Locate the most recent financial statements and related disclosure notes of FedE
ID: 2484386 • Letter: L
Question
Locate the most recent financial statements and related disclosure notes of FedEx Corporation. You can locate the report online at www.fedex.com.
Required:
1. From the information provided in the statement of cash flows, explain what allows FedEx Corporation to expand its business as evidenced by the investing activities, while at the same time not raising as much cash through financing activities.
2. Describe the activities listed under financing activities for the most recent fiscal year. [Hint: FedEx's Statement of Changes in Common Stockholders' Investment (statement of shareholders' equity) will help you determine the nature of the stock activity.] What is the most notable financing activity reported?
3. What are the cash payments FedEx made for interest and for income taxes in the three years reported? (Hint: See the disclosure notes.)
4. Obtain the relevant authoritative literature on disclosure of interest and income taxes using the FASB Accounting Standards Codification. You might gain access at the FASB website (asc.fasb.org). What is the specific citation that specifies the way FedEx reports interest and income taxes separately that enabled you to answer requirement 3?
Explanation / Answer
Answer:1 FedEx is expanding its business as evidenced by the investing activities. External financing need not be sufficient to fund those investments because of the substantial internal financing provided by operating activities. Notice that dividends to shareholders are relatively small, so most funds from operating activities are being reinvested in the business.
Answer:2 The four activities listed under financing activities for the 2009 fiscal year are ($ in millions):
The statement tells us that FedEx borrowed much more cash in 2009 than it paid to retire debt after not borrowing any the previous year. A relatively small amount of cash also was received from sale of stock. [Reference to FedEx's Statement of Changes in Common Stockholders' Investment tells us that stock was sold or granted under employee benefit plans rather than being sold to the public.]
Answer:3 Companies are required to separately disclose cash payments for both interest and income taxes. When the direct method is used to report operating activities, those amounts automatically are shown. But when a company uses the indirect method as FedEx does, supplemental disclosure is needed.
Financing Activities 2009 2008 2007 Principal Payment on Debt -501 -639 -906 Proceeds From Debt Issuances 1000 1054 Proceeds From Stock Issuances 41 108 115 Excess tax benefits on the exercise of stock options 4 38 45 Dividend Paid -137 -124 -110 Other net -7 -5 Cash From financing activities 400 -617 193Related Questions
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