Best Buy Financial Analysis Paper

Amazing Essays
Introduction
Best Buy Co., Inc. is a publically traded company on the New York Stock Exchange, represented by their stock symbol: BBY.N. As a publically traded company, Best Buy is required to prepare and file an annual 10K report. It is important to note that some information may be biased toward Best Buy because their management files the financial reports. For this reason, it is crucial to analyze the given information thoroughly and completely. The information was analyzed to provide results that are most important to consider in investing decisions.

Revenues
Best Buy recognizes revenue from six categories: consumer electronics, computing and mobile phones, entertainment, appliances, services and other. Their revenue arises primarily
…show more content…
Asset Identification
Best Buy records merchandise inventory at the lower-of-cost-or-market. Freight-related costs from their vendors are included as part of the net cost of merchandise inventories. Other costs associated with acquiring, storing and transporting merchandise inventories to their retail stores are expensed as incurred and included in the cost of goods sold (Merchandise Inventories, 62). The inventory estimate adjusts for projected physical inventory losses. Physical inventory is taken periodically to ensure the inventory reported is accurately represented on the balance sheet. The inventory reflects markdowns for the cost over the amount they expect to realize from the ultimate sale or other disposal. Markdowns create a new cost basis for the inventory. Additional changes in fact or circumstances do not result in the setback of previously recorded markdowns or an increase in the new cost basis for the inventory (Merchandise Inventory, 62).
…show more content…
However, there are exceptional cases where inventory could be reported above cost. Inventory with previous fixed monetary value, with no substantial cost of marketing, may be stated at such monetary values. Other expectations must be justifiable by a company’s inability to determine appropriate approximate costs, immediate marketability at quoted market price, and the characteristic of unit interchangeability (FASB ASC 330-10-35-15).

Net Earnings and Comprehensive Income
Net earnings and comprehensive income are composed of different components. Comprehensive income is a change in equity of an entity during a period from transactions and other events and circumstances from non-owner sources (Kieso et al., 53). However, net earnings are calculated with the sum all of revenues minus all the expenses incurred. Net earnings are the financial gain or loss a business made in a period, whereas comprehensive income is the change in equity in the same period originating from non-owner sources.
Comprehensive Income Elements
Best Buy’s comprehensive income is computed as net earning plus other items that are recorded directly to stockholder 's equity. The significant components of comprehensive income are foreign currency translation adjustments and unrealized gains and losses, net of tax, on available-for-sale marketable equity securities (Comprehensive Income (Loss),

Related Documents

  • Decent Essays

    It is the expected rate of return applies to implicit the risk of start-up business. Investors likely to charge higher rates on investment to compensate for hold the specific risk of new firms. The rate should be between 30% to 70% depends on financial performance, management expertise and nature of business. Market Adjusted Rate: The rate of return in CAPM model that used to discount the cash flows which is adjusted based on risk links with the assets. For example, risk free rate and risk premium are core components to determine the cost of capital on CAPM pricing model where beta measures the systematic risk only which can not be diversified.…

    • 710 Words
    • 3 Pages
    Decent Essays
  • Decent Essays

    Receivables Case Study

    • 2923 Words
    • 12 Pages

    C) $461,000. D) $484,000.22.As a firm liquidates old LIFO layers of inventory, the lower costs of the LIFO layers are matched against current sales dollars resulting in a profit margin that is A) inflated. B) deflated. C) lower than normal. D) always the same as under FIFO.23.When the income effect of a LIFO liquidation is material, the SEC requires that the 10-K report disclose A) the dollar impact of LIFO liquidation on both a before- and after-tax basis.…

    • 2923 Words
    • 12 Pages
    Decent Essays
  • Decent Essays

    The elements affected includes Asset and Expense. In the balance sheet, the cash increase due to Prepaid Rent would be recorded as an asset, however with each rent paid in advance by the business, it will be recorded as a reduction in cash. Rent being paid in advance will be recorded as operating activities for the business in the statement of cash flows. Once rent has expired, a reduction will be incurred which is then determined as Rent Expense for the business in the income statement. 4.…

    • 759 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    5 defines earning as a reflect to the current operating performance concept. It includes all of what is in present net income for a period, but it excludes cumulative effects of changes in accounting principle. Earning does not include the cumulative effect of certain accounting adjustments of earlier periods that are recognized in the current period because it rates to the past and they are not relevant when assessing current operating performance. These effects are the accumulation of differences in earning of prior periods that would have occurred if the new method ben used in the past rather than the old…

    • 887 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    FIFO: A Valuation Method

    • 1717 Words
    • 7 Pages

    It is also important to identify a method for valuing the items in the inventory and calculating the cost of goods sold. This can be done through the cost method, the lower of cost or market and the retail method. “A valuation method is used to compute the cost of the inventory dollar amounts and then it is compared to the market dollar amount. The lower of the two amounts must be used when recording inventory.” The cost method involves all direct and indirect costs to acquire the inventory. The cost of the products purchased consists of the invoiced purchase price minus discounts or trade with and addition of transportation, shipping additional cost incurred for attaining the product.…

    • 1717 Words
    • 7 Pages
    Decent Essays
  • Decent Essays

    The current and noncurrent effect key ratios that investors use, and to compare against IFRS companies, the removable of the line item is simple which cannot be said for the reverse (IFRS all non-current allocation to current/non-current). Inventory Costing also have a strong impact on a company’s financial position as well as its operating income. Adidas costs its inventory under the weighted average method while Under Armour uses FIFO. Though both methods are allowed, behind the scenes information could be blurred when choosing one over the other. It is important to note that IFRS and US GAAP allow FIFO and weighted average when costing inventory.…

    • 951 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Analysis Of Wesfarmers

    • 998 Words
    • 4 Pages

    Discuss the problems of measurement in the context of the present AASB / IASB standards and framework using your selected annual report to provide examples? The requirement for a framework is to minimise the risk of measurement. According to the double entry system, equity is calculated as assets minus liabilities. In the classification of financial element, it is important they measured with accuracy and profitability. The problems of measurement are historical cost, which is based on the value which is paid in the past.…

    • 998 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Bottom Line Analysis

    • 713 Words
    • 3 Pages

    Included are: administrative salaries, R&D costs for new products, and marketing expenses. We classify Operating Expenses differently from Cost of Sales, because we cannot link Operating Expenses directly to product or service creation. Depreciation, taking into account the wear and tear on some long term assets, such as machinery, tools and furniture, is also deducted from gross profit. The cost of the asset is Depreciated or Amortized (spread) over the estimated useable life of the asset. We expense a fraction of the original cost of all assets during the period.…

    • 713 Words
    • 3 Pages
    Decent Essays
  • Decent Essays

    Some issues that may occur from acquiring assets in this manner is associating a cost to the items, like the appraisal value and overhead cost (Schroeder et al, 2011). Brignall (2007) mentions that under the general accepted accounting principles (GAAP), the assets a firm acquires must be recorded on the balance sheet with the historical cost; additionally, the long lived assets must be assessed accordingly due to inflation minus the depreciation rate. Schroeder et al (2011) added that the depreciation of the assets is computed for financial purposes, using a straight-line depreciation method. However, the remaining assets below must be recorded using other methods such as the equity method, fair and market value method, fair value option…

    • 1710 Words
    • 7 Pages
    Decent Essays
  • Decent Essays

    | | C. the declaration of a stock dividend on preferred payable in preferred stock when the market price of the preferred is equal to its par value. | | D. the payment of a previously declared cash dividend on the common stock. | | | | 41) Dividends are not paid on | A. nonparticipating preferred stock. | | B. Dividends are paid on all of these.…

    • 3301 Words
    • 14 Pages
    Decent Essays