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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Analyzing LVMH Group’s Balance Sheet

Review the comparative consolidated balance sheets of LVMH Group as of the end of 2017, 2016, and 2015 as shown in the chapter on page 4-46. LVMH prepared these balance sheets using IFRS, and all amounts are expressed in millions of euros.

Required:

Answer the following questions pertaining to LVMH Group’s balance sheets.

  1. 1. What was the amount of the current assets and current liabilities at the end of 2017 and 2016?
  2. 2. What was the current ratio at the end of 2017 and 2016? Did LVMH’s liquidity increase or decrease in 2017?
  3. 3. What was the single largest current asset and current liability?
  4. 4. How much has LVMH borrowed in short-and long term debt as of the end of 2017? Did these borrowings increase or decrease in 2017?
  5. 5. What is the total amount of liabilities as of the end of 2017 and 2016?
  6. 6. What was the total amount of equity as of the end of 2017 and 2016?
  7. 7. What was the debt-to-equity ratio as of the end of 2017 and 2016? How did LVMH’s leverage change in 2017?
  8. 8. What was the inventory turnover rate in 2017? What was the average number of days for inventory turnover in 2017? Does the number of days for inventory turnover for LVMH seem long or short? If so, what aspect of LVMH’s business strategy might explain the length of time it takes to turn over inventory? (Note: LVMH recognized €14,783 million in cost of sales in 2017.)
  9. 9. Are LVMH’s noncurrent assets at the end of 2017 primarily tangible, intangible, or financial in nature?
  10. 10. What was the amount in investments in joint ventures and associates at the end of 2017?
  11. 11. What was the amount of minority interest in equity at the end of 2017?
  12. 12. Given your answers to questions 9 and 10, when LVMH has less than 100% ownership in another company, is it more likely that LVMH owns a minority of the equity (less than 50% of the outstanding shares) or a majority?s

1.

To determine

State the amount of the current assets and current liabilities at the end of 2017 and 2016.

Explanation

Current assets: The assets which could be converted into cash within one year like accounts receivables, or marketable investments; or which could be used up within the completion of an operating cycle, like inventory, supplies and insurance, are referred to as current assets.

Current liabilities: The obligations owed by a company to creditors and suppliers and are to be paid within a year are referred to as current liabilities...

2.

To determine

Compute the current ratio at the end of the year 2017 and 2016 and explain whether the Company LVMH’s liquidity increase or decrease.

3.

To determine

Mention the single largest current asset and current liability.

4.

To determine

State the short and long term debt borrowed by Company LVMH end of 2017 and explain whether these borrowings increase or decrease in 2017.

5.

To determine

State the amount of total amount of liabilities at the end of 2017 and 2016.

6.

To determine

State the total amount of equity at the end of 2017 and 2016.

7.

To determine

Compute the debt-to-equity ratio at the end of 2017 and 2016 and explain the manner in which the Company LVMH leverage change in 2017.

8.

To determine

State the inventory turnover rate for the year 2017, calculate the average number of days for inventory turnover in 2017 and explain whether the number of days in turnover for company LVMH seems long or short, if so provide the aspects of Company LVMH’s business strategy that explains the length of tine taken to turn over inventory.

9.

To determine

Explain whether the Company LVMH’s noncurrent assets at the end of 2017 is tangible, intangible, or financial in nature.

10.

To determine

State the amount in investments in joint ventures and associates at the end of 2017.

11.

To determine

State the amount of minority interest in equity at the end of 2017.

12.

To determine

State whether it is more likely that Company LVMH owns a minority of the equity or a majority of the equity, if Company LVMH has less than 100% ownership in another company, according to the answer given for requirement 9 to requirement 10.

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