accounting-ACG2021 Fall 2015 Comprehensive Financial Statement Analysis Project

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accounting-ACG2021 Fall 2015 Comprehensive Financial Statement Analysis Project

Question # 00139462 Posted By: solutionshere Updated on: 11/24/2015 10:30 AM Due on: 12/24/2015

Subject Business Topic General Business Tutorials:

Question

ACG2021 Fall 2015

Comprehensive Financial Statement Analysis Project

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100%

The objective of this exercise is to develop your ability to perform analysis of the financial information included in financial statements.

Instructions:

You will need the annual report for Kohl's Corporation for fiscal years 2014 and 2013. They will be provided to you in pdf format.

Note that Kohl’s fiscal year is referenced one year back, so, for example, the 2014 fiscal year relates to the fiscal year which ended on January 31, 2015 and the 2013 fiscal year relates to the year which ended February 1, 2014.

Requirement 1: Basic Questions

Answer the questions for the fiscal 2014 year in the shaded input box.

The location (source) where you can find the answer is provided for you above the shaded input box. Use only that source to answer the question. The Index on the second page of the annual report PDF file gives you a table of contents which allows you to quickly find the sources of the information.

Requirement 2 - 6: Ratio and Financial Analysis

For the ratios in requirements 2 and 3, provide the formula of the ratio, the amounts used to calculate the ratio and what the ratio measures. Enter your answers in the shaded input boxes. The first one (a.) was completed as an illustration.

The ratio formulas are listed in pages 775 - 777 in chapter 13 of your textbook. I have added the number of the ratio listed in pages 775 - 777 to each ratio so that you know exactly how to calculate them.

When calculating the ratios, only use the amounts included in the audited financial statements (Item 8. Financial Statements and Supplementary Data); do not just enter those that may be shown in other sections of the annual report. All other sections of the annual report except for the financial statements are not audited and as such the preparer can calculate any other ratios or financial indicators are they wish, not necessarily as the textbook prescribes. If you pick up amounts in other sections you risk getting the question wrong.

Since the fiscal 2014 financial statements are comparative, they include info for both fiscal years 2014 and 2013. Use those financial statements to answer the questions about 2013 as well.

However, some ratios for the 2013 year will require you go to back an additional year because some of the 2013 ratios use averages which are calculated using the 2013 + 2012 balances. For example, the inventory turnover for 2013 uses average inventory calculated by using the 2013 ending inventory balance + the 2013 beginning inventory balance (which is the ending balance in 2012). You need to obtain the fiscal 2012 ending inventory balance included in the 2012 financial statements which have been provided to you.

For ratios that include averages, use a simple average calculation (beginning + ending balance / 2).

Other:

Several questions have multiple parts. Make sure you answer every part in order to receive full credit.

Please do not add columns or rows to this file. I will be using this file to grade and my grading template is in this same format.

The points assigned to each question are included in the boxes highlighted in pink on the right-hand side of the question. There are 141 points which is equivalent to 100%.

Requirement 1

Answer BASIC INFORMATION about company operations and financial results for the 2014 fiscal year ending January 31, 2015.
NOTE: Use amounts found in the "Source" only to answer these questions.

Points

a. As of January 31, 2015, how many stores did Kohl’s operate and in how many states?

Source:

Item 8. Notes to Consolidated Financial Statements: Note #1

1

b. When does the fiscal year end each year? How many weeks did fiscal year 2014 have? How about 2013 and 2012?

Source:

Item 8. Notes to Consolidated Financial Statements: Note #1

1

c. Does Kohl's report a multi-step or single-step income statement? How do you know?

Source:

Item 8. Consolidated Statements of Income

3

d. What is Kohl's largest asset? Largest liability? What is the amount of each?

Source:

Item 8. Consolidated Balance Sheets

2

e. How many shares of common stock are Issued? Outstanding?

Source:

Item 8. Consolidated Balance Sheets

2

f. How many shares of treasury stock did Kohl's purchase during the year?

Source:

Item 8. Consolidated Statements of Changes in Shareholders' Equity

2

g. How much was dividends declared and paid per share?

Source:

Item 8. Consolidated Statements of Income

2

h. When does Kohl's record revenue sold at the stores? What about online sales shipped to customers?

Source:

Item 8. Notes to Consolidated Financial Statements: Note #1

1

i. What method does Kohl's use to value its inventory?

Source:

Item 8. Notes to Consolidated Financial Statements: Note #1

1

j. What method does Kohl's use to depreciate its property and equipment?

Source:

Item 8. Notes to Consolidated Financial Statements: Note #1

1

k. What percentage of Kohl’s total property and equipment are depreciated at year-end?

Source:

Item 8. Notes to Consolidated Financial Statements: Note #1

2

l. What items are recorded as cash equivalents?

Source:

Item 8. Notes to Consolidated Financial Statements: Note #1

1

m. Kohl's has receivables from credit card transactions at fiscal year-end and yet there is no Accounts Receivable classification on the balance sheet. In what balance sheet line are those receivables included and under what conditions?

Source:

Item 8. Notes to Consolidated Financial Statements: Note #1

2

n. What types of Other Comprehensive Income items does Kohl's have?

Source:

Item 8. Consolidated Statements of Comprehensive Income

2

o. Was Kohl’s debt issued at a discount or premium in the aggregate? How do you know?

Source:

Item 8. Notes to Consolidated Financial Statements: Note #2

2

p. What type of items are included in the Various Liabilities to Customers? Why are they classified as liabilities?

Source:

Notes to Consolidated Financial Statements: Note #1

2

q. Using a site such as www.hoovers.com or www.finance.yahoo.com, research the discount variety store industry. List three competitors of Kohl's Corporation.

Source:

Type source here

2

r. List three Kohl's brands.

Source:

Item1. Business

1

s. Does Kohl's have any business relations with foreign entities such as suppliers or customers?

Source:

Item1. Business

2

t. Describe three risk factors that Kohl's faces.

Source:

Item 1A. Risk Factors.

1

u. What was the cause of the increase in average selling price per unit? What was the effect of higher selling prices on the number of units sold?

Source:

Item 7. Management's Discussion and Analysis: Results of Operations.

3

v. Did capital expenditures increase or decrease from prior year? What is the explanation for the change?

Source:

Item 7. Management's Discussion and Analysis: Liquidity and Capital Resources

3

39

KOHLS 2014 Fiscal Year as of January 31, 2015

KOHLS 2013 Fiscal Year as of February 1, 2014

Ratio
(Refer to pgs 775 - 777 for ratio formula)

Calculation of Ratio
Show work

Ratio

Calculation of Ratio
Show work

Ratio

Points

Requirement 2

Evaluate PROFITABILITY. Using information you have learned in the text and elsewhere, evaluate Kohl's profitability for 2014 compared with 2013. In your analysis, you should compute the following ratios and then comment on what those ratios indicate.
NOTE: Use amounts in the audited financial statements only to calculate these ratios (Item 8. of annual report).

a. Rate of return on sales #13

4.6%

4.7%

Ratio:

$ 867

$ 889

Net income / Net sales

$ 19,023

$ 19,031

<--- This item was completed

Did the ratio increase or decrease? Is that positive or negative? Why?

for you as an example

The ratio decreased. This is negative because each dollar of sales produced less income.

b. Asset turnover #14

4

Ratio:

Did the ratio increase or decrease? Is that positive or negative? Why?

c. Return on assets (#15 non-DuPont model)

4

Ratio:

Did the ratio increase or decrease? Is that positive or negative? Why?

d. Return on equity (#17 non-DuPont model)

4

Ratio:

Did the ratio increase or decrease? Is that positive or negative? Why?

e. Gross profit margin percentage #10

4

Ratio:

Did the ratio increase or decrease? Is that positive or negative? Why?

f. Earnings per share #18 (do NOT use one shown on the income statement,

calculate yourself using simple average of outstanding shares)

4

Ratio:

Did the ratio increase or decrease? Is that positive or negative? Why?

g. Generally, are these indicators positive or negative? What trend(s) do you detect from this analysis?

3

Requirement 3

Evaluate the company's ABILITY TO SELL INVENTORY AND PAY DEBTS during 2014 and 2013. In your analysis, you should compute the following ratios, and then comment on what those ratios indicate.
NOTE: Use amounts in the audited financial statements only to calculate these ratios (Item 8. of annual report).

a. Inventory turnover & days' inventory outstanding #3

Turnover

6

Days

Ratio:

Did the ratio increase or decrease? Is that positive or negative? Why?

b. Accounts payable turnover & days' payable outstanding #6

Turnover

6

Days

Ratio:

Did the ratio increase or decrease? Is that positive or negative? Why?

c. Current ratio #1

4

Ratio:

Did the ratio increase or decrease? Is that positive or negative? Why?

d. Quick (acid-test) ratio #2

4

Ratio:

Did the ratio increase or decrease? Is that positive or negative? Why?

e. Debt ratio #8

4

Ratio:

Did the ratio increase or decrease? Is that positive or negative? Why?

f. Times interest earned #9

4

Ratio:

Did the ratio increase or decrease? Is that positive or negative? Why?

g. Generally, are these indicators positive or negative? What trend(s) do you detect from this analysis?

3

Requirement 4

Evaluate Kohl's CASH FLOW.

NOTE: Use amounts in the audited financial statements only to calculate these ratios (Item 8. of annual report).

a. For 2014, was cash provided by, or used in, Operations?

1

b. For 2014, is Kohl's net cash flow from operations greater than or less than Income from Operations? What is the primary cause of the difference?

3

c. For 2014, what is the primary source of cash from investing activities? Is this the same as in 2013 and 2012? If not, state the primary source(s) of cash from investing activities in 2013 and 2012.

3

c. For 2014, what is the primary source of cash from financing activities? Is this the same as in 2013 and 2012? If not, state the primary source(s) of cash from financing activities in 2013 and 2012.

3

d. During 2014, how much Income Taxes were actually paid? Was this higher or lower than Income Tax Expense (called "Provision for Income Taxes" on the income statement).

3

e. Where there any significant non-cash investing or financing activities during the year? If so, explain.

2

Requirement 5

OTHER FINANCIAL ANALYSIS.

a. Has Kohl’s been able to generate increased revenues from 2013 to 2014 to outpace inflation? Provide explanation. Reference the source of your inflation data.

4

b (1). What was the closing market price of Kohl's Corporation stock on February 2, 2015, the next trading day after the balance-sheet date of January 31, 2015?

2

b (2). What is the book value per share on January 31, 2015? (ratio #21)

2

Ratio:

b (3). What is the difference between the Kohl’s market price from b(1). above and the book value from b(2). above? What factors could be attributable to this difference?

4

c (1). For 2014, how much was the dividend declared per share (from Requirement 1, g. )

1

c (2). For 2014, how much as the earnings per share (calculated above in Requirement 2, f. )

1

c (3). What percent of the earnings per share was distributed as a dividend ? Is Kohl's distributing significant earnings to their shareholders?

3

Requirement 6

Overall, determine the financial health of Kohl’s based on the information gathered from requirements 2 – 5 above. Would you invest in this company?
Provide specific reasons as to why.

6

92

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Solution: accounting-ACG2021 Fall 2015 Comprehensive Financial Statement Analysis Project

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accounting-ACG2021 Fall 2015 Comprehensive Financial Statement Analysis Project

Solution: accounting-ACG2021 Fall 2015 Comprehensive Financial Statement Analysis Project

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