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Phillip Morris reported the following information in its 2018 Form 10-K. $ millions Stockholders' (Deficit) Equity Common stock, no par value (2,109,316,331 shares issued in 2018 and 2017) Additional paid-in capital Earnings reinvested in the business Accumulated other comprehensive losses Total stockholders' equity before treasury stock Less: cost of repurchased stock (554,736,610 and 556,098,569 shares in 2018 and 2017, respectively) Total PMI stockholders' deficit Noncontrolling interests Total stockholders' deficit Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to PMI Dec. 31, 2018 Dec. 31, 2017 50 2,715 43,420 (14,155) 31,980 49,421 (17,441) 1,720 (15.721) $11,600 375 $11,225 SO 2.761 41,803 (11,949) 32,615 49,535 (16,920) 1.856 (15,064) a. Compute ROE for 2018 using the equity numbers as reported. Note: 1. Select the appropriate numerator and denominator used to compute ROE from the drop-down menu opti

Phillip Morris reported the following information in its 2018 Form 10-K. $ millions Stockholders' (Deficit) Equity Common stock, no par value (2,109,316,331 shares issued in 2018 and 2017) Additional paid-in capital Earnings reinvested in the business Accumulated other comprehensive losses Total stockholders' equity before treasury stock Less: cost of repurchased stock (554,736,610 and 556,098,569 shares in 2018 and 2017, respectively) Total PMI stockholders' deficit Noncontrolling interests Total stockholders' deficit Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to PMI Dec. 31, 2018 Dec. 31, 2017 50 2,715 43,420 (14,155) 31,980 49,421 (17,441) 1,720 (15.721) $11,600 375 $11,225 SO 2.761 41,803 (11,949) 32,615 49,535 (16,920) 1.856 (15,064) a. Compute ROE for 2018 using the equity numbers as reported. Note: 1. Select the appropriate numerator and denominator used to compute ROE from the drop-down menu opti

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Adjusting for Negative Equity Phillip Morris reported the following information in its 2018 Form 10-K. $ millions Stockholders' (Deficit) Equity Common stock, no par value (2,109,316,331 shares issued in 2018 and 2017) Additional paid-in capital Earnings reinvested in the business Accumulated other comprehensive losses Total stockholders' equity before treasury stock Less: cost of repurchased stock (554,736,610 and 556,098,569 shares in 2018 and 2017, respectively) Total PMI stockholders' deficit Noncontrolling interests Total stockholders' deficit Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to PMI $ Numerator $ Dec. 31, 2018 Dec. 31, 2017 $0 2,715 43,420 (14,155) 31,980 a. Compute ROE for 2018 using the equity numbers as reported. Note: 1. Select the appropriate numerator and denominator used to compute ROE from the drop-down menu options. 2. Enter the numerator and denominator amounts to compute ROE. Denominator ROE ◆ 49,421 (17,441) 1,720 (15,721) $11,600 375 $11,225 $0 2,761 41.803 (11,949) 32,615 49,535 (16,920) 1,856 (15,064) How do you interpret this ratio? Ratio is not intepretable b. Add back treasury shares to adjust for the company's negative equity. Recompute ROE for 2018. Numerator Denominator ◆ Average PMI stockholders' deficit $ Does the adjusted ratio better captures the company's performance during 2018? Yes ROE 96 96
Transcribed Image Text:Adjusting for Negative Equity Phillip Morris reported the following information in its 2018 Form 10-K. $ millions Stockholders' (Deficit) Equity Common stock, no par value (2,109,316,331 shares issued in 2018 and 2017) Additional paid-in capital Earnings reinvested in the business Accumulated other comprehensive losses Total stockholders' equity before treasury stock Less: cost of repurchased stock (554,736,610 and 556,098,569 shares in 2018 and 2017, respectively) Total PMI stockholders' deficit Noncontrolling interests Total stockholders' deficit Net earnings Net earnings attributable to noncontrolling interests Net earnings attributable to PMI $ Numerator $ Dec. 31, 2018 Dec. 31, 2017 $0 2,715 43,420 (14,155) 31,980 a. Compute ROE for 2018 using the equity numbers as reported. Note: 1. Select the appropriate numerator and denominator used to compute ROE from the drop-down menu options. 2. Enter the numerator and denominator amounts to compute ROE. Denominator ROE ◆ 49,421 (17,441) 1,720 (15,721) $11,600 375 $11,225 $0 2,761 41.803 (11,949) 32,615 49,535 (16,920) 1,856 (15,064) How do you interpret this ratio? Ratio is not intepretable b. Add back treasury shares to adjust for the company's negative equity. Recompute ROE for 2018. Numerator Denominator ◆ Average PMI stockholders' deficit $ Does the adjusted ratio better captures the company's performance during 2018? Yes ROE 96 96
Numerator Net earnings Net earnings attributable to PM Average stockholders' deficit Average PMI stockholders' deficit Average PMI stockholders' deficit adjusted for treasury stock
Transcribed Image Text:Numerator Net earnings Net earnings attributable to PM Average stockholders' deficit Average PMI stockholders' deficit Average PMI stockholders' deficit adjusted for treasury stock
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