1.
Calculate the following measures for each of Company C’s operating segments (excluding Bottling Investments and Corporate):
Percentage of total net revenues, 2013 and 2014.
Percentage change in total net revenues, 2012 to 2013 and 2013 to 2014.
Operating income as a percentage of total net revenues (profit margin), 2013 and 2014
1.
Explanation of Solution
Percentage of total net revenues, 2013 and 2014
2014 | 2013 | |||
Total net revenues | Percentage | Total net revenues | Percentage | |
Eurasia & Africa | $ 2,730 | 7.03% | $ 2,763 | 7.08% |
Europe | $ 5,536 | 14.25% | $ 5,334 | 13.66% |
Latin America | $ 4,657 | 11.99% | $ 4,939 | 12.65% |
North America | $ 21,479 | 55.32% | $ 21,590 | 55.32% |
Asia Pacific | $ 5,746 | 14.80% | $ 5,869 | 15.03% |
Eliminations | $ (1,325) | (3.41%) | $ (1,471) | (3.76%) |
Total | $ 38,823 | 100% | $ 39,024 | 100% |
Table: (1)
Percentage change in total net revenues, 2012 to 2013 and 2013 to 2014
2014 | 2013 | 2012 | |||||
Total net revenues | Total net revenues | Total net revenues | Change 2013 to 2014 | Change 2012 to 2013 | Percentage 2013 to 2012 | Percentage 2012 to 2013 | |
Eurasia & Africa | $ 2,730 | $ 2,763 | $ 2,697 | $ (33) | $ 66 | -1.19% | 2.45% |
Europe | $ 5,536 | $ 5,334 | $ 5,123 | $ 202 | $ 211 | 3.79% | 4.12% |
Latin America | $ 4,657 | $ 4,939 | $ 4,831 | $ (282) | $ 108 | -5.71% | 2.24% |
North America | $ 21,479 | $ 21,590 | $ 21,680 | $ (111) | $ (90) | -0.51% | -0.42% |
Asia Pacific | $ 5,746 | $ 5,869 | $ 6,308 | $ (123) | $ (439) | -2.10% | -6.96% |
Eliminations | $ (1,325) | $ (1,471) | $ (1,644) | $ 146 | $ 173 | -9.93% | -10.52% |
Total | $ 38,823 | $ 39,024 | $ 38,995 | $ (201) | $ 29 | -0.52% | 0.07% |
Table: (2)
Operating income as a percentage of total net revenues (profit margin), 2013 and 2014.
2014 | 2013 | |||||
Total net revenues | Operating income | Percentage | Total net revenues | Operating income | Percentage | |
Eurasia & Africa | $ 2,730 | $ 1,084 | 39.71% | $ 2,763 | $ 1,087 | 39.34% |
Europe | $ 5,536 | $ 2,852 | 51.52% | $ 5,334 | $ 2,859 | 53.60% |
Latin America | $ 4,657 | $ 2,316 | 49.73% | $ 4,939 | $ 2,908 | 58.88% |
North America | $ 21,479 | $ 2,447 | 11.39% | $ 21,590 | $ 2,432 | 11.26% |
Asia Pacific | $ 5,746 | $ 2,448 | 42.60% | $ 5,869 | $ 2,478 | 42.22% |
Eliminations | $ (1,325) | — | 0.00% | $ (1,471) | — | 0.00% |
Total | $ 38,823 | $ 11,147 | 28.71% | $ 39,024 | $ 11,764 | 30.15% |
Table: (3)
2.
Determine whether company C should attempt to expand its operations in a particular region of the world to increase operating revenues and operating income.
2.
Explanation of Solution
The company C should attempt to expand its operations in Europe as the net revenues and operating income are high and are increasing year by year in Europe.
3.
List any additional information required to conduct the analysis.
3.
Explanation of Solution
Additional information that is required to conduct the analysis of the study is:
1.
2. Data for the previous year of the company.
3. Data for the competitors company.
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Chapter 8 Solutions
GEN COMBO ADVANCED ACCOUNTING; CONNECT ACCESS CARD
- Effect of Industry Characteristics on Financial Statement Relations. Effective financial statement analysis requires an understanding of a firms economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. Exhibit 1.22 (pages 6061) presents common-size condensed balance sheets and income statements for 12 firms in different industries. These common-size balance sheets and income statements express various items as a percentage of operating revenues. (That is, the statement divides all amounts by operating revenues for the year.) Exhibit 1.22 also shows the ratio of cash flow from operations to capital expenditures. A dash for a particular financial statement item does not necessarily mean the amount is zero. It merely indicates that the amount is not sufficiently large enough for the firm to disclose it. Amounts that are not meaningful are shown as n.m. A list of the 12 companies and a brief description of their activities follow. A. Amazon.com: Operates websites to sell a wide variety of products online. The firm operated at a net loss in all years prior to that reported in Exhibit 1.22. B. Carnival Corporation: Owns and operates cruise ships. C. Cisco Systems: Manufactures and sells computer networking and communications products. D. Citigroup: Offers a wide range of financial services in the commercial banking, insurance, and securities business. Operating expenses represent the compensation of employees. E. eBay: Operates an online trading platform for buyers to purchase and sellers to sell a variety of goods. The firm has grown in part by acquiring other companies to enhance or support its online trading platform. F. Goldman Sachs: Offers brokerage and investment banking services. Operating expenses represent the compensation of employees. G. Johnson Johnson: Develops, manufactures, and sells pharmaceutical products, medical equipment, and branded over-the-counter consumer personal care products. H. Kelloggs: Manufactures and distributes cereal and other food products. The firm acquired other branded food companies in recent years. I. MGM Mirage: Owns and operates hotels, casinos, and golf courses. J. Molson Coors: Manufactures and distributes beer. Molson Coors has made minority ownership investments in other beer manufacturers in recent years. K. Verizon: Maintains a telecommunications network and offers telecommunications services. Operating expenses represent the compensation of employees. Verizon has made minority investments in other cellular and wireless providers. L. Yum! Brands: Operates chains of name-brand restaurants, including Taco Bell, KFC, and Pizza Hut. REQUIRED Use the ratios to match the companies in Exhibit 1.22 with the firms listed above.arrow_forwardEffect of Industry Characteristics on Financial Statement Relations: A Global Perspective. Effective financial statement analysis requires an understanding of a firms economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. Exhibit 1.24 (pages 6667) presents common-size condensed balance sheets and income statements for 12 firms in different industries. These common-size balance sheets and income statements express various items as a percentage of operating revenues. (That is, the statement divides all amounts by operating revenues for the year.) A dash for a particular financial statement item does not necessarily mean the amount is zero. It merely indicates that the amount is not sufficiently large for the firm to disclose it. A list of the 12 companies, the country of their headquarters, and a brief description of their activities follow. A. Accor (France): Worlds largest hotel group, operating hotels under the names of Sofitel, Novotel, Motel 6, and others. Accor has grown in recent years by acquiring established hotel chains. B. Carrefour (France): Operates grocery supermarkets and hypermarkets in Europe, Latin America, and Asia. C. Deutsche Telekom (Germany): Europes largest provider of wired and wireless telecommunication services. The telecommunications industry has experienced increased deregulation in recent years. D. E.ON AG (Germany): One of the major public utility companies in Europe and the worlds largest privately owned energy service provider. E. Fortis (Netherlands): Offers insurance and banking services. Operating revenues include insurance premiums received, investment income, and interest revenue on loans. 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(That is, the statement divides all amounts by operating revenues for the year.) Exhibit 1.23 also shows the ratio of cash flow from operations to capital expenditures. A dash for a particular financial statement item does not necessarily mean the amount is zero. It merely indicates that the amount is not sufficiently large for the firm to disclose it. A list of the 12 companies and a brief description of their activities follow. A. Abercrombie Fitch: Sells retail apparel primarily through stores to the fashionconscious young adult and has established itself as a trendy, popular player in the specialty retailing apparel industry. B. Allstate Insurance: Sells property and casualty insurance, primarily on buildings and automobiles. Operating revenues include insurance premiums from customers and revenues earned from investments made with cash received from customers before Allstate pays customers claims. Operating expenses include amounts actually paid or expected to be paid in the future on insurance coverage outstanding during the year. C. Best Buy: Operates a chain of retail stores selling consumer electronic and entertainment equipment at competitively low prices. D. E. I. du Pont de Nemours: Manufactures chemical and electronics products. E. Hewlett-Packard: Develops, manufactures, and sells computer hardware. The firm outsources manufacturing of many of its computer components. F. HSBC Finance: Lends money to consumers for periods ranging from several months to several years. Operating expenses include provisions for estimated uncollectible loans (bad debts expense). G. Kelly Services: Provides temporary office services to businesses and other firms. Operating revenues represent amounts billed to customers for temporary help services, and operating expenses include amounts paid to the temporary help employees of Kelly. H. McDonalds: Operates fast-food restaurants worldwide. A large percentage of McDonalds restaurants are owned and operated by franchisees. McDonalds frequently owns the restaurant buildings of franchisees and leases them to franchisees under long-term leases. I. Merck: A leading research-driven pharmaceutical products and services company. Merck discovers, develops, manufactures, and markets a broad range of products to improve human and animal health directly and through its joint ventures. J. Omnicom Group: Creates advertising copy for clients and is the largest marketing services firm in the world. Omnicom purchases advertising time and space from various media and sells it to clients. Operating revenues represent commissions and fees earned by creating advertising copy and selling media time and space. Operating expenses includes employee compensation. K. Pacific Gas Electric: Generates and sells power to customers in the western United States. L. Procter Gamble: Manufactures and markets a broad line of branded consumer products. REQUIRED Use the ratios to match the companies in Exhibit 1.23 with the firms listed above.arrow_forward
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