Lands End Lands End The following information is extracted from the annual report of Lands' End (in millions, except per share data): PROBLEM 2-12 Relations between Income, Cash Flow, Year 7 Year 6 Year 5 Vear 4 Year 9 Year 8 and Stock Price Fiscal year $ 51.0 $30.6 $36.1 $64.2 (26.9) (86.5) $43.7 $31.2 Net income 121.8 41.4 34.5 22.4 74.3 Cash from (used by) operations 75.7 11.8 (16.1) 0.03 (1.2) Net cash flow 103.3 27.5 2.4 (74.6) 5.1 16.125 24.375 27.5 Free cash flow* 28.375 Market price per share (end of fiscal year) Common shares outstanding 32.375 39.312 31.0 30.1 32.4 33.7 34.8 35.9 *Defined as Cash flow from operations- Capital expenditures – Dividends. Required: a. Calculate and graph the following separate relations: (1) Net income per share (EPS) and market price per share (2) Cash from operations per share and market price per share (3) Net cash flow per share and market price per share (4) Free cash flow per share and market price per share CHECK b. Which of the measures extracted from the annual report appear to best explain changes in stock price? DiscuSS the implications of this for stock valuation. EPS performs best c. Choose another company and prepare similar graphs. Do your observations from Lands' End generalize?
Lands End Lands End The following information is extracted from the annual report of Lands' End (in millions, except per share data): PROBLEM 2-12 Relations between Income, Cash Flow, Year 7 Year 6 Year 5 Vear 4 Year 9 Year 8 and Stock Price Fiscal year $ 51.0 $30.6 $36.1 $64.2 (26.9) (86.5) $43.7 $31.2 Net income 121.8 41.4 34.5 22.4 74.3 Cash from (used by) operations 75.7 11.8 (16.1) 0.03 (1.2) Net cash flow 103.3 27.5 2.4 (74.6) 5.1 16.125 24.375 27.5 Free cash flow* 28.375 Market price per share (end of fiscal year) Common shares outstanding 32.375 39.312 31.0 30.1 32.4 33.7 34.8 35.9 *Defined as Cash flow from operations- Capital expenditures – Dividends. Required: a. Calculate and graph the following separate relations: (1) Net income per share (EPS) and market price per share (2) Cash from operations per share and market price per share (3) Net cash flow per share and market price per share (4) Free cash flow per share and market price per share CHECK b. Which of the measures extracted from the annual report appear to best explain changes in stock price? DiscuSS the implications of this for stock valuation. EPS performs best c. Choose another company and prepare similar graphs. Do your observations from Lands' End generalize?
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Transcribed Image Text:Lands End
Lands End
The following information is extracted from the annual report of Lands'
End (in millions, except per share data):
PROBLEM 2-12
Relations between
Income, Cash Flow,
Year 7
Year 6
Year 5
Vear 4
Year 9
Year 8
and Stock Price
Fiscal year
$ 51.0
$30.6
$36.1
$64.2
(26.9)
(86.5)
$43.7
$31.2
Net income
121.8
41.4
34.5
22.4
74.3
Cash from (used by) operations
75.7
11.8
(16.1)
0.03
(1.2)
Net cash flow
103.3
27.5
2.4
(74.6)
5.1
16.125 24.375
27.5
Free cash flow*
28.375
Market price per share (end of fiscal year)
Common shares outstanding
32.375 39.312
31.0
30.1
32.4
33.7
34.8
35.9
*Defined as Cash flow from operations- Capital expenditures – Dividends.
Required:
a. Calculate and graph the following separate relations:
(1) Net income per share (EPS) and market
price per share
(2) Cash from operations per share and market
price per share
(3) Net cash flow per share and market price per share
(4) Free cash flow per share and market price per share
CHECK
b. Which of the measures extracted from the annual report appear to best explain changes in stock price? DiscuSS
the implications of this for stock valuation.
EPS performs best
c. Choose another company and prepare similar graphs. Do your observations from Lands' End generalize?
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Net income is the amount that is left over after the company has paid all its expenses including interest and taxes.
Cash flow from operations is the amount of cash that is generated from the core business activities of the company.
Net cash flow is the difference between the cash inflows and cash outflows over a given period of time.
Market price per share is the latest value of a share in the open market.
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