Blockbuster Inc.Balance Sheet for year-ended Dec 31 ...

[anshika]

Blockbuster Inc.

Balance Sheet for year-ended Dec 31 ($000s)

ASSETS	Year 1	Year 2
Cash	194,200	200,200
Accounts Receivables	185,800	150,000
Inventory	242,200	202,900
Other Current Assets	177,300	163,300
Total Current Assets	799,500	716,400
Fixed Assets	​	​
Long Term Investments	214,100	159,500
PP&E	1,079,400	909,000
Goodwill	6,455,900	5,967,500
Total Fixed Assets	7,749,400	7,036,000
Total Assets	8,548,900	7,752,400
LIABILITIES AND SHAREHOLDERS' EQUITY	​	​
Accounts Payable	1,090,400	1,087,400
Short-term Debt	32,800	181,400
Total Current Liabilities	1,123,200	1,268,800
Long-term Debt	1,417,300	734,900
Total Liabilities	2,540,500	2,003,700
Shareholders' Equity	​	​
Common Stock	6,095,200	6,075,800
Retained Earnings	-86,800	-327,100
Total Stockholder Equity	6,008,400	5,748,700
Total Liabilities and Shareholders' Equity	8,548,900	7,752,400

Blockbuster Inc.

Income Statement for year-ended Dec 31 ($000s)

​	Year 1	Year 2
Sales	4,969,100	5,157,600
COGS	2,036,000	2,420,700
SG&A	2,390,600	2,532,400
Depreciation	279,000	246,600
Amortization of Intangibles	180,100	176,100
Operating Income (Loss)	83,400	-218,200
Interest Expense	116,500	78,200
Income Before Tax	-33,100	-296,400
Income Tax Expense	45,400	-56,100
Net Income	-78,500	-240,300

Referring to the Blockbuster financial statements, what is the most important underlying reason for the change in ROE?
◦ Decrease in cost of goods sold
◦ Increase in debt caused the debt/equity ratio to rise
◦ Increase in sales resulted in an increase in product returns which caused inventory turnover to decline
◦ Increase in cost of goods sold caused a big drop in gross margin
◦ Decrease in debt

[shaquita]

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[anshika]

TYSM

[FergA]

Gracias!