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A.
Segment Analysis
Business can be classified by regions, products or services, types of customers and more; each classification is treated as one segment of the business. Revenues earned from different segments individually are called segment revenue. Segment revenues are determined from the invoiced data entered into the accounting system. Segment analysis is done to analyze the contribution of different segments to the total operating performance of the company. It is done with the help of horizontal and vertical comparisons.
Horizontal Analysis
This analysis is done to show the trend of various components in financial statements over a period of time. The earliest period is used as the base period and components of financial statements of later periods are compared with the components of the base period.
Vertical analysis
Vertical analysis is the method of financial statement analysis, and it is useful for evaluating company’s performance and financial condition. Vertical analysis is helpful for analyzing the changes in the financial statements over the time, and comparing each item on a financial statement with a total amount from the same statement.
To prepare: A vertical analysis of the sales as a percent of total sales for the five segments.
B.
To interpret: The vertical analysis of five segment of Company WD.
C.
To prepare: A horizontal analysis of the sales as a percent of total sales for the five segments.
D.
To interpret: The horizontal segment sales analysis.
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Chapter 20 Solutions
Financial & Managerial Accounting
- The Walt Disney Company (DIS) has four business segments, described as follows: Media Networks: Television and radio Parks and Resorts: Resorts, including Disneyland Studio Entertainment: Motion pictures, musical recordings, and stage plays Consumer Products Interactive Media: Character merchandising, Disney stores, books, and games Disney recently reported segment operating income, revenue, and invested assets (in millions) as follows: a. Use the DuPont formula to determine the return on investment for the four Disney segments. Round percentages to one decimal place and investment turnover to two decimal places. b. How do the four segments differ in their profit margin, investment turnover, and return on investment?arrow_forwardHasbro is a leading firm in the toy, game, and amusement industry. Its promoted brands group includes products from Playskool, Tonka, Milton Bradley, Parker Brothers, Tiger, and Wizards of the Coast. Sales of toys and games are highly variable from year to year depending on whether the latest products meet consumer interests. Hasbro also faces increasing competition from electronic and online games. Hasbro develops and promotes its core brands and manufactures and distributes products created by others under license arrangements. Hasbro pays a royalty to the creator of such products. In recent years, Hasbro has attempted to reduce its reliance on license arrangements, placing more emphasis on its core brands. Hasbro also has embarked on a strategy of reducing fixed selling and administrative costs in an effort to offset the negative effects on earnings of highly variable sales. Exhibit 4.30 presents the balance sheets for Hasbro for the years ended December 31, Years 1 through 4. Exhibit 4.31 presents the income statements and Exhibit 4.32 presents the statements of cash flows for Years 2 through 4. Exhibit 4.30 Exhibit 4.31 Exhibit 4.32 REQUIRED a. Exhibit 4.33 presents profitability ratios for Hasbro for Year 2 and Year 3. Calculate each of these financial ratios for Year 4. The income tax rate is 35%. b. Analyze the changes in ROA and its components for Hasbro over the three-year period, suggesting reasons for the changes observed. c. Analyze the changes in ROCE and its components for Hasbro over the three-year period, suggesting reasons for the changes observed. Exhibit 4.33arrow_forwardHow much is the minimum revenue that a single external customer must contribute for it to be considered as a major customer under IFRS 8?arrow_forward
- Effect of Industry Characteristics on Financial Statement Relations: A Global Perspective. Effective financial statement analysis requires an understanding of a firms economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. Exhibit 1.24 (pages 6667) presents common-size condensed balance sheets and income statements for 12 firms in different industries. These common-size balance sheets and income statements express various items as a percentage of operating revenues. (That is, the statement divides all amounts by operating revenues for the year.) A dash for a particular financial statement item does not necessarily mean the amount is zero. It merely indicates that the amount is not sufficiently large for the firm to disclose it. A list of the 12 companies, the country of their headquarters, and a brief description of their activities follow. A. Accor (France): Worlds largest hotel group, operating hotels under the names of Sofitel, Novotel, Motel 6, and others. Accor has grown in recent years by acquiring established hotel chains. B. Carrefour (France): Operates grocery supermarkets and hypermarkets in Europe, Latin America, and Asia. C. Deutsche Telekom (Germany): Europes largest provider of wired and wireless telecommunication services. The telecommunications industry has experienced increased deregulation in recent years. D. E.ON AG (Germany): One of the major public utility companies in Europe and the worlds largest privately owned energy service provider. E. Fortis (Netherlands): Offers insurance and banking services. Operating revenues include insurance premiums received, investment income, and interest revenue on loans. Operating expenses include amounts actually paid or amounts it expects to pay in the future on insurance coverage outstanding during the year. F. Interpublic Group (U.S.): Creates advertising copy for clients. Interpublic purchases advertising time and space from various media and sells it to clients. Operating revenues represent the commissions or fees earned for creating advertising copy and selling media time and space. Operating expenses include employee compensation. G. Marks Spencer (U.K.): Operates department stores in England and other retail stores in Europe and the United States. Offers its own credit card for customers purchases. H. Nestl (Switzerland): Worlds largest food processor, offering prepared foods, coffees, milk-based products, and mineral waters. I. Roche Holding (Switzerland): Creates, manufactures, and distributes a wide variety of prescription drugs. J. Sumitomo Metal (Japan): Manufacturer and seller of steel sheets and plates and other construction materials. K. Sun Microsystems (U.S.): Designs, manufactures, and sells workstations and servers used to maintain integrated computer networks. Sun outsources the manufacture of many of its computer components. L. Toyota Motor (Japan): Manufactures automobiles and offers financing services to its customers. REQUIRED Use the ratios to match the companies in Exhibit 1.24 with the firms listed above.arrow_forwardAnalyze the data below and write what each of these values mean in one coherent paragrapharrow_forwardSegment Contribution Margin Analysis The operating revenues of the three largest business segments for Time Warner, Inc., for a recent year follow. Each segment includes a number of businesses, examples of which are indicated in parentheses.arrow_forward
- For Starbucks and other companies whose business models following methods for going global. O A. franchising O B. exporting O C. 100-percent ownership O D. joint ventures O E. licensingarrow_forwarddetails on Foriegn Direct Investment & Regional Economic Integration to reflect on companies' decision making related to International operationsarrow_forwardGive some examples of the basic revenues and expenses for a company like The Walt Disney Company.arrow_forward
- Agustin Industries is a division of a major corporation. Data concerning the most recent year appears below: Sales Net operating income Average operating assets The division's margin is closest to: Multiple Choice O O 3.5% 19.7% 16.2% 15.0% $ 18,210,000 $ 637,350 $ 4,250,000arrow_forwardProfit center responsibility reporting for a service company Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance, using operating income as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31: The company operates three support departments: Shareholder Relations, Customer Support, and Legal. The Shareholder Relations Department conducts a variety of services for shareholders of the company. The Customer Support Department is the companys point of contact for new service, complaints, and requests for repair. The department believes that the number of customer contacts is a cost driver for this work. The Legal Department provides legal services for division management. The department believes that the number of hours billed is a cost driver for this work. The following additional information has been gathered: Instructions 1. Prepare quarterly income statements showing operating income for the three divisions. Use three column headings: East, West, and Central. 2. Identify the most successful division according to the profit margin. Round to the nearest whole percent. 3. Provide a recommendation to the CEO for a better method for evaluating the performance of the divisions. In your recommendation, identify the major weakness of the present method.arrow_forwardPercentage of Revenue and Net Income from Overseas Operations for 10 Well-Known Corporations. You can select TEN well know Companies operating in America involve in the exports of their products. Calculate their proportion of local and overseas revenues and also dig the income proportion from local and overseas operations as well.arrow_forward
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