a.
Statement of
Statement of cash flow is a financial statement that shows the cash and cash equivalents of a company for a particular period of time. It shows the net changes in cash, by reporting the sources and uses of cash as a result of operating, investing, and financing activities of a company.
Free cash flow describes the net cash provided from operating activities after making required adjustments for dividends and capital expenditures. In other words, it is the cash flow arrived after making payment for capital expenditures and dividend payments.
To Determine: The free cash flow for all three companies.
b.
To Compute: The ratio of free cash flow to sales for all three companies.
c.
To Discuss: The way in which Incorporation A compares to the other two companies with respect to generating free cash flow.
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Chapter 13 Solutions
Corporate Financial Accounting
- Analyze and compare Amazon.com to Netflix Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. Netflix, Inc. (NFLX) provides digital streaming and DVD rentals in the United States. Amazon and Netflix compete in streaming and digital services; however, Amazon also sells many other products online. The cash, temporary investments, operating expenses, and depreciation expense from recent financial statements were reported as follows for both companies (in millions): a. Determine the days cash on hand for Amazon and Netflix. Round all calculations to one decimal place. b. Interpret the results.arrow_forwardAnalyze and compare Amazon.com and Wal-Mart Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. Wal-Mart Stores, Inc. (WMT) is the largest retailer in the United States. Amazon and Wal-Mart compete in similar markets; however, Wal-Mart sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Interest expense and income before income tax expense from the financial statements of both companies for two recent years follow (in millions): a. Compute the times interest earned ratio for both companies for the two years. Round to one decimal place. b. Interpret Amazons interest coverage from Year 1 to Year 2. c. Does a times interest earned ratio less than 1.0 mean that creditors will not get paid interest? d. Interpret Wal-Marts interest coverage from Year 1 to Year 2. e. Which company appears to have the greater protection for creditors?arrow_forward1. Which firm is more likely to borrowing money in the future, a rapidly growing firm that is expanding its markets before the competition "copies" its product or service or a mature company like Procter and Gamble with established mature brands? Explain. 2. Are cash flows constant over time for most firms or do they vary across the life cycle of the typical firm? Explain.arrow_forward
- Finance In addition to footwear, Kenneth Cole Productions designs and sells handbags, apparel, and other accessories. You decide, therefore, to consider comparables for KCP outside the footwear industry. You also know the following about KCP: it has sales of $518 million, EBITDA of $55.6 million, excess cash of $100 million, $3 million of debt, EPS of $1.65, book value of equity of $12.05 per share, and 21million shares outstanding. a. Suppose that Fossil, Inc., has an enterprise value to EBITDA multiple of 10.83 and a P/E multiple of 16.97. What share price would you estimate for KCP using each of these multiples, based on the data for KCP? b. Suppose that Tommy Hilfiger Corporation has an enterprise value to EBITDA multiple of 7.72 and a P/E multiple of 16.58. What share price would you estimate for KCP using each of these multiples based on the data for KCP?arrow_forwardProblem Amazon Co, Inc (AMZN) has an Enterprise Value of $18.7 billion. AMZN’s Enterprise Value to Sales ratio is 0.40 versus 1.65 for peers, while their Enterprise Value to EBITDA ratio is 6.5 versus 15.7 for peers. How would AMZN’s Enterprise Value change if the ratios were equal to the average of its peers? Please answer fast.arrow_forwardr = discount rate C = net cash flow (the profit) at time t (The initial cost of ac- quiring a customer would be a negative net cash flow at time 0.) How much are you worth to a given company if you continue to purchase its brand for the rest of your life? Many marketers are grappling with that question, but it's not easy to determine how much a customer is worth to a company over his or her lifetime. Calculating customer lifetime value can be very com- plicated. Intuitively, however, it can be a fairly simple net pres- ent value calculation, which incorporates the concept of the time value of money. To determine a basic customer lifetime value, each stream of profit (C, the net cash flow after costs are subtracted) is discounted back to its present value (PV) and then summed. The basic equation for calculating net present value (NPV) is: NPV can be calculated easily on most financial calculators or by using one of the calculators available on the Internet, such as the one found at…arrow_forward
- Analyze and compare J. C. Penney and Macys J. C. Penney Company, Inc. (JCP) and Macys, Inc. (M) are large department store chains in the United States. Information from recent annual reports for both companies is as follows (in millions): a. Determine the days cash on hand for each company. Round to one decimal place. b. Which company has the better liquidity position?arrow_forwardWhich of the following statements best describes financial markets? Answer a. Financial markets are a good example of unregulated markets b. Financial markets increase the speed of buying and selling, but they also increase the cost since people are earning fees for these transactions c. Financial markets today offer fewer instruments than they did in the past d. Financial markets lower the cost and increase the speed of buying and selling financial instrumentsarrow_forwardPeople's Bank of China boosts liquidity with open market operations The People's Bank of China, China's central, conducted an open market operation that injected 270 billion yuan into China's banking system. Suppose People's Bank of China buys 20 billion yuan of government securities from ICBC. Show how the transaction changes the balance sheets by filling in the numbers. Source: www.chinadaily.com.cn and finance.yahoo.com, October 8, 2018. In the open market operation described in the news clip, explain whether the People's Bank of China buys or sells People's Bank of China securities. Assets Liabilities (billions of yuan) (billions of yuan) The People's Bank of China securities because Securities Reserves of ICBC A. buys; money is being injected into the banking system ICBC O B. sells; interest rates are falling Assets Liabilities C. buys; an open market operation by definition is a purchase of securities (billions of yuan) (billions of yuan) Securities O D. sells; money is being…arrow_forward
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