This assignment examines the relationship between actual sales revenue and various balance sheet components. Select two non-financial companies from the same industry and calculate the percentage of each of the following balance sheet components relative to total revenue (often reported as total net revenue) in the last quarter of each of the last five years:
•Cash and Cash Equivalents
•Inventory
•Accounts Receivable
•Property, Plant, and Equipment (Gross)
•Accounts Payable
Enter the values in this table from the companies’ annual reports to find the income statement and balance sheet entries. – use Yahoo! Finance
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Percentage of Sales Analysis |
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Historical Balance Sheet Entries in % of Total Revenue At the End of the Calendar Year |
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201X |
201X |
201X |
201X |
201X |
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Company A: |
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Cash and Cash Equivalents |
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Inventory |
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Accounts Receivable |
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Property, Plant & Equipment |
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Accounts Payable |
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Company B: |
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Cash and Cash Equivalents |
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Inventory |
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Accounts Receivable |
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Property, Plant & Equipment |
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Accounts Payable |
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Source: |
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The annual reports may also be obtained from the Securities and Exchange Commission. As an example, the percentage of sales for cash and cash equivalents may be calculated as: (cash and cash equivalents/total sales revenue) x 100.
Include your findings in a 2-3 page summary that answers the following questions:
•What is happening to each company’s percentages over time? Are they roughly stable over time, or have they been trending upward or downward?
•Why do you believe they are trending in that direction?
•Do you believe that the latest percentages can be used to forecast next year’s balance sheet values? Why or why not?
•What are the limitations of the Percentage-of-Sales Method of Forecasting?
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