Barnes and Noble, Inc.

By: Erica MurrayACG 2021.080

Executive Summary

• Barnes and Noble,Inc. is a strong company that continues to grow larger and increase sales. This company can be expected to stay strong throughout the future

http://www.barnesandnobleinc.com/for_investors/annual_reports/bnannual2004.pdf

Introduction

Chief Executive Officer: Leonard Riggio

Location of Home office:

Barnes and Noble, Inc.

122 Fifth Ave

New York, New York 10011

Ending Date of latest fiscal year- January 29, 2005

Description of principle products sold: Barnes and Noble sells a wide variety of merchandise including Books, movies, CDs and, Textbooks

Main geographic area of activity- Currently 49 states, including the District of Columbia

Stock Market Information

Most recent price of stock-$41.25Twelve month trading range- $31.25-$44.75Dividends per share- No dividends paid outDate of information: February 13, 2006

Someone investing in Barnes and Noble should go ahead and BUY do to the fact that a year ago the stock had only rose $2.25, so it could be expected to do somewhat the same and prices shouldn’t rise by much.

Audit ReportCompany’s independent auditors- BDO

Seidman, LLP

The audit reports discusses how the company conducted the report and the standards that were held. Barnes and

Noble is within the standards required by the United States of America.

Industry Situation and Company Plans

Barnes and Noble has a promising future with the selling of books. They have become one of the

#1 Retailers in this industry and they continue to stay that way. According to the letter to the stockholders the company not only plans to

bring in more books, but will continue to update their stores keeping themselves on the cutting

edge.

Statement of Cash Flows

Cash flows from operating more or less than net income for the past two years- More for the past two years

The company is growing through investments

Primary source of financing- The main source of financing comes from proceeds from issuance of long term debt

Over the past two years, there has been a significant increase in cash

Balance Sheet

Assets = Liabilities + Owner’s Equity

2004 3,301,528 = 1,325,582 + 1,165,942

2003 3,812,036 = 1,432,324 + 1,241,074

In 2003 Barnes and Noble has over $75,132 in Stockholder’s equity than it did in 2004. In 2004 Barnes and Noble had $106,742 less in liabilities than it did in

2003. Although the assets are greater in 2003, the company is better off now because they decreased

liabilities.

Income Statement

Income Statement- Single Step

2004 2003

Gross Profit 1,486,976 1,311,715

Income from Operations

244,216 225,774

Net Income 143,376 151,775

Gross profit and income from operations have increased. However, net income has decreased. This could be due to the closing of 41 stores and only opening 32. Also the company broke ground on a new distribution center.

Accounting Policies

Significant Accounting Policies:

Cash- Barnes and Noble considers highly liquid instruments to be an equivalent to cash if it is purchased with a maturity of 3 months initially.

Property, Plant, and Equipment- Use straight line method to calculate depreciation

Revenue- recognizes sales at time of sale, and returns at time of returns.

Inventory- Uses the “First in, First out method”, FIFO

Business

Consolidation,

Restatement of previously issued consolidated financial statements

Use of estimates, cash and cash equivalents

Merchandise inventories

property and equipment

Other Long-Lived Assets

Goodwill and Unamortizable Intangible Assets

Deferred Charges

Derivative Instruments

Advertising Costs

Closed Store expenses

Net earnings per common share

Income taxes

Stock based compensation

Reclassifications

Reporting period

Newly issued Accounting pronouncements

Topics of the Notes to the Financial Statements

Financial AnalysisMarket Strength Ratios

Price/Earning per share:

Dividend Yield: There have been no Dividends paid out in the past 2 years.

Financial Analysis Liquidity Ratios

Working Capital-

2004~ 644,428

2003~753,561

Current Ratio-

2004~1.47 times

2003~1.53 times

A/R Turnover-

2004~65 times

2003~86 times

Average Days Sales Uncollected-

2004~5.6 Days

2003~4.2 Days

Inventory Turnover-

2004~2.66 times

2003~2.37 times

Average days inventory on hand-

2004~137.2 days

2003~154 days

Financial AnalysisProfitability Ratios

2004 2003

Profit Margin 2.94% 3.47%

Assets Turnover 1.05 times 1.05 times

Return on Assets 3.1% 3.6%

Return on Equity 12.3% 4.0%

In 2003 Barnes and Noble experienced a higher profit margin, and return on assets. However the Return on Equity was higher in 2004 than 2003. The Asset Turnover stayed the same for both years.

Financial AnalysisSolvency Ratio

Debt to Equity:

2004~ 1.14

2003~1.15

The Ratio in 2003 is higher than the ratio is 2004. Because the ratio is greater than 1, the band owned more of the company in 2003 than in 2004.