CENGAGENOW FOR CORP. FINC
14th Edition
ISBN: 9781305878907
Author: WARREN
Publisher: Cengage Learning
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Textbook Question
Chapter 2, Problem 2.1ADM
Continuing Company Analysis—Amazon: Horizontal analysis
Amazon.com, Inc. is the largest Internet retailer in the United States. Amazon's income statements through income from operations for two recent years follow:
| Amazon.com, Inc Operating Income Statements For the Years Ended December 31 (in millions) | Year 2 | Year 1 | |
| Product sales | $70,080 | $60,903 | |
| Service sales | 18,908 | 13,549 | |
| Total sales | $88,988 | 574,452 | |
| Cost of sales | $62,752 | $54,181 | |
| Fulfillment | 10,766 | 8,585 | |
| Marketing | 4,332 | 3,133 | |
| Technology and content | 9,275 | 6,565 | |
| General and administrative | 1,552 | 1,129 | |
| Other operating expense (income), net | 133 | 114 | |
| Total operating expenses | $88,810 | $73,707 | |
| Income from operations | $ 178 | $ 745 |
- A. Prepare a horizontal analysis of the operating income statements. (Round percentages to one decimal place.)
- B. Interpret the results of the horizontal analysis.
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KIARA LIMITED
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER:
ASSETS
Property, plant and equipment (cost)
Accumulated depreciation
Long-term investments
Inventory
Accounts receivable
Company tax paid in advance
Bank
EQUITY AND LIABILITIES
2024
2023
R
R
2 490 000
1 620 000
(630 000)
660 000
1 050 000
1 230 000
30 000
(480 000)
450 000
1 290 000
900 000
0
750 000
660 000
5 580 000
4 440 000
Ordinary share capital
2 700 000
2 000 000
Retained income
1 500 000
1 158 000
Long-term loan from Kip Bank (15%)
900 000
1 000 000
Accounts payable
480 000
228 000
Company tax payable
0
54 000
5 580 000
4 440 000
ADDITIONAL INFORMATION
All purchases and sales are on credit.
Interim dividends paid during the year amounted to R150 750.
Credit terms of 3/10 net 60 days are granted by creditors.
Accounting Question
REQUIRED
Study the information given below and answer the following questions. Where discount factors are required
use only the four decimals present value tables that appear after the formula sheet or in the module guide.
Ignore taxes.
5.1 Calculate the Accounting Rate of Return on average investment of the second alternative
(expressed to two decimal places).
5.2 Determine which of the two investment opportunities the company should choose by
calculating the Net Present Value of each alternative. Your answer must include the
calculation of the present values and NPV.
5.3 Calculate the Internal Rate of Return of the first alterative (expressed to two decimal
places). Your answer must include two net present value calculations (using consecutive
rates/percentages) and interpolation.
INFORMATION
The management of Bentall Incorporated is considering two investment opportunities:
(5 marks)
(9 marks)
(6 marks)
The first alternative involves the purchase of a new machine for R900 000 which…
Chapter 2 Solutions
CENGAGENOW FOR CORP. FINC
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