question archive ACCT 301A DR

ACCT 301A DR

Subject:WritingPrice:16.89 Bought3

ACCT 301A DR. SIYI LI ACCT 301A, SPRING 2020 GROUP ASSIGNMENT Due: Tuesday May 11 Each group needs to select two companies in the same industry, as represented by 2-digit SIC code, from the list of S&P 500 companies provided on Canvas. For each company you should obtain the two most recent annual reports and use data in the annual reports to address the following questions. Required: 1. Briefly describe each company and its business. 2. Key accounting policies: a. Describe the inventory valuation methods the companies use during the two years. b. Compare the depreciation methods and key assumptions for calculating depreciation expenses between the two companies. c. Describe the main types of intangible assets the companies have their balance sheets, if any. d. List any new accounting standards the companies discuss in the annual reports. Briefly describe the potential impact the new accounting standards may have on the companies’ financials, if any. 3. Financial ratios: a. Calculate the following financial ratios: i. Current ratio; ii. Inventory turnover; iii. Asset turnover; iv. Profit margin on sales; v. Return on assets; vi. R&D intensity (R&D expenses/total net revenue); vii. Intangible assets to total assets ratio. b. Briefly comment on the ratios above. Address the trend of change in the ratios for each company and compare the two companies. c. Illustrate the two companies’ financial ratios using figures. Design your figures in a way that is easy to understand and refer to these figures in your discussion of each category of ratios. Each group needs to make the following judgments. i. Whether to prepare a separate figure for each ratio or to include more than one ratio in one figure, ii. For each ratio, whether to prepare separate figures for the two companies or to include both companies in the same figure. 4. Briefly discuss your general conclusion about the financial performance of each company using the ratios and indicate which of the two companies may represent a better investment opportunity in your opinion. ACCT 301A DR. SIYI LI Notes: • • • • • The annual reports for both companies should be for 2020 and 2019, or 2019 and 2018 if the 2020 report is not yet available for one or both of the companies. Annual reports can be obtained from each company’s investor relations website or from the SEC’s EDGAR database: (Electronic Data Gathering, Analysis, and Retrieval; http://www.sec.gov/edgar/searchedgar/companysearch.html). You should use Excel to calculate the ratios and prepare the figures. The write-up should be no more than 10 pages long, written using Word, double-spaced, size 12 Times New Roman font. The exhibits, including the ratios and any figures, need to be inserted in the write-up. Each group should submit both the write-up Word file and the Excel file showing calculations. ACCT 301A DR. SIYI LI ACCT 301A, Section 7 Student Groups Group 1 Bryan Amaro Penny Herr Hung Nguyen Lizette Rangel Emmanuel Sigala Email @csu.fullerton.edu bryan64 pennyherr hnguyen1624 Lrangel25 emmanuel.sigala Group 2 Derek Duong Catherine Gruber Albert Salmeron Miguel Del Villar Shan Zhou Email @csu.fullerton.edu duong028 clgruber81 alberts mdv714 zhoushan1995 Group 3 Marisol Esparza Mario Galindo Kousha Hashemi-Nejad Nga Ngo Matthew Park Email @csu.fullerton.edu Marisole388 mariogalindo1017 koushahn ngango88 matt379park Group 4 Nicholas Chorzewski Isabel Diaz Timothy Han Grant Lee Zaira Miranda Email @csu.fullerton.edu nickchorz isabeld354 gogglr123 grantlee miranda1996 Group 5 Brandon Guerrero Cameron Hunt Ana Jones Brian Tran Tong Wu Email @csu.fullerton.edu brandini11 camh88 acjones brianktran sigurewt Group 6 Zachary Hukel Maria Perez Landin Hyunmin Lee Albert Lee Tien Nguyen Email @csu.fullerton.edu ZHukel mlandin hlee140 AlbertLee tiennguyen97 ACCT 301A DR. SIYI LI Group 7 Elizabeth Cromar James Kim Evelin Gutierrez Nava Thao Nguyen Steven Trinh Email @csu.fullerton.edu ecromar jameskkiimm Evelingn09 jolly190898 steven.trinh94 Group 8 John Apodaca Dinah Tovar Armas Luis Jimenez Monica Lau Abrahan Venegas Email @csu.fullerton.edu John1218 dtovar04 JL1965 lautc abrahanvenegas Group 9 Christina Bernal Erin Campbell Meagan Nguyen Anthony Mike Paulino Charles Zafaralla Email @csu.fullerton.edu cbernal4 ErinOCampbell meaganxnguyen apaulino2 czafaralla Group 10 Anh Doan Carmen Kee Kayley Ord Christian Perez Ryan Pham Email @csu.fullerton.edu anhthuydoan carmenkee kayleyaord c_perez2918 ryanpham803 Group 11 Savanna Dang Melissa Flores Peter Nguyen Noah Ornelas Email @csu.fullerton.edu dangsavanna mgflores 99pnguyen ornelasnoah44 Derek Duong Catherine Gruber Albert Salmeron Miguel Del Villar Shan Zhou Group 2 1. Briefly describe each company and its business. Target Corporation: TGT Founded in 1902, Target Corporation operates in the discount store industry as a general merchandise retailer. On the stock market as TGT, Target operates just under two thousand stores including an online presence in the United States, employing roughly 409,000 people. With products such as: perishable foods, dry grocery, frozen foods as well as apparel home décor, electronics, beauty and health products, not excluding home and office furniture. Target also operates various in-store microbusinesses such as a Starbucks and a Target snack Café. Being a well branded company with a positive reputation, Target stands as a household name in the retail market. Page Break Best Buy Co., Inc. BBY Founded in 1966, Best Buy Co., Inc. operates in the specialty retail industry focusing in the technology retail market. With a wide range of technological devices, Best Buy caters to a wide range of customers technological needs. Products such as computer desktops, notebook and laptops. Computer components key to computing, mobile phones including the mobile network carrier service. Health-conscious customers can also find digital health and fitness devices as well as home theater and smart home products. Best Buy also provides their customer with appliances including dishwashers, laundry machines, ovens, appliances as large as refrigerator and as small as blenders and coffee machines. Best Buy offers a wide range of entertainment technology such as drones, movies, music and toys including entertainment systems and gaming hardware and software. With lesser tech savvy customers in mind, Best Buy also offers services such as with Geek Squad that conducts repairs on computer hardware. Best Buy expands its market not just nationally but internationally, operating out of physical locations as well as an online and employing over sixty thousand people. a. 2. Key accounting policies: (Derek H. Duong, best buy ; Catherine Gruber, Target) a. Describe the inventory valuation methods the companies use during the two years. • Best Buy o Best buy had used the Weight Average cost method for 2019 and 2020. Using the weighted average cost inventory yields average cost per unit, which the number can be used to assign a cost to both ending inventory and COGS. Weighted Average method helps place the average cost of production; this can greatly help a company with a wide variety of inventory that aren’t the same. ? Weighted average cost simplifies the cost and data to a more general category for inventory count. b. b. Compare the depreciation methods and key assumptions for calculating depreciation expenses between the two companies. i. Best Buy: Accelerate Depreciation, this method accumulated a large depreciation expense in the earlier periods but the depreciation rate slows down near the end of the business cycle. The purpose, and key assumption, is the expectation that an asset will be used more in the earlier period of the business cycle but then the depreciation of the equipment will start to slow down as the years progresses. o Accelerate depreciation expect to retire when a decision is made to abandon the property/ c. c. Describe the main types of intangible assets the companies have their balance sheets, if any. d. Best Buy: o Trade names are intangible assets best buy have in their balance sheet. The use of other copies trade name to sell their products and provide warehouse for their inventory for future retail sales. Plus hiring salespeople for that marketing brand, and have designated product stations to provide service such as sales of the product, customer service, direct connection to the company, and etc. e. d. List any new accounting standards the companies discuss in the annual reports. Briefly describe the potential impact the new accounting standards may have on the companies’ financials, if any. f. Best Buy: None, no new accounting standards Target utilized the last-in first-out (LIFO) inventory valuation method for the years 2019 and 2020. The LIFO method can often decrease the company’s net profits as the cost of goods sold increases with inventory accumulation to account for the growing cost of the acquisition of inventory. But Target’s business model relies on the high volume of inventory sold to generate profits, so the increased costs brought on by the LIFO method are negligible, primarily due to the fact that inventory typically sells in less than three months. The inventory is valued at the lower of LIFO cost or market, so inventory is reduced for estimated losses relating to markdowns or shrink, which is based on historical data. Depreciation is calculated by the straight-line method or by accelerated depreciation for income tax purposes, as to lower profits in earlier periods are lower due to higher depreciation costs. Both Target and Best Buy utilize accelerated depreciation, as the method operates under the assumption that the asset will be used more at the beginning of its useful life. The benefit of this method is saving the company money through lower income taxes due to the decreased profits. One difference between the corporation’s approaches to depreciation is that Target uses both accumulated and straight-line depreciation. The advantages of incorporating both methods include being able to write off an asset completely, and the use of straight-line depreciation is beneficial for assets with lesser values. Target’s main intangible assets relate to trademarks and customer relationships, as Target owns many brands themselves and collects data from repeat customers based on their purchases. Definite intangible assets are amortized over 4 to 15 years depending on the asset, using both accelerated and straight-line methods. The first quarter of 2020 involved integrating FASB’s 2016 Accounting Standards Update No. 2016-13, which entails the measurement of credit losses on financial instruments, meaning that credit losses on financing receivables and other financial assets must be recognized earlier to improve financial reporting. 3. Financial ratios: a. Calculate the following financial ratios: i. Current ratio; (Current assets)/(Current Liabilities) = current ratio ii. Inventory turnover; (COGS)/(Average Inventory) = inventory turnover iii. Asset turnover; (Net Sales)/(Average Total Assets) = asset turnover iv. Profit margin on sales; (Net Income) / (Net Sales) = profit margin on sales v. Return on assets; (profit margin on sales) * (Asset Turn Over) -or- (Net Income) / (Average total assets) vi. R&D intensity (R&D expenses/total net revenue); vii. Intangible assets to total assets ratio. b. Briefly comment on the ratios above. Address the trend of change in the ratios for each company and compare the two companies. c. Illustrate the two companies’ financial ratios using figures. Design your figures in a way that is easy to understand and refer to these figures in your discussion of each category of ratios. Each group needs to make the following judgments. i. Whether to prepare a separate figure for each ratio or to include more than one ratio in one figure, ii. For each ratio, whether to prepare separate figures for the two companies or to include both companies in the same figure. g. 4. Briefly discuss your general conclusion about the financial performance of each company using the ratios and indicate which of the two companies may represent a better investment opportunity in your opinion. Page Break https://www.annualreports.com/HostedData/AnnualReports/PDF/NYSE_BBY_2020_851f6f3 e187343a0887daecf1283a9d2.pdf https://www.sec.gov/edgar/search/#/q=best%2520buy https://www.sec.gov/Archives/edgar/data/764478/000076447816000064/bby2016x10k.htm http://s2.q4cdn.com/785564492/files/doc_financials/2020/ar/Best-Buy-Fiscal-2020-AnnualReport.pdf (Miguel’s work) Target A) 2020: Current Ratio = 20,309/19,357= 1.05 Inventory Turnover = 54,864/(11,396 + 12,712)/2 = 54,864/12,054 = 4.55 Asset Turnover = 78,112/(43,741 + 50,661)/2 = 78,112/47,201 = 1.65 2021: Current Ratio = 20,756/20,125 = 1.03 Inventory Turnover = 66,177/(8,992 + 10,653)/2 = 66,177/9,823 = 6.74 Asset Turnover = 92,400/(42,779 + 51,248)/2 = 92,400/47,014 = 1.97 Best Buy 2020: Current Ratio = 8,857/8,060 = 1.10 Inventory Turnover = 33,590/(5,174 + 5,409)/2= 33,590/5,292 = 6.35 Asset Turnover = 43,638/(15,591 + 12,901)/2 = 43,638/22,042 = 1.98 2021: Current Ratio = 12,540/10,521 = 1.19 Inventory Turnover = 36,689/(5,612 + 5,174)/2 = 36,689/5,393 = 6.18 Asset Turnover = 47,262/(15,591 + 19,067)/2 = 47,262/17,329 = 2.73 B) We first examined the current ratio by reviewing Target and Best Buy's annual reports for 2020 and 2021. The current ratio measures a company's capability to pay shortterm commitments that are due within one year. This ratio will also inform the investors about how the company can increase the current asset on the balance sheet to gratify its existing debt and payables. Starting with Target, their current ratio for the year 2020 was 1.05, and for the year 2021, it was 1.03. If a company with a current balance has less than 1.0, it means that the company does not have the capital on hand to meet its short-term obligations. However, if it is more significant than 1.0, the opposite is that the company has the finance to be solvent in the short term. Target's current ratio for both years of 2020 and 2021 was slightly above 1.0, which means that Target is in good standing regarding having the ability to pay its obligations. Best Buy’s Current Ratio for the year 2020 was 1.10, and for the year 2021 was 1.19. Since Best Buy’s current ratios for both years are over 1.0, even more so than Target's current ratio means that Best Buy is better capable of paying off its short-term obligations. Both companies seem to be doing well despite the pandemic. However, if an investor was thinking about investing in either company, they will likely go with Best Buy if they were basing their decision on the current ratio. Next, we examined the inventory turnover ratio, which indicates how many times in a given time a company can replace the inventory that it has sold. With this ratio, companies can determine manufacturing, pricing, and the purchase of new inventory. A low inventory turnover ratio means that the company has weak sales and excess inventory. At the same time, a high inventory turnover ratio indicates that the company has solid sales and insufficient inventory. When calculating the inventory turnover for Target in the year 2020, we got 4.55, and for 2021 we got 6.74. This means that in 2020 Target was turning over its inventory 4.55 times a year. While in 2021, Target was turning its inventory 6.74 times a year. To further help explain what this means, we can take 365 days and divide it by these calculations separately. For 2020, after taking 365 and divide it by 4.55, we get 80 days, and for 2021 this time dividing by 6.74, we get 54 days. This means that every 80 days in 2020, Target sells a product, and in 2021 it takes 54 days for Target to sell a product. Moving over to Best Buy for 2020, we calculated the inventory turnover as 6.35, and 2021 as 6.18. Best Buy seemed to be consistent between these two years by turning over their inventory six times a year. To better compare Target and Best Buy, we will use these two calculations to divide 365. So, for the year 2020, taking 365 and dividing it by 6.35, we get 57 days, and for 2021, this time dividing it by 6.18, we get 59 days. Once again, if an investor were to look at these calculations, they would most likely invest in Best Buy rather than Target. The reason is that Best Buy can sell its products faster in both the years 2020 and 2021. Best Buy has remained consistent with its inventory turnover. Even though Target did better in 2021 by turning over their inventory 6.74 times a year, they were not as good in 2020, which was 4.55 inventory turnover. Investors can see that Target may slip back into having a lower inventory turnover. Next up is the asset turnover ratio, and this ratio measures how good a company is at generating sales given its assets. If a company has a high asset turnover ratio, they are more efficient at generating revenue from its assets and if the company has a low ratio it means it is not efficiently using its assets properly to generate sales. Beginning with Target, for the year 2020, the asset turnover ratio is 1.65. In 2021, the asset turnover ratio is 1.97, which is slightly higher than in the year 2020. This indicates that for every dollar in assets, Target generated $1.65 in sales for 2020 and generated $1.97 in sales for 2021. So, Target’s turnover may indicate that they were experiencing slow sales in 2020 but experienced a slightly higher sale in 2021. This also can indicate perhaps that Target is not using its assets efficiently to generate better sales. Now computing Best Buy’s asset turnover ratio, for 2020, we calculated 1.98 and for 2021, we calculated 2.73. In other words, Best Buy generated $1.98 in sales for 2020 and generated $2.73 in sales for 2021. This means that Best Buy, at least for 2021, were using its assets to generate sales better than Target. Target and Best Buy were on par with their ratio in 2020, but Best Buy improved by 2021, making them more appealing to investors. C) Part 4

Option 1

Low Cost Option
Download this past answer in few clicks

16.89 USD

PURCHASE SOLUTION

Option 2

Custom new solution created by our subject matter experts

GET A QUOTE

rated 5 stars

Purchased 3 times

Completion Status 100%