Final Case Study Fall 2020 Instructions The following case study counts as 25% of your final grade. The work should be done independently. If you would like, it is okay to discuss issues you are stuck...

Trial Balance_v1
        Ursula's Um
ella Company
        Dec. 31st 2019        Dec. 31st 2020
    Accounts    Debit    Credit    Debit    Credit
    Accounts Payable        10,000        7,000            Directly Linked
    Accounts Receivable    32,000        20,000            Legends        Covered in Financial Statements
    Accumulated Depreciation        51,000        48,000
    APIC-Common        89,000        89,000
    Bonds Payable        75,000        41,000
    Cash    5,000        1,000
    COGS            430,000
    Common Stock        1,000        1,000
    Dividend            23,000
    Gain on Sale of Equipment                10,000    ~ cash inflow from investing
    Income Tax Expense            23,520
    Income Tax Payable        8,000        22,000
    Interest Expense            9,000
    Inventory    60,000        65,000
    Other Operating Expenses            8,000
    PPE    195,000        250,000
    Prepaid Insurance    7,000        5,000
    Retained Earnings        59,000        59,000
    Sales                635,000
    Selling, General and Administrative Expenses            86,000
    Unearned Revenue        6,000        8,520
        299,000    299,000    920,520    920,520
    Check        TRUE & BALANCED        TRUE & BALANCED
    During 2020 the Company:
    1. Sold old equipment for cash
    2. Bought new equipment for $155,000
    3. Recorded $25,000 of depreciation
    4. Used excess cash to pay off bonds
Part 1_Income Statement
                    Income Statement
                    For the year ending
12/31/2020
    Revenue                635000
    Operating Expenses
        [+] COGS            430000
        [+] SG&A            86000
        [+] Misc Expenses            8000
            [-] Total Operating Expenses        524,000
    EBITDA                111000
        [-] Depreciation            25,000    ~ As per notes
    EBIT                86,000
        [-] Interest            9000
        [+] Other Income
    PBT                77,000
    Taxes for the yea
        Income Tax            23520
        [+] Defe
ed Tax
            [-] Total Taxes for the year        23,520
    PAT                53,480
Part 1_Balance Sheet
                    Balance Sheet    Balance Sheet
                    12/31/19    12/31/20
    Liabilities & Equity
        Cu
ent Liabilities & Provisions
            Cash Credit / Overdraft Utilization
            [+] Unearned Revenue        6000    8520
            [+] Dividends payable
            [+] Bonds payable        75000    41000
            [+] Income tax payable        8000    22000
            [+] Accounts payable        10000    7000
            Total Cu
ent Liab. & Prov.        99,000    78,520
        Non Cu
ent Liabilities
            Secured Loans
            [+] Unsecured Loans
            [+] Total Non Cu
ent Liabilities
        Networth
            Paid Up Capital
            [+] common stock        1000    1000
            [-] Dividends paid            23000
            [+] Retained Earnings        59000    59000
            [+] Total Networth        60000    37000
        Total Liabilities & Equity            159,000    115,520
    Assets
        Cu
ent Assets
            Cash & Cash Equivalent        5000    1000
            [+] Prepaid Insurance        7000    5000
            [+] Inventory        60000    65000
            [+] Account Receivables        32000    20000
            [+] Loans & Advances
            Total Cu
ent Assets        104,000    91,000
        Non Cu
ent Assets
            [+] PPE        195000    250000
        Net Fixed Assets
            Gross Block
            [-] Accumulated Depreciation        51000    48000
            [+] Net Fixed Assets        144,000    202,000
        [+] WIP
        [+] Defe
ed Tax Assets
        [+] Investments
        Total Assets            248,000    293,000
        Note: Balance sheet is not balanced at the moment on account of information provided it is been made as per scope.
Part 1_Retained Earnings
                    Retained Earnings Rollforward
                    For the year ending
12/31/2020
        Face Value of Share
        Equity Infusion During the yea
        Share Issue Price
        Nos. of Shares Issued
    Shares Outstanding
        Opening
        [+] Issued during the yea
        [-] Extinguished during the yea
        Closing
    Paid Up Capital
        Opening            89000
        [+] Issued during the year            89000
        [-] Extinguished during the year            0
        Closing            178,000
    Share Premium Account
        Opening
        [+] Issued during the yea
        [-] Extinguished during the yea
        Closing
    Retained Earnings Account
        Opening            59000
        [+]PAT during the year            53480
        [-] Dividend paid during the year            23000
        Closing            89,480
Part 1_Cash Flows
                        Statement of Cash Flows
                        For the year ending
12/31/2020
    Cash Flow Statement
        Year Tracke
    (All figures in INR Lakhs unless stated otherwise)
    Cashflow from Operating Activities
        PAT                53480
        [+] Defe
ed Tax Liability
        [+] Depreciation                25000
        [+] Interest Expense                9000
        Net Change in Working Capital
            [+]Increase Unearned Revenue            2,520
            [+] Increase Dividends payable            0
            [+] Increase Bonds payable            -34000
            [+] Increase Income tax payable            14000
            [+] Increase Accounts payable            -3000
            [-] Increase in Margin Money with Bank            -4000
            [-] Increase in Inventory            5000
            [-] Increase in Account Receivables            -12000
            [-] Increase in Loans & Advances            0
            [+] Net Change in Working Capital            (31,480)
        Cashflow from Operations                56,000
    Cashflow from Investing Activities
        Capital Expenditure
            Asset Created during the yea
            [+] Increase in WIP
            [-] Total Capital Expenditure
        [+] Gain from Disposal of Assets                10000
        [-] Increase in Investments
        Cashflow from Investment Activities                10,000
    Cashflow from Financing Activities
        [-] Interest Expense                9000
        [-] Dividends Paid                23000
        [-] Secured Loans Mandatory Repayment
        [-] Unsecured Loans Mandatory Repayment
        [+] Additional Cash Credit Utilization
        [+] New Equity Raised (APIC)                89000
        [+] New Secured Loans Raised
        [+] New Unsecured Loans Raised
        [-] Additional Unsecured Loans Repaid
        [-] Additional Secured Loans Repaid
        Cashflow from Financing Activities                57,000
        Net Cashflow                123,000
    Cash & Cash Equivalent
        Closing Balance                123,000
Part II Stockholders Equity
    IBM stockholders' equity    Dec. 31, 2019    Dec. 31, 2018        Dell Stockholders’ equity (deficit):    Jan. 31, 2020    Feb. 01, 2019
    Common stock, par value $.20 per share, and additional paid-in capital; Shares authorized: 4,687,500,000; Shares issued (2019-2,237,996,975; 2018-2,233,427,058)    55,895    55,151        Common stock and capital in excess of par value; Shares authorized: 9,143; Shares issued ( 2020 - 745; 2019- 721)    16,091    16,114    ~Assuming par value $25
    Retained earnings    162,954    159,206        Accumulated Deficit    (16,891)    (21,349)
    Treasury stock, at cost (shares: 2019-1,350,886,521; 2018-1,340,947,648)    (169,413)    (168,071)        Treasury stock at cost (Shares: 2 million)    (65)    (63)
    Accumulated other comprehensive income/(loss)    (28,597)    (29,490)        Accumulated other comprehensive income/(loss)    (709)    (467)
    Non-controlling interests    144    134        Non-controlling interests    4,729    4,823
    Total Stockholders' Equity    20,985    16,929        Total stockholders’ equity (deficit)    3,155    (942)
    Calculations
    1: Average Price Common Stock    20.4774    20.4765    ~par value*no. of shares+new issued/ no. of shares        25.0815    25.0789
    2: Average Price Treasury Stock    125.41    125.34    ~ assuming in millions        32.5    31.5
    3: Price 12/31/2019    134.34    117.32    ~ from yahoo finance        10.25    9.83
    4. Par Value at IPO    75.03        ~ additional paid in capital/total no. of shares        21.60
Part II Explanations:
5. Has IBM reinvested its retained earnings? In other words, has IBM used its retained earnings to fund additional assets? How do you know? (2-4 sentences)
Yes, as there is a change in the retained earnings section and relevant dividends are also paid which can only be taken from retained earnings or surplus cash.
6. What does Dell’s accumulated deficit represent? (2-4 sentences)
Dell's accumulated deficit is an indication wherein the debts of the company surpases the revenues and thus hampering the retained earnings section such that an event occurs where
it undergoes less than zero.
7. Both companies were profitable last year. What did they do with the money they earned? How do you know? (2-4 sentences)
In case of IBM from its balance sheet it is evident there is a huge increase in the net liability side which signs of high financial leverage whereas in Dell from its Income statement we see
the sales pricing or revenues are not kept at par with the expenses. However, still they are at a better place as compared to 2018
Part III Cash Flows
Part III Explanations:
1. How do you interpret Dell’s adjustment for accounts receivable (-286) in its operating cash flows?
To reconcile net income to cash flow from operating activities, these noncash items must be added back, because no cash was expended relating to that expense. The sole noncash expense on Propensity Company's income statement, which must be added back, is the depreciation expense.
2. How do you interpret IBM’s adjustment for accounts receivable (502) in its operating cash flows (don’t wo
y about the distinguishment between financing and non financing receivables)?
Reason is the same To reconcile net income to cash flow from operating activities, these noncash items must be added back, because no cash was expended relating to that expense. Only difference being in this case it is for reconciling the intangibles amortization.
3. How do you interpret Dell’s adjustment for accounts payable (894) in its operating cash flows?
Basically it is the increase in the accounts payable with refernce to the previous year.
Formula: A/c receivable (2020)- A/c receivable (2019)
4. How do you interpret IBM’s adjustment for accounts payable (-503) in its operating cash flows?
Basically it is the decrease in the accounts payable with refernce to the previous year.
Formula: A/c payable (2019)- A/c payable (2018)
Part IV Valuation
        IBM        Dell
        12/31/19    Mkt. Adj Closing
IBM    1/31/20    Mkt. Adj Closing
Dell
    Market To Book    4.85    136.57    0.37    48.77    ~market adj closing price/(stockholders equity/no. of shares)
    Price to Earnings    10.61        1.32        ~ market price/ earnings per share
    ROE (Return on Equity)    0.45        1.75        ~net profit/stockholders equity
    AT (Total Asset Turnover)    0.19        0.59        ~sales/total assets
    PM (Profit...