Discussions and Assignment - Financial Decision Making

Jan 28th, 2014
RockCafe
Category:
Other
Price: $60 USD

Question description

Discussions
To participate in the following discussions, go to this week's Discussion link in the left navigation.

  1. The Balance Sheet 
     
    Discuss the following questions, What information is provided in the balance sheet; what is a common sized balance sheet; and how do you create a common sized balance sheet?  Respond to at least two of your fellow students' postings.
  2. Understanding the Notes to the Balance Sheet
     
    Your friend, Liz, loves to shop at Target and is now interested in investing in the company.  Tom, another friend, has told her that Target’s debt structure is risky with obligations of nearly 74% of total assets.  Liz sees that debt on the balance sheet is 65% of total assets and is confused by Tom’s comment.  Write an explanation to Liz discussing the debt structure of Target and why Tom thinks Target is risky.  Be sure to explain clearly what information appears on financial statements, as well as what information does not appear directly on the financial statements. Use the information below in your discussion and respond to at least two of your fellow students’ postings. 

    At fiscal year-end February 2, 2008, Target Corporation had the following assets and liabilities on its balance sheet (in millions):

    Current liabilities

    $11,782

    Long-term debt

    15,126

    Other liabilities

    2,345

    Total assets

    44,560


    Target reported the following information on leases in the notes to the financial statements:
    Total rent expense was $165 million in 2007, $158 million in 2006, and $154 in 2005, including percentage rent expense of $5 million in 2007, 2006, and 2005.  Most long-term leases include one or more options to renew, with renewal terms that can extend the lease term one to more than fifty years. Certain leases also include options to purchase the leased property.

    Future minimum lease payments required under noncancellable lease agreements existing at February 2, 2008, were: 

    Future Minimum Lease Payments (in Millions)

    Operating Leases

    Capital Leases

    2008

    $ 239

    $ 12

    2009

     187

     16

    2010

     173

     16

    2011

     129

     16

    2010

     123

     17

    After 2010

    2, 843

     155

    Total future minimum lease payments

    $3694 (a)

    $232

    Less: Interest (b)

    (105)

    Present value of minimum capital lease payments

    $127 (c)


    a) Total contractual lease payments include $1,721 million related to options to extend lease terms that are reasonably assured of being exercised, and also include $98 million of legally binding minimum lease payments for stores that will open in 2008 or later.
    (b) Calculated using the interest rate at inception of each lease.
    (c) Includes current portion of $4 million.


Assignment
To complete the following assignment, go to this week's Assignment link in the left navigation. 
Eastman Kodak 2
 
Each chapter in the textbook contains a continuation of this problem. The objective is to learn how to do a comprehensive financial statement analysis in steps as you learn the content of each chapter. Keep this in mind as you complete each week’s written assignment.  Write a 2-page paper analyzing the Eastman Kodak Balance Sheet using the Eastman Kodak 2007 Annual Report and Form10-K, including the important points that an analyst would use in assessing the financial condition of Eastman Kodak.  Attach the Excel worksheet that you created to do the analysis.
  • Open the financial statement analysis template that you saved from the Chapter 1 Eastman Kodak problem and input the data from the Eastman Kodak balance sheet. Eastman Kodak has combined many of its asset and liability accounts into one comprehensive account on the balance sheet.  Be sure to read the notes to determine the correct numbers to input in the template.  For example, the company has combined many items in the account “Other long-term assets” that should be separated into appropriate accounts.  When you have finished inputting the data, review the balance sheet to make sure there are no red blocks indicating that your numbers do not match the cover sheet information you input from the Chapter 1 problem.  Make any necessary corrections before saving your input and the common-size balance sheet that the template automatically creates for you, you will be submitting this saved “print-out” to your instructor.
  • Analyze the balance sheet.  Write a summary that includes important points that an analyst would use in assessing the financial condition of Eastman Kodak.



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