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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
Financial & Managerial Accounting
- Compare Amazon.com to Netflix Amazon.com, Inc. (AMZN) is the worlds leading Internet retailer of merchandise and media. Amazon also designs and sells electronic products, such as e-readers. Netflix, Inc. (NFLX) is one of the worlds leading Internet television networks. Both companies compete in the digital media and streaming space. However, Netflix is more narrowly focused in the digital streaming business than is Amazon. Sales and average book value of fixed assets information (in millions) are provided for Amazon and Netflix for a recent year as follows: a. Compute the fixed asset turnover ratio for each company. Round to one decimal place. b. Which company is more efficient in generating sales from fixed assets? c. Interpret your 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_forwardAmazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. Target Corporation (TGT) is one of the largest value-priced general merchandisers operating in the United States. Target sells through nearly 1,800 brick-and-mortar stores and through the Internet. Amazon and Target compete for customers across a wide variety of products, including media, general merchandise, apparel, and consumer electronics. Cost of goods sold and inventory information from a recent annual report are provided for both companies as follows (in millions): a. Compute the inventory turnover for both companies. Round all calculations to one decimal place. b. Compute the number of days sales in inventory for both companies. Use 365 days and round all calculations to one decimal place. c. Which company has the better inventory efficiency? d. What might explain the difference in inventory efficiency between the two companies?arrow_forward
- Cost Structure of Retailers; The Internet; Operating Leverage Today’s retailers are findingthat online sales and service are a necessary ingredient of their overall marketing and selling strategybecause of increased competition. In certain retail sectors, consumers are moving to the Internet inlarge numbers for convenience and selection. Unfortunately, the investment in resources, both equipment and labor, can be huge. Some studies show that less than a third of online retailers are profitableon internet sales. As a result, some new consulting firms, software firms, and service providers havebegun to provide e-commerce solutions for retailers.Required1. How does a consulting firm, service provider, or software firm help a retailer reduce costs and becomemore competitive for internet sales? What is the role of operating leverage in the retailer’s decision tooutsource online sales and service?2. Cost structure is not the only thing management should be concerned about when moving in to…arrow_forwardCVP Analysis; Strategy Bubba’s Western Wear is a western hat retailer in Lubbock, Texas.Although Bubba’s carries numerous styles of western hats, each hat has approximately the same priceand purchase cost, as shown in the following table. Sales personnel receive a commission to encourage them to be more aggressive in their sales efforts. Currently, the Lubbock economy is really humming, and sales growth at Bubba’s has been great. The business is very competitive, however, andBubba, the owner, has relied on his knowledgeable and courteous staff to attract and retain customerswho otherwise might go to other western wear stores. Because of the rapid growth in sales, Bubbais also finding the management of certain aspects of the business more difficult, such as restockinginventory and hiring and training new salespeople.Sales price $ 80.00Per unit variable expensesPurchase cost 43.50Sales commissions 11.50Total per unit variable costs $ 55.00Total annual fixed expensesAdvertising $…arrow_forwarduestion One In this article Srinivasan (2011) discusses the nature of Apple and Amazon as price setters within the tablet market. Critically discuss the different pricing strategies adopted by Apple and Amazon, and how each of these retailers uses their position as a price setter within the market to maximise their profits. Question Two Having considered the nature of Apple and Amazon as price setters, identify at least one other company which will be required to take the role of price taker within this market. Discuss the pricing strategy of this company, and also the impact of the price setters on this company.arrow_forward
- Identification of Commodity Businesses. A recent article in Fortune magazine listed the following firms among the top ten most admired companies in the United States: Dell, Southwest Airlines, Microsoft, and Johnson Johnson. Access the websites of these four companies or read the Business section of their Form 10-K reports (www.sec.gov). Describe whether you would view their products or services as commodities. Explain your reasoning.arrow_forwardAnalyze Star Stream’s cost-volume-profit relationships Star Stream is a subscription-based video streaming service. Subscribers pay $120 per year for the service. Star Stream licenses and develops content for its subscribers. In addition, Star Stream leases servers to hold this content. These costs are not variable to the number of subscribers, but must be incurred regardless of the subscriber base. In addition, Star Stream compensates telecommunication companies for bandwidth so that Star Stream customers receive fast streaming services. These costs are variable to the number of subscribers. These and other costs are as follows: Enter your answers in whole dollars. Server lease costs per year $ 100,000,000 Content costs per year 2,000,000,000 Fixed operating costs per year 900,000,000 Bandwidth costs per subscriber per year 15 Variable operating costs per subscriber per year 25 a. Determine the break-even number of subscribers. b. Assume Star Stream planned to…arrow_forwardCompanies and growth rates Future value and present value concepts are applied in various ways, such as calculating growth rates, earnings per share, expected sales and revenues in the future, and so forth. Consider the following case: Pharmacist John S. Pemberton invented a soft drink in 1886 that eventually became not only an integral part of everyday life in the United States but also a symbol of consumerism worldwide. In 1929 the first Coca-Cola vending machines were installed in Germany, and in 1930, the German branch of the Coca-Cola Co. opened in Essen. Coca-Cola sales in Germany were 243,000 cases in 1934, 1 million cases in 1936, and 4.5 million cases in 1939. Q1. Germany was a growing market for Coca-Cola, along with other countries in Europe, before World War II. With the previous data given, calculate the company’s sales growth rate for each time period in the following table: Years Growth Rate 1934–1936 ? 1936–1939 ? 1934–1939 ? During World War…arrow_forward
- Analyze Star Stream’s cost-volume-profit relationships Star Stream is a subscription-based video streaming service. Subscribers pay $120 per year for the service. Star Stream licenses and develops content for its subscribers. In addition, Star Stream leases servers to hold this content. These costs are not variable to the number of subscribers, but must be incurred regardless of the subscriber base. In addition, Star Stream compensates telecommunication companies for bandwidth so that Star Stream customers receive fast streaming services. These costs are variable to the number of subscribers. These and other costs are as follows: Enter your answers in whole dollars. Line Item Description Amount Server lease costs per year $ 100,000,000 Content costs per year 2,000,000,000 Fixed operating costs per year 900,000,000 Bandwidth costs per subscriber per year 15 Variable operating costs per subscriber per year 25 a. Determine the break-even number of subscribers.fill in the…arrow_forwardDakeu Clip UI- UOCS IOt introduce the new product. How would the loss of chip revenue due to the defection of Morten customers to other brands affect your upuny analysis of incremental sales? Discuss (no computations required). (Determining relevant cash flows) Landcruisers Plus (LP) has operated an online retail store selling off-road truck parts. As the name implies, the firm specializes in parts for the venerable Toyota FJ40, which is known throughout the world for its durability and off-road prowess. The fact that Toyota stopped building and export- ing the FJ40 to the U.S. market in 1982 meant that FJ40 owners depended more and more on remanufactured parts to keep their beloved off-road vehicles running. More and more FJ40 owners are replacing the original inline six-cylinder engines with a modern American-built engine. The engine replacement requires mating the new en- gine with the Toyota drive train. LP's owners had been offering engine adaptor kits for some time but have…arrow_forwardAmazon.com, Inc. is the worlds leading Internet retailer of merchandise and media. Amazon also designs and sells electronic products, such as e-readers. Netflix, Inc. is the worlds leading Internet television network. Both companies compete in the digital media and streaming space. However, Netflix is more narrowly focused in the digital streaming business than is Amazon. Sales and average book value of fixed assets information (in millions) are provided for Amazon and Netflix for a recent year as follows: a. Compute the fixed asset turnover ratio for each company. Round to one decimal place. b. Which company is more efficient in generating sales from fixed assets? c. Interpret your results.arrow_forward
- Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage LearningCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
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