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Foundation of finance, and the balance sheet

Open the file (Topic Paper I assignment #1) for instructions, and please follow it. I uploaded the needed PowerPoint files for this assignment.

I need 6 full pages

Topic Paper I

For the topic papers, you are to find a recent news story regarding a publically traded company, and relate it to the concepts discussed in the course (see the paper numbers and topics below)

You will need to explain in depth how the concepts connect with the issue in the news story and/or could address the issue. The paper should be 6-7 pages in length with at least 3 scholarly references (the text book is not a scholarly reference, but can be used as an additional reference). Useful sources of information for this paper include:

https://finance.yahoo.com/

https://www.sec.gov/edgar.shtml

, and the company’s most recent quarterly report. Use APA style, including APA section headings.

For this topic paper Include analysis of: The five principles that form the foundation of finance, and b) the balance sheet, as it relates to the company you selected.

Introduction of the issue		15
Connection with course concepts	70
APA / Grammar / Structure / References
Total	100

Foundations of Finance

Tenth Edition

Chapter 1

An Introduction to the Foundations of Financial Management

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Learning Objectives
1.1 Identify the goal of the firm.
1.2 Understand the basic principles of finance, their importance, and the importance of ethics and trust.
1.3 Describe the role of finance in business.
1.4 Distinguish among the different legal forms of business organization.
1.5 Explain what has led to the era of the multinational corporation.
1.6 Describe how this course and the skills you will develop in it will help you in your career and in your life.

The Goal of the Firm

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The Goal of the Firm
The goal of the firm is to _________________________________________________________________________________________________________________________________________?

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The Goal of the Firm
The goal of the firm is to create value for the firm’s owners (that is, its shareholders). Thus the goal of the firm is to “maximize shareholder wealth” by maximizing the price of the existing common stock.
Good financial decisions will increase stock price, and poor financial decisions will lead to a decline in stock price.

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Five Principles That Form the Foundations of Finance

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Principle 1: Cash Flow Is What Matters
Accounting profits are not equal to cash flows. It is possible for a firm to generate accounting profits but not have cash or to generate cash flows and not report accounting profits in the books.
Cash flow, and not profits, drive the value of a business.
We must determine incremental or marginal cash flows when making financial decisions.
Incremental cash flow is the difference between the projected cash flows if the project is selected versus what they will be if the project is not selected.

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Principle 2: Money Has a Time Value (1 of 2)
A dollar received today is worth more than a dollar received in the future.
Because we can earn interest on money received today, it is better to receive money sooner rather than later.

Principle 2: Money Has a Time Value (2 of 2)
Opportunity Cost – It is the cost of making a choice in terms of next best alternative that must be forgone.
Example: By lending money to your friend at zero percent interest, there is an opportunity cost of 1% that could potentially be earned by depositing the money in a savings account in a bank.

Principle 3: Risk Requires a Reward
Investors will not take on additional risk unless they expect to be compensated with additional reward or return.
Investors expect to be compensated for “delaying consumption’’ and “taking on risk.’’
Thus, investors expect a return when they deposit their savings in a bank (e.g., delayed consumption), and they expect to earn a relatively higher rate of return on stocks compared to a bank savings account (e.g., taking on risk).

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Principle 4: Market Prices Are Generally Right
In an efficient market, the market prices of all traded assets (such as stocks and bonds) fully reflect all available information at any moment in time.
Thus stock prices are a useful indicator of the value of the firm. Price changes reflect changes in expected future cash flows. Good decisions will tend to increase in stock price and vice versa.
Note there are inefficiencies in the market that may distort the market prices from value of assets. Such inefficiencies are often caused by behavioral biases.

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Principle 5: Conflicts of Interest Cause Agency Problems
The separation of management and the ownership of the firm creates an agency problem. Managers may make decisions that are not consistent with the goal of maximizing shareholder wealth.
Agency conflict is reduced through monitoring (e.g., annual reports), compensation schemes (e.g., stock options), and market mechanisms (e.g., takeovers).

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Ethics and Trust in Business
Ethical behavior is doing the right thing! But what is the right thing?
Ethical dilemma—Each person has his or her own set of values, which forms the basis for personal judgments about what is the right thing.
Sound ethical standards are important for business and personal success. Unethical decisions can destroy shareholder wealth (e.g., Enron scandal).

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The Role of Finance in Business (1 of 2)
Three basic issues are addressed by the study of finance:
What long-term investments should the firm undertake? (Capital budgeting decision)
How should the firm raise money to fund these investments? (Capital structure decision)
How should cash flows arising from day-to-day operations be managed? (Working capital decision)

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The Role of Finance in Business (2 of 2)
Knowledge of financial tools is relevant for decision making in all areas of business (be it marketing, production, etc.) and also in managing personal finances.
Decisions involve an element of time and uncertainty; financial tools help adjust for time and risk.
Decisions taken in business should be financially viable; financial tools help determine the financial viability of decisions.

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Figure 1.2 How the Finance Area Fits into a Firm

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The Legal Forms of Business Organization (1 of 2)

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The Legal Forms of Business Organization (2 of 2)
Business Forms
Sole Proprietorship
Partnership
Corporation
Hybrid
S-Type
LLC

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Sole Proprietorship
Business owned by an individual
Owner maintains title to assets and profits
Unlimited liability
Termination occurs on owner’s death or by the owner’s choice

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Partnership
Two or more persons come together as co-owners.
General Partnership: All partners are fully responsible for liabilities incurred by the partnership.
Limited Partnerships: One or more partners can have limited liability, restricted to the amount of capital invested in the partnership. There must be at least one general partner with unlimited liability. Limited partners cannot participate in the management of the business, and their names cannot appear in the name of the firm.

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Corporation
Functions legally as a separate entity and apart from its owners.
Corporation can sue, be sued, purchase, sell, and own property.
Owners (shareholders) dictate direction and policies of the corporation, oftentimes through elected board of directors.
Shareholder’s liability is restricted to amount of investment in company.
Life of corporation does not depend on the owners; corporation continues to be run by managers after transfer of ownership through sale or inheritance.

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The Trade-Offs: Corporate Form
Benefits: Limited liability, easy to transfer ownership, easier to raise capital, unlimited life (unless the firm goes through corporate restructuring such as mergers and bankruptcies)
Drawbacks: No secrecy of information, maybe delays in decision making, greater regulation, double taxation

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Double Taxation Example (1 of 2)
Assume earnings before tax = $1,000
Federal tax @ 25% = $250
After-tax income available for distribution to shareholders = $750
Compute the taxes if the company chooses to distribute the entire after-tax profits to shareholders as dividends.

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Double Taxation Example (2 of 2)
If corporation distributes profits as dividends to shareholders, shareholders will be taxed again.
Assuming dividends are taxed @ 15%
Dividend tax = 15% of $750 = $112.50
==>

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S-Corporations and Limited Liability Companies (LLCs) (1 of 2)
S-Type Corporations
Benefits
Limited liability
Taxed as partnership (no double taxation like corporations)
Limitations
Owners must be people so cannot be used for a joint ventures between two corporations

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S-Corporations and Limited Liability Companies (LLCs) (2 of 2)
Limited Liability Companies (LLC)
Benefits
Limited liability
Taxed like a partnership
Limitations
Qualifications vary from state to state
Cannot appear like a corporation otherwise it will be taxed like one

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Table 1.1 The Different Business Organizational Forms (1 of 2)
Blank Number of Owners Liability for Firm’s Debts Change in Ownership Dissolves the Firm Taxation
Sole Proprietorship One Yes Yes Personal/Pass-Through
Types of Partnerships Blank Blank Blank Blank
1. General Partnerships No Limit Each partner is liable for the entire amount Yes Personal/Pass-Through
2. Limited Partnerships At least one general partner (GP), no limit on limited partners (LP) GP – Yes, LP – No GP – Yes, LP – No Personal/Pass-Through

Table 1.1 The Different Business Organizational Forms (2 of 2)
Blank Number of Owners Liability for Firm’s Debts Change in Ownership Dissolves the Firm Taxation
Types of Corporations Blank Blank Blank Blank
1. Corporation No Limit No No Both corporate and personal taxes
2. S-corporation Maximum of 100 No No Personal/Pass-Through
3. Limited Liability Company No Limit No No Personal/Pass-Through

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Finance and the Multinational Firm: The New Role

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Finance and the Multinational Firm: The New Role
Coca-Cola, among other companies, receives significant profits from overseas sales.
U.S. firms are looking to international expansion to discover profits.
In addition to U.S. firms going abroad, we have also witnessed many foreign firms making their mark in the United States. For example, auto industry dominated by Toyota, Honda, Nissan, and BMW.

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Developing Skills for Your Career
Finance is a skill needed regardless of career choice. In this class, you will learn:
Critical thinking skills
Excel skills
Data analysis skills
Collaboration and communication skills

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Key Terms (1 of 2)
Agency problem
Capital budgeting
Capital structure decisions
Corporation
Efficient market
Financial markets
General partnership
Incremental cash flow

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Key Terms (2 of 2)
Limited Liability Company (LLC)
Limited partnership
Partnership
Opportunity cost
S-corporation
Sole proprietorship
Working capital management

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Copyright
This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work and materials from it should never be made available to students except by instructors using the accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials.

36
Total tax=250+112.5=$362.5 or 36.25%

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Foundations of Finance

Tenth Edition

Chapter 2

The Financial Markets and Interest Rates

Learning Objectives
2.1 Describe key components of the U.S. financial market system and the financing of business.
2.2 Understand how funds are raised in the capital markets.
2.3 Be acquainted with recent rates of return.
2.4 Explain the fundamentals of interest rate determination and the popular theories of the term structure of interest rates.

Financing of Business: The Movement of Funds Through the Economy

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Financial Markets: Transfer of Capital
Financial markets play a critical role in capitalist economies. Financial markets help facilitate the transfer of funds from “saving surplus” units to “saving deficit” units, i.e., transfer money from those who have the money to those who need it.
See Figure 2.1 for three ways to transfer capital in the economy:
Direct transfer
Indirect transfer using the investment banker
Indirect transfer using the financial intermediary

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Figure 2.1 Three Ways to Transfer Capital in the Economy

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Direct Transfer
Direct Transfer
Firm seeking funds directly approaches a wealthy investor.
For example, a new business venture seeking funding from venture capitalist.

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Role of Venture Capitalist
Venture capitalist are the prime source of funding for start-up companies and companies in “turnaround” situations. Funding such ventures is very risky but carries the potential for high returns.
The borrowing firm may not have the option of pursuing public offering due to small size, no record of profits, and uncertain future growth prospects.

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Indirect Transfer (1 of 2)
Indirect Transfer (using investment banks)
Here the investment bank acts as a link between the firm (needing funds) and the investors (with surplus funds)

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Indirect Transfer (2 of 2)
Indirect Transfer (using financial intermediary)
Here the financial intermediary (such as mutual funds) collects funds from savers in exchange for its own securities (indirect). The collected funds are then used to acquire securities (such as stocks and bonds) from the firm.

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Public Offerings versus Private Placements
Public Offering
Both individuals and institutional investors have the opportunity to purchase securities. The securities are initially sold by the managing investment bank firm. The issuing firm never actually meets the ultimate purchaser of securities.
Private or Direct Placement
The securities are offered and sold directly to a limited number of investors.

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Primary Markets versus Secondary Markets (1 of 2)
Primary Market (initial issue)
This is the market in which new issues of a securities are sold to initial buyers. This is the only time the issuing firm ever gets any money for the securities. For example, Google raised $1.76 billion through public sale of shares in August 2004.
Seasoned Equity Offering (SEO)
It refers to sale of additional shares by a company with shares that are already publicly traded. For example, Google raised $4.18 billion in September 2005.

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Primary Markets versus Secondary Markets (2 of 2)
Secondary Market (subsequent trading)
This is the market in which previously issued securities are traded. The issuing corporation does not get any money for stocks traded on the secondary market, for example, trading among investors today of Google stocks.
Primary and secondary markets are regulated by the SEC. Firms have to get SEC approval before the sale of securities in primary market. Firms must report financial information to SEC on a regular basis (ex. financial statements) to protect investors.

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The Money Market versus the Capital Market
Money Market
This is the market for short-term debt instruments (maturity periods of one year or less). Money market is typically a telephone and computer market (rather than a physical building).
Examples: Treasury bills (issued by federal government), commercial paper, negotiable CDs, bankers’ acceptances
Capital Market
This is the market for long-term financial securities (maturity greater than one year).
Examples: Corporate bonds, common stocks, Treasury bonds, term loans, and financial leases

Spot Markets Versus Futures Markets
Cash Markets
This is the market in which something sells immediately.
Futures Markets
This is the market for buying and selling at some future date.

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Organized Securities Exchanges
Organized Securities Exchanges are tangible entities and financial instruments are traded on its premises.
New York Stock Exchange (N Y S E, also known as “big board”) is the oldest of all the organized exchanges. In 2018, the value of the shares of stock listed in the NYSE was more than $22 trillion.
The N YS E is a hybrid market allowing face-to-face and electronic trading.

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Over-the-Counter Markets
If firms do not meet the listing requirements of the exchange or wish to avoid higher reporting requirements and fees of exchanges, they may choose to trade on over-the-counter (OTC) markets.
OTC market refers to all securities market except organized exchanges. There is no specific geographic location for OTC market. Most transactions are done through a network of security dealers who are known as broker-dealers and brokers. Their profit depends on the price at which they are willing to buy (bid price) and the price at which they are willing to sell (ask price).
The most prominent OTC market for stocks is NASDAQ. NASDAQ lists more than 5,000 securities (including Facebook, Apple, and Amazon). Most corporate bond transactions are also conducted on OTC markets.

Stock Exchange Benefits
Provides a continuous market
Establishes and publicizes fair security prices
Helps businesses raise new capital

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Investment Banking Function
Investment Banker/Underwriter
They are financial specialists involved as an intermediary in the sale of securities (stocks and bonds). They buy the entire issue of securities from the issuing firm and then resell it to the general public.
The difference between the price the corporation gets and the public offering price is called the underwriter’s spread.

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Functions of an Investment Banker
Underwriting
Underwriting means assuming risk. Because money for securities is paid to the issuing firm before the securities are sold, there is a risk to the investment bank(s).
Distributing
Once the securities are purchased from issuing firm, they are distributed to ultimate investors.
Advising
On timing of sale, type of security, etc.

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Distribution Methods (1 of 4)
Negotiated Purchase
Issuing firm selects an investment banker to underwrite the issue. The firm and the investment banker negotiate the terms of the offer.
Competitive Bid Purchase
Several investment bankers bid for the right to underwrite the firm’s issue. The firm selects the banker offering the highest price.

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Distribution Methods (2 of 4)
Commission or Best-Efforts Basis
Issue is not underwritten, i.e., no money is paid upfront for the stocks. Investment bank, acting as an agent, attempt to sell the stocks in return for a commission.
Privileged Subscription
Investment banker helps market the new issue to a select group of investors such as current stockholders, employees, or customers.

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Distribution Methods (3 of 4)
Dutch Auction
Investors place bids indicating how many shares they are willing to buy and at what price. The price the stock is then sold for becomes the lowest price at which the issuing company can sell all the available shares.
See Figure 2.2.

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Distribution Methods (4 of 4)
Direct Sale
Issuing firm sells the securities directly to the investing public.
No investment banker is involved.

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Private Debt Placements (1 of 2)
Private placements of debt refers to raising money directly from prominent investors such as life insurance companies, pension funds. It can be accomplished with or without the assistance of investment bankers.

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Private Debt Placements (2 of 2)
Advantages
Faster to raise money
Reduces flotation costs
Offers financing flexibility
Disadvantages
Interest costs are higher than public issues
Restrictive covenants
Possible future SEC registration

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Flotation Costs
Flotation costs are transaction costs incurred when a firm raises funds by issuing securities:
Underwriter’s spread (difference between gross and net proceeds)
Issuing costs (printing and engraving of security certificates, legal fees, accounting fees, trustee fees, other miscellaneous expenses)

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Sarbanes-Oxley Act (SOX)
In response to corporate scandals, Congress passed SOX in 2002.
SOX holds senior corporate advisors (such as accountants, lawyers, board of directors, officers) responsible for any instance of misconduct.
SOX attempts to protect the interest of investors by improving transparency and accuracy of corporate disclosures.
SOX has been criticized for imposing additional compliance costs on the firms. Some firms have responded by delisting from major exchanges or choosing to list on foreign exchanges.

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Long-Term Rates of Return
See Figure 2.3.
Higher returns are associated with higher risk.
Investors demand compensation for inflation and other elements of risk (such as default).

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Figure 2.3 Rates of Return and Standard Deviations, 1926 to 2017

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Important Definitions
Opportunity cost—Rate of return on next best investment alternative to the investor
Standard deviation—Dispersion or variability around the mean rate of return in the financial markets
Real return—Return earned above the rate of inflation
Maturity-risk premium—Additional return required by investors in long-term securities to compensate for greater risk of price fluctuations on those securities caused by interest rate changes
Liquidity-risk premium—Additional return required by investors in securities that cannot be quickly converted into cash at a reasonably predictable price

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Interest Rate Levels
Interest rate levels and inflation are displayed in Table 2.2 and Figure 2.4. We observe the following:
Inflation and interest rates have a direct relationship.
The returns are affected by the degree of inflation, default premium, maturity premium, and liquidity premium.

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Table 2.1 Interest Rate Levels and Inflation Rates, 1990 through 2017 (1 of 4)
Year 3-month Treasury Bills % 30-yr Treasury Bonds % 30-yr Aaa Corporate Bonds % Inflation Rate %
1990 7.50 8.61 9.32 5.4
1991 5.38 8.14 8.77 4.2
1992 3.43 7.67 8.14 3.0
1993 3.00 6.59 7.22 3.0
1994 4.25 7.37 7.97 2.6
1995 5.49 6.88 7.59 2.8
1996 5.01 6.71 7.37 2.9

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Table 2.1 Interest Rate Levels and Inflation Rates, 1990 through 2017 (2 of 4)
Year 3-month Treasury Bills % 30-yr Treasury Bonds % 30-yr Aaa Corporate Bonds % Inflation Rate %
1997 5.06 6.61 7.27 2.3
1998 4.78 5.58 6.53 1.6
1999 4.64 5.87 7.05 2.2
2000 5.82 5.94 7.62 3.4
2001 3.40 5.49 7.08 2.8
2002 1.61 5.43 6.49 1.6
2003 1.01 4.93 5.66 2.3
2004 1.37 4.86 5.63 2.7

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Table 2.1 Interest Rate Levels and Inflation Rates, 1990 through 2017 (3 of 4)
Year 3-month Treasury Bills % 30-yr Treasury Bonds % 30-yr Aaa Corporate Bonds % Inflation Rate %
2005 3.15 4.51 5.23 3.4
2006 4.73 4.91 5.59 3.2
2007 4.36 4.84 5.56 2.9
2008 1.37 4.28 5.63 3.8
2009 0.15 4.08 5.31 −0.4
2010 0.14 4.25 4.94 1.6
2011 0.05 3.91 4.64 3.2
2012 0.09 2.92 3.67 2.1

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Table 2.1 Interest Rate Levels and Inflation Rates, 1990 through 2017 (4 of 4)
Year 3-month Treasury Bills % 30-yr Treasury Bonds % 30-yr Aaa Corporate Bonds % Inflation Rate %
2013 0.06 3.45 4.23 1.5
2014 0.03 3.34 4.16 1.6
2015 0.23 2.97 4.06 0.1
2016 0.51 3.11 4.04 1.3
2017 1.32 2.77 3.52 2.0
Mean 2.78 5.22 6.08 2.48

Source: Federal Reserve System, Release H-15, Selected Interest Rates. Office of Inspector General c/o Board of Governors of the Federal Reserve System.

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Figure 2.4 Interest Rate Levels and Inflation Rates, 1990 through 2017
Source: Federal Reserve System, Release H-15, Selected Interest Rates. Office of Inspector General c/o Board of Governors of the Federal Reserve System.

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Observations from Table 2.1 and Figure 2.4
Between 1990 and 2017:
Average inflation premium = 2.48%
Average default risk premium = 0.86%
Average maturity risk premium = 2.44%

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Interest Rate Determinants
Nominal interest rate = Real risk-free rate + Inflation premium + Default-risk premium + Maturity-risk Premium + Liquidity-risk Premium
Thus the nominal rate or quoted rate for securities is driven by all of these risk premium factors. Such knowledge is critical when companies set an interest rate for their issues.

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Real and Nominal Rates
Real risk-free interest rate = risk-free rate − inflation premium
Nominal interest rate ≈ real rate of interest + inflation risk premium
The real rate of interest is the nominal (quoted) rate of interest less any loss in purchasing power of the dollar during the time of the investment.

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The Term Structure of Interest Rates
Figure 2.5 shows the relationship between a debt security’s rate of return and the length of time until the debt matures, where the risk of default is held constant.
The graph could be upward sloping (indicating longer term securities command higher returns), flat (equal returns for long- and short-term securities), or inverted (longer-term securities command lower returns compared to short-term securities).
The graph changes over time. An upward-sloping curve is most commonly observed.

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Figure 2.6 Changes in the Term Structure of Interest Rates around September 11, 2001
Source: Federal Reserve System, Release H-15, Office of Inspector General c/o Board of Governors of the Federal Reserve System.

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Figure 2.7 Historical Term Structures of Interest Rates for Government Securities
Source: Federal Reserve System, Release H-15, Office of Inspector General c/o Board of Governors of the Federal Reserve System.

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What Explains the Shape of the Term Structure? (1 of 3)
The Unbiased Expectations Theory
Term structure is determined by an investor’s expectations about future interest rates.

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What Explains the Shape of the Term Structure? (2 of 3)
The Liquidity Preference Theory
Investors require maturity-risk premiums to compensate them for buying securities that expose them to the risks of fluctuating interest rates.

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What Explains the Shape of the Term Structure? (3 of 3)
The Market Segmentation Theory
Legal restrictions and personal preferences limit choices for investors to certain ranges of maturities.
This theory implies that the rate of interest for a particular maturity is determined by demand and supply for a given maturity.

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Key Terms (1 of 5)
Angel investor
Basis point
Capital markets
Default-risk premium
Direct sale
Dutch auction
Flotation costs
Futures market

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Key Terms (2 of 5)
Initial public offering (I P O)
Inflation premium
Investment banker
Liquidity preference theory
Liquidity-risk premium
Market segmentation theory
Maturity-risk premium
Money market

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Key Terms (3 of 5)
Nominal (or quoted) rate of interest
Opportunity cost of funds
Organized security exchanges
Over-the-counter markets
Primary market
Private placement
Privileged subscription
Public offering

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Key Terms (4 of 5)
Real rate of interest
Real risk-free interest rate
Seasoned equity offering (S E O)
Secondary market
Spot market
Syndicate
Term structure of interest rates
Unbiased expectations theory

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Key Terms (5 of 5)
Underwriting
Underwriter’s spread
Venture capitalist

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Foundations of Finance

Tenth Edition

Chapter 3

Understanding Financial Statements and Cash Flows

Learning Objectives
3.1 Compute a company’s profits, as reflected by its income statement.
3.2 Determine a firm’s financial position at a point in time based on its balance sheet.
3.3 Measure a company’s cash flows.
3.4 Describe the limitations of financial statements.
3.5 Calculate a firm’s free cash flows and financing cash flows.

The Income Statement

The Income Statement
It is also known as profit/loss statement.
It measures the results of firm’s operation over a specific period.
The bottom line of the income statement shows the firm’s profit or loss for a period.

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The Income Statement
It is also known as profit/loss statement.
It measures the results of firm’s operation over a specific period.
The bottom line of the income statement shows the firm’s profit or loss for a period.
Sales − Expenses = Profits

Income Statement Terms (1 of 2)
Revenue (Sales)
Money derived from selling the company’s product or service
Cost of Goods Sold (COGS)
The cost of producing or acquiring the goods or services to be sold
Operating Expenses
Expenses related to marketing and distributing the product or service, general administrative expenses and depreciation expense

Income Statement Terms (2 of 2)
Financing Costs
The interest paid to creditors
Tax Expenses
Amount of taxes owed, based upon taxable income

Common-Sized Income Statement
Common-sized income statement restates the income statement items as a percentage of sales.
Common-sized income statement makes it easier to compare trends over time and across firms in the industry.
See Table 3.1.

Table 3.1 Walmart: Income Statement for the year ending January 31, 2018 (expressed in millions, except per share data, and as a percentage of sales) (1 of 4)
Blank Dollars Percentage of Sales Blank
Sales $500,343 100% Blank
Cost of goods sold (373,396) –74.6 Blank
Gross profits 126,947 25.4 Gross profit margin

Table 3.1 Walmart: Income Statement for the year ending January 31, 2018 (expressed in millions, except per share data, and as a percentage of sales) (2 of 4)
Blank Dollars Percentage of Sales Blank
Operating expenses Blank Blank Blank
Selling, and administrative expenses (95,981) –19.2 Blank
Depreciation expense (10,529) –2.1 Blank
Total operating expenses (106,510) –21.3 Blank
Operating income (earnings before interest and taxes) 20,437 4.1 Operating profit margin

Table 3.1 Walmart: Income Statement for the year ending January 31, 2018 (expressed in millions, except per share data, and as a percentage of sales) (3 of 4)
Blank Dollars Percentage of Sales Blank
Interest expense (2,178) –0.4 Blank
Non-operating losses (3,136) –0.6 Blank
Earnings before taxes (taxable income) (15,123) 3.0 Blank
Income taxes (5,261) –1.1 Blank
Net income (earnings available to common shareholders) $9,862 2.0% Net profit margin

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Table 3.1 Walmart: Income Statement for the year ending January 31, 2018 (expressed in millions, except per share data, and as a percentage of sales) (3 of 4)
Blank Dollars Percentage of Sales Blank
Interest expense (2,178) –0.4 Blank
Non-operating losses (3,136) –0.6 Blank
Earnings before taxes (taxable income) (15,123) 3.0 Blank
Income taxes (5,261) –1.1 Blank
Net income (earnings available to common shareholders) $9,862 2.0% Net profit margin

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Table 3.1 Walmart: Income Statement for the year ending January 31, 2018 (expressed in millions, except per share data, and as a percentage of sales) (4 of 4)
Additional information: Blank
Number of shares outstanding (millions) 3,007
Earnings per share (net income/number of shares) $3.28
Dividends paid to shareholders $6,124
Dividends per share $2.04

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Profit-to-Sales Analysis from Common-Sized Income Statement
See Table 3.1
Gross profit margin (or percentage of sales going toward gross profit) is 25.4%.
Operating profit margin (or percentage of sales going toward operating profit) is 4.1%.
Net profit margin (or percentage of sales going toward net profit) is 2.0%.

The Balance Sheet

The Balance Sheet
The balance sheet provides a snapshot of a firm’s financial position at a particular date.
It includes three main items: assets, liabilities, and owner-supplied capital (shareholders’ equity).
Assets (A) are resources owned by the firm.
Liabilities (L) and owner’s equity (E) indicate how those resources are financed:
A = L + E
The transactions in balance sheet are recorded at cost price, so the book value of a firm may be very different from its current market value.

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Figure 3.2 The Balance Sheet: An Overview
A
A
L
L
E
=

Figure 3.2 The Balance Sheet: An Overview
A
A
L
L
E

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Balance Sheet Terms: Assets (1 of 2)
Current assets comprise assets that are relatively liquid, or expected to be converted into cash within 12 months. Current assets typically include:
Cash
Accounts receivable (payments due from customers who buy on credit)
Inventory (raw materials, work in process, and finished goods held for eventual sale)
Other assets (e.g., prepaid expenses are items paid for in advance)

Balance Sheet Terms: Assets (2 of 2)
Long-Term Asset
Fixed Assets
Include assets that will be used for more than one year. Fixed assets typically include:
Machinery and equipment, buildings, land
Other Assets
Assets that are neither current assets nor fixed assets. They may include long-term investments and intangible assets such as patents, copyrights, and goodwill.

Balance Sheet Terms: Liabilities (1 of 2)
Debt (Liabilities)
Money that has been borrowed from a creditor and must be repaid at some predetermined date.
Debt could be current (must be repaid within 12 months) or long-term (repayment time exceeds one year).

Balance Sheet Terms: Liabilities (2 of 2)
Short-Term Debt (Current Liabilities)
Accounts payable (Credit extended by suppliers to a firm when it purchases inventories)
Accrued expenses (Short-term liabilities incurred in the firm’s operations but not yet paid for)
Short-term notes (Borrowings from a bank or lending institution due and payable within 12 months)
Long-Term Debt
Borrowings from banks and other sources for more than one year

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Balance Sheet Terms: Equity
Equity: Shareholder’s investment in the firm in the form of preferred stock and common stock. Preferred stockholders enjoy preference with regard to payment of dividend and seniority at settlement of bankruptcy claims.
Treasury Stock: Stock that have been repurchased by the company
Retained Earnings: Cumulative total of all the net income over the life of the firm, less common stock dividends that have been paid out over the years
Note that retained earnings are not equal to hard cash!

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Figure 3.2 The Balance Sheet: An Overview
A
A
L
L
E

Balance Sheet: A = L + E
Assets (A)
Current Assets
Fixed Assets
Total Assets
Liabilities (L)
Current Liabilities
Long-Term Liabilities
Total Liabilities
Owner’s Equity (E)
Preferred Stock
Common Stock
Retained Earnings
Total Owner’s Equity
Total Liabilities + Equity

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Table 3.2 Walmart Balance Sheet for Years Ending January 31, 2017 and January 31, 2018 (expressed in millions) (1 of 4)
Assets Dollars
January 31, 2017 Percentage of Assets January 31, 2017 Dollars January 31, 2018 Percentage of Assets January 31, 2018
Cash and cash equivalents $6,867 3.5% $6,756 3.3%
Accounts receivable 5,835 2.9% 5,614 2.7%
Inventories 43,046 21.7% 43,783 21.4%
Prepaid expenses and other current assets 1,941 1.0% 3,511 1.7%
Total current assets $57,689 29.0% $59,664 29.2%
Gross plant and equipment $191,129 96.1% $202,298 98.9%
Less accumulated depreciation (76,951) –38.7% (87,480) –42.8%
Net plant and equipment $114,178 57.4% $114,818 56.1%

Table 3.2 Walmart Balance Sheet for Years Ending January 31, 2017 and January 31, 2018 (expressed in millions) (2 of 4)
Blank Dollars January 31, 2017 Percentage of Assets January 31, 2017 Dollars January 31, 2018 Percentage of Assets January 31, 2018
Goodwill and other intangible assets 26,958 13.6% 30,040 14.7%
Total assets $198,825 100.0% $204,522 100.0%
Liabilities and Equity Blank Blank Blank Blank
Current liabilities Blank Blank Blank Blank
Accounts payable $41,433 20.8% $46,510 22.7%
Accrued liabilities 21,575 10.9% 24,031 11.7%
Short-term notes 9,320 4.7% 9,662 4.7%
Total current liabilities $72,328 36.4% $80,203 39.2%

Table 3.2 Walmart Balance Sheet for Years Ending January 31, 2017 and January 31, 2018 (expressed in millions) (3 of 4)
Blank Dollars January 31, 2017 Percentage of Assets January 31, 2017 Dollars January 31, 2018 Percentage of Assets January 31, 2018
Long-term debt 51,362 25.8% 45,179 22.1%
Total debt $123,690 62.2% $125,382 61.3%
Stockholders’ equity: Blank Blank Blank Blank
Common stock (par value) $305 0.2% $295 0.1%
Paid-in capital 2,371 1.2% 2,648 1.3%
Retained earnings 72,459 36.4% 76,197 37.3%
Total equity $75,135 37.8% $79,140 38.7%
Total liabilities and equity $198,825 100.0% $204,522 100.0%

Total Assets
Total Liability
Total Equity
Total Assets = Total Liabilities + Total Equity

Table 3.2 Walmart Balance Sheet for Years Ending January 31, 2017 and January 31, 2018 (expressed in millions)

Total Assets
Total Liability
Total Equity
Total Assets = Total Liabilities + Total Equity

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Table 3.2 Walmart Balance Sheet for Years Ending January 31, 2017 and January 31, 2018 (expressed in $ millions) (4 of 4)
Total assets exceeded $200 billion, consisting of about one-third current assets and two-thirds of long-term assets
Holding over $6 billion in cash, or about 3% of all the company’s assets.
Held 21 percent of its assets as inventory and 3% as accounts receivable.
Property, plant and equipment accounted for about 56% of its assets.
Intangible assets made up 15% of the assets.

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Debt Ratio
Debt ratio is the percentage of assets that are financed by debt.
Debt ratio is an indication of “financial risk.” Generally, the higher the ratio, the more risky the firm is, as firms have to pay interest on debt regardless of the earnings or cash flow situation.

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Net Working Capital
Net Working Capital = Current assets − current liabilities
The larger the net working capital, the better the firm’s ability to repay its debt.
Net working capital can be positive or zero or negative. It is generally positive.
An increase in net working capital may not always be good news. For example, if the level of inventory goes up, current assets will increase, and thus net working capital will also increase. However, increasing inventory level may well be a sign of inability to sell.

Measuring Cash Flows
Why isn’t Profit = Cash?

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Measuring Cash Flows
Profits in the financial statements are calculated on “accrual basis” rather than “cash basis.”
Thus, profits are not equal to cash.

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Accrual Basis Accounting
Accrual basis is the principle of recording revenues when earned and expenses when incurred rather than when cash is received or paid.
Thus, sales revenue recorded in the income statement includes both cash and credit sales. Similarly, inventory purchases may not be entirely paid for in cash because suppliers may extend credit for some of the purchases.
Treatment of long-term assets: Asset acquisitions (that will last more than one year, such as equipment) are not recorded as an expense but are written off every year as depreciation expense.

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The Beginning Point: Changes in the Balance Sheet and Cash Flows
Sources of Cash Use of Cash
Decrease in an Asset Increase in an Asset
Example: Selling inventories or collecting receivables provides cash. Example: Investing in fixed assets or buying more inventories uses cash.
Increase in a Liability or Equity Decrease in a Liability or Equity
Example: Borrowing funds or selling stock provides the firm with cash. Example: Paying off a loan or buying back stock uses cash.

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Table 3.3 Walmart’s Changes in Balance Sheets Between 2017 and 2018 Create Sources and Uses of Cash ($ millions) (1 of 2)
Changes in Assets January 31, 2017 January 31, 2018 Changes Sources Uses
Accounts receivable $5,835 $5,614 ($221) ($221) Blank
Inventories $43,046 $43,783 $737 Blank $737
Prepaid expenses and other current assets $1,941 $3,511 $1,570 Blank $1,570
Gross plant and equipment $191,129 $202,298 $11,169 Blank $11,169
Goodwill and other intangible assets $26,958 $30,040 $3,082 Blank $3,082

Table 3.3 Walmart’s Changes in Balance Sheets Between 2017 and 2018 Create Sources and Uses of Cash ($ millions) (2 of 2)
Changes in debt and equity January 31, 2018 January 31, 2017 Changes Sources Uses
Accounts payable $41,433 $46,510 $5,077 $5,077 Blank
Accrued liabilities $21,575 $24,031 $2,456 $2,456 Blank
Short-term notes $9,320 $9,662 $342 $342 Blank
Long-term debt $51,362 $45,179 ($6,183) Blank ($6,138)
Par value $305 $295 ($10) Blank ($10)
Paid-in capital $2,371 $2,648 $277 $277 Blank

Figure 3.3 Statement of Cash Flows: An Overview

Three Sources of Cash Flows (1 of 2)
Cash flows from Operations (e.g., sales revenue, labor expenses)
Cash flows from Investments (e.g., purchase of new equipment)
Cash flows from Financing (e.g., borrowing funds, payment of dividends)

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Three Sources of Cash Flows (2 of 2)
Why do we care?

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Three Sources of Cash Flows (2 of 2)
If we know the cash flows from operations, investments, and financing, we can understand the firm’s cash flow position better, that is, how cash was generated and how it was used.

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Income Statement Conversion: From Accrual to Cash Basis
Cash Flow from Operations: Five Steps
Add back depreciation.
Subtract (add) any increase (decrease) in accounts receivable.
Subtract (add) any increase (decrease) in inventory.
Subtract (add) any increase (decrease) in other current assets.
Add (subtract) any increase (decrease) in accounts payable
Add (subtract) any increase (decrease) in other accrued expenses.

Walmart’s Cash Flow from Operations
Net income Blank $9,862
Depreciation expense (Source of cash) $10,529 Blank
Decrease in accounts receivable (Source of cash) 221 Blank
Increase in inventories (Use of cash) (737) Blank
Increase in other current assets (Use of cash) (1,570) Blank
Increase in accounts payable (Source of cash) 5,077 Blank
Increase in accrued liabilities (Source of cash) 2,456 Blank
Total adjustments to net income Blank $15,976
Cash flows from operating activities Blank $25,838

Cash Flow from Investing in
Long-Term Assets
Long-term assets include fixed assets and other long-term assets. A firm may be engaged in acquisition and sale of such assets leading to cash flows.
Walmart example:
Changes in Long-Term Assets January 31, 2017 January 31, 2018 Changes Inflow Outflow
Gross plant and equipment $191,129 $202,298 $11,169 Blank ($11,169)
Goodwill and other intangible assets $26,958 $30,040 $3,082 Blank $3,082

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Cash Flows from Financing the Business
Cash Inflow Cash Outflow
The firm borrows more money (an increase in short-term or long-term debt). The firm repays debt (a decrease in
short-term or long-term debt).
Owner(s) invest in the business (an increase in stockholders’ equity). The firm pays dividends to the owner(s) or repurchases the owners’ stocks (a decrease in equity).

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Financing the Business Illustrated: Walmart
Dividends paid to shareholders ($6,124)
Increase in short-term notes payable 342
Decrease in long-term debt ($6,183)
Issued new common stock (increase in par value and paid-in capital) $267
Net cash outflows from financing activities ($11,698)

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Table 3.4 The Walmart Company Statement of Cash Flows ($ millions) Year Ended January 31, 2018

Suggestions for Computing Cash Flows
Consider one section at a time.
You need only two items from the income statement: net income and depreciation expense.
Consider change for all items in the balance sheet, except ignore accumulated depreciation and net fixed assets; ignore change in retained earnings.

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The Limitations of Financial Statements and Accounting Malpractice

Accounting Malpractice and Limitations of Financial Statements
Financial statements are prepared following the Financial Accounting Standards Board’s generally accepted accounting principles (GAAP).
Because accounting rules give managers discretionary powers, it is possible that two firms with similar financial performance may report different results.
There have been several cases of accounting malpractice where rules have been broken.

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Key Terms (1 of 7)
Accounts payable (trade credit)
Accounts receivable
Accrual basis accounting
Accrued expenses
Accumulated depreciation
Balance sheet
Book value
Cash

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Key Terms (2 of 7)
Cash basis accounting
Common-size balance sheet
Common-size income statement
Common stock
Common stockholders
Cost of goods sold
Current assets (gross working capital)
Debt

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Key Terms (3 of 7)
Debt ratio
Depreciation expense
Dividends per share
Earnings before taxes (taxable income)
Earnings per share
Equity
Financing cash flows
Fixed assets

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Key Terms (4 of 7)
Fixed costs
Free cash flows
Gross fixed assets
Gross profit
Gross profit margin
Income statement (profit and loss statement)
Inventories
Liquidity

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Key Terms (5 of 7)
Long-term debt
Mortgage
Net fixed assets
Net income (net profit, or earnings available to common stockholders)
Net profit margin
Net working capital
Operating expenses

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Key Terms (6 of 7)
Operating income (earnings before interest and taxes)
Operating profit margin
Other current assets
Paid-in capital
Par value
Preferred stockholders
Profit margins
Retained earnings

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Key Terms (7 of 7)
Semi-variable costs
Short-term debt (current liabilities)
Short-term notes (debt)
Statement of cash flows
Treasury stock
Variable costs

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Runninghead: RECENT FINANCIAL PERFORMANCE OF CHIPOTLE 1

Evaluating the Recent Financial Performance of Chipotle Mexican Grill

Barger, Daniel D.

MSA 602

Dr. Michael Dillon

Central Michigan University

RECENT FINANCIAL PERFORMANCE OF CHIPOTLE 2

Abstract

The intent of this paper is to evaluate the financial performance of Chipotle Mexican Grill Inc.

during the last 3 fiscal years to examine growth and evaluate risk. The goal is to determine how

growth was achieved as well as the risks and opportunity costs of those decisions.

RECENT FINANCIAL PERFORMANCE OF CHIPOTLE 3

Evaluating the Recent Financial Performance of Chipotle Mexican Grill

Chipotle Mexican Grill (Chipotle) is considered a fast-casual restaurant chain that has

more than two thousand locations and produced revenue of $5.5 billion in 2019. Each individual

restaurant is company owned, rather than franchised, and the chain is headquartered in Newport

Beach, California. Chipotle has shown signs of recent growth in the last three fiscal years under

their current CEO and that trend is continuing upward in the start of this decade. With

groundbreaking environmental initiatives and an emphasis on the healthiness of their foods’

ingredients, the company is achieving the goal of maximizing shareholder wealth.

Three Year Performance

At the end of the fiscal year ending in 2016, Chipotle had a decrease in revenue from

sales. That marks the only time that sales revenue did not increase from one year ending to the

next looking back from 2014 onward (Chipotle, 2020 page 28). Chipotle has since achieved an

increase in sales revenue for three straight fiscal years. While sales trending upward is usually a

sign that a business is becoming more profitable, Chipotle saw only a modest increase in net

income from 2017 to 2018 (Chipotle, 2020). Net income was also at an all-time low in 2016 due

to the fallout from several health-related outbreaks that plagued the company in 2015. The

potential of this threat to business has been identified by Chipotle as a risk in their annual reports

since then (Chipotle, 2020).

One of the most noteworthy trends to be observed from the end-of-year balance sheets is

the increase in the cost of doing business. Nearly every operating expense has increased for

Chipotle over the last few fiscal years (SEC, 2020, page 19). The cost of labor can easily be

attributed to the increases in federal minimum wage. Operating expenses related to disposal can

be accredited to the emphasis the company has placed on environmental responsibility. Supply

RECENT FINANCIAL PERFORMANCE OF CHIPOTLE 4

chain issues for avocados also impacted the company’s bottom line. Lucas (2019) reports,

“rising avocado costs pushed the cost of food, beverage and packaging up 1.1%” (para. 1).

Despite these increases in operating costs, the company has still achieved growth by maximizing

sales opportunities, particularly with regard to digital sales.

Increase in Digital Sales

The increase in digital sales is a contributing factor in overcoming the increased

operating costs. Chipotle first introduced a mobile application that allowed customers to place

orders in advance back in 2009. Boulton (2019) writes, “But the app didn’t incorporate mobile

payment; consumers ordered in advance but waited in line to pay and pick up their food. Partly

because of this friction, Chipotle’s digital capabilities ultimately accounted for only 4 percent to

5 percent of total sales before Garner took the helm in 2015” (para. 4). By turning the

application into a loyalty rewards program, Chipotle has tapped into a modern way of

establishing repeat business from satisfied customers. As Lucas (2019) mentions, “digital sales

grew 99.1% and made up 18.2% of sales for the quarter. In March, Chipotle launched a loyalty

program as part of a broader strategy to build digital engagement. This marks the program’s first

full quarter since it began. Niccol told analysts that the program now has 5 million members, up

from 3 million last quarter” (para. 9). Digital sales now comprise 18% of total revenue for

Chipotle (SEC 2020, page 14).

The restaurant chain is using data from the application and web transactions to

personalize the offers they send to consumers, all of which is based on previous orders. Thanks

to their new partnership with Google Analytics, even the timing of the offers is targeted toward

the approximate timeframe that customers are about to place an order (Boulton, 2019). To

further capitalize on the digital market, Chipotle built separate kitchens in many of their

RECENT FINANCIAL PERFORMANCE OF CHIPOTLE 5

restaurants that handle the digital orders exclusively. The app accounts for lead times based on

current orders and even factors in delivery times to provide accurate wait time estimates. By

expediting the sales transactions for one fifth or their orders, Chipotle has found a way to make

the digital orders more rewarding in a growing market.

Chipotle is also now partnering with DoorDash to offer delivery at 95% of its locations.

By reinvesting in their digital platform, streamlining the ordering process, increasing prices, and

offering delivery, the company has ensured continued growth. Lucas (2019) shows, “The

company reported same-store sales growth of 10%, topping analyst estimates of 8.33%.

Transactions at stores open at least a year increased by nearly 7%. The average check jumped by

3.5%, helped by menu price increases put in place last year” (para. 15). Revenue from digital

sales has been a driving factor in the company’s ability to maintain financial solvency even with

the increased operating expenses of recent years by focusing on improving the customer

experience. It is revealing that same-store sales growth improved by 10% which is a strong

indicator that the loyalty program is taking hold.

Ratios as a Measure of Financial Competency

According to their most recent 10-K filing with the SEC, Chipotle has mostly provided

mixed results on many ratios used to determine financial success. In examining the current ratio

as a measure of liquidity, the ratio of 1.61 in 2019 took a step back from the 1.81 achieved in

2018 and the 1.94 from 2017. However, according to the acid-test ratio, the company has

increased liquidity from .66 in 2017 to .76 in 2019 (SEC, 2020 page 35).

Asset management is a measure of how efficiently the firm’s assets are being used to

generate sales. Within that realm, operating return on assets is used to determine the rate or

return being earned on the firm’s assets. Chipotle achieved an ORA of 8.7% in 2019 compared

RECENT FINANCIAL PERFORMANCE OF CHIPOTLE 6

to the 11.4% in 2018 and 13.2% in 2017. It would seem that the company’s return on the assets

at their disposal is actually diminishing. This could be in part to the increase in assets from

creating kitchens to accommodate digital sales. Clearly, the increase in assets is greater than the

increase in income from operations. It would be interesting to examine this measurement in the

coming fiscal years now that digital sales through the app are in place without the expense of

investing in separate kitchens. For investors, this may signal an area of growth opportunity in

the coming fiscal year.

Chipotle’s operating profit margins have moved from 6% in 2017, down to 5.3% in 2018,

and up to 7.9% in 2019 (SEC, 2020). This ratio of operating income as a percentage of total

sales is a good way to measure the fluctuation of operating costs and their effect on net income.

The company identified supply chain variations for their food ingredients as a potential risk to

operating profit margins. Climate changes and the resulting crop yield have a direct impact on

supply and demand. As an investor, noting regional weather events that affect suppliers would

be a savvy way to forecast potential increases in operating costs.

Investment Risks vs. Rewards

Cyber security is a significant risk identified by Chipotle in their most recent filing with

the SEC. With the majority of in-store transactions taking place via credit or debit card and an

increased reliability on digital sales from the app, this is certainly a factor to consider for

investors. It does not make Chipotle uniquely risky from an investor perspective as most

companies do business in this way in modern times, but it does signal new ground for Chipotle

and investors would hope that they are proceeding cautiously with safeguards in place to protect

user data.

RECENT FINANCIAL PERFORMANCE OF CHIPOTLE 7

Foodborne illness is also a major risk, not just because it has plagued the company in the

past, but because it causes both a decrease in sales as well as an increase in food preparation and

disposal costs (SEC, 2020 page 8). It serves as a constant risk for companies in the restaurant

business as even one outbreak can have a severely negative effect on the reputation of the brand.

Incidents stemming from either of these risk factors may also have significant legal costs and

liabilities.

Despite these and other risks, investors have continued to be rewarded for buying into

Chipotle as shares have gained in the last three fiscal years. Earnings per share have increased

from $6.17 at year-end 2017, to $6.31 at year-end 2018, to almost doubling to $12.38 at the end

of 2019. The decisions the company has made are clearly benefitting stockholders as the

restaurant chain continues to find ways to build upon the customer experience.

Conclusion

Chipotle is growing as an organization. They have added new restaurants and generated

sales through innovation and the incorporation of new technologies. So far, the risk assumed

from an increased reliance on digital sales, the possibility of fallout from foodborne illness, and

increases in cost of supplies has been negated by the chain’s ability to establish and maintain

repeated sales. Stock prices have reached an all-time high and value for investors has increased

consistently during the last three fiscal years.

RECENT FINANCIAL PERFORMANCE OF CHIPOTLE 8

References

Security Exchange Commission. (February 5, 2020). Filing Detail, Form 10-K. Retrieved from

https://www.sec.gov/ix?doc=/Archives/edgar/data/1058090/000105809020000010/cmg-

20191231x10k.htm

Chipotle Mexican Grill, Inc. (2020). Annual Reports. 2018. Retrieved from

https://ir.chipotle.com/annual-reports

Boulton, C. (November 12, 2019). Chipotle Doubles Digital Sales with Loyalty Program. CIO

(Online), Retrieved from https://www.cio.com/article/3452887/chipotle-doubles-digital-

sales-with-loyalty-app.html

Lucas, A. (July 23, 2019). Chipotle’s Stock Hits All-Time High After Earnings Top Estimates,

Raises Sales Forecast. CNBC.com, Retrieved from

https://www.cnbc.com/2019/07/23/chipotle-earnings-q2-2019.html

Yahoo! Finance. (April 22, 2019). Chipotle Mexican Grill, Inc. (NYSE:CMG): Financial

Strength Analysis. Yahoo! Finance, Retrieved from

https://finance.yahoo.com/news/chipotle-mexican-grill-inc-nyse-162911558.html

Yahoo! Finance. (February 2-7, 2020). Income Statement. Yahoo! Finance, Retrieved from

https://finance.yahoo.com/quote/CMG/financials/

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