Module 1: Financial Accounting for MBAs
Question 1
Applying the Accounting Equation and Assessing Financial Statement Linkages
The following information is available for Advanced Micro Devices (AMD) and Intel for a recent fiscal year.
• AMD’s assets increased by $1,004 million and its liabilities increased by $334 million.
• Intel’s assets increased by $4,714 million and its liabilities decreased by $830 million.
a. Complete the following table.
Assets, beginning Assets, end Liabilities, Liabilities, Stockholders’ Equity,
(in $ millions) of year of year beginning of year end of year end of year
AMD $ $4,556 $2,956 $ $
Intel $123,249 $ $ $53,400 $
b. Calculate average assets for each company.
(in $ millions) Average Assets
AMD $
Intel $
c. Which company has the larger proportion of its assets financed by the company’s owners at year-end?
Copyright 2025
,Question 2
Applying Financial Statement Relations to Compute Dividends
a. Fill in the fiscal year (FY) amounts for Norfolk Southern to explain the changes in retained earnings. Note: Use a negative sign with answers that
reduce (are substracted from) the beginning of year balance.
Norfolk Southern Inc.
Retained Earnings
(in millions)
Beginning Balance at Dec. 31, FY1 $13,207
Net income
Dividends on Common Stock (960)
Share repurchases (1,373)
Other (4)
Ending Balance at Dec. 31, FY2 12,883
Net income 3,005
Dividends on Common Stock
Share repurchases (3,271)
Other (3)
Ending Balance at Dec. 31, FY3 11,586
Net income 3,270
Dividends on Common Stock (1,167)
Share repurchases
Other (3)
Ending Balance at Dec. 31, FY4 $10,697
b. True or false: Norfolk Southern purchased its own shares back each year?
Copyright 2025
,Question 3
Computing and Interpreting Financial Statement Ratios
Following are selected ratios of Norfolk Southern.
Return on Assets (ROA) Component FY4 FY3
Profitability (Net income/Sales) 25.7% 27.0%
Productivity (Sales/Average assets) 0.329 0.291
a. Was the company profitable in FY4?
b. In which year was the company more profitable?
c. Is the change in productivity a positive or negative development?
d. Compute the company’s ROA for both years. Note: Enter your answer as a percentage rounded to one decimal place (Ex: 29.4%).
FY4 %
FY3 %
e. From the information, which of the following best explains the change in ROA during FY4?
Question 4
Computing Return on Assets and Applying the Accounting Equation
Nordstrom Inc. reports net income of $564 million for a recent fiscal year. At the beginning of that fiscal year, Nordstrom had $8,115 million in total
assets. By fiscal year end, total assets had decreased to $7,886 million. What is Nordstrom’s ROA? Note: Enter answer as a percentage rounded to
the nearest 2 decimal places (ex: 24.58%).
ROA %
Question 5
Computing Return on Equity
In a recent year, Adobe Inc. reports net income of $4,756 million. Its stockholders’ equity is $14,051 million and $14,797 million at the start and end
of the fiscal year, respectively.
a. Compute its return on equity (ROE) for the year. Round answers to the nearest whole dollar amount.
Numerator Denominator Result
Return on equity $ $ %
b. Adobe repurchased $6,550 million of its common stock during the year. Did this repurchase increase or decrease ROE? NOTE: Assume there was
no change in net income related to the stock repurchase.
c. If Adobe had not repurchased common stock during the year, what would ROE have been? Note: Enter answer as a percentage rounded to the
nearest one decimal place (ex: 24.8%). %
Copyright 2025
, Question 6
Understanding What Information Financial Statement Users Demand
Users of financial statements include:
Current shareholders
Company CEO
Banker
Equity analyst
Supplier
Match the financial statement users to the question they are most likely to ask.
Questions Financial Statement User
1. What is the expected net income for next quarter?
2. Will the company have enough cash to pay dividends?
3. Has the company paid for inventory purchases promptly in the past?
4. Will there be sufficient profits and cash flow to pay bonuses?
5. Will the company have enough cash to repay its loans?
Question 7
Balance Sheet Equation and Financing Sources
In a recent year, the total assets of Microsoft Corporation were $364,840 million, and its equity was $166,542 million.
Required
a. What is the amount of its liabilities?
b. Does Microsoft receive more financing from its owners or nonowners?
c. What percentage of financing is provided by Microsoft’s owners? Note: Enter answer in percentage format rounded to one decimal place (ex:
24.6%). %
Copyright 2025
Question 1
Applying the Accounting Equation and Assessing Financial Statement Linkages
The following information is available for Advanced Micro Devices (AMD) and Intel for a recent fiscal year.
• AMD’s assets increased by $1,004 million and its liabilities increased by $334 million.
• Intel’s assets increased by $4,714 million and its liabilities decreased by $830 million.
a. Complete the following table.
Assets, beginning Assets, end Liabilities, Liabilities, Stockholders’ Equity,
(in $ millions) of year of year beginning of year end of year end of year
AMD $ $4,556 $2,956 $ $
Intel $123,249 $ $ $53,400 $
b. Calculate average assets for each company.
(in $ millions) Average Assets
AMD $
Intel $
c. Which company has the larger proportion of its assets financed by the company’s owners at year-end?
Copyright 2025
,Question 2
Applying Financial Statement Relations to Compute Dividends
a. Fill in the fiscal year (FY) amounts for Norfolk Southern to explain the changes in retained earnings. Note: Use a negative sign with answers that
reduce (are substracted from) the beginning of year balance.
Norfolk Southern Inc.
Retained Earnings
(in millions)
Beginning Balance at Dec. 31, FY1 $13,207
Net income
Dividends on Common Stock (960)
Share repurchases (1,373)
Other (4)
Ending Balance at Dec. 31, FY2 12,883
Net income 3,005
Dividends on Common Stock
Share repurchases (3,271)
Other (3)
Ending Balance at Dec. 31, FY3 11,586
Net income 3,270
Dividends on Common Stock (1,167)
Share repurchases
Other (3)
Ending Balance at Dec. 31, FY4 $10,697
b. True or false: Norfolk Southern purchased its own shares back each year?
Copyright 2025
,Question 3
Computing and Interpreting Financial Statement Ratios
Following are selected ratios of Norfolk Southern.
Return on Assets (ROA) Component FY4 FY3
Profitability (Net income/Sales) 25.7% 27.0%
Productivity (Sales/Average assets) 0.329 0.291
a. Was the company profitable in FY4?
b. In which year was the company more profitable?
c. Is the change in productivity a positive or negative development?
d. Compute the company’s ROA for both years. Note: Enter your answer as a percentage rounded to one decimal place (Ex: 29.4%).
FY4 %
FY3 %
e. From the information, which of the following best explains the change in ROA during FY4?
Question 4
Computing Return on Assets and Applying the Accounting Equation
Nordstrom Inc. reports net income of $564 million for a recent fiscal year. At the beginning of that fiscal year, Nordstrom had $8,115 million in total
assets. By fiscal year end, total assets had decreased to $7,886 million. What is Nordstrom’s ROA? Note: Enter answer as a percentage rounded to
the nearest 2 decimal places (ex: 24.58%).
ROA %
Question 5
Computing Return on Equity
In a recent year, Adobe Inc. reports net income of $4,756 million. Its stockholders’ equity is $14,051 million and $14,797 million at the start and end
of the fiscal year, respectively.
a. Compute its return on equity (ROE) for the year. Round answers to the nearest whole dollar amount.
Numerator Denominator Result
Return on equity $ $ %
b. Adobe repurchased $6,550 million of its common stock during the year. Did this repurchase increase or decrease ROE? NOTE: Assume there was
no change in net income related to the stock repurchase.
c. If Adobe had not repurchased common stock during the year, what would ROE have been? Note: Enter answer as a percentage rounded to the
nearest one decimal place (ex: 24.8%). %
Copyright 2025
, Question 6
Understanding What Information Financial Statement Users Demand
Users of financial statements include:
Current shareholders
Company CEO
Banker
Equity analyst
Supplier
Match the financial statement users to the question they are most likely to ask.
Questions Financial Statement User
1. What is the expected net income for next quarter?
2. Will the company have enough cash to pay dividends?
3. Has the company paid for inventory purchases promptly in the past?
4. Will there be sufficient profits and cash flow to pay bonuses?
5. Will the company have enough cash to repay its loans?
Question 7
Balance Sheet Equation and Financing Sources
In a recent year, the total assets of Microsoft Corporation were $364,840 million, and its equity was $166,542 million.
Required
a. What is the amount of its liabilities?
b. Does Microsoft receive more financing from its owners or nonowners?
c. What percentage of financing is provided by Microsoft’s owners? Note: Enter answer in percentage format rounded to one decimal place (ex:
24.6%). %
Copyright 2025
