财务报表分析与运用 杰拉尔德 课后答案英文版第七章.doc
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1、Chapter 7 SolutionsOverview:Problem LengthProblem #sS2, 3, 5, 8, and 10M1, 4, 6, 7, 9, 11, 12, and 13AppendicesM7A-1 and 7B-1L7A-2 and 7B-21.MExhibit 7S-1 contains the calculations required.Exhibit 7S-1. ChevronAdjustments for Capitalization of InterestAmounts in $ millionspart cYear1995199619971998
2、19991999/95As reportedInterest expense $ 401 $ 364 $ 312 $ 405 $ 472 1.18Pretax income 1,789 4,740 5,502 1,834 3,648 2.04Net income 930 2,607 3,256 1,339 2,070 2.23Capitalized interest 141 108 82 39 59 Amortization of capitalized interest 47 24 28 35 9 a. CalculationsEBIT$2,190 $5,104 $5,814 $2,239
3、$4,120 Times interest earned5.4614.0218.635.538.731.60b. AdjustedNet capitalized interest $ 94 $ 84 $ 54 $ 4 $ 50 After 35% income tax 61 55 35 3 33 Interest expense 542 472 394 444 531 0.98EBIT 2,237 5,128 5,842 2,274 4,129 (i) Times interest earned4.1310.8614.835.127.781.88(ii) % reduction from re
4、ported ratio-24.4%-22.5%-20.4%-7.4%-10.9%Pretax income$1,695 $4,656 $5,448 $1,830 $3,598 2.12(iii) Net income 869 2,552 3,221 1,336 2,038 2.34% reduction from reported-6.6%-2.1%-1.1%-0.2%-1.6%b.(iv)Expensing all interest reduces net income for each year. However the effect diminishes over time.c.(i)
5、Because the amount of interest capitalized declined over time, restatement reduces the rate of increase in interest expense.(ii)While the interest coverage ratio is lower after restatement, its trend improves due to the lower growth rate of interest expense.(iii)Both pretax and net income are lower
6、after restatement but their growth rate improves due to the lower growth rate of interest expense.d.The restated data are more useful for financial analysis because they are based on actual interest expense. They provide better comparability with firms that do not capitalize interest. 2.Sa.(i)Intere
7、st cost can be capitalized on borrowings directly associated with the project or when the company has debt equal to or exceeding the cost of construction.(ii) Start-up costs must be expensed under U.S. GAAP.(iii) Shipping costs are considered part of the cost of acquisition.(iv) Increases in the mar
8、ket value of land and buildings may not be recognized under U.S. GAAP.b.(i)While the benchmark treatment under IAS 23 is to expense all interest, capitalization of borrowing costs directly attributable to a project is an allowed alternative.(ii) Same as U.S. GAAP except that the benchmark The capita
9、lization of interest is an allowed alternative under IAS 23 (paragraph 11)(iii) Same as U.S. GAAP.(iv) While revaluation is an allowed alternative under IAS 16, it must be applied to all assets in a particular class and could be selectively applied to a particular project.3.Sa.Under SFAS 86 (text pa
10、ge 242), computer software development costs can be capitalized only when economic feasibility has been established.b.Under IAS 38 (paragraph 45), intangible assets such as computer software can be recognized when the enterprise can demonstrate technical and economic feasibility. 4.MExhibit 7S-2 con
11、tains the calculations required by parts a through c.Exhibit 7S-2EricssonAmounts in SEK millions199719981999Development costs for software to be sold:Opening balance 7,398 10,744 Capitalization 5,232 7,170 7,898 Amortization (3,934) (3,824) (4,460)Writedown (989)Year-end balance 7,398 10,744 13,193
12、Development costs for software for internal use:Opening balance Capitalization 1,463 Amortization (152)Year-end balance 1,311 a. Under Swedish GAAP:Net sales 167,740 184,438 215,403 Pretax income 17,218 18,210 16,386 Total assets 147,440 167,456 202,628 Stockholders equity 52,624 63,112 69,176 Avera
13、ge total assets157,448 185,042 Average equity 57,868 66,144 Average stockholders equity 57,868 66,144Asset turnover1.171.16Pretax ROE0.310.25b. Adjustments:Development costs for software to be sold:Capitalization 5,232 7,170 7,898 Amortization (3,934)(3,824) (4,460)Write down (989)Net effect 1,298 3
14、,346 2,449 Development costs for software for internal use:Capitalization 1,463 Amortization (152)Net effect - - 1,311 Total pretax effect 1,298 3,346 3,760 Adjusted pretax income 18,516 21,556 20,146 (i) % change8%18%23%Exhibit 7S-2 (continued)Year-end balances:Software to be sold 7,398 10,744 13,1
15、93 Internal use software 1,311 Total 7,398 10,744 14,504 Less: deferred tax 35% (2,589) (3,760)(5,076)Increase in equity 4,809 6,984 9,428 Adjusted total assets154,838 178,200 217,132 (ii) % change5.0%6.4%7.2%Adjusted equity 57,433 70,096 78,604 (iii) % change9.1%11.1%13.6%c:Adjusted average assets1
16、66,519 197,666 Adjusted average equity 63,764 74,350 (i) Adjusted asset turnover1.111.09(ii) Adjusted pretax ROE0.340.27d.The adjustments for Ericsson show that capitalization of software development costs can have a significant effect on reported income and equity, and on financial ratios. Therefor
17、e comparability requires that all firms be restated to the same basis.e.The amounts capitalized highlight expenditures and enable the analyst to inquire about the new products under development. The amortization period used may be useful as a forecast of the useful life of the product. In both cases
18、 (capitalization and amortization) significant changes from prior periods may provide useful signals of impending change.5.Sa.The capitalization of the investment in displays delays their impact on income as compared with expensing. In addition, cash from operations is permanently increased as the e
19、xpenditures are classified as cash flows for investment. Finally, if these expenditures are volatile, capitalization and amortization smoothes the impact on reported income.b.(i)In 2000, the capitalized amount increased by $1,648,000. Had promotional displays been expensed, net income would be $1,07
20、1,200 (after 35% tax) lower. Expensing would have reduced net income by 7.4% ($1,071.2/$14,467).(ii) Shareholders equity would be reduced by 65% of $10,099,000 equal to $6,564,350 or 7.1%.(iii) Reported return on (average) assets equals $14,467/($166,656 + $140,609)/2 = 9.42%Adjusted return on (aver
21、age) assets equals ($14,467 $1,071)/($166,656 - $10,099) + ($140,609 - $8,451)/2 = 9.28% as assets must be reduced by the investment in promotional displays.6.Ma.Brand names are clearly an asset. However, it is not clear that these assets should be shown on corporate balance sheets.One advantage of
22、recognizing brand names is completeness; a balance sheet that ignores major firm assets is of limited use for analysis. Another advantage is that the cost of acquiring or developing a brand name should be recorded as an investment (asset) in order to properly match revenues and expenses. The major d
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