ACCT212 Project 2: Financial Statement Analysis-YUM! Brands, Inc.

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Description

ACCT212
Project 2: Financial Statement Analysis-YUM! Brands, Inc.
Description:
Using
the financial statements for YUM! Brands, Inc. located in Appendix A of your
Textbook, you will calculate Vertical and Horizontal Analysis and the
Financial Ratios listed below for the year ended in 2006.
Due Date:
The project is due by the end
of Week 7.
Grade Weight:(75 points)
The
financial statement analysis project will count for 7.5% of your overall
course grade. The Worksheets contained in this Workbook will aid in
completing the requirements for submission.
Requirements:
1.
Complete the Excel Spreadsheet in this Workbook labeled Horizontal &
Vertical. Calculate the Horizontal
& Vertical Analysis of YUM Brands, Inc.
2. Complete the Excel Spreadsheet in this Workbook labeled
Ratios. Calculate the 2006 Ratios and
show your computations and the formulas for YUM! Brands, Inc. Financial
Statements in Appendix A.
Financial
Ratio Calculations*
A.
Liquidity Ratio
1.
Current ratio
2.
Acid-test ratio
3. Inventory turnover
4. Accounts Receivable
turnover
5. Average Collection Period
(Days’ sales in receivables)
B. Solvency Ratios
1. Debt ratio
2. Times-interest-earned
ratio
C. Profitability Ratios
1. Gross Profit Percentage
2. Rate of return on net
sales (Profit Margin rate)
3. Rate of return on total
assets
4. Rate of return on common
stockholders’ equity
5. Earnings per share of
common stock
6. Price/earnings ratio
7. Dividend Yield
8. Book value per share of
common stock
*Note: If you are unable to locate an item needed for a ratio, make
an assumption and make sure you note your assumption in your work.

PROJECT
#2-HORIZONTAL AND VERTICAL ANALYSIS-SOLUTION
Horizontal Horizontal
YUM!
Brand, Inc.-Consolidated Statements of Income
Vertical Vertical Analysis Analysis
30-12-2006 Analysis 31-12-2005 Analysis $ Change % Change
in millions %-2006 in millions %-2005 2005-2006 2005-2006
Revenues
Company Sales $8,365 $8,225
Franchise and license fees 1,196 1,124
Total Revenues 9,561 9,349
Costs and Expenses
Company restaurants
Food and paper 2,549 2,584
Payroll and employee benefits 2,142 2,171
Occupancy and other operating expenses 2,403 2,315
Total Costs 7,094 7,070
General and administrative
expenses
1,187 1,158
Franchise and license
expenses
35 33
Closures and impairment
expenses
59 62
Refranchising (gain) loss -24 -43
Other (income) expense -51 -80
Wrench litigation (income)
expense
0 -2
AmeriServe and other charges
(credits)
-1 -2
Total Costs and Expenses 8,299 8,196
Operating Profit 1,262 1,153
Net interest expense (income) 154 127
Income (Loss) Before Income
Taxes
1,108 1,026
Income taxes 284 264
Net Income (loss) $824 $762
Horizontal Horizontal
YUM! Brand, Inc.-Consolidated
Balance Sheets
Vertical Vertical Analysis Analysis
30-12-2006 Analysis 31-12-2005 Analysis $ Change % Change
in millions %-2006 in millions %-2005 2005-2006 2005-2006
ASSETS
Current Assets
Cash and equivalents $319 $158
Short-term investments 6 43
Accounts and notes receivable 220 236
Inventories 93 85
Prepaid expenses and other
current assets
132 75
Deferred income taxes 57 181
Advertising cooperative
assets
74 77
Total Current Assets 901 855
Property, pland and
equipment, net
3,631 3,356
Goodwill 662 538
Intangible assets, net 347 330
Investments 138 173
Other assets 369 320
Deferred income taxes 305 225
Total Non-current Assets 5,452 4,942
Total assets $6,353 $5,797
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable and other
current liabilities
$1,386 $1,256
Income taxes payable 37 79
Short-term borrowings 227 211
Advertising cooperative
liabilities
74 77
Total current liabilities 1,724 1,623
Long-Term Liabilities
Long-term debt 2,045 1,649
Other liabilities and
deferred credits
1,147 1,076
Total long-term liabilities 3,192 2,725
Shareholders’ Equity
Preferred stock, no par
value, no shares issued
Common
stock, 265 shares and 278 shares issued in 2006 and 2005, respectively
Retained earnings 1,593 1,619
Accumulated other
comprehensive loss
-156 -170
Total shareholders’ equity 1,437 1,449
Total liabilities and shareholders’
equity
$6,353 $5,797
Ratio Formula Calculation Result
(words) (numbers)
A.
Liquidity Ratios
Hint: All Formulas are located on Page 710 &
711, with the exception of Gross Profit %
1. Current Ratio = Current assets = =
Current liabilities
2. Acid Test Ratio = Cash+Short-term Investmetns + Net Current receviables = =
Current Liabilities
3. Inventory turnover = Cost of goods sold = =
Average inventory
4. Accounts Receivable
turnover
= Net Sales = =
*Use
Total Sales and Net A/R and Notes Receivable
Average net accounts receivable
5.
Average Collection Period (Days’ sales in receivables)
= Average net accounts receivable = =
One day’s sales
B. Solvency Ratios
1. Debt ratio = Total liabilities = =
Ttoal assets
2. Times-interest-earned ratio = Income from operations = =
Note – Use Operating Profit Interest expense
C. Profitability Ratios
1. Gross Profit Percentage = Gross profit = =
Note: Gross Profit is Revenue – Costs. Do Not Include Expenses Total Revenue
Formula on Page 328
2. Rate
of return on net sales (Profit Margin rate)
= Net income = =
Net sales
3. Rate of return on total
assets
= Net income + Interest expense = =
Average total assets
4. Rate
of return on common stockholders’ equity
= Net income – Preferred dividends = =
Average common stockholder’s equity
5.
Earnings per share
= Net income – Preferred
dividends
= = $
Hint –
Page 758 – Use Weighted Average without Dilutive Shares
Average number of shares of
common stock outstanding
6. Price/earnings ratio = Market price per share of common stock = 29.40 =
Earnings per shares
7. Dividend Yield = Dividend per share of common stock = =
Hint: Dividend Per Share – Located on Page 751 in
Textbook
Market price per share of common stock 29.40
8. Book value per share = Total Stockholder’s equity – Preferred equity = = $
Number of shares of common outstanding
Market
Price Information was retreived from the following link:
.aol.com/quotes/yum-brands-inc/yum/nys/historical-prices?tf=12%2F29%2F2006-10%2F4%2F2009&gran=d”>http://finance.aol.com/quotes/yum-brands-inc/yum/nys/historical-prices?tf=12%2F29%2F2006-10%2F4%2F2009&gran=d

Project
2 Rubric – Students
Criteria Excellent Good Poor Very Poor
H & V Analysis:
Completeness All
requirements are completed in accordance with the directions, labeled and
organized well in worksheet.
All
requirements are completed and mostly follow the directions, labeled and
fairly organized in worksheet.
Most
requirements are completed that mostly follow the directions, missing some
labels and only somewhat organized.
Requirements
are not completed and/or the directions were generally not followed, missing
labels and unorganized.
Accuracy All
ratios are calculated with accurate results and appropriate terms of
expression.
80%
plus of ratios are calculated with accurate results and mostly appropriate
terms of expression.
60-79%
of ratios are calculated with accurate results and some appropriate terms of
expression.
Less
than 60% of ratios are calculated with accurate results and some appropriate
terms of expression.
Ratios:
Completeness All
requirements are completed in accordance with the directions, labeled and
organized well in worksheet.
All
requirements are completed and mostly follow the directions, labeled and
fairly organized in worksheet.
Most
requirements are completed that mostly follow the directions, missing some
labels and only somewhat organized.
Requirements
are not completed and/or the directions were generally not followed, missing
labels and unorganized.
Accuracy All
ratios are calculated with accurate results and appropriate terms of
expression.
80%
plus of ratios are calculated with accurate results and mostly appropriate
terms of expression.
60-79%
of ratios are calculated with accurate results and some appropriate terms of
expression.
Less
than 60% of ratios are calculated with accurate results and some appropriate
terms of expression.

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