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    Cabou Coffee and Fazer Group: Financial Statements Ratio Analysis

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    We will continue to review the financial statements of Cabou Coffee and Fazer Group to learn additional information. The emphasis of this case is to review the income statement, balance sheet and computation of ratios.

    Review the financial statements for the companies and answer the following questions for the last reporting year:

    Balance Sheet

    - What components of stockholders' equity do each of the companies disclose?
    - Do the companies have preferred stock shares outstanding? If so, what special features do these shares contain?
    - Do any of the companies report treasury shares? If so, do the companies disclose the reason for reacquiring the shares?

    Income Statement

    - What are the basic and diluted earnings per share for each company?
    - Have the companies reported any discontinued operations for the last year?
    - Do the companies disclose any stock compensation plans? If so, are they reporting such plans under the fair value or intrinsic value methods? What was the value of compensation expense measured for any outstanding stock option plans?

    Financial Ratios

    Compute the following ratios. Also, interpret and assess each group of ratios for the company. What type of story are the ratios telling the analyst?

    Profitability ratios:
    Gross profit margin
    Net profit margin
    Return on stockholders' equity

    Liquidity ratios:
    Current ratio
    Quick ratio
    Inventory turnover

    Leverage ratios:
    Debt-to-assets
    Debt-to-equity
    Times-covered ratio

    What type of information do you find in footnotes to the financial statements?

    Do you find the balance sheet, income statement or other measures such as ratios the most informative? Comment of the advantages and disadvantages of using ratios for analysis.

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    Solution Preview

    Caribou Coffee = "C"
    Fazer Group = "F"

    Balance Sheet
    - What components of stockholders' equity do each of the companies disclose?

    As you see from the cut and pasted equity sections (see attached), C shows much more detail than F. For instance, the number of shares authorized, the par value are shown for C but not for F. C has both preferred and common stock while F only has one class of stock.

    - Do the companies have preferred stock shares outstanding? If so, what special features do these shares contain?

    Only Caribou has preferred stock and it has not been issued yet (see zero amounts in the equity section (attached).

    - Do any of the companies report treasury shares? If so, do the companies disclose the reason for reacquiring the shares?

    Neither firm has treasury stock.

    Income Statement
    - What are the basic and diluted earnings per share for each company?

    C: $1.75 per share basic EPS and $1.69 per share diluted EPS for 2011.
    F: They do not disclose shared issued or outstanding or earnings per share.

    - Have the companies reported any discontinued operations for the last year?

    Neither firm reported any discontinued operations for 2011 (neither had any extraordinary items of any kind).

    - ...

    Solution Summary

    Your tutorial is 775 words and includes print-screens of sections of the financial reports for your inspection. Ratios for 2011 for both Caribou and Fazer are shown in Excel, with the numerator and denominator shown so you can see how each amount was constructed.

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