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Assurance of Learning Exercises Using the information above

Customer Question

Assurance of Learning Exercises
Using the information above and the financial statement information for Avon Products below, calculate the following ratios for Avon for both 2006 and 2007:
a.     Gross profit margin
b.     Operating profit margin
c.     Net profit margin
d.     Times-interest earned
e.     Return on shareholder’s equity
f.     Return on assets
g.      Debt to equity ratio
h.     Long term debt to capital ratio
i.     Days of inventory
j.     Inventory turnover ratio
k.     Average collection period
Based on these ratios, did Avon’s financial performance improve, weaken, or remain about the same from 2007 to 2007?
A. Estimated Value Chain Costs for Recording and Distributing Music CDs through Traditional Music Retailers
The following table presents the representative costs and markups associated with producing and distributing a music CD retailing for % in brick and mortar music stores
Value Chain Activities and Costs in Producing and Distributing a CD
1.     Record company direct production cost s:                     $2.40
     Artists and repertoire                         $0.75
     Pressing of CD and packaging                    $1.65
2.      Royalties                                   $0.99
3.     Record company marketing expenses                    $1.50
4.     Record company overhead                              $1.50
5.     Total record company costs                         $6.39
6.      Record company’s operating profit                         $1.86
7.     Record company’s selling price to distributor wholesaler          $8.25
8.     Average wholesale distributor markup to cover distribution
     activities and profit margins                         $1.50
9.     Average wholesale price charged to retailer                    $9.75
10.     Average retail markup over wholesale cost                    $5.25
11.     Average price to consumer at retail                         $15.00

B. Consolidated statements of income for Avon Products, Inc., 2006- 2007 (in millions, except per share data)
 &nb sp;                                           Years ended December 31
                    & nbsp;                        2007          2006     
Total Revenue              ;                           $9,938.7          $8,763.9
Costs, expenses, and other:
     Cost of sales             &nb sp;                     3,941.2          3,416.5
     Selling, general, and administrative expenses               5,124.8          4,586.0
Operating profit            & nbsp;                           872.7          761.4
     Interest expense                                    112.2          99.6
     Interest income              & nbsp;                    (42.2)          (55.3)
     Other expense, net      & nbsp;                           6.6          13.6     
Total other expenses              &nbs p;                    76.6          57.9
Income before taxes and minority interest                         796.1          703.5
Income taxes        &nbs p;                               262.8          223.4     
Income before minority interest                               533.3          480.1
Minority interest                      &nbs p;                 (2.6)          (2.5)
Net Income                                          $530.7          $477.6     
Earnings per share:               
     Basic      &nb sp;                                 $1.22          $1.07
     Diluted& nbsp;                                       $1.21          $1.06
Weighted- average shares outstanding:          
      ;Basic                                        $433.47          447.40
     Diluted          & nbsp;                             $436.89          $449.16               




C. Consolidated Balance Sheets for Avon Products, Inc. (in millions, except per share data)
Years ended December 31
                    & nbsp;                        2007          2006     
Assets
Current assets
Cash, including cash equivalents of $492.3                         $963.4          $1,198.9
And $825.1
Accounts receivable (less allowances of $141.1 and $119.1               $840.4          700.4
Inventories                   & nbsp;                    1,041.8          900.3
Prepaid expense and other                                    669.8          534.8
     Total current assets       &nb sp;                      3,515.4          3,334.4
Property, plant and equipment, at cost                         71.8          65.3
Land            & nbsp;                           972.7          910.0
Buildings and Improvements                         1,317.9          1,137.0
Equipment                      & nbsp;            2,362.4          2,112.3
Less accumulated depreciation                         (1,084.2)     (1,012.1)
                           ;              1,278.2          1,100.2
Other assets     ;                                    922.6          803.6
Total assets                                   $5, 716.2     $5,238.2     
Liabilities and Shareholder’s equity     
Current liabilities
Debt maturing within one year         &n bsp;                    $929.5          $615.6
Accounts payable          ;                               800.3          655.8
Accrued liabilities         &nbs p;                         1,221.3          1,044.6
Income taxes&n bsp;                                       102.3          209.2
     Total current liabilities &nbs p;                            3,053.4          2,525.2
Long term debt                     & nbsp;                  1,167.9          1, 1707.07
Other liabilities (including minority interest of $38.2 and $37.0)          783.3          751.9
     Total liabilities                                    $5,004.6          $4,447.8
Shareholder’s Equity
Common stock, par value $0.25-authorized 1,500                    184.7          183.5
Shares; issued 736.3 and 732.7 shares                         
Additional paid in capital     &n bsp;                             1,724.6          1,549.8
Retained earnings                                         3,586.5          3,396.8
Accumulated other comprehensive loss                         (417.0)          (656.3)
Treasury stock, at cost-308.6 and 291.4 share                    (4,367.2)     (3,683.4)
     Total shareholder’s equity            &n bsp;                 $711.6          $790.4
     Total liabilities and shareholder’s equity                    $5,716.2          $5,238.2
Submitted: 5 years ago.
Category: Homework
Expert:  Expert Sissy replied 5 years ago.

"Using the information above and the financial statement information for Avon Products"

There is no informaiton above. What book and problem # XXXXX XXXXX I will try to look it up.

Customer: replied 5 years ago.
Book name: Crafting and executing Straegy by A. Thompson, AJ. Strickland, III, and John Gamble. Question 2, page 134.

Assurance of Learning Exercises

Using the information and the financial statement information for Avon Products below, calculate the following ratios for Avon for both 2006 and 2007:

a. Gross profit margin

b. Operating profit margin

c. Net profit margin

d. Times-interest earned

e. Return on shareholder's equity

f. Return on assets

g. Debt to equity ratio

h. Long term debt to capital ratio

i. Days of inventory

j. Inventory turnover ratio

k. Average collection period

Based on these ratios, did Avon's financial performance improve, weaken, or remain about the same from 2007 to 2007?

A. Estimated Value Chain Costs for Recording and Distributing Music CDs through Traditional Music Retailers

The following table presents the representative costs and markups associated with producing and distributing a music CD retailing for % in brick and mortar music stores

Value Chain Activities and Costs in Producing and Distributing a CD

1. Record company direct production cost s: $2.40

Artists and repertoire $0.75

Pressing of CD and packaging $1.65

2. Royalties $0.99

3. Record company marketing expenses $1.50

4. Record company overhead $1.50

5. Total record company costs $6.39

6. Record company's operating profit $1.86

7. Record company's selling price to distributor wholesaler $8.25

8. Average wholesale distributor markup to cover distribution

activities and profit margins $1.50

9. Average wholesale price charged to retailer $9.75

10. Average retail markup over wholesale cost $5.25

11. Average price to consumer at retail $15.00

 

 

 

 

 

 

 

 

 

B. Consolidated statements of income for Avon Products, Inc., 2006- 2007 (in millions, except per share data)

Years ended December 31

2007 2006

Total Revenue $9,938.7 $8,763.9

Costs, expenses, and other:

Cost of sales 3,941.2 3,416.5

Selling, general, and administrative expenses 5,124.8 4,586.0

Operating profit 872.7 761.4

Interest expense 112.2 99.6

Interest income (42.2) (55.3)

Other expense, net 6.6 13.6

Total other expenses 76.6 57.9

Income before taxes and minority interest 796.1 703.5

Income taxes 262.8 223.4

Income before minority interest 533.3 480.1

Minority interest (2.6) (2.5)

Net Income $530.7 $477.6

Earnings per share:

Basic $1.22 $1.07

Diluted $1.21 $1.06

Weighted- average shares outstanding:

Basic $433.47 447.40

Diluted $436.89 $449.16

 

 

 

 

C. Consolidated Balance Sheets for Avon Products, Inc. (in millions, except per share data)

Years ended December 31

2007 2006

Assets

Current assets

Cash, including cash equivalents of ($492.3 and $825.1) $963.4 $1,198.9

 

Accounts receivable (less allowances of $141.1 and $119.1) $840.4 700.4

 

Inventories 1,041.8 900.3

Prepaid expense and other 669.8 534.8

Total current assets 3,515.4 3,334.4

Property, plant and equipment, at cost 71.8 65.3

Land 972.7 910.0

Buildings and Improvements 1,317.9 1,137.0

Equipment 2,362.4 2,112.3

Less accumulated depreciation (1,084.2) (1,012.1)

1,278.2 1,100.2

Other assets 922.6 803.6

Total assets $5, 716.2 $5,238.2

Liabilities and Shareholder's equity

Current liabilities

Debt maturing within one year $929.5 $615.6

Accounts payable 800.3 655.8

Accrued liabilities 1,221.3 1,044.6

Income taxes 102.3 209.2

Total current liabilities 3,053.4 2,525.2

Long term debt 1,167.9 1, 1707.07

Other liabilities (including minority interest of 783.3 751.9

$38.2 and $37.0)

Total liabilities $5,004.6 $4,447.8

Shareholder's Equity

Common stock, par value $0.25-authorized 1,500 184.7 183.5

Shares; issued 736.3 and 732.7 shares

Additional paid in capital 1,724.6 1,549.8

Retained earnings 3,586.5 3,396.8

Accumulated other comprehensive loss (417.0) (656.3)

Treasury stock, at cost-308.6 and 291.4 share (4,367.2) (3,683.4)

Total shareholder's equity $711.6 $790.4

Total liabilities and shareholder's equity $5,716.2 $5,238.2

 

 

 

 

 

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