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[answered] Audencia "Programme Grande Ecole" - Finan


Hello ! I have trouble with my financial analysis case study (Part III, Exercices)...?

I have difficulty calculating the invested capital (it is shareholders' equity + financial liabilities), I have trouble identifying liabilities in this case...?

It is the same for the cash flows using the indirect method (I know that there are operating, investing and financing activities). As there are no plant and property, I suppose that are no investing activities, but what about the other statements ??

Thank you for your help !

Regards




Audencia ?Programme Grande Ecole? - Financial Analysis

 

Final exam ? May 2014 (3 hours)

 

I. Multiple choice questions (2 points)

 

For questions 1-4, please write your answer as A,B,C or D, in your exam paper. There

 

is only one correct answer to each question.

 

1. Which of the following items is not a part of a company?s Annual Report?

 

A.

 

B.

 

C.

 

D. The auditor?s report

 

Notes to the financial statements

 

Notes to the shareholders

 

Management?s discussion and analysis of operations 2.Which of the following statements are true?

 

A.

 

B.

 

C.

 

D. Development costs can be capitalized under US GAAP in all circumstances

 

Extraordinary items are segregated under IFRS

 

Wages are not considered an expense under US GAAP

 

LIFO cannot be used under IFRS 3.What information is included in the Financial Review of a company?s Annual

 

Report?

 

A. Internal and external sources of liquidity

 

B. Commitments for capital expenditures/sources of funding

 

C. Events causing material changes in cost/revenue relationships (e.g. future

 

price increase)

 

D. All mentioned above

 

4. Net assets are equal to

 

A. Total assets

 

B. Total assets minus total liabilities

 

C. Total liabilities minus total assets

 

D. Preferred equity

 

II. Questions (4 points)

 

1. Using the Du Pont System, show and explain briefly how Return on Equity (ROE)

 

is connected to Return on Assets (ROA).

 

2. What are the main principles and constraints of US GAAP?

 

3. What are the main differences in the making of the statement of cash flows under

 

US GAAP and IFRS?

 

4. How a company can inflate ROE? Explain briefly and provide an example. What

 

risks have such inflation for a potential investor? 1 III. Exercises (4 points)

 

A) Casmire Ltd (2 points)

 

The transactions below, in chronological order, relate to Casmire Ltd for January

 

2011, the company's first month of activity:

 

1. Received $60,000 cash from investors; issued 500 ordinary shares

 

2. Acquired a small office by paying $21,000 in cash

 

3. Provided $5,400 of services on credit

 

4. Acquired a small parcel of land by paying $20,000 cash

 

5. Received $1,700 from a client, who was billed previously (transaction n?2)

 

6. Paid $1,400 to the North Shore Advertiser for advertising that ran during the first

 

half of the month

 

7. Acquired $20,000 of equipment from Makita by paying $15,000 down and

 

agreeing to pay the balance owed within the next month

 

8. Borrowed $10,000 from the bank (repayable in 3 years)

 

9. Received $1,300 from clients for services performed the same day

 

10. Paid $3,500 on account to Makita in partial settlement of the balance due from the

 

transaction n?6

 

11. Rented a car from Hertz Car Rental for use on the same day -charges amounted to

 

$275, bill received from Hertz but not yet paid

 

12. Paid $1,900 for January wages

 

13. Paid $1,000 for business registration administrative fees

 

14. The cost of services provided to customers for the month is $750

 

Determine the impact of each of the preceding transactions on Casmire Ltd's assets,

 

liabilities and stockholders? equity, and prepare the 31/01/11 balance sheet and the

 

January 2011 income statement. The buildings of the company are depreciated using

 

the straight line method for a ten-year useful life with $1,000 salvage value in the end

 

of the useful life. Ignore the impact of depreciation and amortization for any other

 

item.

 

B) Lewison Corporation (2 points)

 

You will find below Lewison Corporation's balance sheet and income statement for

 

its latest accounting period:

 

Income Statement

 

Sales

 

Cost of goods sold

 

Gross margin

 

Selling and administrative expenses

 

Income before income taxes

 

Income tax expense

 

Net income 934

 

360

 

574

 

410

 

164

 

50

 

114 2 Balance Sheet

 

2009 Balance

 

(31/12/2009)

 

Cash

 

52

 

Accounts Receivable

 

70

 

Inventory

 

60

 

Property, Plant & Equipment

 

681

 

less: Accumulated depreciation

 

(321)

 

Total Assets

 

542 2008 Balance

 

(31/12/2008)

 

40

 

90

 

71

 

580

 

(300)

 

481 Accounts payable

 

32

 

36

 

Bonds payable

 

320

 

290

 

Common stock

 

140

 

140

 

Retained earnings

 

50

 

15

 

Total Liabilities and Owners'

 

Equity

 

542

 

481

 

The company did not dispose of any property, plant, and equipment, retire any bonds

 

payable, or repurchase any of its own common stock during the year. The company

 

declared and paid a cash dividend.

 

1. Calculate the Invested Capital of the company for 2009. (0,5 points)

 

2. Prepare the 2009 Statement of Cash Flows of the company using the indirect

 

method. (1,5 points)

 

IV. Case Study (10 points)

 

Attached to this exam paper are the following documents for Nvidia Corporation:

 

1. Balance Sheet 2009-10

 

2. Income Statement 2008-10

 

3. Cash flow statement 2008-10

 

4. Ratio table with 2010 industry averages

 

Additional useful information

 

Nvidia Corporation is an American global technology company based in Santa Clara,

 

California. Nvidia manufactures graphics processing units (GPUs), as well as having

 

a significant stake in manufacture of system-on-a-chip units (SOCs) for the mobile

 

computing market. Nvidia's primary GPU product line labeled "GeForce" is in direct

 

competition with AMD's "Radeon" products. Together they control more than 65% of

 

the market for GPUs. The remaining part of the market is controlled by Intel and its

 

integrated GPUs.

 

1. Using the information provided above and the attached documents, calculate

 

two ratios for each of the following categories

 

a) Profitability ratios

 

b) Activity/efficiency ratios

 

c) Leverage and coverage ratios (one for leverage and one for coverage)

 

d) Liquidity ratios

 

e) Return ratios 3 f) Market ratios

 

All ratios should be calculated for 2010. (2 points)

 

2. Using the ratios you have calculated above and the provided industry averages

 

as well as the other documents attached, prepare a brief commentary on

 

financial performance and position of the company. Your commentary should

 

include an analysis of the company?s liquidity, profitability, operating

 

efficiency, capital structure, returns and market measures. Summarize your

 

findings and give your overall assessment of the company?s investment

 

potential by mentioning its key strengths and weaknesses in your conclusion.

 

(maximum 3 pages) (8 points) 4 Ratio Table

 

Ind.

 

Avg.*

 

Short-term liquidity

 

Current ratio

 

Quick ratio

 

Operating efficiency

 

Average collection period

 

Days inventory held

 

Days payable outstanding

 

Cash conversion cycle

 

Fixed asset turnover

 

Total asset turnover

 

Leverage

 

Debt ratio

 

Long-term debt to total

 

capitalization

 

Debt to equity

 

Times interest earned

 

Profitability

 

Gross profit margin

 

Operating profit margin

 

Net profit margin

 

Returns

 

Return on assets

 

Return on equity

 

Market measures

 

Earnings per share (EPS)

 

Closing stock price

 

P/E ratio

 

Based on closing price

 

Dividend payout rate

 

Dividend yield

 

Based on closing price 2.1

 

1.5

 

51 days

 

74 days

 

48 days

 

77 days

 

11.7

 

1.2

 

45.2% 0.9

 

1.8 times

 

65.31%

 

35.73%

 

26.28% 55.69%

 

16.26%

 

12.44% 23.19% 10.48% 55.46%

 

23.82%

 

14.08% 30.0%

 

(0.3)%

 

1%

 

(0.2)%

 

5%

 

5$ 21.6 3% * Industry average is from The Risk Management Association, Annual Statement

 

Studies, 2010; SIC #3674. Average ROE, EPS and Net Profit Margin are only

 

estimates for the purpose of the examination. 5 NVIDIA CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(In thousands, except per share data) January 31,

 

2010

 

$

 

3,326,445

 

2,149,522

 

1,176,923 Revenue

 

Cost of revenue

 

Gross profit

 

Operating expenses:

 

Research and development

 

Sales, general and administrative

 

Restructuring charges and other

 

Total operating expenses

 

Income (loss) from operations

 

Interest income

 

Interest expense

 

Other income (expense), net

 

Income (loss) before income tax

 

Income tax expense (benefit)

 

Net income (loss) $ Year Ended

 

January 25,

 

2009

 

$ 3,424,859

 

2,250,590

 

1,174,269 908,851

 

367,017

 

1,275,868

 

(98,945)

 

23,115

 

(3,320)

 

(3,144)

 

(82,294)

 

(14,307)

 

(67,987) January 27,

 

2008

 

$ 4,097,860

 

2,228,580

 

1,869,280 855,879

 

362,222

 

26,868

 

1,244,969

 

(70,700)

 

42,859

 

(406)

 

(14,707)

 

(42,954)

 

(12,913)

 

$

 

(30,041) 691,637

 

341,297

 

1,032,934

 

836,346

 

64,289

 

(54)

 

760

 

901,341

 

103,696

 

$ 797,645 Basic net income (loss) per share

 

Weighted average shares used in basic per share computation (1) $ (0.12)

 

549,574 $ (0.05)

 

548,126 $ 1.45

 

550,108 Diluted net income (loss) per share

 

Weighted average shares used in diluted per share computation (1) $ (0.12)

 

549,574 $ (0.05)

 

548,126 $ 1.31

 

606,732 (1) Reflects a three-for-two stock split effective on September 10, 2007.

 

See accompanying notes to the consolidated financial statements. 64 Source: NVIDIA CORP, 10-K, March 18, 2010 Powered by Morningstar? Document Research? NVIDIA CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS

 

(In thousands, except share and per share data)

 

January 31,

 

2010

 

ASSETS

 

Current assets :

 

Cash and cash equivalents

 

$

 

Marketable securities

 

Accounts receivable, less allowances of $16,330 and $18,399 in 2010 and 2009,

 

respectively

 

Inventories

 

Prepaid expenses and other

 

Deferred income taxes

 

Total current assets

 

Property and equipment, net

 

Goodwill

 

Intangible assets, net

 

Deposits and other assets

 

Total assets

 

$

 

LIABILITIES AND STOCKHOLDERS? EQUITY

 

Current liabilities:

 

Accounts payable

 

$

 

Accrued liabilities and other

 

Total current liabilities

 

Other long-term liabilities

 

Capital lease obligations, long term

 

Commitments and contingencies - see Note 13

 

Stockholders? equity:

 

Preferred stock, $.001 par value; 2,000,000 shares authorized; none issued

 

Common stock, $.001 par value; 2,000,000,000 shares authorized; 652,391,708 shares

 

issued and 561,465,851 outstanding in 2010; and 629,386,584 shares

 

issued and 538,460,766 outstanding in 2009

 

Additional paid-in capital

 

Treasury stock, at cost (90,925,857 shares in 2010 and 90,925,818 shares in 2009)

 

Accumulated other comprehensive income

 

Retained earnings

 

Total stockholders' equity

 

Total liabilities and stockholders' equity

 

$ January 25,

 

2009 447,221

 

1,281,006 $ 374,963

 

330,674

 

38,214

 

8,752

 

2,480,830

 

571,858

 

369,844

 

120,458

 

42,928

 

3,585,918 318,435

 

537,834

 

39,794

 

16,505

 

2,167,958

 

625,798

 

369,844

 

147,101

 

40,026

 

$ 3,350,727 344,527

 

439,851

 

784,378

 

111,950

 

24,450 $ 417,688

 

837,702 218,864

 

559,727

 

778,591

 

151,850

 

25,634 653

 

2,219,401

 

(1,463,268)

 

12,172

 

1,896,182

 

2,665,140

 

3,585,918 629

 

1,889,257

 

(1,463,268)

 

3,865

 

1,964,169

 

2,394,652

 

$ 3,350,727 See accompanying notes to the consolidated financial statements. 65 Source: NVIDIA CORP, 10-K, March 18, 2010 Powered by Morningstar? Document Research? NVIDIA CORPORATION AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

(In thousands)

 

Year ended

 

January 25,

 

2009 January 31,

 

2010

 

Cash flows from operating activities:

 

Net income (loss)

 

$

 

Adjustments to reconcile net income (loss) to net cash

 

provided by operating activities:

 

Stock-based compensation expense related to

 

stock option purchase

 

Stock-based compensation expense

 

Depreciation and amortization

 

Impairment charge on investments

 

Deferred income taxes

 

Payments under patent licensing arrangement

 

In-process research and development expenses

 

Other

 

Changes in operating assets and liabilities, net of effects

 

of acquisitions:

 

Accounts receivable

 

Inventories

 

Prepaid expenses and other current assets

 

Deposits and other assets

 

Accounts payable

 

Accrued liabilities and other long-term liabilities

 

Net cash provided by operating activities

 

Cash flows from investing activities:

 

Purchases of marketable securities

 

Proceeds from sales and maturities of marketable

 

securities

 

Purchases of property and equipment and

 

intangible assets

 

Acquisition of businesses, net of cash and cash

 

equivalents

 

Other

 

Net cash used in investing activities

 

Cash flows from financing activities:

 

Payments related to stock option purchase

 

Payments related to repurchases of common stock

 

Proceeds from issuance of common stock under

 

employee stock plans

 

Other

 

Net cash used in financing activities

 

Change in cash and cash equivalents

 

Cash and cash equivalents at beginning of period

 

Cash and cash equivalents at end of period

 

$

 

Supplemental disclosures of cash flow information:

 

Cash paid for income taxes, net

 

Cash paid for interest on capital lease obligations $

 

$ (67,987) $ (30,041) Source: NVIDIA CORP, 10-K, March 18, 2010 $ 797,645 135,735

 

107,091

 

196,664

 

(21,147)

 

(857)

 

1,893 162,706

 

185,023

 

9,891

 

(23,277)

 

(21,797)

 

188 133,365

 

133,192

 

89,516

 

(57,255)

 

4,000

 

(216) (56,741)

 

204,656

 

1,580

 

3,857

 

119,366

 

(136,303)

 

487,807 348,873

 

(177,295)

 

21,528

 

(2,108)

 

(283,207)

 

58,876

 

249,360 (146,055)

 

(3,690)

 

(6,293)

 

(13,914)

 

216,875

 

123,026

 

1,270,196 (1,193,948) (999,953) (1,250,248) 752,434 1,226,646

 

) 753,839

 

) (77,601

 

(218)

 

(519,333) (407,670

 

)

 

(27,948

 

(442)

 

(209,367) (75,542)

 

(1,622)

 

(761,318) (78,075)

 

- (423,636) (552,512) 138,029

 

1,105

 

61,059

 

29,533

 

417,688

 

447,221 $ 73,547

 

815

 

(349,274)

 

(309,281)

 

726,969

 

417,688 225,969

 

220

 

(326,323)

 

182,555

 

544,414

 

726,969 4,217

 

3,256 $

 

$ $

 

$

 

$ (187,745) $ 7,620

 

- January 31,

 

2010

 

Non-cash activities:

 

Change in unrealized gains (losses) from marketable securities

 

Assets acquired by assuming related liabilities

 

Acquisition of business - goodwill adjustment January 27,

 

2008 8,305

 

37,830

 

- $

 

$ Year Ended

 

January 25,

 

2009

 

$

 

$

 

$ (6,360)

 

47,236

 

3,411 2,328

 

- January 27,

 

2008

 

$

 

$

 

$ 9,462

 

18,072

 

2,633 Powered by Morningstar? Document Research? See accompanying notes to the consolidated financial statements.

 

67 Source: NVIDIA CORP, 10-K, March 18, 2010 Powered by Morningstar? Document Research?

 


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