FinancialStatementAnalysis

MidTermExamination
PGPII,TermIV
Time:90Minutes,Max.Marks]=25
(Attemptanyfivequestions,allquestionscarryequalmarks)

1. Belowareabalancesheetandanincomestatementthathavebeenreformulated.
BalanceSheet
AssetsLiabilitiesandEquity
2009200820092008
Operatingassets205.3189.9Operatingliabilities40.634.2
Financialassets45.742.0Financialliabilities120.4120.4
Shareholdersequity90.077.3
Total251.0231.9Total251.0231.9

IncomeStatement2009
Operatingrevenues134.5
Operatingexpenses(112.8)
Operatingincome21.7
Interestrevenues2.5
Interestexpenses(9.6)
Comprehensiveincome14.6

A. Howmuchwaspaidoutinnetdividendsduring2009?
B. Whatisfreecashflowfor2009?
C. Whatwasthereturnonnetoperatingassetsin2009?
D. Whatwasthefirmsnetborrowingcost?

2. BigDataLtd.suppliesyouwiththefollowingdetailsasgiventheTable.DetermineitsBasic
EPS(BEPS)andDilutedEPS(DEPS)forboththeyears.Applicabletaxrateis35%.
200607

200506

9.15

6.56

2.00

2.00

20.00lakh

20.00lakh

1.20

0.60

Particulars
Netprofitattributabletoexistingequityshareholders(Rs.InCrores)
No.ofequitysharesoutstanding(FVRs.10)inCrores
No.of6%foreigncurrencyconvertiblebonds(FCCBs),equivalentof
Rs.100each,issuedon1stOctober2005.Eachcompulsorily
convertibleinto5equityshares.
InterestexpenseonFCCBs

3. (a)ChrisTiteraistheChiefFinancialOfficer(CFO)forDallasCompany.ItisJanuary10and
Chrishasjustfinishedcompilingthe preliminaryfinancialresultsforthemostrecentfiscal
yearthatendedonDecember31.ThepreliminaryresultsindicatethatDallaslost$1,00,000
duringtheyear.Dallasisalargecompany(withassetsinexcess$1billion),sothe$1,00,000
lossisessentiallythesameaszero.However,theBoardofDirectorsthinksthatitconveysa
verynegativeimageforDallasCompanytoreportalossforyear,evenifthelossamountis
verysmall.Asaresult,theyhaveinstructedChristolookatnumbersagainandseeifhecan
turnthislossintoaprofit.WhatthingscanChristdo,astheCFO,toturnthislossintoaprofit?
WhatconcernsshouldChrishave?


(b)AttheendofthefiscalyearendingJune30,2003,Microsoftreportedcommonequityof$64.9
billion on its balance sheet, with $49.0 billion invested in financial assets (in the form of cash
equivalentsandshortterminvestments)andnofinancingdebt.Forfiscalyear2004,thefirmreported
$7.4 billion in comprehensive income, of which $1.1 billion was aftertax earnings on the financial
assets.ThismonthMicrosoftisdistributing$34billionoffinancialassetstoshareholdersintheform
ofaspecialdividend.
a. CalculateMicrosoftsreturnoncommonequity(ROCE)for2004.
b. HoldingallelseconstantwhatwouldMicrosoftsROCEbeafterthepayoutof$34billion?
c. Wouldyouexpectthepayouttoincreaseordecreaseearningsgrowthinthefuture?Why?

4. HLtd.Acquiredasinvestment15,000sharesinSLtd.forRs.1,55,000on1stJuly,1999.The
BalanceSheetsofthetwocompanieson31stMarch,2000wereasfollows:

Liabilities

H.Ltd.

SLtd.

Assets

H.Ltd.

SLtd.

Rs.

Rs.

Rs.

Rs.

EquitysharesofRs.10each 9,00,000
fullypaid

2,50,000

Machinery

7,00,000

1,50,000

Generalreserve

1,60,000

40,000

Furniture

1,00,000

70,000

Profit&LossAccount

80,000

25,000

Investment

1,55,000

BillsPayable

40,000

20,000

Stock

1,00,000

50,000

Creditors

50,000

30,000

Debtors

60,000

35,000

CashatBank

90,000

40,000

Billsreceivable

25,000

20,000

Total

12,30,000

3,65,000

12,30,000

3,65,000

Thefollowingadditionalinformationisprovidedtoyou:
(i)
GeneralReserveappearinginthebalancesheetofSLtd.Hasremainedunchangedsince
31stMarch,1999
(ii)
ProfitearnedbySLtd.Fortheyearended31stMarch,2000amountedtoRs.20,000.
(iii)
On1stFebruary,2000HLtd.SoldtoSLtd.GoodscostingRs.8000forRs.10,000.25%of
thesegoodsremainedunsoldwithSLtd.On31stMarch,2000.CreditorsofSLtd.include
Rs.4,000duetoHLtd.Onaccountofthesegoods.
(iv)
OutofSLtdsacceptances,Rs.15000arethosewhichhavebeenacceptedinfavourofH
Ltd.Outofthese,H,Ltd.Hadendorsedby31stMarch,2000Rs.8,000worthofbills
receivableinfavourofitscreditors.
Youarerequiredtodrawaconsolidatedbalancesheetasat31stMarch,2000.
5. The following is the reformulated comparative Balance Sheet for General Mills Inc,. As an
analystyouarerequired togiveinsightintohowafirmorganizesitsbusiness.Further the
operatingincomeaftertaxforthefirmis$1901millionand$1602millionfor2008and2007
respectively.TheNetOperatingassetsfor2006is$5360million.Assumeanexpectednormal
rate of return of 9%. How much is the extra value in terms of Operating income over and
abovethenormalreturniscreatedbyGeneralMillsinc.Commentonit.

(inMillionofDollars)

937
1,483
3,164

OperatingAssets
WorkingCash
Receivables
Inventories
PrepaidExpenses
Land,BuildingandEquipment
Goodwill
Intangibleassets
Deferredtaxassets
Otherassets
Total
OperatingLiabilities
AccountsPayable
DeferredtaxLiabilities
Otherliabilities
NetOperatingassets
NetFinancialObligations:
Currentportionofdebt
NotesPayable
Longtermdebt
CashEquivalents
CommonShareholdersEquity
MinorityInterest(MI)
CommonShareholders'Equity(afterMI)

442
2,209
4,349
611

2008

50
1,082
1,367
511
3,108
6,786
3,777

1,750
18,413

5,584
12,847

6,389
6,458
242
6,218

2007

50
953
1,173
444
3,014
6,835
3,694
67
1,587
17,817

778
1,433
3,309
5,520

12,297

1,734
1,254
3,218
367
5,839
6,458
1,139
5,319

6. FollowingisthecashflowstatementforIBM(giveninthenextpage).Youarerequiredto
analyzethestrategicbusinessactivitiesofthefirmwithrespecttooperational,investment
andfinancingactivities.

Consolidated Statement of Cash Flows

International Business Machines Corporation and Subsidiary Companies

($ in millions)
For the year ended December 31:

2013

2012

2011

$16,483

$16,604

$15,855

Depreciation

3,327

3,392

3,589

Amortization of intangibles

1,351

1,284

1,226

614

688

697

(1,610)

797

1,212

(236)

(729)

(342)

Cash flows from operating activities

Net income
Adjustments to reconcile net income
to cash provided by operating activities

Stock-based compensation
Deferred taxes
Net (gain)/loss on asset sales and other
Change in operating assets and liabilities, net of acquisitions/divestitures

(1,407)

(2,230)

(1,279)

Retirement related

294

(1,008)

(1,371)

Inventories

(57)

280

(163)

Other assets/other liabilities

(747)

733

(28)

Accounts payable

(529)

(224)

451

17,485

19,586

19,846
(4,108)

Receivables (including financing receivables)

Net cash provided by operating activities

Cash flows from investing activities

(3,623)

(4,082)

Proceeds from disposition of property, plant and equipment

372

410

608

Investment in software

(517)

(635)

(559)

Payments for property, plant and equipment

Purchases of marketable securities and other investments

(4,608)

(4,109)

(1,594)

Proceeds from disposition of marketable securities and other investments

4,873

3,142

3,345

Non-operating finance receivablesnet

(1,063)

(608)

(291)

Acquisition of businesses, net of cash acquired

(3,056)

(3,722)

(1,811)

297

599

14

(7,326)

(9,004)

(4,396)

Proceeds from new debt

16,353

12,242

9,996

Payments to settle debt

(10,013)

(9,549)

(8,947)

Divestiture of businesses, net of cash transferred

Net cash used in investing activities
Cash flows from financing activities

Short-term borrowings/(repayments) less than 90 daysnet

Common stock repurchases

621

(441)

1,321

(13,859)

(11,995)

(15,046)

Common stock transactionsother

1,074

1,540

2,453

Cash dividends paid

(4,058)

(3,773)

(3,473)

Net cash used in financing activities

(9,883)

(11,976)

(13,696)

28

(116)

(493)

304

(1,511)

1,262

Effect of exchange rate changes on cash and cash equivalents

Net change in cash and cash equivalents

10,412

11,922

10,661

$10,716

$10,412

$11,922

Income taxes paidnet of refunds received

$4,024

$3,169

$4,168

Interest paid on debt

$982

$ 1,009

$956

Capital lease obligations

$14

$10

$39

Cash and cash equivalents at January 1

Cash and cash equivalents at December 31
Supplemental data

Amounts may not add due to rounding.

The accompanying notes on pages 84 through 146 are an integral part of the financial statements.

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