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# ACCT212 Project 2: Financial Statement Analysis-YUM! Brands, Inc. Description: Using the financial statements for YUM! Brands, Inc. located in Appendix A of your Textbook, you will calculate Vertical and Horizontal Analysis and the Financial Ratios listed below for the year ended in 2006. Due Date: The project is due by the end of Week 7. Grade Weight:(75 points) The financial statement analysis project will count for 7.5% of your overall course grade. The Worksheets contained in this Workbook will aid in completing the requirements for submission. Requirements: 1. Complete the Excel Spreadsheet in this Workbook labeled Horizontal & Vertical. Calculate the Horizontal & Vertical Analysis of YUM Brands, Inc. 2. Complete the Excel Spreadsheet in this Workbook labeled Ratios. Calculate the 2006 Ratios and show your computations and the formulas for YUM! Brands, Inc. Financial Statements in Appendix A. Financial Ratio Calculations* A. Liquidity Ratio 1. Current ratio 2. Acid-test ratio 3. Inventory turnover 4. Accounts Receivable turnover 5. Average Collection Period (Days’ sales in receivables) B. Solvency Ratios 1. Debt ratio 2. Times-interest-earned ratio C. Profitability Ratios 1. Gross Profit Percentage 2. Rate of return on net sales (Profit Margin rate) 3. Rate of return on total assets 4. Rate of return on common stockholders’ equity 5. Earnings per share of common stock 6. Price/earnings ratio 7. Dividend Yield 8. Book value per share of common stock *Note: If you are unable to locate an item needed for a ratio, make an assumption and make sure you note your assumption in your work. PROJECT #2-HORIZONTAL AND VERTICAL ANALYSIS-SOLUTION Horizontal Horizontal YUM! Brand, Inc.-Consolidated Statements of Income Vertical Vertical Analysis Analysis 30-12-2006 Analysis 31-12-2005 Analysis \$ Change % Change in millions %-2006 in millions %-2005 2005-2006 2005-2006 Revenues Company Sales \$8,365 \$8,225 Franchise and license fees 1,196 1,124 Total Revenues 9,561 9,349 Costs and Expenses Company restaurants Food and paper 2,549 2,584 Payroll and employee benefits 2,142 2,171 Occupancy and other operating expenses 2,403 2,315 Total Costs 7,094 7,070 General and administrative expenses 1,187 1,158 Franchise and license expenses 35 33 Closures and impairment expenses 59 62 Refranchising (gain) loss -24 -43 Other (income) expense -51 -80 Wrench litigation (income) expense 0 -2 AmeriServe and other charges (credits) -1 -2 Total Costs and Expenses 8,299 8,196 Operating Profit 1,262 1,153 Net interest expense (income) 154 127 Income (Loss) Before Income Taxes 1,108 1,026 Income taxes 284 264 Net Income (loss) \$824 \$762 Horizontal Horizontal YUM! Brand, Inc.-Consolidated Balance Sheets Vertical Vertical Analysis Analysis 30-12-2006 Analysis 31-12-2005 Analysis \$ Change % Change in millions %-2006 in millions %-2005 2005-2006 2005-2006 ASSETS Current Assets Cash and equivalents \$319 \$158 Short-term investments 6 43 Accounts and notes receivable 220 236 Inventories 93 85 Prepaid expenses and other current assets 132 75 Deferred income taxes 57 181 Advertising cooperative assets 74 77 Total Current Assets 901 855 Property, pland and equipment, net 3,631 3,356 Goodwill 662 538 Intangible assets, net 347 330 Investments 138 173 Other assets 369 320 Deferred income taxes 305 225 Total Non-current Assets 5,452 4,942 Total assets \$6,353 \$5,797 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable and other current liabilities \$1,386 \$1,256 Income taxes payable 37 79 Short-term borrowings 227 211 Advertising cooperative liabilities 74 77 Total current liabilities 1,724 1,623 Long-Term Liabilities Long-term debt 2,045 1,649 Other liabilities and deferred credits 1,147 1,076 Total long-term liabilities 3,192 2,725 Shareholders’ Equity Preferred stock, no par value, no shares issued Common stock, 265 shares and 278 shares issued in 2006 and 2005, respectively Retained earnings 1,593 1,619 Accumulated other comprehensive loss -156 -170 Total shareholders’ equity 1,437 1,449 Total liabilities and shareholders’ equity \$6,353 \$5,797 Ratio Formula Calculation Result (words) (numbers) A. Liquidity Ratios Hint: All Formulas are located on Page 710 & 711, with the exception of Gross Profit % 1. Current Ratio = Current assets = = Current liabilities 2. Acid Test Ratio = Cash+Short-term Investmetns + Net Current receviables = = Current Liabilities 3. Inventory turnover = Cost of goods sold = = Average inventory 4. Accounts Receivable turnover = Net Sales = = *Use Total Sales and Net A/R and Notes Receivable Average net accounts receivable 5. Average Collection Period (Days’ sales in receivables) = Average net accounts receivable = = One day’s sales B. Solvency Ratios 1. Debt ratio = Total liabilities = = Ttoal assets 2. Times-interest-earned ratio = Income from operations = = Note – Use Operating Profit Interest expense C. Profitability Ratios 1. Gross Profit Percentage = Gross profit = = Note: Gross Profit is Revenue – Costs. Do Not Include Expenses Total Revenue Formula on Page 328 2. Rate of return on net sales (Profit Margin rate) = Net income = = Net sales 3. Rate of return on total assets = Net income + Interest expense = = Average total assets 4. Rate of return on common stockholders’ equity = Net income – Preferred dividends = = Average common stockholder’s equity 5. Earnings per share = Net income – Preferred dividends = = \$ Hint – Page 758 – Use Weighted Average without Dilutive Shares Average number of shares of common stock outstanding 6. Price/earnings ratio = Market price per share of common stock = 29.40 = Earnings per shares 7. Dividend Yield = Dividend per share of common stock = = Hint: Dividend Per Share – Located on Page 751 in Textbook Market price per share of common stock 29.40 8. Book value per share = Total Stockholder’s equity – Preferred equity = = \$ Number of shares of common outstanding Market Price Information was retreived from the following link: http://finance.aol.com/quotes/yum-brands-inc/yum/nys/historical-prices?tf=12%2F29%2F2006-10%2F4%2F2009&gran=d Project 2 Rubric – Students Criteria Excellent Good Poor Very Poor H & V Analysis: Completeness All requirements are completed in accordance with the directions, labeled and organized well in worksheet. All requirements are completed and mostly follow the directions, labeled and fairly organized in worksheet. Most requirements are completed that mostly follow the directions, missing some labels and only somewhat organized. Requirements are not completed and/or the directions were generally not followed, missing labels and unorganized. Accuracy All ratios are calculated with accurate results and appropriate terms of expression. 80% plus of ratios are calculated with accurate results and mostly appropriate terms of expression. 60-79% of ratios are calculated with accurate results and some appropriate terms of expression. Less than 60% of ratios are calculated with accurate results and some appropriate terms of expression. Ratios: Completeness All requirements are completed in accordance with the directions, labeled and organized well in worksheet. All requirements are completed and mostly follow the directions, labeled and fairly organized in worksheet. Most requirements are completed that mostly follow the directions, missing some labels and only somewhat organized. Requirements are not completed and/or the directions were generally not followed, missing labels and unorganized. Accuracy All ratios are calculated with accurate results and appropriate terms of expression. 80% plus of ratios are calculated with accurate results and mostly appropriate terms of expression. 60-79% of ratios are calculated with accurate results and some appropriate terms of expression. Less than 60% of ratios are calculated with accurate results and some appropriate terms of expression.

ACCT212 Project 2: Financial Statement Analysis-YUM! Brands, Inc.
Description:
Using the financial statements for YUM! Brands, Inc. located in Appendix A of your Textbook, you will calculate Vertical and Horizontal Analysis and the Financial Ratios listed below for the year ended in 2006.
Due Date:
The project is due by the end of Week 7.
Grade Weight:(75 points)
The financial statement analysis project will count for 7.5% of your overall course grade. The Worksheets contained in this Workbook will aid in completing the requirements for submission.
Requirements:
1. Complete the Excel Spreadsheet in this Workbook labeled Horizontal & Vertical. Calculate the Horizontal & Vertical Analysis of YUM Brands, Inc.
2. Complete the Excel Spreadsheet in this Workbook labeled Ratios. Calculate the 2006 Ratios and show your computations and the formulas for YUM! Brands, Inc. Financial Statements in Appendix A.
Financial Ratio Calculations*
A. Liquidity Ratio
1. Current ratio
2. Acid-test ratio
3. Inventory turnover
4. Accounts Receivable turnover
5. Average Collection Period (Days’ sales in receivables)
B. Solvency Ratios
1. Debt ratio
2. Times-interest-earned ratio
C. Profitability Ratios
1. Gross Profit Percentage
2. Rate of return on net sales (Profit Margin rate)
3. Rate of return on total assets
4. Rate of return on common stockholders’ equity
5. Earnings per share of common stock
6. Price/earnings ratio
7. Dividend Yield
8. Book value per share of common stock
*Note: If you are unable to locate an item needed for a ratio, make an assumption and make sure you note your assumption in your work.

 PROJECT #2-HORIZONTAL AND VERTICAL ANALYSIS-SOLUTION Horizontal Horizontal YUM! Brand, Inc.-Consolidated Statements of Income Vertical Vertical Analysis Analysis 30-12-2006 Analysis 31-12-2005 Analysis \$ Change % Change in millions %-2006 in millions %-2005 2005-2006 2005-2006 Revenues Company Sales \$8,365 \$8,225 Franchise and license fees 1,196 1,124 Total Revenues 9,561 9,349 Costs and Expenses Company restaurants Food and paper 2,549 2,584 Payroll and employee benefits 2,142 2,171 Occupancy and other operating expenses 2,403 2,315 Total Costs 7,094 7,070 General and administrative expenses 1,187 1,158 Franchise and license expenses 35 33 Closures and impairment expenses 59 62 Refranchising (gain) loss -24 -43 Other (income) expense -51 -80 Wrench litigation (income) expense 0 -2 AmeriServe and other charges (credits) -1 -2 Total Costs and Expenses 8,299 8,196 Operating Profit 1,262 1,153 Net interest expense (income) 154 127 Income (Loss) Before Income Taxes 1,108 1,026 Income taxes 284 264 Net Income (loss) \$824 \$762 Horizontal Horizontal YUM! Brand, Inc.-Consolidated Balance Sheets Vertical Vertical Analysis Analysis 30-12-2006 Analysis 31-12-2005 Analysis \$ Change % Change in millions %-2006 in millions %-2005 2005-2006 2005-2006 ASSETS Current Assets Cash and equivalents \$319 \$158 Short-term investments 6 43 Accounts and notes receivable 220 236 Inventories 93 85 Prepaid expenses and other current assets 132 75 Deferred income taxes 57 181 Advertising cooperative assets 74 77 Total Current Assets 901 855 Property, pland and equipment, net 3,631 3,356 Goodwill 662 538 Intangible assets, net 347 330 Investments 138 173 Other assets 369 320 Deferred income taxes 305 225 Total Non-current Assets 5,452 4,942 Total assets \$6,353 \$5,797 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities Accounts payable and other current liabilities \$1,386 \$1,256 Income taxes payable 37 79 Short-term borrowings 227 211 Advertising cooperative liabilities 74 77 Total current liabilities 1,724 1,623 Long-Term Liabilities Long-term debt 2,045 1,649 Other liabilities and deferred credits 1,147 1,076 Total long-term liabilities 3,192 2,725 Shareholders’ Equity Preferred stock, no par value, no shares issued Common stock, 265 shares and 278 shares issued in 2006 and 2005, respectively Retained earnings 1,593 1,619 Accumulated other comprehensive loss -156 -170 Total shareholders’ equity 1,437 1,449 Total liabilities and shareholders’ equity \$6,353 \$5,797

 Ratio Formula Calculation Result (words) (numbers) A. Liquidity Ratios Hint: All Formulas are located on Page 710 & 711, with the exception of Gross Profit % 1. Current Ratio = Current assets = = Current liabilities 2. Acid Test Ratio = Cash+Short-term Investmetns + Net Current receviables = = Current Liabilities 3. Inventory turnover = Cost of goods sold = = Average inventory 4. Accounts Receivable turnover = Net Sales = = *Use Total Sales and Net A/R and Notes Receivable Average net accounts receivable 5. Average Collection Period (Days’ sales in receivables) = Average net accounts receivable = = One day’s sales B. Solvency Ratios 1. Debt ratio = Total liabilities = = Ttoal assets 2. Times-interest-earned ratio = Income from operations = = Note – Use Operating Profit Interest expense C. Profitability Ratios 1. Gross Profit Percentage = Gross profit = = Note: Gross Profit is Revenue – Costs. Do Not Include Expenses Total Revenue Formula on Page 328 2. Rate of return on net sales (Profit Margin rate) = Net income = = Net sales 3. Rate of return on total assets = Net income + Interest expense = = Average total assets 4. Rate of return on common stockholders’ equity = Net income – Preferred dividends = = Average common stockholder’s equity 5. Earnings per share = Net income – Preferred dividends = = \$ Hint – Page 758 – Use Weighted Average without Dilutive Shares Average number of shares of common stock outstanding 6. Price/earnings ratio = Market price per share of common stock = 29.40 = Earnings per shares 7. Dividend Yield = Dividend per share of common stock = = Hint: Dividend Per Share – Located on Page 751 in Textbook Market price per share of common stock 29.40 8. Book value per share = Total Stockholder’s equity – Preferred equity = = \$ Number of shares of common outstanding Market Price Information was retreived from the following link: http://finance.aol.com/quotes/yum-brands-inc/yum/nys/historical-prices?tf=12%2F29%2F2006-10%2F4%2F2009&gran=d

 Project 2 Rubric – Students Criteria Excellent Good Poor Very Poor H & V Analysis: Completeness All requirements are completed in accordance with the directions, labeled and organized well in worksheet. All requirements are completed and mostly follow the directions, labeled and fairly organized in worksheet. Most requirements are completed that mostly follow the directions, missing some labels and only somewhat organized. Requirements are not completed and/or the directions were generally not followed, missing labels and unorganized. Accuracy All ratios are calculated with accurate results and appropriate terms of expression. 80% plus of ratios are calculated with accurate results and mostly appropriate terms of expression. 60-79% of ratios are calculated with accurate results and some appropriate terms of expression. Less than 60% of ratios are calculated with accurate results and some appropriate terms of expression. Ratios: Completeness All requirements are completed in accordance with the directions, labeled and organized well in worksheet. All requirements are completed and mostly follow the directions, labeled and fairly organized in worksheet. Most requirements are completed that mostly follow the directions, missing some labels and only somewhat organized. Requirements are not completed and/or the directions were generally not followed, missing labels and unorganized. Accuracy All ratios are calculated with accurate results and appropriate terms of expression. 80% plus of ratios are calculated with accurate results and mostly appropriate terms of expression. 60-79% of ratios are calculated with accurate results and some appropriate terms of expression. Less than 60% of ratios are calculated with accurate results and some appropriate terms of expression.

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