Question 1
Refer to the consolidated financial statements (including the NOTES) of Foot Locker, Inc., that are presented in Appendix B at the end of your textbook,(Financial Accounting ISBN:0136108865) in order to complete each requirement. The book only has the numbers for 2005- 2007. If you need numbers for other years, you can get them from the Foot Locker, Inc. Annual Reports, which are on the Foot Locker, Inc. website. You can find the information you need either by going to the Investor Relations web page www.footlocker-inc.com/investors.cfm?page=investor-relations or by going to www.sec.gov and downloading the company?s 10-k for the relevant year(s). Suppose you are an investor considering buying Foot Locker, Inc., common stock. The following questions are important. Show amounts in millions and round to the nearest $1 million. 1 Explain whether Foot Locker, Inc. had more sales revenue or collected more cash from customers during 2007. Why is accounts receivable missing from its balance sheet? 2 Investors are vitally interested in a company?s sales and profits, and its trends of sales and profits over time. Consider Foot Locker?s sales and net income (net loss) during the period from 2005 through 2007. Compute the percentage increase or decrease in net sales and also in net income (net loss) from 2005 to 2007. Which item grew faster during this two-year period, net sales or net income (net loss)? Can you offer a possible explanation for these changes? During 2007, Foot Locker, Inc. had numerous accruals and deferrals. As a new member of Foot Locker, Inc.?s accounting staff, it is your job to explain the effects of accruals and deferrals on net income for 2007. The accrual and deferral data follow, along with questions that Foot Locker, Inc.?s stockholders have raised (all amounts in millions): 3 Examine Footnote 8 to Foot Locker?s consolidated financial statements (Other Current Assets). Notice that included in this total is ?net receivables.? Ending net receivables for 2006 (beginning balance of 2007) were $59 million. Ending net receivables for 2007 were $50 million. Which of these amounts did Foot Locker, Inc. earn in 2006? Which amount is included in Foot Locker, Inc.?s 2007 net income? 4 Examine Footnote 9 (Property and Equipment, Net). Notice that accumulated depreciation stood at $870 million and the end of 2006 and at $903 million at year-end 2007. Assume that depreciation expense for 2007 was $100. Explain what must have happened to account for the remainder of the change in the accumulated depreciation account during 2007. 5 Focus on cash and cash equivalents. Why did cash change during 2007? The statement of cash flows holds the answer to this question. Analyze the seven largest individual items on the statement of cash flows (not the summary subtotals such as ?net cash provided by operating activities?). For each of the seven individual items, state how Foot Locker Inc.?s action affected cash. Show amounts in millions and round to the nearest $1 million. 6 What securities are included in Foot Locker?s Short-term investments? What type of securities are they? 7 Make a T-account for Short-term investments. Record $249 as the balance in the account as of the end of 2006. Using the information in the investments section of the Consolidated Statement of Cash Flows, record the cash purchases and sales of short-term investments during 2007. Why doesn?t the ending balance equal the amount shown on the balance sheet as of the end of 2007? 8 Three important pieces of information are (a) the cost of inventory on hand, (b) the cost of sales, and (c) the cost of inventory purchases. Identify or compute each of these items for Foot Locker, Inc. at the end of its fiscal year 2007. 9 Assume that all inventory purchases were made on account, and that only inventory purchased increased Accounts Payable. Compute Foot Locker, Inc.?s cash payments for inventory during fiscal 2007. 10 How does Foot Locker, Inc. value its inventories? Which costing method does Foot Locker Inc. use? 11 Did Foot Locker, Inc.?s gross profit percentage and rate of inventory turnover improve or deteriorate in fiscal 2007 (versus fiscal 2006)? Consider the overall effect of these two ratios. Did Foot Locker, Inc. improve during fiscal 2007? How did these factors affect the net income for fiscal 2007? Foot Locker, Inc.?s inventories totaled $1,254 million at the end of fiscal 2005. Round decimals to three places. 12 Which depreciation method does Foot Locker, Inc. use? Over what useful life does Foot Locker, Inc. depreciate various types of fixed assets? 13 Were Foot Locker, Inc.?s plant assets proportionately newer or older at the end of fiscal 2007 (versus 2006)? Explain your answer. 14 The current liability section of Foot Locker, Inc.?s Consolidated Balance Sheet as of February 2, 2008 (the end of fiscal 2007) lists accrued and other liabilities totaling $268 million. Find the details of this total in the Notes to Consolidated Financial Statements. What are the four principal items comprising this total? 15 How would you rate Foot Locker, Inc.?s overall debt position at the end of fiscal 2007 ? risky, safe or average? Compute the ratios that enable you to answer this question. 16 As of the end of fiscal 2007, how many classes of stock does Foot Locker, Inc. have authorized? Issues? Outstanding? 17 During 2007, Foot Locker, Inc. repurchased its treasury stock. How many shares did it purchase? How much did it pay for the stock? How much per share? Compare the price it paid for these shares with the market price of the company?s stock at the end of each quarter (see footnote 26). Does it look like the company was getting a ?good deal? on the purchase of its stock? Why? 18 Did Foot Locker, Inc. issue any new shares of common stock during fiscal 2007? Briefly explain the reasons. 19 Prepare a T-account to show the beginning and ending balances, plus all the activity in Retained Earnings for fiscal 2007. 20 What indicates that Foot Locker, Inc. owns foreign subsidiaries? Identify the item that proves your point and the financial statement on which the item appears. 21 At February 2, 2008, did Foot Locker, Inc. have a cumulative net gain or a cumulative net loss from translating its foreign subsidiaries? financial statements into dollars? How can you tell? 22 What is your evaluation of the quality of Foot Locker, Inc.?s earnings? State how you formed your opinion. 23 Perform a trend analysis of Foot Locker?s net sales, gross profit, operating income and net income. Use 2005 as the base year, and compute trend figures for 2006 and 2007.,Thanks Michael, I appreciate the help,For number 17: average market price per share for the year was $20.41,Enter your follow up question here...
Question 2
The Case of When in Rome You are about to make a major presentation to a potential Saudi Arabian partner. As you do your research, you discover that the custom in Saudi Arabia is that women are not present at any of the meetings where either the science or the financial issues are discussed. If women are present, they are not expected to take a leadership role in the presentation. Your lead market rep is a brilliant and very articulate female with a Ph.D. She has been responsible for all of the professional presentations which have been made to other potential partners. Further, her knowledge about both the product and the science behind the product is richer than anyone else's on the team. In addition, the compensation package is set so that the lead rep for any marketing effort receives a 10% bonus when a deal is sealed. However, you are afraid that if the lead market rep actually makes the presentation, given the customs about women, the deal will not be made. In this question, the company has to work to balance the requirements of two different cultures. Leadership needs to assure that the woman gets the opportunity to have recognition (both in terms of finance and evaluation) for her work at the same time that the difference in roles which may be present in other cultures is acknowledged and respected. A key ethical question is when to push the cultural envelope and when to accede to the cultural expectations. Be Attentive If we consider each of the lenses a pane in a window which gives us a balanced view of the problem, the final process combines all four of the lenses as we balance among the four core values of our community. After working through each of the lenses individually, you can now see how to put the pieces together in a whole. The process requires that you diligently ask the core questions over and over as you analyze problems that come to you. All four lenses are needed. In the question about what comes first, rights and justice or results and virtue, the answer is - it doesn't matter. If you prefer to start with rights and justices, your horizons can be expanded as you dream of possibilities with those who focus on results and reputation. If you start with imagining what is possible, those dreams need to be disciplined by the constraints of rights and justice. As you go through all four lenses, you can calibrate your response and assure that you have considered all facets of the problem. For the final round, we will work through the lenses in the order in which they were presented: (1) Rights/Responsibility Lens; (2) Results Lens; (3) Relationship Lens; (4) Reputation Lens. We begin by setting the context. Please address the following questions: ? Who is the ethical actor? Who or what group will be taking the action in this particular problem? ? Who are the stakeholders? Who are those people and/or groups to which we owe a duty? What are the express and implied agreements that you have with each of the constituents? ? What is the context and assumptions? What are the facts that need to be considered? In framing the context, what assumptions as to competing rights and responsibilities are present?
Question 3
Need in excel spreadsheet. 1. You have a portfolio comprised of the following. If the portfolio beta is 1.15, what is the beta of stock C? ?Stock? Value? Beta ? A?$3,000? 1.4 ? B?$4,000? .8 ? C?$2,000? ? ? D?$1,000? .9 2. A portfolio is invested 40 percent in stock A, 30 percent in stock B, and 30 percent in stock C. What is the expected return and standard deviation of this portfolio? ? State of? Probability of? Rate of Return if State Occurs? ?Economy. ?State of Economy?? Stock A. ?Stock B? Stock C ?Boom? .10? .05? .16? .23 ?Normal? .70? .08? .09? .11 ?Recession? .20? .15? -.03? -.25 3. You have 8 marbles, 7 of them weigh the same and one of them weighs different. You also have a balance scale. Within 2 weighings, how do you figure out which one is the weird one and whether it is heavier or lighter than one of the other 7? (5 points) 4. You have a string-like fuse that burns in exactly one minute. The fuse is inhomogeneous, and it may burn slowly at first, then quickly, then slowly, and so on. You have a match, and NO watch. How do you measure exactly 30 seconds? (5 points)
Question 4
Peterson Manufacturing Corporation accumulates the following data relative to jobs started and finished during the month of June 2011. Costs and Production Data Actual Standard Raw materials unit cost $2.25 $2.00 Raw materials units used 10,600 10,000 Direct labor payroll $122,400 $120,000 Direct labor hours worked 14,400 15,000 Manufacturing overhead incurred $184,500 Manufacturing overhead applied $189,000 Machine hours expected to be used at normal capacity 42,500 Budgeted fixed overhead for June $51,000 Variable overhead rate per machine hour $3.00 Fixed overhead rate per machine hour $1.20 Overhead is applied on the basis of standard machine hours. Three hours of machine time are required for each direct labor hour. The jobs were sold for $400,000. Selling and administrative expenses were $40,000. Assume that the amount of raw materials purchased equaled the amount used. Compute all of the variances for (1) direct materials and (2) direct labor. (Round intermediate calculations to 2 decimal places, e.g. 12.50 and final answers to 0 decimal places, e.g. 1,250.) Total materials variance $ Materials price variance $ Materials quantity variance $ Total labor variance $ Labor price variance $ Labor quantity variance $ Compute the total overhead variance. (Round intermediate calculations to 2 decimal places, e.g. 12.50 and final answers to 0 decimal places, e.g. 1,250.) $ Prepare an income statement for management. Ignore income taxes. (List amounts from largest positive to smallest positive followed by most negative to least negative, e.g. 15, 14, 10, -17, -5, -1. For favorable variances use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Enter all other amounts as positive amounts and subtract where necessary.) PETERSON MANUFACTURING CORPORATION Income Statement For the Month Ended June 30, 2011 $ Gross profit (at standard) Variances $ Total variance - Gross profit (actual) Net income $
Question 5
Shiela Penny is the Chief Financial Officer [CFO] of SALEM Manufacturing, a U.S. based manufacturer of gas turbine equipment. She has just concluded negotiations for the sale of a turbine generator to Crown, a British firm for One million pounds. This single sale is quite large in relation to SALEM?s present business. SALEM has no other current foreign customers, so the currency risk of this sale is of particular concern. The sale is made in September with payment due three months later in December. Shiela Penny has collected the following financial market information for the analysis of her currency exposure problem: ? Spot Exchange rate: $1.5640 per British pound. ? Three month forward rate: $1.5549 per pound ? SALEM?s cost of capital: 16% ? U.K. Annual borrowing interest rate: 12.0% (or 3.0% per quarter) ? U.K. Annual investment interest rate: 10.0% (or 2.5% per quarter) ? U.S. Annual borrowing interest rate: 12.0% ( or 3.0% per quarter) ? U.S. Annual investment interest rate: 8.0% (or 2.0% per quarter) ? June put option in the over-the-counter (bank) market for 1,000,000 British pounds; Strike price $1.55 (nearly at-the money) 1.5% premium ? June put option in the over-the counter (bank) market for 1,000,000 British pounds: Strike price $1.51 (out-of-the money) 1.0% premium ? SALEM?s foreign exchange advisory service forecasts that the spot rate in there months will be $1.56 per British pound. Like many manufacturing firms, SALEM operates on relatively narrow margins. Although Ms. Penny and SALEM would be very happy if the pound appreciated versus the dollars, concerns center on the possibility that the pound will fall. When Ms. Penny budgeted this specific contract, she determined that the minimum acceptable margin was at a sale price of $1,500,000. The budget rate, the lowest acceptable dollar per pound exchange rate, was therefore established at $1.5 per British pound. Any exchange rate below would result in SALEM actually losing money on the transaction. Four alternatives are available to SALEM to manage the exposure: 1. Remain un-hedged. 2. Hedge in the forward market. 3. Hedge in the money market. 4. Hedge in the options market. What should SALEM do?
