CC The Percentage of Borrowed Funds to Equity Question

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($ in 000s)
Company
GPS
GPS
GPS
GPS
GPS
GPS
GPS
GPS
GPS
GPS
Tru
Tru
Tru
Tru
Tru
Tru
Tru
Tru
Tru
Tru
Cash and
cash
equivalents
Year
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
6,867
8,705
9,135
7,281
7,781
6,550
7,395
7,907
8,569
6,851
7,257
4,871
7,727
10,122
8,859
9,929
8,501
7,906
8,145
5,922
Receivables,
net
5,835
5,624
6,778
6,677
6,768
5,937
5,089
4,144
5,986
3,613
3,908
6,294
3,438
1,042
2,306
1,235
2,663
3,258
2,746
4,964
Inventory
43,046
44,469
45,141
44,858
43,803
40,714
36,318
32,713
26,523
32,724
36,929
45,044
37,724
28,604
35,124
26,343
27,347
31,907
32,517
42,335
Assets of
discontinued
operations
0
0
0
460
0
0
131
140
-211
-150
307
1,431
5,924
3,524
18,280
27,555
30,204
29,573
46,730
18,540
Prepaid
expenses and
other
1,941
1,441
2,224
1,909
1,588
1,774
2,960
1,473
3,625
2,958
4,889
5,160
7,796
8,143
8,267
8,044
7,787
9,240
7,158
6,464
Total current
assets
57,689
60,239
63,278
61,185
59,940
54,975
51,893
46,377
44,491
45,996
53,289
62,800
62,609
51,436
72,836
73,107
76,502
81,884
97,295
78,225
Land
26,026
25,659
25,722
25,098
24,045
22,475
21,545
19,988
26,931
18,748
27,138
27,222
27,231
27,302
27,582
27,209
26,347
25,747
31,267
22,949
Buildings and
improvements
117,567
115,907
116,194
113,373
108,615
101,526
97,323
100,290
121,653
84,688
117,116
113,701
115,719
135,179
122,624
141,383
102,810
95,400
84,228
87,447
Fixtures and
equipment
23,334
23,005
23,061
22,502
21,557
20,150
19,316
17,920
24,145
16,808
24,458
23,764
23,760
23,107
23,831
22,849
21,951
21,080
34,105
24,829
Computer
Less
hardware Construction- accumulated
and software in-progress depreciation
10,770
10,617
10,644
10,385
9,950
9,300
8,915
8,271
11,144
7,758
11,782
11,631
11,347
10,644
11,409
10,969
11,258
11,444
12,406
9,504
1,795
1,770
1,774
1,731
1,658
1,550
1,486
2,478
3,457
1,993
889
1,400
1,884
364
5,227
4,280
2,520
2,331
3,083
1,544
-71,782
-66,787
-63,115
-57,725
-51,896
-45,399
-43,486
-36,649
-58,733
-24,288
-55,391
-56,613
-58,813
-69,516
-60,040
-55,031
-51,356
-46,600
-65,861
-45,057
Goodwill
17,037
16,695
18,102
19,510
20,497
20,651
16,763
25,026
21,028
13,524
3,480
3,760
5,391
4,921
4,987
4,587
4,440
3,684
3,883
2,210
Right of use asset operating net,
0
0
0
0
0
0
0
4,015
4,513
3,417
0
0
0
0
0
0
0
4,030
4,022
3,875
Right of use asset – Property under
finance, net
capital lease
0
0
0
0
0
0
0
1,503
1,671
1,777
0
0
0
0
0
0
0
2,812
3,011
3,034
6,468
6,345
2,375
2,543
2,752
2,721
2,780
0
0
0
5,498
5,330
2,256
2,340
2,504
2,612
2,502
0
0
0
Pension Plan
Assets
20,078
19,386
19,582
20,804
22,742
19,728
19,470
22,514
25,456
26,011
16,944
16,829
15,648
17,036
18,708
19,896
20,823
21,642
22,617
23,621
Investments in
equity securities
9,921
6,131
5,671
6,149
5,987
5,456
4,129
3,942
4,786
3,423
102
1,231
309
2,236
2,219
334
2,270
1,556
1,322
578
Total
noncurrent
assets
161,214
158,728
160,010
164,370
165,907
158,159
148,240
169,299
186,051
153,860
152,015
148,256
144,733
153,614
159,051
179,087
143,565
143,127
134,083
134,533
Total assets
218,903
218,967
223,288
225,555
225,847
213,134
200,133
215,676
230,542
199,856
205,304
211,056
207,342
205,050
231,886
252,194
220,067
225,011
231,378
212,758
Accounts
payable
23,102
20,330
25,690
19,492
9,765
20,147
18,005
10,329
15,197
14,061
24,651
17,929
22,319
15,835
19,813
19,158
20,019
20,724
22,172
20,521
Accrued
liabilities
20,654
19,607
19,152
18,793
18,808
18,180
18,701
18,734
23,894
18,200
16,609
22,189
14,544
19,822
22,913
28,116
6,997
12,977
14,130
5,522
Current liabilities
Accrued income of discontinued Current portion
taxes
operations
capital lease
921
521
1,021
966
2,211
1,164
157
1,347
243
984
810
458
898
850
1,946
1,024
1,341
1,185
214
866
0
0
0
89
0
0
47
92
99
102
0
0
0
0
65
102
188
81
87
90
720
698
313
335
363
361
378
0
0
0
396
384
172
184
200
199
208
0
0
0
Current portion Current portion
of lease liability – of lease liability – Current portion
finance lease
operating lease of long-term debt
0
0
0
0
0
0
0
342
445
506
0
0
0
0
0
0
0
301
392
400
0
0
0
0
0
0
0
684
650
606
0
0
0
0
0
0
0
602
583
533
2,194
2,560
3,903
3,375
4,547
1,737
3,831
3,370
4,674
2,678
1,931
2,253
3,435
2,970
4,001
1,529
2,977
2,966
4,113
2,357
Short-term
borrowings
1,099
2,708
1,592
7,670
6,805
4,047
1,031
523
914
210
988
1,136
2,098
1,598
1,009
2,044
1,198
1,671
929
1,439
Debt to
Equity
1.718115
1.618874
1.598271
1.773018
1.776789
1.819013
1.862641
2.074984
2.269199
2.108377
1.904694
1.884151
1.939625
1.842474
1.98395
1.821943
1.980673
2.204869
2.138373
2.077653
Total
Projected
current
Benefit
liabilities Obligation
48,690
46,424
51,671
50,720
42,499
45,636
42,150
35,421
46,116
37,347
45,385
44,349
43,466
41,259
49,947
52,171
32,928
40,507
42,620
31,728
22,309
21,540
21,757
23,115
23,939
20,767
20,495
22,514
24,243
24,309
18,827
18,699
17,387
18,929
20,787
21,166
21,919
22,781
23,317
24,103
Long-term
debt
52,032
54,255
52,512
58,085
66,516
59,696
58,195
74,563
76,696
61,958
56,906
63,269
65,914
61,904
73,270
79,429
83,134
80,406
80,438
77,192
Capital
lease
liability
6,003
5,816
2,606
2,788
3,023
3,009
3,150
0
0
0
5,283
5,118
2,293
2,453
2,660
2,648
2,772
0
0
0
Lease liability operating lease
0
0
0
0
0
0
0
6,215
5,313
4,017
0
0
0
0
0
0
0
4,034
3,971
3,807
Lease liability finance lease
0
0
0
0
0
0
0
3,108
3,110
3,305
0
0
0
0
0
0
0
2,767
2,929
2,993
Deferred income
taxes
9,334
7,321
8,805
9,508
8,536
8,421
6,231
3,716
4,545
4,624
8,223
6,443
7,748
8,367
7,511
7,410
5,483
4,308
4,379
3,806
Total
noncurrent
liabilities
89,678
88,932
85,680
93,496
102,015
91,892
88,071
110,116
113,907
98,214
89,238
93,529
93,342
91,653
104,228
110,654
113,308
114,295
115,033
111,900
Total
liabilities
(Cur +
noncur)
138,368
135,356
137,351
144,216
144,513
137,528
130,221
145,537
160,023
135,560
134,624
137,878
136,808
132,912
154,175
162,825
146,236
154,802
157,653
143,628
Common Additional paidstock
in capital
305
317
323
323
332
342
352
378
365
373
204
222
236
236
240
249
262
276
274
278
5,108
5,436
6,914
7,455
7,766
6,817
5,076
4,551
5,377
2,138
25,160
23,769
21,773
19,867
17,444
15,498
14,716
12,973
11,728
10,942
Retained
earnings
89,354
90,021
85,777
76,566
72,978
68,691
63,967
66,357
64,645
62,433
48,151
41,391
42,862
55,996
58,467
66,596
61,436
60,542
65,878
59,103
Accumulated
other
Total
comprehensive shareholders’ Total liabilities
income(loss)
equity
and equity
-14,232
-12,163
-7,077
-3,005
258
-244
517
-1,147
133
-648
-2,836
7,796
5,662
-3,960
1,560
7,027
-2,582
-3,582
-4,154
-1,193
80,535
83,611
85,937
81,339
81,334
75,606
69,912
70,139
70,520
64,296
70,680
73,178
70,533
72,138
77,711
89,369
73,831
70,209
73,726
69,130
218,903
218,967
223,288
225,555
225,847
213,134
200,133
215,676
230,542
199,856
205,304
211,056
207,342
205,050
231,886
252,194
220,067
225,011
231,378
212,758
Check Total
Assets
218,903
218,967
223,288
225,555
225,847
213,134
200,133
215,676
230,542
199,856
205,304
211,056
207,342
205,050
231,886
252,194
220,067
225,011
231,378
212,758
Difference
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Change in
accounts
receivable (CF)
3,444
-211
1,154
-101
91
-831
-848
-945
1,842
-2,373
294
2,386
-2,856
-2,396
1,263
-1,070
1,428
595
-513
2,219
Change in
accounts
payable (CF)
-3,942
1,423
672
-283
-1,055
-3,089
-4,396
-3,605
-6,191
6,202
4,205
8,115
-7,320
-9,120
6,520
-8,781
1,004
4,560
610
9,818
Change in
accrued
Change in
income taxes
accrued
(CF)
liabilities (CF)
-492
-400
500
-55
1,245
-1,047
-1,007
1,190
-1,104
741
-174
-352
440
-48
1,096
-921
317
-156
-972
652
137
-1,047
-455
-359
15
-628
521
33
5,160
-5,694
-1,591
5,580
-7,645
5,278
3,091
5,203
-21,119
5,980
1,153
-8,608
Depreciation
and
amortization
(CF)
4,080
3,454
3,173
4,870
3,478
130
3,641
3,157
3,176
3,446
3,302
4,187
4,862
4,133
4,493
5,169
5,799
4,236
4,986
4,001
Change in
Inventories
(CF)
7,122
1,423
672
-283
-1,055
-3,089
-4,396
-3,605
-6,191
6,202
4,205
8,115
-7,320
-9,120
6,520
-8,781
1,004
4,560
610
9,818
Other
operating
activities
0
0
0
-2,234
0
0
0
497
-1,591
-2,332
294
-938
-454
4,610
850
1,569
0
-39
5,630
-1,288
Net cash flows
from operating
activities
1,455
14,829
16,856
16,959
20,428
13,718
20,563
23,639
25,637
15,725
13,851
24,056
11,361
26,504
21,074
23,349
-2,221
22,910
24,959
3,187
Proceeds from
disposal of
property and
equipment
1,118
881
1,241
727
532
580
489
1,002
236
2,378
0
333
0
880
0
151
13
147
-1,283
-1,115
Investment
and business
acquisitions,
net of cash
0
-5,000
-10,000
-5,800
0
0
-5,558
-15,431
-11,043
0
124
191
-7,133
-5,689
-8,551
-480
-209
0
0
0
Other
investing
activities
-122
-79
-192
-138
-271
-131
219
-438
-101
-694
-6,547
2,173
-1,427
-6,893
-4,138
0
0
13
-1,928
-1,241
Payments for
property and
equipment
-10,619
-11,477
3
-13,115
-12,898
-13,510
0
-12,184
-16,249
0
-558
-124
-422
-311
-293
-164
-307
-190
-287
-215
Net cash flows
Payments of
for investing Other financing long-term
activities
activities
debt
Dividends paid
-9,623
-15,675
-8,948
-18,326
-12,637
-13,061
-4,850
-27,051
-27,157
1,684
-6,980
2,573
-8,982
-12,014
-12,982
-493
-503
-30
-3,498
-2,571
0
0
0
0
0
0
0
0
0
0
0
-5,000
-11,023
5,222
0
15,009
0
0
0
0
-2,055
-4,432
-3,904
-4,968
-1,478
-4,584
-4,080
-6,033
-5,475
-9,069
-11,738
-378
-9,217
-1,391
-6,796
-13,889
-10,040
-8,946
-14,504
-9,699
-3,306
-3,433
-3,488
-4,035
-5,048
-5,048
-5,237
-5,317
-5,421
-5,446
-1,591
-1,600
-1,600
-1,600
-1,600
-1,710
-1,710
-1,820
-1,820
-1,820
Net change in
short-term
borrowings
676
1,609
-1,116
6,078
-1,758
3,925
-3,016
-508
391
-704
778
148
962
-500
-589
1,035
-846
473
-742
510
Proceeds from
issuance of longterm debt
20,672
10,495
0
3,866
211
5,050
11,396
15,546
13,870
4,931
8,787
0
8,858
10,778
26,093
15,529
4,493
0
3,950
0
Purchase of
Treasury
stock
-8,298
-4,112
0
0
0
0
-14,776
-276
-1,845
-7,121
-6,471
-15,480
0
-6,493
-8,333
-8,187
-10,898
-1,880
-15,289
-3,021
Stock
option
exercises
479
719
600
426
282
0
0
0
0
0
982
1,333
1,658
2,027
1,600
396
1,307
209
0
0
Net cash flows
from financing
activities
8,168
846
-7,908
1,367
-7,791
-657
-15,713
3,412
1,520
-17,409
-9,253
-20,976
-10,362
8,042
10,375
8,183
-17,694
-11,964
-28,405
-14,030
Net (decrease) /
increase in cash and
cash equivalents
1,500
1,838
430
-1,854
500
-1,231
845
512
662
-1,718
406
-2,386
2,856
2,396
-1,263
1,070
-1,428
-595
239
-2,223
difference
Net change
-1,500
-1,838
-430
1,854
-500
1,231
-845
-512
-662
1,718
-2,788
8,038
-10,839
20,137
19,730
29,968
-18,990
11,511
-7,183
-11,191
0
0
0
0
0
0
0
0
0
0
-2,382
5,652
-7,983
22,533
18,467
31,038
-20,418
10,916
-6,944
-13,413
Sales
revenue
572,852
567,419
578,167
560,083
544,518
514,401
485,992
479,084
627,955
446,296
341,836
358,908
355,163
352,340
356,546
344,654
344,188
327,881
415,012
320,982
Credit
card
revenue
4,556
3,516
3,422
3,218
3,047
3,096
2,897
2,953
3,246
2,494
0
0
0
0
5,960
6,218
7,129
8,542
7,244
6,776
Less
Less Sales Discount
returns
on Sales
-36,099
-43,883
-43,883
-42,104
-38,095
-37,728
-41,057
-40,108
-52,332
-41,860
-30,981
-28,776
-32,047
-32,052
-34,221
-36,966
-43,507
-39,182
-43,879
-47,930
-55,436
-44,922
-52,055
-44,903
-40,819
-32,819
-25,983
-33,844
-51,933
-23,612
-1,988
-2,199
-370
-3,493
-2,503
-3,394
-8,299
-6,766
-7,321
-9,288
Net sales
485,873
482,130
485,651
476,294
468,651
446,950
421,849
408,085
526,936
383,318
308,867
327,933
322,747
316,796
325,782
310,511
299,511
290,476
371,056
270,540
Cost of
sales
Gross
margin
361,256
360,984
365,086
358,069
352,297
335,127
314,946
304,444
393,308
285,895
225,530
228,284
231,822
287,872
291,436
279,240
266,435
257,502
336,381
244,558
124,617
121,146
120,565
118,225
116,354
111,823
106,903
103,641
133,629
97,423
83,337
99,649
90,924
28,924
34,347
31,271
33,076
32,973
34,674
25,982
Depreciation
and
amortization
4,211
4,411
4,292
4,160
4,007
4,104
3,948
3,828
4,074
3,433
6,355
9,836
9,462
8,871
9,084
9,471
9,262
8,991
9,911
7,198
Selling, general
and
administrative
expenses
101,593
97,279
93,056
90,665
87,954
84,516
81,762
76,157
99,079
70,815
55,355
60,787
60,473
313
646
-277
163
1,557
685
336
Net pension Pension service
cost
cost
535
517
522
555
575
498
492
409
540
550
582
564
583
533
452
449
417
454
499
508
526
488
547
511
560
488
578
542
Pension nonservice cost
components
83
-10
18
50
38
36
72
36
Gain on
sale
323
521
300
263
272
288
277
278
260
220
0
-4,756
0
0
-716
0
0
0
0
0
Interest
income
2,267
2,469
2,529
2,351
2,268
2,165
3,255
1,884
1,246
1,489
0
0
0
0
0
13
44
109
55
188
Interest
expense
2,102
2,239
2,446
2,456
2,338
2,493
2,425
1,841
2,849
1,706
3,101
3,493
3,919
3,808
4,472
4,036
4,567
4,341
5,632
3,998
Provision
for
income
taxes
6,204
6,558
7,985
8,105
7,968
7,944
4,480
4,801
5,871
4,600
5,760
7,120
5,351
5,342
6,838
6,287
3,866
3,617
3,733
2,833
Income from
continuing
operations
12,561
13,132
15,092
14,899
16,053
14,720
16,837
18,095
22,098
17,411
12,314
13,209
11,302
10,135
12,091
11,259
14,210
13,483
13,649
10,649
Discontinued
Net
operations, net income /
of tax
(loss)
2,267
0
0
0
0
2,232
2,221
963
0
2,066
302
187
-1,156
0
-1,404
13
-2,244
109
55
1,988
14,828
13,132
15,092
14,899
16,053
16,952
19,058
19,058
22,098
19,477
12,616
13,396
10,146
10,135
10,686
11,272
11,966
13,592
13,703
12,637
Basic
EPS
1.14
1.18
1.37
1.36
1.46
1.34
1.53
1.63
2.02
1.59
0.39
0.42
0.36
0.32
0.38
0.34
0.45
0.43
0.43
0.33
Diluted
EPS
1.15
1.20
1.38
1.37
1.47
1.35
1.54
1.66
2.03
1.60
0.40
0.43
0.37
0.33
0.39
0.36
0.46
0.44
0.44
0.34
Market
price per
share
44.50
44.56
46.23
44.50
47.10
41.54
48.32
48.41
52.21
47.45
8.30
9.89
7.88
8.08
8.23
8.05
10.24
11.12
11.54
9.93
Accounting 334 (Professor Cohen) – Data Analytics – Excel Exercise – Due April 28th 2022
This is a data analytics exercise modified from the one presented in your textbook. We will be using
Excel to perform an analysis of two companies: GPS Corporation and Tru, Inc.
Please download the Excel spreadsheet “GPS_Tru_Financials.xls” from the Data Analytics Module on
Canvas.
Part 1: For each of the two companies in the most recent five-year period 2017-2021 calculate and
display (using the chart option) the trends for the:
(a) Debt to equity ratio (Total Debt / Total Equity)
(b) Rate of return on assets (Net Income / Total Assets)
(c) Rate of return on shareholders’ equity (Net Income / Shareholders’ Equity)
Please make sure to label the charts correctly (including chart title, x-axis, and the y-axis). These charts
will be used to answer the next part and will be submitted as supporting material.
Part 2: Based on what you find, answer the following questions:
1. Which of the two companies finances a higher percentage of its assets by borrowed funds
relative to funds invested by shareholders as measure by the debt to equity ratio in 2021?
2. Which of the two companies indicates a higher profitability during the period 2017-2021
without regard to the sources of financing as measured by the return on assets ratio?
3. Which of the two companies indicates a higher effectiveness of employing resources provided
by owners during the period 2017-2021 as measured by the return on shareholders’ equity
ratio?
4. Management is using its borrowed funds to enhance the earnings for shareholders of (a) GPS
Corporation, (b) Tru, Inc., (c) both firms, or (d) neither firm during the period 2017-2021?
Background Information
• What does the debt to equity (D/E) ratio tell us? The firm’s capital structure refers to the
amount of debt and equity the company uses to finance its operations. D/E ratio is oftentimes
used as a measure of risk. All else equal, the higher the D/E ratio, the higher the risk. The risk
referred to here is “default risk” because it indicates the likelihood the company will default on
its obligations (if it borrows excessively).
However, debt can also create “favorable financial leverage”. If the company can earn a return
on the borrowed funds in excess of the cost of borrowing the funds, then shareholders are
provided with a total return greater than what could have been earned with equity funding
alone. Examining additional ratios will help determine whether the company has a favorable
financial leverage.
•
What does return on assets (ROA) ratio tell us? ROA (net income / assets) is a measure of the
company’s profitability. It measures profitability without regard to the source of the company’s
financing (i.e., whether the financing is debt or equity). Remember, Assets = Liabilities + Equity,
so when we divide by assets we are dividing by debt and equity.
You can also think of ROA in terms of how well the company employs its assets. The ratio helps
us answer the following question: for every $1 of asset the company employs, how much net
income does the company generate?
•
What does return on shareholders’ equity (ROE) ratio tell us? ROE (net income / shareholders’
equity) is also a measure of the company’s profitability. However, it does measure profitability
with regard to the source of financing – it looks specifically at the shareholders’ equity (rather
than debt and equity combined). Doing so, the ROE measures how effective the company is at
employing resources provided by the owners’ of the company.
The ratio helps us answer the following question: for every $1 of financing provided by
shareholders, how much net income does the company generate?
•
Does the company have favorable financial leverage? For our purposes, we will consider a
company to have favorable financial leverage if its ROE is greater than its ROA.
Assignment Submission:
To receive full credit, please upload by December 2nd to the Data Analytics Assignment on Canvas, a
report in a Word or PDF with:
A. Your answers to the above four questions.
B. Supporting data and labeled charts associated with the three ratios (debt to equity, return on
equity, and return on assets). You will need to copy your chart from Excel (Microsoft ‘snip and
sketch’ is an easy tool you can use to avoid any formatting issues).
**Please name your file submission as follows: LastName_FirstName_DataAnalytics (e.g.,
Cohen_Shira_DataAnalytics).**
Finally, you may consult with your classmates as you do this assignment, but the work you submit must
be your own. For those not familiar with Excel, I have created a short explanation video that walks you
through the first part of the assignment – posted to Canvas in the Data Analytics module.
Good luck! �

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