Financial Statement Analysis

FINANCIAL
STATEMENT
ANALYSIS
STUDENT iD:
[Pick the date]

Question 1
The given data has been shown under Item 5 (PART II) which corresponds to stock performance
graph. The relevant screenshot is indicated as follows.
Question 2
Activision Blizzard (Inc) CAGR = (271.51/100)1/5 = 22.11% p.a.
Nasdaq Composite CAGR =(165.84/100)1/5 = 10.65% p.a.
S&P 500 CAGR = (150.33/100)1/5 = 8.49% p.a.
RDG Technology Composite CAGR = (190.13/100)1/5 = 13.71% p.a.

Question 3
a) Topline growth in 2018 = [(7500-7017)/7017]*100 = 6.88% p.a.
b) Dividend Payout ratio (2018) = (0.34/2.38)*100 = 14.29%
c) Quality of earnings ratio = Operating cash flows/Net Income
High quality earnings are observed for 2014, 2015, 2016 & 2017 since the quality of earnings
ratio exceeds 1. However, low quality earnings are observed for 2018 since the quality of
earnings ratio is lesser than 1.
d) Trailing PE = 44/Earnings per share for 2018 = 44/2.38 = 18.49
e) The given data would be found under selected financial data of PART II (Item 6).
Question 4
The following equation can be used to compute the missing data for the two companies as on
January 1, 2018.
Assets = Liabilities + common stock + additional paid-in capital + retained earnings
The following computation is for LifeZone Corp.
2900 = 1275 + 150 + additional paid-in capital + 1,150
Solving the above, additional paid-in capital for LifeZone as on January 1, 2018 = $ 325 million
The following computation is for BridgeLine LTD
2850 = 950 + 200 + 225 + Retained earnings
Solving the above, additional paid-in capital for BridgeLIne as on January 1, 2018 = $1,475
million

Market value of shares issued to acquire BridgeLIne = $ 4.8 billion
Total asset value for BridgeLIne = $ 2.85 billion
Goodwill = ($4.8 -$2.85) billion = $ 1.95 billion
Question 5
It is noteworthy that the book values for the Target Company is equal to the fair value.
Amount paid for a 60% stake in Target company = $ 180 million
Net assets of the company = $ 18 million
60% of the net assets would equal (60/100)*18 million = $ 10.8 million
Hence, goodwill = $ 180 million - $ 10.8 million = $169.2 million
Also, minority interest = (60/100)*18 million = $ 10.8 million
Question 6
Basic earnings per share = (Net income – Dividends to preferred shareholders)/weighted average
common shares outstanding
Basic earnings per share for Federal Corporation (2018) = (27908-3888)/4,200 = $5.72
Diluted earnings per share = (Net income – Dividends to preferred shareholders)/weighted
average dilutive shares
Diluted earnings per share for Federal Corporation (2018) = (27908-3888)/4,620 = $5.20
Question 7
a) GMB’s average borrowing rate = 5%/(1-0.33)= 7.46% p.a.