SPJIMR: PGMPW 2022: Financial Statement Analysis

7. A comparison is made between 3 firms in different industries using net profit margin, total asset
turnover and current ratio:
Net Profit Margin Total Asset Turnover Current Ratio
Firm A 1.67% 3.40 times 1.16
Firm B 21.48% 1.06 times 2.01
Firm C 4.44% 1.49 times 1.71
1. Apple: The company designs, manufactures and markets a range of personal computers,
mobile communication and media devices, and portable digital music players, and sells a
variety of related software, services, peripherals, networking solutions, and third party
digital content and applications.
2. Costco Wholesale Corporation: They operate membership warehouses based on the
concept that offering the members low prices on limited selection of nationally branded and
selected private label products in a wide range of merchandise categories will produce high
sales volumes and rapid inventory turnover.
3. Target Corporation: Their Retail segment includes all of their merchandising operations,
including their fully integrated online business. They offer everyday essentials and
fashionable, differentiated merchandise at discounted prices.
Which firm is Firm A, Firm B and Firm C ? Comment on your reasons.
8. Case: Eat at my Restaurant
Yum Brands, Inc.: It consists of 6 operating segments – KFC, Pizza Hut, Taco Bell, Long John
Silver’s, All American Food Restaurants and Yum Restaurants.
Panera Bread: It’s a National bakery – café concept with 1,453 Company owned and franchise
operated bakery – café location in 40 states, the District of Columbia and Ontario, Canada
Starbucks: It is the premier roaster and retailer of specialty coffee in the world, operating in
more than 50 countries.
Yum Brands Panera Bread Starbucks
2010 2009 2010 2009 2010 2009
Current Ratio 0.94 0.73 1.56 2.26 1.55 1.29
Acid test 0.69 0.36 1.27 1.93 0.98 0.59
Times Interest earned ( times) 7.52 6.10 267.91 200.89 35.0 11.35
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Debt / Equity Ratio ( %) 398.26 541.65 55.23 40.22 73.5 82.74
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Net profit margin ( %) 10.21 9.88 7.25 6.36 8.83 4.00
Return on assets (%) 14.98 15.66 12.70 11.39 15.8 6.95
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Return on total equity (%) 83.22 210.00 18.71 15.85 28.1 14.11
4
a. For each company indicate the trend in liquidity
b. Give your opinion as to the relative liquidity of each of the companies. How would you rank
these companies, considering liquidity?
c. Comment on the relative times interest earned and the debt/ equity ratio?
d. Which company appears to have a better net profit margin?
e. Which company appears to have the best returns on assets?

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SPJIMR: PGMPW 2022: Financial Statement Analysis

9. KNR Constructions reported the following financial data in its December 31, 2012, report to
shareholder
Preferred Stock, 8%, ₹100 Par ₹ 40,000
Common Stock, ₹10 par, 20,000 Shares
Issued and Outstanding 200,000
Securities Premium 160,000
Retained Earnings 170,000
In 2013, the firm reported the following (presented in partial form).
Operating income ₹120,000
Interest expense ₹ 30,000
Earnings before tax ₹ 90,000
Tax ₹40,000
Net income
₹ 50,000
The common stock dividends were declared and paid @ 9% for the year ended December 31, 2013. The
year-end market price for 2013 was ₹18.00.
Required:
For 2013, compute:
a. Earnings per share
b. Dividends per share based on ending shares
c. Percentage of earnings retained
d. Dividend payout
e. Dividend yield
f. Price earning ratio

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