement and balance sheet unaudited C Quarterly report filed by public companies with the SEC that contains additional unaudited financial information D Written public news announcement that is normally distributed to major news services E Annual report filed by public companies with the SEC that contains additional detailed financial information F Report containing the four basic financial statements for the year related notes and often statements by management and auditors E5 9 Terms A B K E F C J H D G Definitions 1 Net income 2 Income tax expense on operations 3 Income before extraordinary items 4 Cost of goods sold 5 Operating expenses 6 Gross margin on sales 7 EPS 8 Interest expense 9 Service revenue 10 Pretax income from operations A Revenues Gains Expenses Losses including effects of discontinued operations and extraordinary items if any B Income tax on revenues minus operating expenses C Sales revenue minus cost of goods sold D Sales of services for cash or on credit E Amount of resources used to purchase or produce the goods that were sold during the reporting period F Total expenses directly related to operations G Income before all income tax and before discontinued operations and extraordinary items if any H Cost of money borrowing over time I Item that is both unusual and infrequent J Net income divided by average shares outstanding K Income before unusual and infrequent items and the related income tax L None of the above E5 10 Case A 900 525 375 Sales revenue Cost of goods sold Gross margin Operating expenses Selling expense 50 Administrative expense 125 Total expenses 175 Pretax income 200 Income tax expense 80 Net income 120 Amounts not given in the exercise Case B 750 300 450 100 150 250 200 30 170 Case C 420 190 230 80 70 150 80 20 60 Case D 1 200 500 700 Case E 750 320 430 390 120 510 190 50 140 240 90 330 100 20 80 P5 2 P E 1 Capital in excess of par 2 Assets B C 11 Current liabilities 12 Long term liabilities M O J I D A Q G 3 Retained earnings 4 Book value 5 Other assets 6 Shares outstanding 7 Shareholders equity 8 Liquidity 9 Normal operating cycle 10 Current assets N F L K H 13 Fixed assets 14 Liabilities 15 Contra asset account 16 Accumulated depreciation 17 Intangible assets Monday October 10th E5 18 Req 1 Net Income given Average Total Assets given Current Prior Year Year 36 796 0 093 32 735 0 084 394 143 390 728 The increase in ROA from 0 084 in the prior year to 0 093 in the current year means that the firm earned 0 009 more for each 1 of investment Req 2 Security analysts would be more likely to increase their estimates of share value on the basis of this change The company increased its earnings by 0 009 for each 1 of investment and hence increased the corresponding value of that investment P5 1 1 E 2 L 3 D 4 I 5 M 6 W 7 B 8 Q 9 A 10 H 11 U 12 J 13 C 14 G 15 V 16 R 17 K 18 N 19 T 20 S 21 O 22 P 23 F P5 8 NEWELL RUBBERMAID Consolidated Statement of Operations For the Year Ended December 31 2008 dollars in thousands Net Sales Cost of Products Sold Gross Profit Operating Expenses Selling General and Administrative Expenses Other Expense Total Operating Expenses Operating Income loss Interest and Other Non Operating Expense Income before Income Taxes 6 470 6 4 347 4 2 123 2 1 502 7 419 7 1 922 4 200 8 199 0 1 8 Income Tax Expense Net Loss Income from Continuing Operations Loss on Sale of Discontinued Operations Net of Income Taxes Net Loss Income 53 6 51 8 0 5 52 3 ANSWERS TO MULTIPLE CHOICE 1 b 6 d 2 b 7 b 3 d 8 c 4 a 9 d 5 b 10 b CHAPTER 6 E6 3 Sales revenue 5 500 400 9 000 Less Sales returns and allowances 1 10 x 9 000 from D Less Sales discounts 9 10 x 9 000 from D x 3 Less Credit card discounts 400 from C x 2 Net sales 14 900 900 243 8 13 749