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Question 1
Here are the latest financial statements filed by Zoom Video Communic
Question 1
Here are the latest financial statements filed by Zoom Video Communications (ticker symbol:
ZM) with the Securities and Exchange Commission (form 10-K):
https://www.sec.gov/ix?doc=/Archives/edgar/data/1585521/000158552120000095/zm-
20200131.htm
Answer the following questions:
a) How much did Zoom have in cash and short-term investments as of January 31, 2020?
b) What is the value of Zoom’s total assets?
c) What is the value of Zoom’s long-term debt?
d) What was the book value of Zoom’s equity?
e) Is Zoom a profitable company?
f) What was Zoom’s largest expense item for the fiscal year that ended on January 31,
2020.
theoretical relationship between gross and net margins, i.e., should one always be larger
than the other one?
Question 2
Consider the following potential events that might have taken place at Global Conglomerate on
December 30, 2015. (This is the company we covered in class. Note that December 30 is one day
before the fiscal year end, December 31.) For each one, indicate which line items in Global’s
balance sheet would be affected and by how much. Also indicate the change to Global’s book
g) Compute Zoom’s gross and net profit margin. Which one is larger? What is the
value of equity. (In all cases, ignore any tax consequences for simplicity.)
a) Global used $20 million of its available cash to repay $20 million of its long-term debt.
b) A warehouse fire destroyed $5 million worth of uninsured inventory.
c) Global used $5 million in cash and $5 million in new long-term debt to purchase a $10
million building.
d) A large customer owing $3 million for products it already received declared bankruptcy,
leaving no possibility that Global would ever receive payment.
e) Global’s engineers discover a new manufacturing process that will cut the cost of its
flagship product by over 50%.
f) A key competitor announces a radical new pricing policy that will drastically undercut
Global’s prices.
Question 3
What was the change in Global Conglomerate’s book value of equity from 2014 to 2015
according to Table 2.1 from the textbook? Does this imply that the market price of Global’s
shares increased in 2015? Explain.
Question 4
In early-2015, Abercrombie & Fitch (ANF) had a book equity of $1390 million, a price per share
of $25.52, and 69.35 million shares outstanding. At the same time, The Gap (GPS) had a book
equity of $2983 million, a share price of $41.19, and 421 million shares outstanding.
a) What is the market-to-book ratio of each of these clothing retailers?
b) What conclusions can you draw by comparing the two ratios?
Question 5
See Table 2.5 showing financial statement data and stock price data for Mydeco Corp.
a) What is Mydeco’s market capitalization at the end of each year?
b) What is Mydeco’s market-to-book ratio at the end of each year?
Question 6
Suppose that in 2016, Global launches an aggressive marketing campaign that boosts sales by
15%. However, their operating margin falls from 5.57% to 4.50%. Suppose that they have no
other income, interest expenses are unchanged, and taxes are the same percentage of pretax
income as in 2015.
a) What is Global’s EBIT in 2016?
b) What is Global’s net income in 2016?
c) If Global’s P/E ratio and number of shares outstanding remains unchanged, what is
Global’s share price in 2016?
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