Question

1. Answer the following questions. (Hint: Apply the accounting equation.)

a. Prada, an Italian luxury fashion house, had assets equal to €3,888 million and liabilities equal to €1,187 million for January 31, 2014. What was the total equity for Prada’s business at year-end?

b. Rogers Communications Inc. is a Canadian communications and media company. At the beginning of 2013, the company’s assets were $19,618 million and its equity was $3,768 million. During the year, assets increased $3,983 million and liabilities increased $3,082 million. What was its equity at the end of the year?

c. At the beginning of 2013, Carrefour, a French retailer, reported liabilities of €37,959 (in thousands). During the year, assets decreased by €2,442, and year-end assets equaled €43,564. Liabilities decreased €2,992 during the year. What were its beginning and ending amounts for equity? All numbers are in thousands of Euro.

2. Financial Statement Relations to Compute Dividends Adidas, a German sporting goods company, reports the following balances in its retained earnings.

($ millions) 2013 2012

Retained earnings ........................................ $4,959 $4,454

During 2013, Adidas reported net income of €790 million.

a. Assume that the only changes affecting retained earnings were net income and dividends. What amount of dividends did Adidas pay to its shareholders in 2013?

b. This dividend amount constituted what percent of its net income?

Answer 1

1	Assets = Liabilities + Equity
a.	Prada
	Assets = Liabilities + Equity
	€ 3888 = € 1187 + Equity
	Equity = € 3888 - € 1187 = € 2701 million
b.	Rogers Communications Inc.
	Beginning of 2013:
	Assets = $19618 million
	Equity = $3768 million
	Liabilities = $19618 - $3768 = $15850 million
	End of 2013:
	Assets = $19618 million + $3983 million = $23601 million
	Liabilities = $15850 million + $3082 million = $18932 million
	Equity = $23601 - $18932 = $4669 million
c.	Carrefour
	Beginning of 2013:
	Assets = € 2442 + € 43564 = € 46006
	Liabilities = € 37959
	Equity = € 46006 - € 37959 = € 8047 thousand
	End of 2013:
	Assets = € 43564
	Liabilities = € 37959 - € 2992 = € 34967
	Equity = € 43564 - € 34967 = € 8597 thousand

2. Adidas

a. Dividends paid in 2013 = $4454 + $790 - $4959 = $285 million

b. Dividend/Net income = $285/$790 = 36.08%

Note: Percent is rounded off to 2 decimal places in the absence of specific instructions regarding the same. Kindly round off as required.