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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
         The retail mover
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Required          a.   Compute and comment on the following for 2003, 2004, and 2007:
1.      Working capital
2.      Current ratio
b.    Comment on the difference between net income and net cash outflow from operat- ing activities for the year ended December 31, 2004, and December 31, 2007.
c.     This company reported a loss of $177,340,000 for 2008. Reviewing the balance sheet data, speculate on major reasons for this loss.
d.    Considering (a), (b), and (c), comment on the wisdom of the short-term bank loan in 2008. (Consider the company’s perspective and the bank’s perspective.)
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a. |
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 December 31, |
 |
 December 31, |
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Selected Balance Sheet Data |
 |
2004 |
 |
2003 |
|
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Total current assets |
 |
$719,478,441 |
 |
$628,408,895 |
|
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Total current liabilities |
 |
458,999,682 |
 |
366,718,656 |
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The Retail Mover Statement of Cash Flows
Year Ended December 31, 2004
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Net cash flow from operating activities: Net income |
 $ 39,577,000 |
|
Noncash expenses, revenues, losses, and gains included in income: Increase in equity in Zeller’s  Limited |
 (2,777,000) |
|
Depreciation and amortization |
9,619,000 |
|
Net increase in reserves |
74,000 |
|
Increase in deferred federal income taxes |
232,000 |
|
Net increase in receivables |
(51,463,995) |
|
Net increase in inventories |
(38,364,709) |
|
Net increase in prepaid taxes, rents,  etc. |
(209,043) |
|
Increase in accounts payable |
9,828,348 |
|
Increase in salaries, wages, and bonuses |
470,054 |
|
Increase in taxes withheld from employees’ compensation |
301,035 |
|
Decrease in taxes other than federal income  taxes |
(659,021) |
|
Increase in federal income taxes payable Increases in deferred credits, principally income taxes related to installment sales (short-term) |
4,007,022 Â 14,045,572 |
|
Rounding difference in working  capital |
520 |
|
Net cash outflow from operating  activities |
(15,319,217) |
|
Cash flows from investing  activities: Investment in properties, fixtures, and improvements |
 (16,141,000) |
|
Investment in Zeller’s Limited |
(436,000) |
|
Increase in sundry accounts (net) |
(48,000) |
|
Net cash outflow from investing  activities |
(16,625,000) |
|
Cash flows from financing activities: Sales of common stock to  employees |
 5,219,000 |
|
Dividends to stockholders |
(20,821,000) |
|
Purchase of treasury stock |
(13,224,000) |
|
Purchase of preferred stock for  cancellation |
(948,000) |
|
Retirement of 4 3/4% sinking fund debentures |
(1,538,000) |
|
Increase in short-term notes payable |
56,323,016 |
|
Increase in bank loans |
7,965,000 |
|
Net cash inflow from financing  activities |
32,976,016 |
|
Net increase in cash and short-term securities |
$Â Â 1,031,799 |
|
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(continued) |
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b.
Selected Balance Sheet Data                             December 31, 2007
                                                                                    ![]()
Total current assets                                                                             $1,044,689,000 Total current liabilities                                                                             661,058,000
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The Retail Mover Statement of Cash Flows
Year Ended December 31, 2007
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Net cash flow from operating activities: Net income |
 $ 10,902,000 |
|
Noncash expenses, revenues, losses, and gains included in income: Undistributed equity in net earnings of unconsolidated subsidiaries |
 (3,570,000) |
|
Depreciation and amortization of  properties |
13,579,000 |
|
Increase in deferred federal income taxes—noncurrent |
2,723,000 |
|
Decrease in deferred contingent compensation and other liabilities |
(498,000) |
|
Net receivables increase |
(52,737,000) |
|
Merchandise inventories increase |
(51,104,000) |
|
Other current assets increase |
(8,935,000) |
|
Accounts payable for merchandise decrease |
(2,781,000) |
|
Salaries, wages, and bonuses decrease |
(3,349,000) |
|
Other accrued expenses increase |
3,932,000 |
|
Taxes withheld from employees increase |
2,217,000 |
|
Sales and other taxes increase |
448,000 |
|
Federal income taxes payable decrease |
(8,480,000) |
|
Increase in deferred income taxes related to installment sales |
4,449,000 |
|
Net cash flow from operating  activities |
(93,204,000) |
|
Cash flows from investing  activities: Investments on properties, fixtures, and improvements |
 (23,143,000) |
|
Increase in other assets—net |
(642,000) |
|
Investment in Granjewel Jewelers & Distributors, Inc. |
(5,700,000) |
|
Net cash outflow from investing  activities |
(29,485,000) |
|
Cash flows from financing  activities: Increase in short-term notes payable to banks |
 100,000,000 |
|
Receipts from employees under stock purchase contracts |
2,584,000 |
|
Short-term commercial notes |
73,063,000 |
|
Cash dividends to  stockholders |
(21,122,000) |
|
Decrease in long-term debt |
(6,074,000) |
|
Purchase of cumulative preferred stock, for  cancellation |
(618,000) |
|
Purchase of treasury common stock |
(136,000) |
|
Bank loans decreased |
(10,000,000) |
|
Net cash inflow from financing  activities |
137,697,000 |
|
Net increase in cash |
$ 15,008,000 |
|
c. |
 |
Income Statement Data related to 2007 and 2008 (in Part)
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2008 |
 |
2007 |
|
Net earnings (loss) |
$(177,340,000) |
 |
$10,902,000 |
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Balance Sheet Data related to 2007 and 2008 (in Part)
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|
 |
December 31, 2008 |
 |
December 31, 2007 |
|
Assets Current assets: Cash notes |
  $ 79,642,000 |
 |
  $      45,951,000 |
|
Customers’ installment accounts receivable |
 518,387,000 |
 |
 602,305,000 |
|
Less: Allowance for doubtful accounts |
 (79,510,000) |
 |
 (16,315,000) |
|
Unearned credit insurance premiums |
(1,386,000) |
 |
(4,923,000) |
|
Deferred finance income |
(37,523,000) |
 |
(59,748,000) |
|
 |
399,968,000 |
 |
521,319,000 |
|
 |
 |
 |
(continued) |
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 December 31, 2008 |
 |
 December 31, 2007 |
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|
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Merchandise inventories |
407,357,000 |
 |
450,637,000 |
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Other accounts receivable, refundable taxes, and  claims |
31,223,000 |
 |
19,483,000 |
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|
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Prepaid  expenses |
6,591,000 |
 |
7,299,000 |
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Total current assets |
$924,781,000 |
 |
$1,044,689,000 |
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Liabilities |
 |
 |
 |
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Current liabilities: |
 |
 |
 |
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|
 |
Bank loans |
$600,000,000 |
 |
$                            — |
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Short-term commercial notes |
— |
 |
453,097,000 |
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Current portion of long-term  debt |
995,000 |
 |
 |
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Accounts payable for merchandise |
50,067,000 |
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58,192,000 |
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Salaries, wages, and bonuses |
10,808,000 |
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14,678,000 |
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Other accrued expenses |
49,095,000 |
 |
14,172,000 |
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Taxes withheld from employees |
1,919,000 |
 |
4,412,000 |
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Sales and other taxes |
17,322,000 |
 |
13,429,000 |
||
|
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Federal income taxes payable |
17,700,000 |
 |
— |
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Deferred income taxes related to installment sales |
2,000,000 |
 |
103,078,000 |
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|
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Total current liabilities |
749,906,000 |
 |
661,058,000 |
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Other liabilities |
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| Â | Â | Â | Â | Â | Â | Â |
Long-term debt                                                                                                                                           216,341,000                        220,336,000
Deferred federal income taxes                                                                                                                                    —                          14,649,000
Deferred contingent compensation and other liabilities                                                       2,183,000                              4,196,000
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                               ![]()
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Total other liabilities                                                                                                                      218,524,000                           239,181,000 Total liabilities                                                                                                                                                $968,430,000                $  900,239,000
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