Answer To: UNIVERSITY OF MIAMI ACC 685 – Financial Statement Analysis & Valuation Term Project Select two...
Tanmoy answered on Feb 24 2021
Liquidity
Mar-18
Mar-17
Current Ratio
2.41
2.15
Acid Test Ratio
2.29
2.03
Accounts Receivable Turnover Ratio
13.38
13.50
Collection Period
27.29
27.05
Days to sell inventory
0.23
0.24
Capital Structure & Solvency
Total Debt to Equity
0.60
0.63
Long term Debt to Equity
0.06
0.04
Times Interest Earned
95.6
87.43
Return on Investment
Return on Asset
0.12
0.13
Return on Common Equity
0.23
0.24
Operating Performance
Gross Profit Margin
75.20%
73.21%
Operating Profit Margin
27.84%
25.26%
Net Profit Margin
20.25%
19.96%
Asset Utilization
Cash Turnover
1.21
1.89
Account Receivable Turnover
13.38
13.50
Inventory Turnover
4.43
4.21
Working Capital Turnover
1.47
1.74
PPE Turnover
11.37
11.16
Total Asset Turnover
0.60
0.63
Market Measures
Price-to-earnings
0.90
0.97
Earnings Yield
1.11
1.03
Dividend Yield
-
-
Dividend Yield Payout Ratio
-
-
Price to Book
0.01
0.01
Electronic Arts Financial Statements and Analysis
STATEMENTS OF OPERATIONS DATA
2018
2017
Net revenue
5,150
4,845
Cost of revenue
1,277
1,298
Gross profit
3,873
3,547
Total operating expenses
2,439
2,323
Operating income
1,434
1,224
Interest and other income (expense), net
15
-14
Income before provision for (benefit from) income taxes
1,449
1,210
Provision for (benefit from) income taxes
406
243
Net income
1,043
967
Earnings per share:
Basic
3.39
3.19
Diluted
3.34
3.08
Number of shares used in computation:
Basic
308
303
Diluted
312
314
As of March 31,
BALANCE SHEETS DATA
2018
2017
Cash and cash equivalents
4,258
2,565
Short-term investments
1,073
1,967
Working capital
3,513
2,784
Total assets
8,584
7,718
0.75% convertible senior notes due 2016, net
—
—
Senior notes, net
992
990
Other long-term liabilities
506
253
Total liabilities
3,989
3,658
Total stockholders’ equity
4,595
4,060
(In millions, except par value data)
March 31, 2018
March 31, 2018
ASSETS
Current assets:
Cash and cash equivalents
4,258
2,565
Short-term investments
1,073
1,967
Receivables, net of allowances of $165 and $145, respectively
385
359
Other current assets
288
308
Total current assets
6,004
5,199
Property and equipment, net
453
434
Goodwill
1,883
1,707
Acquisition-related intangibles, net
71
8
Deferred income taxes, net
84
286
Other assets
89
84
TOTAL ASSETS
8,584
7,718
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
48
87
Accrued and other current liabilities
821
789
Deferred net revenue (online-enabled games)
1,622
1,539
Total current liabilities
2,491
2,415
Senior notes, net
992
990
Income tax obligations
250
104
Deferred income taxes, net
1
1
Other liabilities
255
148
Total liabilities
3,989
3,658
Commitments and contingencies (See Note 12)
Stockholders’ equity:
Preferred stock, $0.01 par value. 10 shares authorized
—
—
Common stock, $0.01 par value. 1,000 shares authorized; 306 and 308 shares issued and outstanding, respectively
3
3
Additional paid-in capital
657
1,049
Retained earnings
4,062
3,027
Accumulated other comprehensive loss
(127
(19
Total stockholders’ equity
4,595
4,060
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
8,584
7,718
Electronic Arts is an USA based video game corporation headquartered in California. It was established in on 28th May, 1982. They develop and distribute the game DVD’s and apps through PC’s, mobile and tablets. Their main product includes FIFA, Madden NFL and Need for Speed game DVD’s. Their mission is inspiring the world to play. Their main competitor is Blizzard Activation. There are other small competitors who are trying to enter the game segments like Discord, Ubisoft, Activision and Niantic.
The Liquidity ratio of EA Sports is sound in both the years 2017 and 2018. Although the Debt collection period is 27 days but it is less than a month. This reflects that the debtors make payment on time.
The capital structure of EA Sports is totally capital based and there is no dividend payment option available. There is no issue of preference share capital and debenture in the capital structure of the company. Although they have the provision of preferred stocks but, they have not raised capital till now through this option. They also do not encourage long term loans.
The Return on Investment of EA Sports in the year 31st Dec’ 2018 was 25.37% as compared to 26.65% in the same period in 2017. Asset utilization has increased by 11.22% in 2018 from 9.48% in the year 2017. The Net bookings of the company reflect the operating profits and hence it was $5180 million in 2018 compared to $4942 million in 2017. Hence the operating performance of EA Sports has increased.
Since, EA sports operates through different platforms like PCs, mobile apps and tablets, all these segments saw considerable growth in the year 2018 compared to its competitors.
The Accounting methods used by EA Sports are as follows:
1. Depreciation: They use straight line method of depreciation while...