This and similar cases in each chapter are based on the consolidated financial statements of Yum! Brands, Inc., given in Appendix B at the end of this book

 This and similar cases in each chapter are based on the consolidated financial statements of Yum! Brands, Inc., given in Appendix B at the end of this book. As you work with Yum! Brands, Inc., you will develop the ability to analyze the financial statements of actual companies. 

Requirements 1. Go on the Internet and do some research on Yum! Brands, Inc., and its industry. Use one or more popular websites like http://finance.yahoo.com or http://Www.google.com/finance. Write a paragraph (about 100 words) that describes the industry, some current developments, and a projection for where the industry is headed. 

2. Read Note 1—(Description of Business) of Yum! Brands, Inc.'s annual report. What do you learn here and why is it important? 

3. Name two of Yum! Brands, Inc.'s competitors. Why is this information important in evaluating Yum! Brands, Inc.'s financial performance? 

4. Write Yum! Brands, Inc.'s accounting equation at December 31, 2012 (express all items in millions and round to the nearest $1 million). Does Yum! Brands, Inc.'s financial condition look strong or weak? How can you tell? 

5. What was the result of Yum! Brands, Inc.'s operations during 2012? Identify both the name and the dollar amount of the result of operations for 2012. Does an increase (or decrease) signal good news or bad news for the company and its stockholders? 

6. Examine retained earnings in the Consolidated Statements of Shareholders' Equity. What caused retained earnings to increase during 2012? 

7. Which statement reports cash and cash equivalents as part of Yum! Brands, Inc.'s financial position? Which statement tells why cash and cash equivalents increased (or decreased) during the year? Which activities caused Yum! Brands, Inc.'s cash and cash equivalents to change during 2012, and how much did each activity provide or use? 

valuation of business operations  

 Details about Y! Brands, Incorporation 

It is a quick-service restaurant company. 

• It is a fortune 500 company. 

• The company had total sales of Country U $13 billion.

• The brand has around 40,000 restaurants around the world. 

• The following are the licensed brands under this company.

o T Bell

o Company K

o Company PH 

o Company WS

 

Requirement 2 

 

 Note 1 - Description 

According to the requirements of the Securities and Exchange Commission, all the public companies must prepare the annual report, which contains the following information:

• Details regarding the company’s financial status

• Summary about the company, its industry, its brands, and its growth policies

• States the risks of the company and its competitors

Hence, the annual report provides complete information about the financial position of a company, which helps the investors to take decisions.

Therefore, some of the important information provided in note 1 of the annual report. They are as follows: 

• Description of the process that the company uses to deliver its products to its customers.

 • The company sells the products through the following operating segments: Country C division, International division, three Country U divisions, and Country I division. 

• The note 1 details information about the different types of restaurants that are under Y Brands. 

Details about the competitor 

The following are the two companies that are competitors for Y! Brands: 

• Company Mc

 • Company CFA 

 

All three companies do their business online and earn revenue. The company's financial statements are being compared with the other companies to know the growth and performance. 

 Accounting equation 

The accounting equation of Asset= Liabilities+ Equity indicates that the resources of the business (Asset) will always equal to the claims of the business (owners' equity and outsiders' equity). 

Asset = Liabilities + Shareholders' Equity 

$9,011 =$6,699 + $59+$2,253 

The company's financial position is very strong. The company's assets are enough to pay off the debts of the company and will have enough funds to expand.

 

 Net income 

The only item that increases year after year is the net income. This is an important item that reveals the difference between revenue and expenses. In the year 2012, the company had a net income of $1,597 million. In the year 2011, the company had a net income of $1,319 million. Therefore, when comparing both the years, it is good news for a company that it had a positive trend and net income. 

Retained Earnings

In the year 2012, the consolidated balance sheet reported an increase in the retained earnings up to $234 million. The reason for this is explained in the consolidated statements of stockholders' equity. The following were the changes made to the retained earnings: 

• It increased by $1,597 million due to net income 

• It decreased by $569 million due to dividends 

• It decreased by $794 million due to repurchase made 

Cash and cash equivalents Cash: The amount of money that is readily available in hand to meet the current requirements of the company and to pay debts is called cash. 

 Cash equivalents: Instead of keeping idle cash during high-interest rates, the companies invest cash in the short-term interest-bearing accounts or certificates of deposit (CD) at several banks and financial institutions, insecurities, and in government securities. Such investments that have a maturity period of 90 days or less than 90 days at the time of purchase are called cash equivalents.

The consolidated balance sheets report cash and cash equivalents. The consolidated cash flows explain the reason for the increase/decrease in the cash/ cash equivalents. The changes were made in the cash and cash equivalents due to the following activities:

• Cash provided by operating activities amounted to $2,294 million (net cash inflow)

• Cash provided by investing activities amounted to $1,005 million (net cash outflow)

• Cash provided by financing activities amounted to $1,716 million(net cash outflow)