7-1
Review the letters to the shareholders, annual reports and proxy statements linked below for Amazon.com, Inc., American Express, and IBM. Each of these companies made a significant acquisition in the year listed.
As you review the statements, draft answers to the following questions:
a. What was the cost of each acquisition? How was that cost allocated in each case? What amount of goodwill was recorded by each firm?
b. What was each firm’s business strategy motivation underlying the different acquisitions?
c. How were the acquisitions financed (e.g., preferred stock, common stock, debt securities, cash or some combination thereof)?
7-2
1. Getting warmed up:
As you review the annual report, draft answers to the following questions:
A. What types of derivative transactions does Xerox engage in (cash flow hedges, fair value hedges or speculative hedges)?
B. What types of commodities does Xerox hedge? How do derivative transactions align with Xerox’s overall business strategy?
C. What was the 2007 income statement effect of each category? Give the total dollar amount as well as the effect as a percentage of revenues and income before tax. Have these transactions materially affected the profitability of Xerox? Explain your answer.
D. Where does Xerox disclose the financial statement impact of the cash flow hedges it enters into? Do you consider these to have a material impact on its financial position? Explain.
7-3
Here is a link to Ford Motor Company’s 2007 annual report.
1.Getting warmed up:
As you review the annual report, draft answers to the following questions:
a. What are the functional currencies of Ford’s subsidiaries?
b. How much and where did Ford report the gain or loss on remeasurement of its subsidiaries’ financial statements?
c. From what currencies were the subsidiaries’ financial statements remeasured into dollars?
D .In examining the comparative financial statements, do these gains and losses appear to change dramatically over time? Does this appear to affect the volatility (and apparent riskiness) of Ford’s cash flow stream?
2.Now start three separate discussion threads by posing analytical questions for your classmates to consider. Use the guidance in Theme 1 of this module to formulate your analytical questions.
7-4
Here is a link to H. J. Heinz Company’s 2009 annual report.
1.Getting warmed up:
As you review the annual report, draft answers to the following questions:
a. What are Heinz’s business segments? Are Heinz’s operating segments based on product/industry or geographic groupings?
b. Examine the segment-disclosure totals for revenues, profits and assets. Do they agree with the totals reported in the consolidated financial statements?
c. How significant is intersegment revenue? From this analysis, is Heinz primarily horizontally or vertically integrated or a conglomerate?
d. What geographical area provides most of Heinz’s revenues? Would you consider Heinz a multinational corporation? Why or why not?
e. Qualitatively, do you consider Heinz’s segmental reporting to be adequate? What additional information or details would you like to see disclosed regarding its segments?
2. Now start three separate discussion threads by posing analytical questions for your classmates to consider. Use the guidance in Theme 1 of this module to formulate your analytical questions