The Company conducts the majority of its operations from leased premises, which include distribution centers, warehouses, offices, and retail stores. Future minimum lease payments for no cancelable real and personal property operating leases are as follows: Operating Leases ($ in Millions) 1997 $259 1998 213 1999 183 2000 160 2001 144 Thereafter 706 Total minimum lease payments $1,665 Present value of lease payments $1,000 Weighted-average interest rate 10% 2. During the fiscal year ended March 31, 1997, the Company sold $800 million of its accounts receivable with recourse, all of which were outstanding at year end. 3. Merchandise inventory. Substantially all merchandise inventory is valued at the lower of cost (first-in, first out) or market. 4. Substantially all of the Company?s employees are enrolled in Company-sponsored defined-contribution profit sharing and retirement savings plans. MILLER STORES: DATA EXTRACTED FROM MARCH 31, 1997, FINANCIAL STATEMENT FOOTNOTES 1. The Company?s real estate policy is to own its stores;thus, the Company has no operating leases. 2. The Company does not sell or securitize its accounts receivable. 3. All inventories are valued on the last-in, first-out (LIFO) cost basis. As of March 31, 1997, inventories were $700 million lower than they would have been had the first-in, first-out (FIFO) cost basis been used. 4. Actuarial present value of accumulated (ABO) and projected (PBO) benefit obligation for its pension plan at March 31, 1997, was as follows ($ in millions): ABO PBO Vested $1,550 $1,590 Nonvested 40 210 Total $1,590 $1,800 Plan assets at fair value = $3,400 Accrued pension per 3/31/97 balance sheet = $0 b. Select, based on Part a, the company that best meets Westfield?s investment criteria. Justify your choice. c. Describe, based on Table 9 and Table 10, the balance sheet adjustments in each of the following areas required to enhance the comparability of JDS and MLS. (A total of four adjustments is required.) (1) Leases (2) Sale of receivables with recourse (3) Inventory valuation method (4) Pensions d. Calculate each of the following ratios for both JDS and MLS using the adjusted financial data from Part c. ignore any income tax effects. Show your work. (1) Book value per common share (2) Total-debt-to-equity ratio (3) Fixed-asset utilization (turnover) e. Select, based on Part d, the company that best meets Westfield?s investment criteria. Justify your choice.
Calculate each of the following ratios for both JDS and MLS using the adjusted financial data from...
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