Name:Jaimin Pandya Student Id: 2292119

Q1-12 : Access the 2018 10-K for Seagate Technology pie at the SEC's database of financial reports.
Who is the company's auditor? What specific language does the auditor use in expressing its
opinion, and what responsibilities does it assume?

Answer:

Auditors: Ernst & Young LLP

The Auditors have mentioned an unqualified opinion that the company’s financial statements are
reported in accordance with the US GAAP. An unqualified opinion is a good sign for investors and
creditors, as it indicates that the financial statements are reliable and can be used to make informed
decisions.

The auditors have also mentioned that the Audit has been conducted in accordance with the
accordance with the standards of the Public Company Accounting Oversight Board (PCAOB). This
means that the auditors have obtained reasonable assurance that the financial statements are free
of material misstatement (both, due to error or fraud). The auditors will follow these responsibilities
they will develop an audit plan that outlines the scope and objectives of audit and will gather
evidence about the company's financial statements by reviewing documents, interviewing
employees, and performing other procedures, will communicate with the company's management
about any significant findings during the audit and will issue a report that summarizes the results of
the audit and expresses an opinion on the financial statements.

Q1-16: In 2016, Oracle Corporation reported consolidated net income of $9,017 million, yet it only
included $8,901 million in retained earnings. Explain why this happened.

Answer:

The difference between Oracle's net income of $9,017 million and its retained earnings of $8,901
million in 2016 can be explained by the following factors:

1. Dividends paid. Oracle paid out $116 million in dividends in 2016. Since oracle paid $116 million
in dividend they only reported $8901 million as retained earning even though they had $ 9,017 in net
income.
2. Acquisitions. Oracle acquired several companies in 2016. When a company acquires another
company, it often pays for the acquisition with cash or stock. This can reduce the company's retained
earnings.
Hence in the case of Oracle, the difference between its net income and retained earnings in 2016 is
likely due to a combination of factors, including acquisitions, dividends, and accounting adjustments.
M1-24: Best Buy's financial statements, dated February 2, 2019, report total assets of $12,901
million and total liabilities of $9,595 million.

Required
a. Why might Best Buy have chosen February 2 as a year-end date? Select all that apply.

I. February is after the holiday season when sales are high. Best Buy wants to include those
holiday sales in its results.

II. A non-December year end will help reduce federal income taxes.

III. In early February, inventory will be lower because of the holiday season sales and Best Buy
can more easily (and inexpensively) count its inventory.

IV. Other retailers pick late January or early February, and so there is an industry standard
that Best Buy wants to use.

b. What is the amount of Best Buy's equity at February 2, 2019?

Answer:
a. I
b. Equity = Total Assets -Total Liabilities = 12,901 – 9,595 = 3,306
c. Total Liabilities reflect the non-owners’ financing whereas equity represents owners’
financing. Hence, majority (~75%) financing is provided by the non-owners.
d. 75%

M1-28: Several line items and account titles are listed below. Foreach, indicate in which of the
following Financial statement(s) we would likely find the item or account: income statement (IS),
balance sheet (BS), statement of stockholders' equity (SE), or statement of cash flows (SCF).

a. Cash asset
b. Expenses
c. Noncash assets
d. Contributed capital
e. Cash outflow for capital expenditures
f. Retained earnings
g. Cash inflow for stock issued
h. Cash outflow for dividends
i. Revenue

Answer:
a. BS
b. IS
c. BS
d. SE
e. SCF
 f. SE
g. SCF
h. SCF
i. IS

M1-30: For each of the following companies, briefly explain what type of competitive advantage(s)
they have, if any.
Select from: barriers to entry, product differentiation, cost leader, or buyer power.
a. Apple
b. Walmart
c. Pfizer
d. Uber
e. American Airlines
f. UPS
g. McDonald's

Answer
a. Apple (product differentiation): Apple is known for its innovative products and its strong
brand image. This gives it a high degree of product differentiation, which makes it
difficult for competitors to imitate.
b. Walmart is a low-cost leader. It achieves this through economies of scale, efficient
operations, and strong bargaining power with suppliers.
c. Pfizer is a pharmaceutical company with a strong patent portfolio. It gives it a high
barrier to entry, as it is difficult for new entrants to compete without their own patents.
d. Uber is a ride-sharing company that has a large number of customers. This gives uber
buyer power, which it can use to negotiate lower prices from its suppliers
e. American Airlines is a major airline with a large network of routes. This gives it a high
barrier to entry, as it is difficult for new entrants to compete without a similar network.
f. UPS is a package delivery company with a large fleet of trucks and planes. This gives it
economies of scale, which allows it to operate at a lower cost than its competitors which
makes them cost leader.
g. McDonald's is a fast food chain with a strong brand image and a loyal customer base.
This gives it a high degree of product differentiation, which makes it difficult for
competitors to imitate.

E1-34: Answer the following questions about Target.

a. Briefly describe the types of assets Target is likely to include in its inventory.
b. What kinds of assets would Target likely include in its property and equipment?
c. Target's balance sheet reports about two-thirds of its total assets as long term. Given Target's
business model, why do we see it report a relatively high proportion of long-term assets?

Answer
 a. Target’s inventory is likely to include the merchandise offered by the company for
sale like apparels, beauty and household essentials, perishable food items, home
furnishing and décor, pet supplies, electronics, office supplies and packaging
products. The specific types of assets that Target includes in its inventory will vary
depending on the time of year, the location of the store, and the needs of its
customers.
b. Target’s property and equipment would likely consist of land, buildings, in progress
constructions and building improvements, fixture and equipment and computer
hardware and software, Transportation equipment. These are just some of the most
common types of assets that Target would include in its property and equipment.
c. Target's business model is to offer a wide variety of products at competitive prices.
This requires a significant investment in property and equipment, as well as
intangible assets such as its brand name. Target also has a significant amount of
planned capital expenditures, which are investments in long-term assets that will
help it to grow its business. Hence, we see a high proportion of long term assets in
the Total Asset.

P1-45: Following is selected financial information from Five Below for its fiscal year ended
February 2, 2019 ($ thousands)

1. Prepare the income statement for the year ended February 2, 20 19.
2. Prepare the balance sheet as of February 2, 2019.
3. Prepare the statement of cash flows for the year ended February 2, 2019.

Answer

1. Income statement

Revenue 15,59,563
COGS 9,94,478
Gross Profit 5,65,085
SG&A 3,73,278
Operating Income 1,91,807
Interest Expense 42,162
Net Income 1,49,645
2. Balance Sheet

Asset Liabilities
Non cash Asset (Year End) 7,00,516 Total Liabilities 3,37,170
Cash 2,51,748
Equity
Total Equity 6,15,094

Total Asset 9,52,264 Total Liability + Total Equity 9,52,264

Cashflow from investing activities -39,472