LT Week Two Solution
Introduction to Accounting and Finance
June 10, 2008
1. 1998 – 1999
0.31 – 0.24 = 0.07
0.07/0.24 = .29
1999 – 2000
0.55 – 0.31 = 0.24
0.24/0.31 = 0.77
2000 – 2001
0.55 – 0.27 = 0.28
0.28/0.55 = 0.51
2. 1998
755/9862 = 0.07
1999
1030/11806 = 0.08
2000
1854/15721 = 0.12
2001
927/18250 = 0.05
3. 2000 – cost of sales 2001 – cost of sales
7549/15721 = 0.48 10041/18250 = 0.55
2000 – R&D 2001 – R&D
1630/15721 = 0.10 2016/18250 = 0.11
2000 – selling, general, & admin 2001 – selling, general, & admin
4072/15721 = 0.26 4544/18250 = 0.25
2000 – in process R&D 2001 - in process R&D
12/15721 = .000763 77/18250 = .0042
4. 2000 2001
1854/7309 = 0.25 927/10586 = 0.9
5. (1)2000 2001
1854/15721 = 0.12% 927/18250 = 0.05%
(2a) 2000 2001
1854/14152 = 0.13% 927/18181 = 0.05%
(2b) 2000
1854/15721 x 15721/14152 = 0.13%
2001
927/18250 x 18250/18181 = 0.05%
(3b) 2000 2001
0.13/1-6843/14152 = 0.05/1-7595/18181=
1-0.48 = 1-0.41 =
0.13/0.52 = 25% 0.05/0.59 = 8.5%
The cost of sales was 3,000 higher in 2000 than it was in 2001. The company invested more in 2000 than 2001. The companies’ strategy on investment was in the negative because of the market drop.
6. 1998 1999 2000
11.25/0.24 = 46.9 16.75/0.31 = 54.03 28.50/0.55 = 51.8
2001
9.50/0.27 =35.2
The price earning ratio indicates expectations about the future of a company. In 2000Sun Microsystems stock price was 28.5 and earnings per share was .55. In 2001 the stock price per decreased to 9.5 and earnings per share decreased to .27. In 2001 Sun Microsystems’ total cost and expenses increased and there was a loss on strategic investments. Unfortunately all of this had an adverse affect on the net income.
7. 1998 1999 2000
11.25/1.18 = 9.53 16.75/1.55 = 10.81 28.50/2.29 = 12.45
2001
9.50/3.26 = 2.91
Between 1998 and...