Weis Markets, Inc., is a Pennsylvania business corporation formed in 1924. The C
ID: 2338368 • Letter: W
Question
Weis Markets, Inc., is a Pennsylvania business corporation formed in 1924. The Company is engaged principally in the retail sale of food. The business of the Company is highly competitive and the Company competes based on price and service with national retail food chains, local chains and independent food stores. Weis Markets operates 155 supermarkets primarily in Pennsylvania and Maryland under the names Weis Markets, Mr. Z's, Scot's, Cressler's Marketplace and King's, and 31 SuperPetz pet supply stores. (Source: Company 2007 Form 10-K) a. Generally, what type of users (external or internal) are the financial statements prepared for? Give examples of the potential users that might rely on the financial statements b. How do the intended users influence the type of information included in the financial statements and how the financial statements are prepared/shown? c. What information does the statement of cash flows provide? How is this information different from the information contained in the income statement? d. What are the two genera Weis Markets use and how do you know? Why do you think most companies prepare their statement of cash flows using this method? e. What are the three major sections of the statement of cash flows? f. Specifically, how does the statement of cash flows relate to the Balance Sheet? g. The balance sheet includes an account called "cash and cash equivalents." What are cash equivalents? l methods for preparing the statement of cash flows? Which method does h. Complete the atixhed 2007 statement of cash flows for Weis Markets. Some amounts are filled in for you. Refer to the attached financial statements of Weis Markets, Inc. as you answer the following questions: i. Use the 2007 statement of cash flows you constructed and the statements of income for 2005 through 2007, to evaluate Weis Markets' profitability and ability to generate cash. Comment on the nature of the differences between net income and cash from operations in each year. j. Refer to the company's statements of cash flows for 2005 through 2007. Has Weis Markets maintained its productive capacity, expanded it or decreased it over the last three years? k. Review the following press release by Weis Markets relating to planned capital expenditures: "Vice Chairman Jonathan Weis today said his company would invest $80 million in its growth over the next twelve months. Mr. Weis made the announcement at his companys annual shareholder meeting, which was held in Sunbury earlier today For the coming year, we plan to invest nearly $80 million in our growth. We will target three quarters of this budget to our store base, said Mr. Weis. "We currently have 19 major projects in various stages of planning, including three new stores, tworeplacement units, nine additions andfive remodels Mr. weis noted this was a 23% increase over 2007, when his company made S64.2 million in capital expenditures." iscuss Weis Markets' capacity for increasing its capital expenditures. What are the likely sources of cash to fund the increased level of investment in property and equipment?Explanation / Answer
As per policy, only four parts of a question are allowed to answer at a time, so answering a to d here :
Answer:
a.The various uses of financial statements are: External : The Bankers, Prospective investors, Financial Institutions and other analyst. The Internal Users are the existing shareholders, creditors and the company’s management.
As the financial statements are the only source of getting information about the company, so all the desired users are relying on the financial statements.
b) The intended users influence the informations from Financial Statements as :
1. Bankers and Creditors : The interest coverage, turnover, profitability and Liquidity of the company.
2.Investors : The dividend returns, EPS, Payout of the company and growth prospects.
3.Shareholders : The company’s growth, profitability and dividend payout of the company.
4. Management : The progress from the past years and expected prospects of growth in future in different areas
c)The Cash flow statements provides informations like 1. Movement of cash, 2) Cash generated through operation, 3) Investment of cash and 4) Funds raised through various sources like issuing shares, writing notes and Loans from banks and 5) Liquidity status of the company.
The Income statement contains informations regarding the revenues and expenses relating to the period whether incurred or accrued, but Cash Flow Statements contains informations of incurred expenses only.
d) Direct and Indirect are the two general methods of preparing Statement of Cash Flow. Weis Markets is following Indirect method of preparing Cash Flow Statement as all the adjustments are made to the Net Income to calculate cash from operating activities and cash from investing and financing activities are shown separately.
Most of the companies prepare their Cash Flow Statements through Indirect method only because it connects the bottom line of Income statement ie. Net Income with the closing cash balance of the period.
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