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FIN 571 Final Exam Guide (New)
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1.A proxy fight occurs when: the board of directors
disagree on the members of the management team.
Discussion Question 1:
Based on what you know about accounting, what role do you see it playing in business operations?
How dependent do you think a business is on its accounting department? Why?
Accounting plays many important roles especially when it comes to

business operations. Accounting is mainly responsible for almost all of the
financial needs of the business. It keeps track of all spending, profit and
loss that the company inquires.
The business is very dependent on it accounting department. Accounting
department is responsible for monitoring more than the cash flow, it also
works closely with IRS, government to make sure that everything is being
done correctly (payroll, taxes, etc). The accounting side of the business can
be considered to be the lungs of the company next to the heart.
Discussion Question 2:
Why are ethics so important in the field of accounting?
Wow where should I start? First of all the when dealing with accounting
there must be consistent clear communication between the business and
the accounting department. Honesty is always the best policy. Good
ethnics keeps the business running at its top level. The company's
personal information, employee information could be given to the wrong
hands and it can destroy the company. A good accounting department
has way too much to lose and they will not want to risk a horrible reputation
in the field.
Another response
People bring all their financial information to an accountant who in turn looks through
all of it with a fine tooth comb. People need to know that they can trust this person
with all of their personal information. Most licensed professionals swear to a code of
ethics, whether they follow them or not is up to that professional. Unfortunately
there are many out there that do not and they ruin the trust for other professionals.
Accountants really need to have the trust of their clients being that they work with
peoples taxes and finances and need much information from their clients.
Another response
Ethics are important in the field of accounting for

several reasons. Ethics mean different things to
differnt depending on the role of the accountant.
If an accountant is hired by an individual or a
business, that accountant is trusted with the
finances of the person or business. The
accountant is trusted to give an honest account
of finances and not to defraud or jeopardize that
individuals or companies relationship with the
government, creditors of financiers. Individuals
and businesses also trust the ethics of
accountants insofar that they do not disclose
their information to those that do not have a
right to it. Finally, In the accounting profession,
much like many other professional service
professions, an accountants reputation is the
continuing source of employment. If they are
knows to have a bad or even flexible ethical code
then they can develop a bad reputation and
experience a loss of business.
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FIN 571 Final Exam Guide Set 2 (NEW)

1. Financial managers should primarily strive to:
Financial Statements
Today, I will be describing a balance sheet, income statement, retained earnings

statement, and statement of cash flows and how a company uses these financial
statements as a tool to make future decisions for the company.
Balance Sheet
A balance sheet a statement sheet that reports the companys financial balances
of the business. This sheet includes the companys total of assets and liabilities.
It is used for all three types of business sole proprietorship, business partnership
and corporate business companys. Creditors rely on this financial sheet to
determine if the company will be able to repay.
Income Statement
An Income Statement is a financial statement that shows the companys profit
and losses. It basically shows all the companys gains and losses that were made
during a period of time. After the company deducts the expenses from the
revenue then you will get a total net income. This is a great statement to use
especially because this will show investors how much net income is the company
bringing in, or how financially stable the company truly is.
Retained Earnings Statements
Retained Earnings Statements reports the changes to the retained earnings (net
income in a corporation) during a certain time period. This financial statement
shows dividends, profits and loses. Investors and Lenders monitor the retained
Earning Statements especially when it comes to monitoring dividends. Some
invest use this tool to see if the company is paying high/low dividends. Retained
Earnings Statement is part of the balance sheet under Stockholders equity.
Statement of Cash Flow

Statement of Cash Flows provides information regarding the companys cash
receipts. This statement gives a detailed account of the operating, investing and
financial activities of the company. It also allows investors a chance to observe
how financially stable the company is so that they can make a choice if they
want to take a risk on investing into the company. Also the accounting
department needs this statement in order to see if the company has enough
money for payroll uses.
All four of these financial statements are all extremely important tools to use in
the business. Another statement that was not listed but is often used is called
comparative statements. Comparative statement gives a side by side
comparison of the financial statements above.
Reference
http:yourdictionary.com /accounting_statements.org Retrieved 1/28/10

Thomas, Y. 2005-08-27 Accounting 101 pg. 52 Statements
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FIN 571 Week 1 Connect Problems (Math and
Accounting Review)

FIN 571 Week 1 Connect Problems (Math & Accounting
Review) Compare and contrast sole proprietorships, partnerships, and
corporations.
Sole proprietorships means that a business that owned by one person.
That includes and not limited to all profits and losses, debts and unlimited
liability, all will come from the solely one owner and not a group or in this
case a partner or co-owner etc. Partnerships are seen much differently
than sole proprietorships. Partnerships is a business that owned by more
that one person/s. This is the number one difference from being a sole
proprietorship or sole owner. Basically, two or more people come together
and split the cost, debts, and liability. Corporations is an business that has
separate entity owned by stockholders. The huge difference between
corporations and the other two is that they are owned by stockholders.
Stockholders make decisions that is first best for their company, secondly
the company that they have together.
Why would a entrepreneur want to choose one over the other?
An Entrepreneur is a person that wants to start a business with their vision
and have more power of the decision making. The best choice for an
entrepreneur is to choose sole proprietorship out of all the three choices.
The first and most important reason is because it is much easier to start a
business as sole proprietorships. Sole proprietorship takes all the profit that
and doesn't have to split it between any other owners or corporations.
If I was to start a new business which one would I choose?
In this case it depends on the type of business. My case I will be opening a
hair salon and I would prefer sole partnerships. i choose that because I
want to be in control and I don't want to split the profit.
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FIN 571 Week 1 Connect Problems (Week 1
Problem Set)

FIN 571 Week 1 Connect Problems (Week 1 Problem
Set) Current assets
When it comes to a company's classified balance sheets you will find
current assets sheet. Current assets is cash or cash equilivants that the
company will use. What you will find on a current asset sheet is Cash and
equilvants, Short term investments, Accounts receivables, and other
assets.
Long-term investments
Long-term investments when it comes to balance sheet are investments
that the company intends to hold onto. The investments that are listed are
as follows, bonds, stocks and cash. You will also find short-term
investments in the company. The difference between short-term and long-
term investments is that the short-term investments will be sold and the
long-term investments normally the company will choose to keep it.
Property, plant, and equipment
Property, plant, and equipment are what the company calls "fixed assets".
Property, plant and equipment are assets that can not be easily converted
into cash. These are basically items such as company car (used to deliver
products), computers and copier machine, and freezer used for
restaurants.
Intangible assets
Intangible assets are non-monetary items that can not be seen or touched.
For example, trademarks, copywriters, patents and goodwill. Intangible
assets are normally listed in the separate assets.
references
http://www.investopedia.com/terms/i/intangibleasset.asp
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FIN 571 Week 1 DQ 1

What is ethics? For Discussion Question 1: Post your response to
the following:
When reviewing a financial report, why should information be
reliable, relevant, consistent, and comparable?
In other words, why are these accounting characteristics
important?
What kinds of problems could be created if a financial report is not
reliable, relevant, consistent, or comparable?
It is extremely vital that the company has accurate financial reporting. This
information determines whether or not to invest in your company's stock.
This information will help them decide if it is profitable to invest or not to
invest in your company based what is in your financial history. The
information must be relevant because it will help the company, investors
and lenders make decisions. It helps answer questions like, "how stable is
your company", or "what future does this company have". The information
should be reliable. In other words the information that is reported must be
able to be verified, backed up with truthful information. Comparable occurs
when different companies use the same accounting principles. This makes
it much easier to compare results between company's. Consistency
happens when the company uses the same accounting method every
year. When the financial statements are reported each year, it paints a
financial picture of where the company is headed now and in the future.
What kinds of problems will occur if the information does not include these
things?
Falsified or manipulated statements doesn't only effect the company but it

also to name a few effects the lenders, creditors, investor's, etc. This will
result in the company not having a faithful representation.
Another response
The main objective of generating financial information is providing useful information
that can be used in decision-making... only if this information is relevant, reliable,
comparable, and consistent, can it be useful for decision makers. (Kieso, 2003).
Relevance gives a basis for making decisions that will impact the future of a business,
and it confirms and corrects expectations from the past. If the information makes a
difference in making decisions, it is relevant.
Reliability means that the information can be depended on and it can be proven to be
free of error, and the information is factual. The information cannot favor one set of
users over another. CPAs audit financial statements to ensure reliability.
Comparability is also an important characteristic of financial reporting... this happens
when different businesses use similar accounting principles, making it much easier for
one to compare companies, and the method used in a business must be disclosed to the
users of the information to enable the users to convert the information as accurately
as possible.
Consistency simply means that the business uses the same accounting principles on a
yearly basis... consistently. This helps decision makers analyze a company's trends. A
company can change the methods used if they can justify the change, showing that the
new method is more useful for analysis. If the method is changed, it must be disclosed
in the notes that go with the statements to show users a lack of consistency.
These characteristics are very important to a business... decisions cannot be made
based on incorrect information, and everyone involved in a business venture of any kind,
whether they be management, owners, or investors and creditors, as well as consumers,
etc. must be able to rely on the financial information provided in order to make any
type of decision. Without this information, it is difficult to imagine any business
succeeding, even for a short time.
Examples of problems that could occur without reliable, relevant, consistent, or
comparable information includes not being able to get loans or investments;
management could make decisions that cause irreparable damage to entire operations,
consumers could easily lose faith and cut their ties... the possibilities are endless for
companies that lack these qualities in their financial reporting.
DQ2
For Discussion Question 2: Post your response to the following:

How does information from financial reports influence business
decisions?
Why is it important for business managers to understand the
information found on financial reports?
How does information from financial reports influence business decisions?
Once the information from the financial reports have been posted then a
team will review the company's financial history to see what decision were
profitable or not. The decisions that were made previous to the financial
reports being posted will show which way the company needs to go to
continue to remain #1.
Why is it important for business managers to understand the information
found on financial reports?
IT is extremely important for he business managers to understand the

information found on the financial reports. The business managers are
going to be the people that are going to make decisions for the company.
They need to know how to interpret the financial reports and come up with
different strategies that will continue to make the company money.
Another response
The information from financial reports influences business decisions because it shows where
the company stands. The managers use the information from the financial report compared to
the current year from the previous year, whether the company growths or losses. It is very
important for business managers to understand the information found on financial reports
because the information from the financial reports enables business managers to see how to
improve and keep the business afloat. It also gives business managers an insight what came in
and went out and the total operating cost of the company as well as cutting cost in a certain
areas. The information from the financial reports helps the manager manages the business
accurately.
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FIN 571 Week 1 DQ 2

Assume that interest rates have increased
substantially.
Internal Cash Control
By
Kamilah Crooms
Accounting 220
Jess Stern
Internal Cash Control
The accounting department receives from sales invoices once a month. Most
of the information is missing on the invoices.
The accounting department relies on each department within the company and all
the information has to be submitted completely and in a timely matter. In this

scenario most of the information that has been turned in has information that is
missing on the invoices. I would say that the internal controls that are not being
followed are Documentation procedures. Company documentation is very important
and must be turned in complete. These documents show proof of delivery or proof of
services to the customer. Any incomplete documents can be very costly and can
cause a delay in the company being paid for any services rendered. For example,
one of the requirements in a transportation department is to make sure that the
drivers verify the load and sign for the load prior to leaving the yard, these
documents says that the load left in good condition. Well, it so happened that we
allowed a driver to leave without signing the paperwork. This caused a delay in
accounting because we had to get signatures from the driver and the customer
which took a month later to complete.
Rob, Sue, and Bob use the same cash register at the donut shop.
Rob, Sue, and Bob all use one register has often turned into not the best
decision ideally for the company. It can increase the risk for the drawer being
short and it will be hard for the company to find out which employee or
employees had shorted the register. The internal controls that are not being
followed are Establishment of responsibility. Happens when the company

assigns one person to be in control of a specific job or have authority to make
decisions (pg 161 Internal Control and Cash). When the company signs one person
to be responsible over the register it will allow the company to hold that one person
responsible for any shortages.
Sam does the ordering of materials at the beginning of every month and pays
the bill.
In this case Sam is ordering materials and paying all the bills. This process is
actually known as related activities (pg 162 Internal Control and Cash). This occurs
when one person is doing two different responsibilities just like Sam. The internal
Control that is not being applied is Segregation of Duties. It is better for the two to be
a separate responsibility because it will minimize the billing errors.
Bank reconciliations are done by the person who is responsible for all cash
responsibilities.
The problem with this scenario is that the same person is responsible for all
cash responsibilities, why is this person doing the only one that does this job?
Having one person take on such a major responsibility increases the chances
of embezzlement and thief. The internal control that is not being applied is
rotating employees duties and requiring employees to take vacations. One person
should not be completely in control of one job, the company should encourage
vacations or switching positions to prevent incorrect handling of the companys
valuable information.
New checks came in and are left on the shelf with other supplies.
This is a tough scenario because there are all sorts of internal controls that are
not being used in this case. I would say in my opinion that the first internal
control that comes to my mind that is not being applied is bonding of employees
who handle cash.
Every employee that works near or with expensive equipment should be held reliable
or responsible for the companys assets. Bonding of employees who handle cash
protects the company by insuring that the employee is or isnt a risky applicant
(background checks) or reassuring that the employee that they will be prosecuted to
the fullest extinct if they are found guilty of thief. For example, I had worked at Mc
Donalds and
there were my shift managers and one employee that were caught with stealing
money from the company. This situation had happen very differently. The armor truck
dropped off a deposit that belonged to another company (armors mistake) but they
signed it. Those employees thought that nothing was going to be traced back to
them but the little did they know, all evidence traced back to them. They each
received jail time, and felony records.
Everyone has access to the computer system and the last audit was seven
years ago by the former accountant
This scenario has two things that are going on at the same time. I will first
start off with the computer system and how everyone has access to the
computer. The internal control that is not being applied is Physical, Mechanical,
and Electronic Controls. This allows the company to control assets through
physical or electronic based systems or programs. It is extremely important for a
company to invest in computer or informational protection for the company
and for their employees. Todays technology age most companies are
investing in a computerized program. This will help protect from internal errors
and external protection. For example, all companies invest in a virus
protection this will ensure that the companys information is protected and not
in the wrong hands.
Invest idle cash

Invest idle cash occurs when any excess funds or cash needs to be invested. The
money should be highly invest and risk free. For example, a major company should
make investments with their assets into profitably investments and risk free.
Plan the timing of major expenditures
This is when a company sets aside money for major cash needs. We live in a world
that things happen daily. A good company would set aside emergency funds. For
example, during a terrible thunderstorm, the winds practically ripped off the roofing
shingles off a commercial business. The company will be able to use the money for
emergency.
Delay payment of liabilities
Delay payment of liabilities is when a company pays bills not too soon and not late.
This allows the company to have money available for bills that that really need to be
paid allowing excess funds to be free for other uses.
Keep inventory levels low
This occurs when the company keeps the inventory low so that it will bring in more
profits. For example, if the managers at a fast-food over plan and fix too many
hamburgers and the customers dont buy it, then the food will go bad and the
company will lose profit.
Increase the speed of collection on receivables
This occurs when money is owed to the company, the company cannot claim these
until the funds have been received. Some companies offer incentives to encourage
customers to pay early or on time. For example, my job encourages their customers
by letting them know that there will be a price increase on or after a certain date and
this really works because the customers want to pay at a lower price.
References:
http:yourdictionary.com /accounting_statements.org Retrieved 2/13/2010
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FIN 571 Week 1 Individual Assignment Business
Structures

Watch the "Your Business Structure" and "Corporate Business

Structures" videos on the Electronics Reserve Readings page.
Identify the different business structures. Axia College
Material
Appendix B
Cash Management Matrix
Directions: Using the matrix, list how each of the principles of internal control works, and give an
example for each. Next, list how each of the principles of cash management works, and give an
example for each.
Principles of Internal Control How it Works

Establishment of responsibility Happens when the company assigns My job, Our Sa
one person to be in control of a specific the only one th
job or have authority to make restocking fee
decisions.
team to be in
customers retu
Segregation of duties This is when the company has more A church- You h
than one person to control a task or job the offering and
someone who w
what was receiv
Documentation procedures Evidence or proof of all company My job we deliv

transactions customers, and
sign prior to lea
customer sign a
form
Physical, mechanical, and electronic controls Allows the company to control assets Our job has a sy
through physical or electronic based this tracks the e
systems or programs. lunches. Also, m
CSR have been
Physical control
guard, they req
to entry.
Independent internal verification Any information that can be reviewed , My job has a wa
compare, and reconciliation by a employee inventory and w
they were short
can go back and
and compare th
system and a ph
determine if the
incorrect
Other controls Bonding of employees, company Our company fir

protects against abuse of assets. because she had
card business ca
was not work re
Principles of Cash Management How it Works
Invest idle cash Occurs when any excess funds or cash My fathers com
needs to be invested, investments and
favor
Plan the timing of major expenditures A company wants to make sure that During the reces
there is money set aside for major cash lower than expe
needs companies pulle
Delay payment of liabilities When a company pays the bills at an Ok, when times
appropriate time not late and not too bills are due I or
soon. which bills need
soonest, becaus
early I will cut o
could be used fo
Keep inventory levels low Happens when a company keeps the Sees Chocolate
inventory low so that it will continue to sure that they a
bring profit or making too m
the company wi
Increase the speed of collection on Money that is owe to the company by When a custome
receivables other people or customers is money product and has
that can not be counted towards the company can no
companies funds theirs until it is
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FIN 571 Week 2 Connect Problems

FIN 571 Week 2 Connect Problems 1.Sankey, Inc., has
current assets of $4,230, net fixed assets of $25,700,
current liabilities of $3,500, and long-term debt of
$14,400. Discussion Question 1: Post your response to the
following:
How would you describe the difference between financial

and managerial accounting? What are the distinguishing
features of managerial accounting?
There are many differences between financial and managerial accounting.
The financial accounting statements are available to external users such as
employees, stockholders, creditors, investors, etc. This is available to them
so that they can monitor the company's performances quarterly or annually.
Managerial accounting provides financial information for managers and
other internal people or department. Managerial accounting is confidential
so it is only observed by internal users such as management, owner, and
will provided to external users such as the public. Management uses this
for budgeting purposes or to monitor profit loss/gain within the company.
Managerial accounting can be available to them as often as needed.
Managerial accounting statements is a great way for management to make
decisions based on what has been reported.
Another response
The differences between managerial accounting and financial accounting are
distinct. Managerial accounting reports are for those in managerial and decision
making positions. The managers use the financial report to answer questions,
which would advance the company and its employees. The manager would want
to know if certain investments should be made and should the company advance
an employee's salary. The manager needs the report to decide if a factory is built
or if a certain stock is brought. The financial accountant has the job of showing
the external users such as creditors and stockholders a picture of the company's
stability.
The manager's purpose is to manage by making stable plans, delegate duties,

motivate the workers, and control the atmosphere. Distinguishing features of
managerial accounting are the fact no cpa will audit the report, and there is no
specific frequency of the report. The reports are done in a need to know basis
and for a specific reason, which is for business purposes. The reports are detailed
and pertain to specific business decisions. The financial accountant need only be
concerned with the company's finances.
DQ2
Discussion Question 2: Post your response to the following:
Select a management function (planning, directing and

motivating, or controlling) and explain how that function
relates to business as a whole. Next, select a different
function listed by a classmate. Discuss with your classmate
how the functions you each selected complement each
other.
The management functions that I choose was controlling. Controlling job is
to make sure that the each department/person is keeping the company's
activities or plans on track and in order to achieve that they must work
closely with Management planning function. Controlling continually
compares the company's performance to make sure that the planned
standards are being met. In my opinion this is known as the "dirty work".
Controlling operations have to know what to look for and how to keep track
of all the company's activities. They have to take actions and quickly
correct any errors and make sure that the company goals are being
achieved in a timely matter or the time that it was planned. If there are
errors it is job of the controlling operations to take quick action. The
controlling operations not only correct errors after it happens but they also
are in charge of foreseeing any potential errors and act quickly to get that
resolved.
Another response
I chose Controlling as part of the management function. The controlling
function relates to business as a whole because it helps monitoring the
firms performance to make sure the planned goals are being met.
Managers need to pay attention to costs versus performance of the
organization. let say, if the company has a goal of increasing sales by 10%
over the next two months, the manager may check the progress toward
the goal at the end of month one. If they are not reaching the goal the
manager must decide what changes are needed to get back on track.
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FIN 571 Week 2 DQ 1

In order to receive proper credit, please reply to this
message when posting your answers to WK2 DQ1.
Cost, Volume, and Profit Formulas
By
Kamilah Crooms
Due February 28, 2010

Explain the components of cost-volume-profit analysis.
The components of cost volume-profit analysis consist of Level or volume of activity,

Unit Selling Price, Variable Cost per unit, total fixed costs, and Sales mix.
What does each of the components mean?
Level or volume of activity is the activity that causes change or behavior when it comes
to the cost. Unit selling Price is the cost for the product basically how much each unit
is selling for. The Variable Cost per unit is something that can change depending on
the activity. The total fixed cost does stay the same as activities change but differ per
unit. The Sales mix is basically what the name says. Its a mixture of sale items when
more than one product sold the sales will remain the consistent.
Based on the formulas you have reviewed, what happens to contribution margin per
unit when unit selling prices increase?
Contribution margin is the amount of revenue left over after subtracting the variable cost.
So basically Unit sales price subtracting or minus variable cost.
Illustrate your explanation with an example from a fictitious company of how an

increase in unit selling prices might affect contribution margin.
Kellys Sweetheart Flowers
The owner of Kellys Sweetheart Flowers is selling their bouquet of flowers for $10
per unit. The Variable Cost per unit is $4.00. The contribution margin will be
($10-$4) = $6. If the sells price increases to say $15, then the contribution margin
will be ($15-$6) = $9 per unit.
When fixed costs decrease, what does this do for sales? Illustrate your explanation
with an example from a fictitious company.
Kellys Sweetheart Flowers
When the fixed cost decreases, the contribution margin ratio the net income and sales will
increase.
For example,
The flowers are $10 per unit. The variable cost per unit is $4.00. The contribution
margin will be ($10-$4) = $6. The fixed cost is $3. We subtract Contribution margin
Fixed Cost= Net income. The net income is $3.00.
Define contribution ratios
The contribution margin ratio is the contribution margin per unit margin divided by the
unit selling price.
What happens to contribution ratios as one of the components changes?
Shown in the example above, if one or more of the components changes is will cause the
net income to increase or decrease.
Reference
statements.suite101.com/article.cfm/cost_volume_profits*the_p_l. Retrieved
2/28/2010
//http:yourdictionary.com /CVP.org Retrieved 2/26/2010
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FIN 571 Week 2 DQ 2

Suppose rf is 5% and rM is 10%. According to the SML
and the CAPM, an asset with a beta of 2.0 7 How should
mixed costs be classified in CVP analysis? What approach is used to effect
the appropriate classification?
According to our class materials all mixed cost must be classified into their
fixed and variable and variable elements. The method that can be used to
determine is called the high/low method. To determine the variable cost the
analysis takes the total cost and divide it with the low activity level. To get
the fixed cost then the company would have to subtract the total variable
with either the high or low activity level.
9. Cost volume profit CVP analysis is based entirely on unit costs. Do you
agree? Explain.
In my opinion when it comes to making financial decisions for the company,
often times more than one method is used. Cost volume profit is also based
on Volume or level activities, unit selling prices, variable cost per unit, total
fixed and sales mix.
14. You can find the break point in dollars by drawing a horizontal line to
the vertical axis. I you want to find the break even point in units it will be a
vertical line from the break even point to the horizontal axis.
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FIN 571 Week 2 Individual Assignment Business
Structure Advice

Write a 350 to 700 word response to the following e-mail:
Dear Consultant,
I am currently starting a business and developing my business
plan. I'm in need of some advice on how to start forming my
business. Axia College Material
Appendix C
Budgets Matrix
Directions: Using the matrix, define each of the budgets listed and briefly describe its uses.
Budget Definition Describe its uses

Sales budget Estimate of the The sales budget shows
expected sales for the dollars and units. This
period. All of the other will allow management
budgets depend on the to see how many units
sales budget. This is will be produced for the
where all the other period
budgets will start from
Production budget A production of units Shows management

needed to be produced how many units will be
in order to meet the produced during each
projected sales budget period and what
amount is needed to
fulfill inventory
demands
Direct materials budget Is the estimated Shows management

quantity or cost of the how much raw materials
raw materials that is that is already on hand
needed in order to and or that needs to be
produce the units ordered to meet
required to fulfill inventory demands.
inventory
Direct labor budget A estimate of cost and Shows how many hours,
quantity of direct labor how many laborers
needed in order to meet needed to produce the
production units for that budget
period. Management
will decide what will be
the right amount of
laborers needed and if
the company will be
able to meet the budget
Manufacturing overhead An estimated expected This list all overhead

budget amount of cost involving cash
manufacturing cost for disbursement in a
the budget period quarter
Selling and administrative Anticipated selling and Shows area of budget

expense budget administrative expenses that are not
expenses in the budget listed other than
period manufacturing.
Expenses such as
marketing, promotion
cost etc for the budget
period
Budgeted income statement Estimate of expected Is a very important tool

profitability of because it shows the
operations in a budget company estimated
period profit for the budget
period.
Cash budget A projection of Cash budget helps

expected cash flows in management keep a
and out of the business. tally or total of all cash
balances.
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FIN 571 Week 2 Individual Assignment Ethics and
Finance

The Sarbanes-Oxley Act of 2002 (SOX) was passed as
the result of the Enron scandal and other instances of
accounting fraud. This act was passed to strengthen
the role of the Securities and Exchange Commission
(SEC). Discussion Question 1: Post your response to the following:
You know how important it is to create budgets for your
household. How does budgeting help management make
good business decisions?
Budgeting is a very important skill that can be applied to everyday life and
also when it comes to making good business decisions. I really like the way
our class resources says about Budgeting. Budgeting is used as a planning
tool used by management to make good decision for the company. If a
company is successful than more than likely that means that the
management team is very good at managing the company finances.
Budgeting helps management plan ahead, defines what is most important,
shows warning signs, reach a company target without over or under
budgeting and etc.
Another response
In a business, a budget helps a business make good decisions because they are
used by the company to plan for future events and coordinate the events and
duties in the company. They also gives objectives used to evaluate the
performance of the company on each level which can help to make future
decisions that will not hurt the company based on the projected objectives. It
can also be used to alert the company of possible problems or negative trends in
the company that need to be addressed so that there is a clear picture of the
overall health of the company before decisions are made. The budget helps the
company to be able to make an informed decision when making one. It is there
in order to make sure that making a decision like taking on another company will
not hurt the company and is something that the compnay can sustain based on
the budget.
DQ2
Discussion Question 2: Post your response to the following:

What are some of the different types of budgets?
Describe in detail one type of budget covered in the text.
Describe what the budget is used for and what information it

provides a business.
Then, as you respond to your classmates, discuss how the budget

you described relates to the budgets they described.
Discuss how a business benefits from each of the budgets.
There are many different types of budgetting. For example, there sales
budget which allows management to see how many units that need to be
produced, production budget which will allows everyone to see how many
units are going to be produced in or needed to be produced in order to
meet the inventory for that budget period. One budget that I can describe in
detail is called the direct labor budget and this budget shows how many
people, hours is needed in order to meet the required budget for that
period. This will give management an idea of how much money is needed
such as paying the cost of labor. The company benefits by each of these
budgets because it will help manage just how much money it will cost the
company during this period. Management can also see if there are different
ways to cost the company out of pocket cost down during this period.
Another response
I chose to write about the Production Budget. The Production
Budget shows the cost of each unit needed to produce an item or
manufacture a product. The formula used by the Production
Budget :
Budget sales units + Desired ending finished goods units -

Beginning finished goods units = Required production units.
An example would be, every Easter the bakeries in the Bronx

loads up on Hot Cross Buns. My mother and grandmother would
buy these tasty sweet breads,and eat them for breakfast. I
personally would like to eat them every week but, they are only
sold during the Easter season. Maybe, it has something to do with
the glazed cross on the top.
Every Easter Holiday, there appears these Hot Cross Buns and the
bakeries production department allows for the purchases for
items needed to make the buns. After Easter has gone, Hot Cross
Buns are not included in the budget.
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FIN 571 Week 2 Individual Assignment Ratio
Analysis Problems

Ratio Analysis
(Individual Assignment)
You may use excel or word.doc format for this assignment.
Please post your homework as a word.doc or excel file in the class
discussion section below by the due date.
What is a Flexible budget?
A Flexible budget is a budget that change or is flexible during
different levels or activity. Unlike the static budget which is a budget
based on one activity level, the flexible budget is based off of more
than one activity level.
The steps to development a flexible budget is :

a) Identify the activity index, and the range of activity
b) Find out what the variable cost, and determine the variable cost
per unit
c) Find out what the fixed cost and determine the budgeted
amount for each unit
d) Organize the budget for selected additional activity within the
appropriate range
The information found on a flexible budget cannot begin with the

master budget. The flexible budget uses the same guidelines the
original budget. The budget consists of Sales, Cost of Goods Sold,
Selling Expenses, General and Administrative Expenses, Income
Taxes, and finally the Net Income.
The information on the budget is a great tool to be used for
evaluation performances. The flexible budget can be used for
monthly comparison purposes. Also during the process that
management is identifying the activity index and the range of
activity it will allow them to see the cost of direct labor hours for
that budget period.
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FIN 571 Week 2 Learning Team Reflection

Read the Ethics case, "A Sad Tale: The Demise of Arthur Anderson"
located in the WileyPLUS Week Fundamentals of Corporate Finance
Chapter readings.
Income statement is a financial statement that shows how much money is coming from
product sales and services prior to any expenses being taken out. Both internal and external
users such as managers and investors are able to access this. For example, if a investor
wanted to see if the company made money or lost money they would use this financial
statement report.
Balance sheet shows what condition the company is currently in. whereas the other financial
statements only came monthly or annually. For example, what if the management planning
team wanted to see the company's current assets, ownership equity and liabilities? All they
have to do is run the balance sheet report.
CVP income statement or Cost Volume statement reports or monitors the effects of the
changes in cost and volume when it comes to the company profits. For example, I work at a
manufacturing plant for roofing shingles. The CVP analyst studies the cost which includes
but not limited too, manufacturing, material, labor cost. This financial statement report would
help the management team budget the cost of manufacturing goods.
Statement of cash flow tracks the movement of cash coming in or out of the business. This
financial statement will show if the company made cash or not, or if the net income
increased or decreased. For example, the owner or the management department will use
this to determine if the company has earned enough money to be able to for any expenses.
Retained earnings statements is a percentage that is kept by the company to be reinvested
or to be used to pay debts. For example, if a company was looking to expand their business
by purchasing top of the line equipment they can use this statement to see how much
money the company has put away.
References:
http://www.investopedia.com/terms/r/retainedearnings.asphttp://financial- Retrieved
2/18/2010
statements.suite101.com/article.cfm/financial_statements_the_p_l. Retrieved 2/18/2010
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FIN 571 Week 3 Connect Problems If the Garnett Corp.
has a 15 percent ROE and a 25 percent payout ratio,
what is its sustainable growth rate? What is a Flexible budget?
A Flexible budget is a budget that change or is flexible during
different levels or activity. Unlike the static budget which is a budget
based on one activity level, the flexible budget is based off of more
than one activity level.
The steps to development a flexible budget is :

a) Identify the activity index, and the range of activity
b) Find out what the variable cost, and determine the variable cost
per unit
c) Find out what the fixed cost and determine the budgeted
amount for each unit
d) Organize the budget for selected additional activity within the
appropriate range
The information found on a flexible budget cannot begin with the

master budget. The flexible budget uses the same guidelines the
original budget. The budget consists of Sales, Cost of Goods Sold,
Selling Expenses, General and Administrative Expenses, Income
Taxes, and finally the Net Income.
The information on the budget is a great tool to be used for

evaluation performances. The flexible budget can be used for
monthly comparison purposes. Also during the process that
management is identifying the activity index and the range of
activity it will allow them to see the cost of direct labor hours for
that budget period.
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FIN 571 Week 3 DQ 1

Why are interest rates on short-term loans not
necessarily comparable to each other? Capstone
Discussion Question: Post your response to the following:
Think back over what you have studied and learned in this
course. Do you have a new perception of or appreciation for
the field of accounting and how it contributes to business?
Explain.
To be perfectly honest with you I truly had no clue what accounting did for a
company and how important it was. I always thought that accounting only
dealt with payroll. In fact accounting does much more that just payroll and
monitor company supplies (coffee, paper, pens & pencils). The accounting
sets budgets for the entire company, monitors outflow and inflow of profits,
plans budgets for each department, and much more. When I first begun
this class I was really nervous, I truly thought that I was going to have a
hard time understanding the accounting but I happy to say that I was
wrong. I understood every part of this course.
On a personal note I would like to thank you Jess. If it wasn't for your pep
talk I probably would had gave up. You are truly a great instructor. I wish
you all the best! God Bless
Another response
Accounting has taken a whole new meaning to me in my vocabulary. Prior to this
course, I just took accounting as a calculator and crunching numbers. I now
have a new respect for accounting and all the aspects that are involved. I never
once took into consideration profit, sales, revenue, and balance sheets also being
included with accounting. There is so much more involved with accounting, and
had I not taken this course I would have never known. Accounting is a very
important part of running a business. I feel that it is imperative to all people
thinking of opening a business should take some type of accounting class to
become more aware of how to run the accounting part of a business.
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FIN 571 Week 3 DQ 2

Optical Supply Company offers credit terms of 2/10, net
60
Business Plan
By
Kamilah T. Crooms
The name of my business is called DestinyWear. DestinyWear is a urban
fashion clothing company for woman, men and youth. DestinyWear specializes in
making clothing for every occasion. My name is Kamilah Crooms and I am the owner
and CEO of DestinyWear.My goal is to ensure that my company will be succesfull in
all areas and in each department. In order for me to make sure that the company
was going to begin in the right direction I had to priortize what was most important in
establishing my business plan. The main priority is that I had to first choose the
appropriate business structure, a high demanding product, and most of all an
outstanding accounting team.
Business Structure
Upon establishing DestinyWear I had to decide which business struture that I

felt was best for me to pursue. I decided that as a Entreprenuer the best choice for
me abd the direction of the company would be for me to be sole proprietorship. Sole
proprietorship allowed me to be the sole owner of DestinyWear. The first and most
important reason that I wanted sole proprietorship is because it is much easier to
start a business as sole proprietorships. Sole proprietorship takes all the profit that
and doesn't have to split it between any other owners or corporations. I also want the
power to make and change decisions along the way without having to first consult
anyone else.
DestinyWear Products
DestinyWear products will range from jeans, shirts, accessories and shoes.
The company will first start off with its most profitable product and that will be the
DestinyWear designer jeans line. The jeans line has over twenty different jeans
designs
from straight leg, baggy, cargo, overalls, shorts and much more. The jeans line will
provide services within the United States and Canada and will eventually service
International customers. The DestinyWear jeans line will have its own building. In this
building the bottom floor will consist of the factory and the top floor will have the
different departments such as management, marketing and most importantly the
accounting department.
DestinyWear Accounting Department
The accounting plays a major role in establishing my company DestinyWear.

The accounting department does more than managing and reporting the companys
financial documents it is the greatest tool in establishing my business. The key to a
powerful accounting department here at DestinyWear is applying the principles of
internal control. These principles consist of establishment of responsibilities,
segregation of responsibilities, documentation procedures, Physical, mechanical,
and electronic controls, Independent internal verification and other controls such as
Bonding of employees. In order to ensure that this business plan works
DestinyWear has to hire nothing but the best qualified employees.
DestinyWear Accounting Staff
DestinyWear accounting team of fine employees will all be hired through the
company. There are several requirements that have to be met in order for myself as
the owner and Human Resource department to even consider the applicant for
accounting. We looked for characteristics, education and work history experience.
The first and far most important qualifying requirements are education. The applicant
has to have a Bachelor BA/BS in accounting degree a plus if he or she has a
masters.
The second requirement is experience. The applicant must have the minimum
of five years of experience working in accounting. He or She must have knowledge
and employment experience of working with financial statements, cash management
and internal control. Employees must be experienced in Invest idle cash, planning
the timing of major expenditures, delay payment of liabilities keeping inventory levels
low, and increasing the speed of collection on receivables. In the category of
experience we had to hire applicants according to the position that had to be filled in
accounting. For example, if a position in accounting such as management or
supervisory needed to be filled, then we would look for years of experience in
management or supervisory positions. I personally prefer that every employee have
some type of management experience.
Last but not least, the employees characteristics. It is a must that every accounting
staff member has and applies professionalism, great ethic and moral skills, accuracy,
and most importantly punctuality, and reaching company deadlines. These
characteristics are very important to have at DestinyWear.
DestinyWear Accounting Management Team
The DestinyWear accounting management team will be reporting to me and to

the other head staff each week to report updates and any new changes. The
management team is responsible to have all the different types of budgeting reports
that includes Sales, Labor, etc. Management must follow the responsibility reporting
system for each department. The managers will use the companys financial
information to predict outcomes of the business. I require a report from each
responsibility center, cost center, profit center and investment center to be reported
each month. Management is responsible to ensure that the company does not over
or under budget and if any changes it must be reported immediately.
Conclusion
DestinyWear will be a very successful team not only because of the products
that we produce but because of having a great accounting team. With the help of
accounting team I DestinyWear products will be in every wardrobe in America.
REFERENCES
//http:yourdictionary.com /CVP.org Retrieved 3/20/2010
Thomas, Y. 2005-08-27 Accounting 101 pg. 52

Statements. March 19, 2010
Drucker, P. Managing in the next society 2002. retrieved

march 19,2010
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FIN 571 Week 3 Individual Assignment

Interpreting Financial Results

Resource: Financial Statements for the company assigned by your

instructor in Week 2.
Costco Wholesale Corporation
If we look at the financial statements of the company we can find that the
company is financially strong. Its strength are:
1. It has enough amount of current asset to repay its current liability. The current ratio of
the company 8.18 indicates that the company has $8.18 liquid asset to repay its $1 of
current liability.
2. The operating cost of the company is increasing because the company is able to
reduce its expenses.

3. Cash from operating activity has increased for the company.
Apart from this strength the company also has some weakness in its
financial statement:
(i) Increasing inventory indicates that the company inventory conversion period is
increasing.
(ii) The cash from investing activity shows that the company cash outflow is more in
the short term investment i.e. in non operating activity.

(iii) The overall has for the year 2008 has declined for the company.
Net Income:
If we look at the trend in net income of the company we can find that the
company net income looks fluctuating but it has improved it net income in
2008 as compared to 2007.
Debt ratio as a percentage of total assets:

If we look at the debt ratio as percent of total asset we can find that the
debt ratio is declining in 2008 as compared to 2007 i.e. the company is
increasing equity to finance debt.
Debt as a percentage of total equity:
As we can see that the debt as percent of total equity is declining in 2008
as compared to 2007 i.e. the company is increasing equity in its capital
structure.
As we can see that there is nothing negative in 2008 for the company and
this is the reason it has positive trend as compared to 2007. Hence there
is no need to correct anything for the company.
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Watch the "Concept Review Video: Working Capital Management"

video located in theWileyPLUS Assignment: Week 3 Videos Activity.
Week 1 DQ 1
Due Tuesday, Day 2
Go to the U.S. Securities and Exchange Commissions Web site

at http://www.sec.gov and the Financial Accounting Standards Boards Web
site athttp://www.fasb.org. Identify the mission and main activities of each
organization. Then, analyze the similarities and differences between the
roles of each entity. Which entity has more influence over financial
statement reporting? Explain your answer.
According to the SEC website their mission is to protect investors,
maintain fair, orderly, and efficient markets, and facilitate capital
formation. The SEC also requires public companies to disclose meaningful
financial and other information to the public. This provides a common pool
of knowledge for all investors to use to judge for themselves whether to
buy, sell, or hold a particular security. The SEC is concerned primarily with
promoting the disclosure of important market-related information,
maintaining fair dealing, and protecting against fraud.
According to the FASB website the mission of the FASB is to establish and
improve standards of financial accounting and reporting that foster
financial reporting by nongovernmental entities that provides decision-
useful information to investors and other users of financial reports. Since
1973, the Financial Accounting Standards Board (FASB) has been the
designated organization in the private sector for establishing standards of
financial accounting that govern the preparation of financial reports by
nongovernmental entities
The major difference in the SEC and the FASB is that the SEC deals with
reporting of financial statements for all industries while the FASB deals
mainly with the private nongovernmental entities. Both are concerned
with the fairness of financial reports and work in the interest of the public.
I believe that the SEC has more influence over financial statement
reporting because they can bring civil action against companies and
individuals for violations of securities laws. Although according to the FASB
website, the Commissions policy has been to rely on the private sector
for this function to the extent that the private sector demonstrates ability
to fulfill the responsibility in the public interest.
Response 2
Go to the U.S. Securities and Exchange Commissions Web site

at http://www.sec.gov and the Financial Accounting Standards Boards Web site
athttp://www.fasb.org. Identify the mission and main activities of each organization.
Then, analyze the similarities and differences between the roles of each entity. Which
entity has more influence over financial statement reporting? Explain your answer.
U.S. Securities and Exchange Commission (SEC)
According to the SECs website The mission of the U.S. Securities and Exchange
Commission is to protect investors, maintain fair, orderly, and efficient markets, and
facilitate capital formation(U.S. Securities and Exchange Commission, 2010, Para. 1).
The main activities of the SEC are to interpret federal securities laws; issue new rules
and amend existing rules; oversee the inspection of securities firms, brokers, investment
advisers, and ratings agencies; oversee private regulatory organizations in the securities,
accounting, and auditing fields; and coordinate U.S. securities regulation with federal,
state, and foreign authorities. (U.S. Securities and Exchange Commission, 2010)
Financial Accounting Standards Board (FASB)
According to the FASBs website The mission of the FASB is to establish and improve
standards of financial accounting and reporting that foster financial reporting by
nongovernmental entities that provides decision-useful information to investors and other
users of financial reports. That mission is accomplished through a comprehensive and
independent process that encourages broad participation, objectively considers all
stakeholder views, and is subject to oversight by the Financial Accounting Foundations
Board of Trustees (Financial Accounting Standards Board, n.d., Para. 3).
The main activities of the FASB are to identify financial reporting issues based on
requests/recommendations from stakeholders or through other means. The FASB
Chairman decides whether to add a project to the technical agenda, after consultation with
FASB Members and others as appropriate, and subject to oversight by the Foundation's
Board of Trustees. The Board deliberates at one or more public meetings the various
reporting issues identified and analyzed by the staff. The Board issues an Exposure Draft
to solicit broad stakeholder input. (In some projects, the Board may issue a Discussion
Paper to obtain input in the early stages of a project) The Board holds a public roundtable
meeting on the Exposure Draft, if necessary. The staff analyzes comment letters, public
roundtable discussion, and any other information obtained through due process activities.
The Board redeliberates the proposed provisions, carefully considering the stakeholder
input received, at one or more public meetings. The Board issues an Accounting Standards
Update describing amendments to the Accounting Standards Codification (Financial
Accounting Standards Board, n.d.).
Both the SEC and the FASB have the same goals of fairness, accuracy, and
understandability of financial accounting and reporting. Both agenecys
accomplish these goals in the best interest of the overall public.
The differences between the SEC and the FASB is that the FASB regulates
financial reporting in the private sector of businesses (but are subject to the rules
and regulations of the SEC) and the SEC deals with regulating the financial
reporting of publicly held corporations.
I believe that the SEC has the greatest influence over financial statements
reporting because they have the final approval on all changes of the rules and
regulations. The Sec can also bring civil or administrative enforcement actions
against individuals and companies in violation of the securities laws.
References
Financial Accounting Standards Board. (n.d.). Facts about FASB. Retrieved July
15, 2010, from Financial Accounting Standards
Board:http://www.fasb.org/facts/index.shtml#mission
U.S. Securities and Exchange Commission. (2010, May 3). The Investors
Advocate: How the SEC Protects Investors, Maintains Market Integrity, and
Facilitates Capital Formation. Retrieved July 15, 2010, from U.S. Securities
and Exchange Commission: http://www.sec.gov/about/whatwedo.shtml
Week 1 DQ 2
Due Thursday, Day 4
Search the Internet or the Online Library for information about the
Sarbanes-Oxley Act. A useful guide to some of these provisions is
located at http://www.soxlaw.com. Summarize at least two
provisions of the law, and discuss your interpretation of these
provisions with your classmates. Do you think this law will make
financial statements more reliable? Also, discuss how Sarbanes-
Oxley establishes boundaries to ensure ethical practices. What
does the law allow or prohibit, and why?
The Sarbanes-Oxley act has many provisions to give companies guidelines

for responsible, and ethical financial reporting. One of those provisions is
listed in Section 302 of the act. The provision is that periodic statutory
financial reports be certified that signing officers have reviewed the reports,
the report does not contain any untrue, or misleading information. The
financial statements fairly present the financial condition. The signing
officers are responsible for internal controls. A list of all deficiencies in
internal controls, and a list of fraud involving employees, and anything that
could negatively affect the internal controls.
Another provision pertains to the "management assessment of internal

controls". This provision ensures that information is published in annual
reports regarding the adequacy of internal controls, structure and
procedures.
The Sarbanes-Oxley act is designed to help companies promote ethical

accounting procedures. The act gives guidelines as to how financial
statements are reported. The act requires verification that officers within
the company have checked the information in the reports for accuracy and
true. The act also requires that the companies have internal controls in
place to ensure ethical reporting practices. The main thing that the
Sarbanes-Oxley promotes is transparency in reporting.
Response 2
Section 802 of the Sarbanes-Oxley Law defines the penalties that may be
assessed against individuals who failed to comply with the Act. An
individual could be subject to 20 years in jail for altering, destroying,
mutilating, concealing, falsifying records, documents or tangible objects.
Guilt is define by the intent to impede a legal investigation. This part of the
law gets to the heart of how Arthur Anderson reacted by destroying
documents important to Worldcom. The law further defines that any
accountant who knowingly violates their ethics by wilfully violates the
requirements of maintenance of all audit or review papers. These papers
are subject to review up to five years.
The second Section that I reviewed was the Section 302. This actually is
my favorite part of the law because it directly holds the officers and
directors accountable for the accuracy of reporting in their financial
statements. It defines that the management must review and understand
the financial statements and sign that they are true and accurate. It also
holds the management accountable for the internal controls, requiring any
deficiencies to be reported. In the past directors of companies relied
heavily on the internal officers, management, to report the company
performance without questioning the accuracy or taking their role on
oversight committees seriously. They could hide behind a veil of trust of
the key leaders. This Section clearly puts the responsibility for the Board to
remain independent of the executives and function more effectively on the
respective oversight committees they serve. The example I would share is
what happened in WorldCom. The company leaders shared what they
wanted to with the Board, who trusted implicitly the top leaders. Had they
questioned their legal representation or auditors, they potentially could
have uncovered the fraud that was committed by the creation of shell
companies, with WorldCom employees as stockholders.
I would love to think this law would protect the investing community.
Financial reporting has improved to some extent. Unfortunately the scams
still continue. Example would be Barney Madoff or what happened in the
financial mortgage industry. These unethical practices were conducted
after Sarbanes Oxley was implemented. Madoff was able to provide false
financial information to investors. Financial industry was allowed to get to
aggressive in underwriting and product suite. Fines and penalties are
deterrents. Ethics still must be inherent in an individual and company.
Laws and requirements are a guide. There will never be enough auditors,
inspectors or oversight boards to catch all of the fraud in the corporate
community.
The law prohibits falsifying information, failing to notify of material changes,

and destruction of records.
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FIN 571 Week 3 Team Assignment Financial
Statement Interpretation

Select three publicly traded companies. Choose one
each from the following sectors: manufacturing,
service, and retail. At least one of the three companies
should be foreign Lucent Technologies
Axia College of University of Phoenix
Lucent Technologies is a company based on networking for service providers,
government, and enterprises worldwide (Lucent Technologies, n.d., Para 1). The
products and services they work with are separated into three categories; service
and maintenance, wireless mobility networking, and wire line networking. Lucent
Technologies is backed by Bell Labs, which does research and development in
networking technologies.
During the years of 2001 to 2003 this company has experienced a decrease in
demand because of other companies loss or capital used toward spending. This
is mainly due to a downturn in the economy. As an investor this information is
necessary to know because it explains the decrease or increase in sections of the
balance sheet. In order to compare the growth or decline of the companys profit,
an investor must change a balance sheet into a common-size balance sheet. First
when looking at the balance sheet an investor will see that the amount of paid in
capital has increased from the year of 2003 to 2004, the assets have increased,
but the liabilities have decreased. When running a debt/asset ratio it is noticed
that this ratio drops from 1.2 in 2003 to 1.0 in 2004. This shows the companys
risk is low when concerning financial leverage, usually when the debt ratio is less
than one percent it is financed mainly by company equity, so this company is
close to being debt free from creditors.
After changing the balance sheet to a common-size balance sheet there are
several factors an investor will look at. The current assets have dropped to .48
from .49 in 2004. This does not show harm to the company because only the
accounts receivable dropped while the rest of the current assets increased. This
means the company is not in as much danger of default on money owed to it. It
does have a rise in marketable securities. The one concern in the assets is the
increase of prepaid cost of pensions and goodwill. Goodwill can be used for tax
breaks but prepaid pensions cannot benefit the company.
When looking at the liabilities section an investor will see a drop in pension and
liabilities and an increase in long term debt, both of these could be affected
because of the drop in the economy. Long term liabilities are often increased to
help a company control interest rate increases so as an investor cutting back on
pension liabilities cuts back cost to the company and watching interest rate
increase show the company is concerned with its earning and investors. This
would be encouraging or an investor. The stockholders deficit shows a drop in
accumulated deficits from -1.43 to -1.22 and total deficits of -.26 to -.08. This
shows the company is working to control any money loss and turning it to the
companys advantage. Overall it shows the company is still earning a profit
although small. With an increase of assets and a drop in liabilities the company is
showing it is working in a low risk capital.
After reviewing this information, a creditor or investor must be able to compare
this company to the industry totals. By comparing how this company compares
to other companies similar to it, a person can see if it is competitive and worth
taking a risk. Running ratios will also show if the company is capable of paying
off any debts it has or if it can acquire the needed cash in case of emergencies.
Overall as an investor, I would say this company would be worth investing in.
Reference
Axia College. (2007). Understanding Financial Statements. Retrieved May 10,
2010 from Axia College, Week 2 Assignment, ACC/230.
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FIN 571 Week 4 Connect Problems Q-1 Even though
most corporate bonds in the United States make
coupon payments semiannually, bonds issued
elsewhere often have annual coupon payments.
Differentiating Depreciation Methods
There is one main difference between straight line depreciation and accelerated
depreciation. Straight line is decided by taking the cost of the assets, figuring out
the salvage cost when the use of the asset is finished and how many years of
use the asset has. A person then takes the cost minus salvage and divides the
remainder by the number of years of use. This amount is the depreciation
expense subtracted each year from the cost. The accelerated depreciation does
not have the same amount of deprecation subtracted each year. It does have the
cost minus salvage value to figure out the amount to use but is then divided out
differently. A person takes the sum of the years of a products useful life, such as
three years is 3 + 2 + 1 = 6, then a person would divide the depreciation
amount by 3/6 the first year, 2/6 the second and finally 1/6 for the final year. So
the amount of depreciation expense is larger to smaller with accelerated and
equal amounts for straight line.
The advantages of straight line method are it is easier and faster to figure. The
advantage of accelerated method is it is more accurate when figuring
depreciation expense. The accelerated method has an advantage and
disadvantage concerning taxes. A company can use the accelerated method to
take advantage of bigger tax breaks at the beginning of an assets life, but since
this amount drops during the lifespan if the company needs added tax breaks it
will not receive them from these assets in the future. With the straight line
method the amount of tax breaks are even through the life of the product. Most
companies choose this form of depreciation for reporting purpose on taxes but
will use the accelerated method to figure taxable income.
As mentioned before the advantage of straight line depreciation is it is easier to
figure and uses the same total each year for deduction of depreciation expense
but the disadvantage is that if use for taxable income and reporting a company
does not get a bigger tax break at the beginning of the assets life when they
have just put out the cost for the item and may need a bigger tax break.
------------------------------------------------
FIN 571 Week 4 DQ 1

A firm uses a single discount rate to compute the NPV
of all its potential capital budgeting projects, even
though the projects have a wide range of
nondiversifiable risk
Preparing an Income Statement

The companies net income is profitable when the sales exceed the cost of goods
sold. In this, the gross profit is $761k. This is beneficial to the company. Though
we took the cost of goods away from the net sales there are still other areas
which need to take a piece of the pie. For this company, once the SG&A and
depreciation are taken out, the company still contains a profit of $290k. But the
buck does not stop there. Once the interest income and interest expense are
adjusted the balance before earnings and taxes is $290k. After taxes are taken
out, the company is left with a net profit of $174k.
In this case I think the company has achieved success with a net profit of $174k.
If the company were unable to be profitable, the company would eventually go
out of business. We would be able to tell if the company was not profitable by
looking at each section individually. The cost of goods sold is what stands out for
me. If we pay more to make the product then we are actually selling it for, there
is no profit to be made. So, I think it should all start there.
------------------------------------------------
FIN 571 Week 4 DQ 2

Phyllis believes that the firm should use straight-line
depreciation for a capital project because it results in
higher net income during the early years of the
projects life. Week 3 DQ 1
Due Tuesday, Day 2
Post your answer to Problem 3.5 on p. 109 (Ch. 3). How might
the information contained within the stockholder equity
statement be used for management and investor decision-
making? Provide specific examples of situations in which the
stockholder equity information might be used.
The statement of stockholders equity provides the changes in the equity accounts during the
accounting period more in depth than the balance sheet. The information found on the
statement of stockholders equity includes retained earnings, common and preferred stock,
and additional paid in capital. Management uses the statement of stockholders equity to
ensure they are reaching their goal of maximizing shareholder's equity. The use of market
ratios help with the analysis of the statement of stockholders equity, such as earnings per
share, price-to-earnings, dividend payout, and dividend yield. These ratios will help both
management and investors in analyzing the company. For example, if I were looking to
invest in a companys stocks I would utilize all of the financial ratios, as well as the market
ratios. The earnings per share ratio is calculated before the price to earnings ratio, P/E,
because the earnings per share ratio is used in the second. If a company pays dividends,
the dividend payout ratio will come in handy. It tells us The percentage of earnings paid to
shareholders in dividends (Investopedia, 2010, p. 1).
References
Investopedia. (2010). Dividend Payout Ratio. Retrieved August 3, 2010, from

Investopedia:http://www.investopedia.com/terms/d/dividendpayoutratio.asp
Response 2
Explain what can be found on a statement of stockholders equity .

The major elements of stockholders' equity include capital stock, paid-in
capital, retained earnings, treasury stock, unrealized loss on long-term
investments, and foreign currency translation gains and losses.
How might the information contained within the stockholder

equity statement be used for management and investor decision-
Management may look at the stockholders equity statement retained

earnings section to determine if company should borrow money for capital
investments or finance it through various forms of equity. It may also be
used by the stockholder to evaluate the compensation paid to the
company officers. Investors may also look at the statement for cumulative
net unrealized gains and losses before purchasing stock in the company.
Investors are also interested in the paid in capital because they can
compare it to the additional paid in capital and the difference between
the two values will equal the premium paid by investors over and above
the par value of the shares.
DQ 2
Week 3 DQ 2
Due Thursday, Day 4
Provide an example from the text or the Internet that

demonstrates a situation in which a companys net profits
appeared good in the statements, but the gross or operating
profits presented a different picture. Discuss how this might have
occurred. Respond to the following question, addressed in
Problem 3.6 on p. 109 (Ch. 3): Why is the bottom-line figure, net
income, not necessarily a good indicator of a firms financial
success? Look for indicators like liquidity or solvency to answer
this discussion question.
An example that demonstrates the situation is Enron. Enrons
financial statements did not show all the expenses and costs.
Instead of showing them on the income statement they made
entries so the cost and expenses would post in the balance sheet.
The same was done with the revenues. This way it would be less
expenses and the net profit appeared good. Many debts and
losses were not reported in the financial statements. From the
third quarter of 2000 through the third quarter of 2001, the
directors fraudulently used reserve accounts within Enron
Wholesale to mask the extent and volatility of its windfall trading
profits, particularly its profits from theCalifornia energy markets;
avoid reporting large losses in other areas of its business; and
preserve the earnings for use in later quarters. By early 2001,
Enron Wholesale's undisclosed reserve accounts contained over
$1 billion in earnings. The head of the company improperly used
hundreds of millions of dollars of these reserves to ensure that
analysts' expectations were met. In addition, Skilling and others
improperly used the reserves to conceal hundreds of millions of
dollars in losses within Enron's EES business unit from the
investing public.This would show the creditors that Enron was
making profits and its position was solid.
The net income is not necessarily a good indicator of a firms
financial success because the income statement only shows the
profit or loss at a period of time and does not show the whole
picture of the company. The Balance Sheet, Statement of cash
flow, Statement of shareholders equity and the Income
Statement all together give the real picture of the business. Each
one of them shows different aspects of the business. These
statements show where the income is actually coming from; is it
from sales or from loans the company is borrowing? If the
company is selling a building or any other asset but that does not
mean that it is selling more products and making profit. Looking
at the Income Statements the company might be making profit
but at the same time it is extremely leveraged.
Response 2
A companys net income is not the whole picture, just part of it. There are lots of things that
contribute to the net income that may not be significative to the companys success. If the
value of a dollar has a sudden change that can affect the bottom line if the company
happens to hold the medium of exchange that can benefit by the change that might occur.
The company can falsely inflate the bottom line. A companys net income is coupled with
liabilities, cash flow, and selects financial ratios. Looking at it this way is a much better way
of seeing what the companys success is like. A company can change up many things to
make it look like their income is better. These things that can be changed are single sales
events, cash infusion, or false financial statements. Some things like debt that a company
has, the companys cash on hand, their capital assets conditions, or even their sales trends.
To figure the success of the company, you must look at the whole picture. One thing cannot
tell you all the facts of the companys affairs. You cannot tell the net income of the company
just from the bottom line. Look at all the financial records.
Response 3
Provide an example from the text or the Internet that demonstrates a situation in which a companys
net profits appeared good in the statements, but the gross or operating profits presented a different
picture. Discuss how this might have occurred. Respond to the following question, addressed in
Problem 3.6 on p. 109 (Ch. 3): Why is the bottom-line figure, net income, not necessarily a good
indicator of a firms financial success? Look for indicators like liquidity or solvency to answer this
discussion question.
Net income is not necessarily a good indicator of a firms financial

success because they have ways to manipulate it by increasing
their revenues or hiding some of their expenses. For investors
trying to decide where to invest their money, they need to look
more into assessing how the company came up with the numbers
they presented.
An example of this situation is when Laribee Wire Manufacturing

Co. exaggerated in recording their inventory value which allowed
them in acquiring loans from six banks totaling to about $130
million using it as collateral. At the same time, they reported $3
million in net income for the period, but in actuality they lost $6.5
million.
This company showed a higher net income by reporting fake

inventory in which its value was overstated and transferred over
to their income statement. When the banks assessed their
financial statements, it was enough to sway them into lending the
loans they needed.
Reference:
Investopedia. (2010). Spotting Creative Accounting On The

Balance Sheet. Retrieved
fromhttp://www.investopedia.com/search/searchresults.aspx?
q=Spotting+Creative+Accounting+On+The+Balance+Sheet&submit=Sea
rch
------------------------------------------------
FIN 571 Week 4 Individual Assignment Analyzing
Pro Forma Statements

Decide upon an initiative you want to implement that

would increase sales over the next five years, (for
example, market another product, corporate
expansion, and so on). Week 3 DQ 1
Due Tuesday, Day 2
Post your answer to Problem 3.5 on p. 109 (Ch. 3). How might
the information contained within the stockholder equity
statement be used for management and investor decision-
The statement of stockholders equity provides the changes in the equity accounts during the
accounting period more in depth than the balance sheet. The information found on the
statement of stockholders equity includes retained earnings, common and preferred stock,
and additional paid in capital. Management uses the statement of stockholders equity to
ensure they are reaching their goal of maximizing shareholder's equity. The use of market
ratios help with the analysis of the statement of stockholders equity, such as earnings per
share, price-to-earnings, dividend payout, and dividend yield. These ratios will help both
management and investors in analyzing the company. For example, if I were looking to
invest in a companys stocks I would utilize all of the financial ratios, as well as the market
ratios. The earnings per share ratio is calculated before the price to earnings ratio, P/E,
because the earnings per share ratio is used in the second. If a company pays dividends,
the dividend payout ratio will come in handy. It tells us The percentage of earnings paid to
shareholders in dividends (Investopedia, 2010, p. 1).
References
Investopedia. (2010). Dividend Payout Ratio. Retrieved August 3, 2010, from

Investopedia:http://www.investopedia.com/terms/d/dividendpayoutratio.asp
Response 2
Explain what can be found on a statement of stockholders equity .
The major elements of stockholders' equity include capital stock, paid-in

capital, retained earnings, treasury stock, unrealized loss on long-term
investments, and foreign currency translation gains and losses.
How might the information contained within the stockholder

equity statement be used for management and investor decision-
Management may look at the stockholders equity statement retained

earnings section to determine if company should borrow money for capital
investments or finance it through various forms of equity. It may also be
used by the stockholder to evaluate the compensation paid to the
company officers. Investors may also look at the statement for cumulative
net unrealized gains and losses before purchasing stock in the company.
Investors are also interested in the paid in capital because they can
compare it to the additional paid in capital and the difference between
the two values will equal the premium paid by investors over and above
the par value of the shares.
DQ 2
Week 3 DQ 2
Due Thursday, Day 4
Provide an example from the text or the Internet that

demonstrates a situation in which a companys net profits
appeared good in the statements, but the gross or operating
profits presented a different picture. Discuss how this might have
occurred. Respond to the following question, addressed in
Problem 3.6 on p. 109 (Ch. 3): Why is the bottom-line figure, net
income, not necessarily a good indicator of a firms financial
success? Look for indicators like liquidity or solvency to answer
this discussion question.
An example that demonstrates the situation is Enron. Enrons

financial statements did not show all the expenses and costs.
Instead of showing them on the income statement they made
entries so the cost and expenses would post in the balance sheet.
The same was done with the revenues. This way it would be less
expenses and the net profit appeared good. Many debts and
losses were not reported in the financial statements. From the
third quarter of 2000 through the third quarter of 2001, the
directors fraudulently used reserve accounts within Enron
Wholesale to mask the extent and volatility of its windfall trading
profits, particularly its profits from theCalifornia energy markets;
avoid reporting large losses in other areas of its business; and
preserve the earnings for use in later quarters. By early 2001,
Enron Wholesale's undisclosed reserve accounts contained over
$1 billion in earnings. The head of the company improperly used
hundreds of millions of dollars of these reserves to ensure that
analysts' expectations were met. In addition, Skilling and others
improperly used the reserves to conceal hundreds of millions of
dollars in losses within Enron's EES business unit from the
investing public.This would show the creditors that Enron was
making profits and its position was solid.
The net income is not necessarily a good indicator of a firms
financial success because the income statement only shows the
profit or loss at a period of time and does not show the whole
picture of the company. The Balance Sheet, Statement of cash
flow, Statement of shareholders equity and the Income
Statement all together give the real picture of the business. Each
one of them shows different aspects of the business. These
statements show where the income is actually coming from; is it
from sales or from loans the company is borrowing? If the
company is selling a building or any other asset but that does not
mean that it is selling more products and making profit. Looking
at the Income Statements the company might be making profit
but at the same time it is extremely leveraged.
Response 2
A companys net income is not the whole picture, just part of it. There are lots of things that
contribute to the net income that may not be significative to the companys success. If the
value of a dollar has a sudden change that can affect the bottom line if the company
happens to hold the medium of exchange that can benefit by the change that might occur.
The company can falsely inflate the bottom line. A companys net income is coupled with
liabilities, cash flow, and selects financial ratios. Looking at it this way is a much better way
of seeing what the companys success is like. A company can change up many things to
make it look like their income is better. These things that can be changed are single sales
events, cash infusion, or false financial statements. Some things like debt that a company
has, the companys cash on hand, their capital assets conditions, or even their sales trends.
To figure the success of the company, you must look at the whole picture. One thing cannot
tell you all the facts of the companys affairs. You cannot tell the net income of the company
just from the bottom line. Look at all the financial records.
Response 3
Provide an example from the text or the Internet that demonstrates a situation in which a companys
net profits appeared good in the statements, but the gross or operating profits presented a different
picture. Discuss how this might have occurred. Respond to the following question, addressed in
Problem 3.6 on p. 109 (Ch. 3): Why is the bottom-line figure, net income, not necessarily a good
indicator of a firms financial success? Look for indicators like liquidity or solvency to answer this
discussion question.
Net income is not necessarily a good indicator of a firms financial

success because they have ways to manipulate it by increasing
their revenues or hiding some of their expenses. For investors
trying to decide where to invest their money, they need to look
more into assessing how the company came up with the numbers
they presented.
An example of this situation is when Laribee Wire Manufacturing

Co. exaggerated in recording their inventory value which allowed
them in acquiring loans from six banks totaling to about $130
million using it as collateral. At the same time, they reported $3
million in net income for the period, but in actuality they lost $6.5
million.
This company showed a higher net income by reporting fake

inventory in which its value was overstated and transferred over
to their income statement. When the banks assessed their
financial statements, it was enough to sway them into lending the
loans they needed.
Reference:
Investopedia. (2010). Spotting Creative Accounting On The

Balance Sheet. Retrieved
fromhttp://www.investopedia.com/search/searchresults.aspx?
q=Spotting+Creative+Accounting+On+The+Balance+Sheet&submit=Sea
rch
------------------------------------------------

Watch the "Concept Review Video: Stock Valuation" video located in

the WileyPLUS Assignment: Week 4 Videos Activity.
STOCK DIVIDEND
Stock Split
University of Phoenix
Stock Dividend
In the present time, the stock dividend has become important
concept. When dividend is given in form of stock, it is called stock
dividend. In this form of dividend, the cash does not use. It is important,
when the corporation declares stock dividend, the market value of the
share decreases because the number of stock increases. The many
companies prefer stock dividend due to the tax benefit. If the individual
gets stock dividend, he does not pay any tax on stock dividend. Thus the
stock dividend reduces tax burden. On the other hand, the ownership of
investors also spurs up in the company because the number of holding
share increases. There is also disadvantage of stock dividend. The market
value of the share decreases, so the market value of holding also
decreases (Kennon, 2009).
The ABC Company is leading company in its industry. The number of
outstanding share of the company is one million. On the other hand, the
number of investors is five millions. The value of market capitalization is
$100 million. The management declares 20% stock dividend. Thus the
200000 shares will be distributed as a stock dividend. The number of
outstanding share will be increased by 200000 and the new total number
of outstanding stock will be 1.2 million. On the other hand, the new value
per share in the market will be $83.33 (100 million/1.2 million). This
example is taken from below mentioned link:
Stock Split
The stock split is also an important concept. When the management
wants to increases number of shares, the management follows this
method. In this method, the face value of the share is split and number of
share gets increased. Due to increment in number of outstanding share,
the market value of per share also gets affected but the total market
capitalization of the company does not affect. Both stock split and stock
dividend increase number of outstanding shares but both are different due
to the accounting treatment. In the stock split, the investors do not get
any real benefit. It is also known as non-cash distribution of dividend.
The motto behind stock split is to increase trading of the shares in the
market (Baker, 2009)
For example, the face value of per share is $100 and the total
outstanding shares are 100 million. If the management of the company
announces stock split in ratio of 1:2, the total outstanding shares will be
increased by 100 million, thus the new total number of the share will be
200 million. On the other hand, the face value of the share will reduce by
50%. So the new face value of the share will be $50. Due to effect of stock
split, the holding share of the investor will also increase in the prorate
basis. If the investor has 10 shares, now he will have 20 shares. It is
important thing that the total issued capital will not be changed. The
illustration of stock split has been got from following link:
Reverse Stock Split
The reverse stock split is just opposite of stock split. In this process,
the management reduces the number of outstanding shares. The

company increase face value of the share. In this method corporation
decides a ratio such as 2:1. Thus the company accumulates two shares in
one share. In this method, the total market value of company does not
change. Due to reverse stock split, the earning per share and face value of
per share rises. Thus the reverse stock split provides just opposite result
from stock split. It is important question, why company selects this
method. When the management seems that the face value of the share is
less as compared to competitors then the company goes for this method
to make its share value to equal to competitors shares face value. It is
also a sound strategy to increase treading of shares. If the face value of
share is too cheap in comparison to competitors, the investors will be
discouraged for investment. For increasing the confidence of investors,
the management uses this method (Mladjenovic, 2009).
For example, an investor holds 100 shares of XYZ Company and the
face value per share is $50. If the management go for reverse stock split
option and declares one share for 10 shares then the holding of the
individual will reduce 9 shares for every 10 shares. Thus the new holding
of the investor will be 10 (100/10) shares but the face value per share will
be $500. It is also important that the total market capitalization will
remain as same as before reverse split. The example of the reverse split is
take form below mentioned link:
http://www.sec.gov/answers/reversesplit.htm.
References
Baker, H. K. (2009). Dividends and Dividend Policy. John Wiley and Sons.
Kennon, J. (2009). All About Dividends. Retrieved May 31, 2010, from
http://beginnersinvest.about.com/od/dividendsdrips1/a/aa040904_2.
htm
Mladjenovic, P. (2009). Stock Investing for Dummies. Dummies.
------------------------------------------------
FIN 571 Week 4 Team Assignment Operating
Leverage and Forecasting

Operating Leverage and Forecasting Problems Team Assignment
Please complete the following problems. When

calculating earnings per share and PE ratios, please
show your work. This problem is similar to the
examples shown in the lecture.
Analyzing an Income Statement
The net income of Kodak has decreased a bit; it appears that the company is
more profitable. By conducting a side by side analysis from 2004 to 2003 the
company has increased in current assets and decreased in total assets. It
appears that the company went down in property, plant and equipment net as
well as discontinued operations. So, despite the decrease in total assets it looks
like the company has made a good decision.
The company has also decreased its total liabilities by about 4%. I believe this to
be good because the short term borrowings and long term debt has decreased.
To me, this means that the company is tightening their belt and paying off old
debt.
Total shareholders equity has down a little bit in dollars, but on the percentage
level the companys percentage has gone up. I believe this is because the
company issued $104k more shares in 2004 than in 2003. The company has the
same amount of shares outstanding in 2004 that it did in 2003 as well. Retained
earnings on the stock have gone up in 2004 as well. I believe this is contributed
by the more shares that have been issued.
I believe the profitability of the company is under good standings. They appear to
be making the necessary adjustments in the company to stay with in a profitable
income.
1.
2.------------------------------------------------

1.The difference between the present value of an
investments future cash flows and its initial cost is the:
payback period. internal rate of return. profitability
index. discounted payback period. Cash Flow Statement Analysis
Cash Flow Statement Analysis

The cash flow statement is important financial statement of the
corporation. The cash flow statement states from where cash has come and
where cash has been gone. Thus the cash flow statement makes a relationship
between beginning balance and ending balance of cash. The cash flow statement
is prepaid on the basis of income statement and balance sheet of the company.
The Little Bit Incs beginning cash balance including marketable securities was
$24000. On the other hand, the ending cash balance including marketable
securities of the company was $40000 (Weygandt, Kimmel & Kieso, 2009).
The net income of the company was $5500 during 2009. The company
generated cash inflow from operating activity is less as compared cash out flow
from operating activities. The company generated $9000 negative cash balance
in operating activity section of the cash flow statement. On the other hand, in
the investment section, the firm has also negative cash balance. The firm has
$7000 negative balance in investment section of the cash flow statement. The
Little Bit Inc made investment during the year instead of selling of assets. Last
section of the cash flow statement is financing activity section. In which, all
finance related activities come. The corporation sold some shares and borrowed
some money from outside lenders therefore the company has positive case
balance by $32000 in financing activity section.

Reference
Weygandt, J.J.,Kimmel, P.D. & Kieso, D.E. (2009). Managerial Accounting: Tools for
Business Decision Making. John Wiley and Sons.
------------------------------------------------
FIN 571 Week 5 DQ 1

Because the weighted average is always a correct
measure of a required return, Week 5 DQ 1
Due Tuesday, Day 2
In what ways does the statement of cash flows relate to the balance sheet
and income statement?
It is important to understand what we are doing with the numbers

and the results these numbers give us because the result is the
information that will be available to us from financial statements.
Although some want to see the income statement and ignore the
other statements we need to use them together to see the total
picture of what is happening to our business. The relationship
between the numbers on the financial statements shows us
everything we need to know about the business.
The income statement shows income and expenses for a period of
time and if we are making or loosing money. The balance sheet
compares the assets to liabilities and shows how much money the
business would have if everything is sold today.
The statement of cash flow might be the most critical statement
because there is plenty of information we can gain form it. This
statement relates with the income statement on operating
activities to see if they are generating cash or not. It is related to
the balance sheet on how much cash is used in investing
activities. In relationship with the balance sheet the cash flow
statement shows what cash is provided or used by financing
activities. It will tell us how much debt has been paid and will
indicated if we are using more debt or have paid down the credit
line.
When the business makes a sale or receives payment for a sale
on credit that is an inflow. A sale shows up as income on the profit
and loss statement and as an inflow on the cash flow statement. It
also shows up either as cash or accounts receivable on the
balance sheet. Also, how quickly we can collect on accounts
receivable will play a big role in the cash flow. When the business
spends money, it shows up as an expense in the profit and loss
statement and as an outflow on the cash flow statement. It also
shows up on the balance sheet as a decrease in cash, or an
increase or decrease in liabilities, depending on what the expense
represents.
Response 2
In what ways does the statement of cash flows relate to the balance sheet and income statement?
The cash flow statement relates to the income statement and balance
sheet. The net income from the income statement is listed on the
statement of cash flows. Operating activities are analyzed on the
statement of cash flows; this section of the statement reconciles the net
income to the actual cash the company received from or used during
operations. The second section of the statement of cash Flows is the cash
flow from investing activities which include purchase or sale of assets. The
last section in the Statement of Cash Flows is the cash flows from
financing activities that includes raising cash by selling stocks/bonds or
borrowing from backs; or cash out flows from paying back loans. The
balance sheet shows the different account balances at the end of the
accounting period. The statement of cash flows reflects changes in the
accounts listed on the balance sheet between accounting periods. The net
cash from operating, financing, and investing activities are added up to
calculate the net change in cash.
Week 5 DQ 2
Due Thursday, Day 4
Discuss how the statement of cash flows is utilized by investors. If you

were an investor reviewing a statement of cash flows, what section might
interest you most? Why? Discuss the circumstances in which other
sections of the statement might be important to an investor.
Prior to making an investment in a company, one would want to understand

the decisions the owners are making to fund the operations of the company
daily. Maintaining sufficient cash to acquire new product, pay overhead,
and satisfy generated sales would be the predominant need of the
company. Second need would be for the company to have sufficient cash
to remain competitive. This may require cash to invest in research and
development, increase inventory as new product introduction, improve
efficiency in plant and equipment, or cash to satisfy prior borrowing
obligations. By reviewing the statement of cash flow, the investor can
determine if the company is generating sufficient cash internally to fund
operations or are they requiring outside injection of cash to finance the
short fall in cash needed to operate the company. Last, the investor can
review the statement of cash flow to better understand the leverage of the
company and the requirement for repayment of debt, or dividends to
reward prior investments.
Response 2
Discuss how the statement of cash flows is utilized by investors. If you were an investor reviewing a
statement of cash flows, what section might interest you most? Why? Discuss the circumstances in
which other sections of the statement might be important to an investor.
The statement of cash flow is utilized by investors because it has all

information integrated from the balance sheet and the income
statement. The statement of cash flow is used by an investor to see if the
operating activities are greater than the net income to have earnings that
are called high quality. If operating activities are less, then a red flag will
be raised as to why the net income is not becoming cash. Another reason
would be investors believe cash is the best. The statement shows all cash
coming and going from the business. If the company generates additional
cash than what is being used, then the company can reduce their debt,
acquire another business, or buy some of the stock back. The last reason
why would be that financial models are based upon the statement of cash
flow.
If I was an investor reviewing a statement of cash flows the section that
might interest me the most would be the operating activities. I would like
to know how the company was doing and what areas need to be improved
to have more cash generated in the business. All the sections are
important to an investor so they can see the complete big picture of their
investment.
------------------------------------------------
FIN 571 Week 5 DQ 2

The development of the new issue junk bond market
had important implications for capital structure choice.
Candela Corporation
Candela Corporation
Candela Corporation and Subsidiaries have been working for over 34 years
developing and commercialize aesthetic laser systems that allow physicians and
personal care providers to treat a variety of cosmetic and medical conditions
such as removal of spider veins, scars, stretch marks, warts, as well as hair
removal and age spots, freckles and tattoos. Other skin treatments such as
psoriasis and acne and acne scars are also treated. (Axia College, 2007)
Going from top to bottom on The Candela Corporation and Subsidiaries
Consolidated Statement of Cash Flows; for the operating activities, 2002 shows
an alarming loss in the net income while 2003 and 2004 for the company are
showing a significant and steady climb in the net income. In 2004 there was a
new category added called Provision for the disposal of discontinued operations
and the category has caused an increased the account for 2004. Loss from
discontinued operations grew from 2002 to 2003 but had a significant decline for
2004. Depreciation has increased over the last 3 years as well. Provision for bad
debts increased significantly too, but an increase in bad dept is expected as
revenue increases. The provision for deferred taxes shows the company went
from a loss in 2002 and 2003 to show there was no tax loss in 2004. The tax
benefit from exercised stock options has practically doubled sense 2003. The
changes in assets and liabilities for the last 3 years have been up and down.
Receivables have increased, notes receivable decreased, and inventories have
increased. Other current assets, other assets have also increased. Accounts
payable has made a significant decrease in the last 3 years as well as accrued
payroll expenses. The accrued payroll decreasing could mean that the amount of
employees over the years has decreased as well. The accrued warranty costs
have increased as well; this could mean that the company renewed equipment
warranties. The net cash provided by operating activities looks to have gone
from a loss in 2002 to a large profit in 2003 and then a decrease, yet still a profit
for 2004. It appears on the operations level that management needs to do more
to regulate the companys finances so there is not an up and down variance each
year.
The cash flow from investing activities shows me that in the last three years
they had large amount of investments in 2002 and 2003 but now they are letting
them decrease.
The cash flow from financing activities states that the proceeds from issuance
of common stock have increased significantly from 2002 to 2003 and rose a little
more in 2004. The repurchases of stock has not happened sense 2002 and the
principle payment of long-term debt grew in 2003 from 2002 and shows no
activity for 2004. Same goes for the net borrowing on line of credit; it appears
that Candela Corporation is current on payments to line of credit. So, the net
cash from financial activities looks great for 2004. The cash and cash equivalents
for each year have increased steadily.
After reviewing the consolidated statement of cash flows for Candela
Corporation, I believe the company is making a profit, but perhaps need some
control over their operating activities.
Reference
Axia College. (2007). Statement of Cash Flows. Retrieved June 14, 2010 from Axia
College, Week Six, ACC 230.
------------------------------------------------
FIN 571 Week 5 Individual Assignment DCF and
WACC Problems

Discounted Cash Flows and WACC Homework Problems
Please post the answers (and show your work) in

the assignments section by midnight the last day
of the week assigned.
Analyzing Statements of Cash Flows
4.8. Research Problem

Choose five companies from different industries and locate their statements of
cash flows
for the most recent year.
(a) Create a table to compare the dollars provided or used by operating,
investing, and financing activities, as well as the overall increase or decrease in
cash.
(b) Create a second table for each company comparing this same information for
each of the three years presented in that companys statement of cash flows.
Include an additional column that looks at the combined cash flows for all three
years.
(c) Write a short analysis of the information gathered. Your discussion should
address, among other things, whether cash flow from operating activities is large
enough to cover investing and financing activities, and if not, how the company
is financing its activities. Discuss differences and similarities between the
companies you have chosen.
(a) Create a table to compare the dollars provided or used by operating,

investing, and financing activities, as well as the overall increase or decrease in
cash.
STATEMENT OF CASH FLOW ANALYSIS
STARBUC HARELY
KS DAVIDSON RITE AID
2008 2008 2008
NET INCOME / STARTING $ $ $

LINE 315.5 - (1,079.0)
$ $ $
OPERATING ACTIVITIES 1,258.7 (684.7) 79.4
$ $ $
INVESTING ACTIVITES (1,086.6) (393.3) (2,933.7)
$ $ $
FINANCING ACTIVITIES (184.5) 1,293.4 2,904.0
$ $ $
CASH (11.5) 190.7 49.9
(b) Create a second table for each company comparing this same information for
each of the three years presented in that companys statement of cash flows.
Include an additional column that looks at the combined cash flows for all three
years.
STARBUCKS
2008 2007 2006
Net Income/Starting Line 315.5 672.64 564.26

Cash from Operating Activities 1258.70 1331.22 1131.63
Cash from Investing Activities -1086.60 -1201.95 -841.04
Cash from Financing Activities -184.50 -171.89 -155.33
Net Change in Cash -11.50 -31.35 138.80
Net Cash - Beginning Balance 281.30 312.61 173.81
Net Cash - Ending Balance 269.80 281.26 312.61
HARLEY DAVIDSON
2008 2007 2006
Net Income/Starting Line 0 933.84 1043.15

Cash from Operating
Activities -684.65 798.15 761.78
Cash from Investing
Activities -393.25 391.21 -35.26
Cash from Financing
Activities 1293.39 -1037.80 -637.02
Net Change in Cash 190.70 164.46 97.42
Net Cash - Beginning
Balance 402.85 238.40 140.98
RITE AID
2008 2007 2006
Net Income/Starting Line -1078.99 26.83 1273.01

Cash from Operating Activities 79.37 309.15 417.17
Cash from Investing Activities -2933.74 -312.78 -231.08
Cash from Financing Activities 2903.99 33.72 -272.84
Net Change in Cash 49.61 30.08 -86.75
Net Cash - Beginning Balance 106.15 76.07 162.82
(c) Write a short analysis of the

information gathered. Your discussion
should address, among other things,
whether cash flow from operating
activities is large enough to cover
investing and financing activities, and
if not, how the company is financing
its activities. Discuss differences and
similarities between the companies
you have chosen.
Starbucks operating cash flow has gone up in 2007 and decreased a little in 2008. The net c
The net loss in cash at end of year is decreasing from the previous year. This could mean th
Harley Davidson's operating cash flow has significantly decreased from 2007. It appears the
activities is probable from the lack of information supplied for net income. With the econom
the net income is decreasing. With a bounced back economy in the coming year could refle
Rite Aid's operating cash flow has taken a significant decrease as well from previous years.
in cash is better than it has been in previous years. Rite Aids net gain in cash could be from
the company.
1.
2.------------------------------------------------

Watch the "Concept Review Video: Cost of Capital" video located in

the WileyPLUS Assignment: Week 5 Videos Activity.
Findwhat.com Case - CheckPoint
ACC 230
Findwhat.com has recorded the 135 percent increase in the revenue which is mainly
due to the business acquired of Espotting during the year. The different accounting policies
are present for the acquiring firm and the acquired firm. The company has recorded certain
premature revenues for the amount which advertisers had made only the advance deposit. As
result, the company is recognizing the vendor financing as revenue. In some places, the gross
revenue has been recognized while in another, the net revenue has been recognized. The
network click revenue is recognized at gross level while the private level revenue is taken at
net level. Some of the revenue expenditures have been recognized as the capital expenditures.
Revenue for set up network fee is treated as deferred revenue and is recognized over
a period of time. The company is very inconsistent with regards to its accounting policies in
terms of recognition of revenue. The provision and treatment of amount for doubtful debt is
also not satisfactory. When a customer clicks on a sponsored advertisement, the whole of the
revenue due to him is recognized. The company is having a very high amount of doubtful
debt balance at the end of the year ending December 31, 2004.
------------------------------------------------
FIN 571 Week 5 Team Assignment Capital
Budgeting Assignment, Part 1 (New Heritage
Doll)

Acting as the executive team for a small company, your
team will apply the principles of capital budgeting to
invest in growth and cash flow improvement
opportunities in three phases over 10 simulated years.
Week 7 DQ 1
Due Tuesday, Day 2
Post your answer to Study Question 5.2 on p. 180 (Ch. 5). As
you read your classmates responses, consider the following
scenario: If you compared two different companies that utilized
two different valuation methods, how might the quality of the
results differ? Also, comment on the difficulty of making
comparisons between two firms that use different valuation
methods.
Understanding the different inventory methods is crucial. First the

person that establishes the inventory needs to determine which method to
use. LIFO, or FIFO. LIFO means Last in First Out. This means that when
a purchase is made, and sales are recorded the newest product is used
first. So if I bought 10 combs at $2 on December 1st, and then I buy 5
combs at $2.50 on December 10th. When sales are made I am going to
record sales using the $2.50 until I sell through the 5 combs that were
purchased on the 10th, and then the cost will go to the previous purchase
price of $2 until those 10 combs are sold through. FIFO is just the
opposite. Meaning that goods are used in the order that they are
received. The first items ordered, are the first items sold. Either method
will pass an audit. It is important to note though that managers can't switch
back and forth between the two methods. Profit will vary depending on
which method is being used. Say you sold only 6 combs at $3 each. Using
the LIFO method this would equal $3.50 profit. If you used the FIFO
method, this would result in a $6.00 profit.
Response 2
Post your answer to Study Question 5.2 on p. 180 (Ch. 5). As you read your classmates responses,
consider the following scenario: If you compared two different companies that utilized two different
valuation methods, how might the quality of the results differ? Also, comment on the difficulty of
making comparisons between two firms that use different valuation methods.
It is very important to understand which inventory valuation method is

being used to determine the profit numbers quality. The balance sheet,
statement of cash flow and income statement can be directly impacted by
the valuation method that used to determine the costs of inventory. The
three methods that are used are FIFO, LIFO and Average Cost. The
valuation ratios can be dramatically affected depending on the inventory
valuation that is being used over a long-term period; especially because
prices are likely to rise. When using FIFO you can increase net income, but
then at the same time raise the amount taxes that business is obligated to
pay. When using LIFO the inventory can be obsolete because they are old
this will result in lower net revenue because the products pricing is
higher. The Average Cost results usually fall between LIFO and FIFO. The
bottom line can be affected mainly by the inventory analysis and the ratio
results that are formed from that analysis. It is easier to compare
companies that are in the same line of business, so I believe that quality
of results would differ tremendously if different valuation methods were
used. If you use LIFO that company may seem unattractive but they are
performing well, as for FIFO it may look good as for profit, but may not be
performing well.
DQ 2
Week 7 DQ 2
Due Thursday, Day 4
Post your answer to Study Question 5.6 on p. 180 (Ch. 5).

Discuss the consequences of poor quality reporting. What has
the U.S. government done to improve the quality of reporting
after recent financial scandals such as Enron?
I think that the significance is that the analysts only see this one HUGE
transaction. The events that actually led up to this large transaction
actually took place over a 2 year period. These items should have been
written off as they occurred. Wall Street would not have known that the
executives refused to write off these accounts when they should
have. Wall Street only see's the one large transaction. If the company
would have been more honest in their reporting they would have seen
(more than likely) that there were many accounts over a two year period
that should have been written off at different periods. So the analysts
would not have seen a pattern of recurring write-offs. If the analysts only
see the one transaction they are less likely to be able to paint an accurate
picture of the financial standing of the business for investors, or potential
investors. If the investors could see that there were many accounts that
had to be written off maybe their investing decisions would have been
different. The regulation of the accounting field has grown by leaps and
bounds since the Enron scandal. The government has implemented
several agencies and regulations to ensure honesty in accounting
practices. SOX is one example of an agency that has been put into place to
ensure honesty in accounting. SOX implements things like internal
controls, and accountability for CEO's and CFO's.
Response 2
I believe the impact and importance of this write-off event is a very big
matter. It is obvious how they handled it that it was a scandal from the
start. I think that everyone involved had a big role in how things played
out. To me I think of the investors as a really big hit to this but also feel that
audit committees have to be held responsible as well. It has been shown
over many examples that adit oversights are happening to financial
reporting. Although I do feel they are getting better and tighter due to
conforming tightly with the GAAP requests. I feel over time the accounts
receivable should have been written off in smaller increments and not all
taken by $405 million at once. Maybe that isn't correct but it would have
been easier I would think to take the receivables over time.
Response 3
Wall Street should have read the footnotes and seen that the write off was for accounts
receivables and should have been reported in the allowance for doubtful accounts. Every
company that allow sales on credit face doubtful accounts; therefore, the write off may
reoccur. The significance of this transaction is that WorldCom want to cover up the $405
million dollars that it was unable to collect from its customers, but WorldCom wrote off a
large sum of money rather recording the write-off as needed and the analyst over looked it.
Depending on how the company policy is for writing off accounts, from 1998 to the
3rd quarter in 2000 is 11 quarters. If the company wrote off bad accounts quarterly it should
have wrote off 36,818,181.82 per quarter. Investors would not want to continue to invest into
a company that has poor collection skills, or poor management. Unusual items are simply for
those items that are not recurring operating expenses. Bad debts do not fall under this
category. Since the Enron and WorldCom scandals many rules and regulations have been
put in place by the government such as SOX. More people are being held accountable for
their actions and consequences follow poor quality reporting such as fudging the books.
------------------------------------------------
FIN 571 Week 5 Working Capital Simulation
Managing Growth, Part 1 (New Heritage Doll)

Acting as the executive team for a small company, your
team will apply the principles of capital budgeting to
invest in growth and cash flow improvement
opportunities in three phases over 10 simulated years.
Presenting to Stakeholders
Presenting to Stakeholders
Financial statements provide insight into the companys current status
and lead to the development of policies and strategies for the future (Axia,
2007). Financial statements and notes to the financial statements should be used
to analyze the company. For instance, what do the financial statements reveal
about why the company has requested a loan or purchased items on credit?
What is the firms capital structure and what does the firm have outstanding?
How well can the company pay back debt? What recourses are used to pay debt?
What is the companys performance record and are there any future expansions?
What are the expected returns and how successful is the company compared to
industry averages? Which areas of operations contributed to the companys
success, and what are the strengths and weaknesses of the company? What
changes can be made to improve the future performance of the company?

Key financial ratios will assist in determining the information requested.
Liquid ratios measure a firms ability to meet cash needs as they arise. The
current ratio is a good tool to use because it measures the ability the firm has to
pay debts when due. The current ratio for REC is at 2.4 times for 2007, although
it is down from 2006 the company is still able to pay current debt when due.
Cash flow ratio considers cash flow from operating activities has increased from
2006, and this indicates an improvement in short-run solvency. Average

collection period has gone down 5 days within the last year. The cash conversion
cycle gives in-site on why the cash flow has improved or decreased, in this case
the conversion period for REC has improved by 26 days.
Activity ratios measure the liquidity of specific assets and the efficiency of
managing assets. Accounts payable turnover is up seven times from the prior
year and inventory turnover is also up .25 from last year. Accounts payable
turnover is down 9.05 from 12.10 in 2006. This means that the company is
taking longer to repay payables. The fixed asset turnover and total asset
turnover ratios are used to assess managements skills in generating sales from
investments in assets. The fixed asset turnover has dropped slightly, but the
total asset turnover has risen slightly. The increase in total asset turnover comes
from improvements in inventory and accounts receivable turnover.

Leverage ratios measure the extent of a firms financings with debt
relative to equity and its ability to cover interest and other fixed charges (Axia,
2007). Debt ratio, long-term debt to total capitalization and dept to equity have
all raised slightly implying a slightly riskier capital structure. The times interest
earned and the cash interest coverage have increased since 2006. The interest
payments can be covered 7.4 times this year. The cash interest has improved
due to the operating profits and cash from operations. The fixed coverage ratio is
also important in cases where companies use operating leases. In this case, the
fixed charges have increased slightly.

Profitability ratios are used to measure the overall performance of a firm
and its efficiency in managing assets, liabilities, and equity. The ratios used are
the gross profit margin, operating profit margin and net profit margin. All of
which have improved for REC. As well as the cash flow margin, return on total
assets, return on equity and cash return on assets. Over all the company seems
to be in well financial standings and looking toward a profitable year.

Reference
Axia College. (2007). The Analysis of Financial Statements. Retrieved June 28,
2010,
from Axia College, Week Eight, ACC 230.
------------------------------------------------
FIN 571 Week 6 Individual Assignment Working
Capital Simulation Managing Growth Assignment

Resources:
Harvard Business Publishing: Working Capital Simulation:

Managing Growth Assignment
Interpreting Financial Ratios
Luna Lighting, a retail firm, has experienced modest sales growth over the past
three years
but has had difficulty translating the expansion of sales into improved
profitability. Using
three years financial statements, you have developed the following ratio
calculations and
industry comparisons. Based on this information, suggest possible reasons for
Lunas profitability problems.
Industry
2009 2008 2007 2009

Current 2.3X 2.3X 2.2X 2.1X
Average collection period 45 days 46 days 47 days 50 days
Inventory turnover 8.3X 8.2X 8.1X 8.3X
Fixed asset turnover 2.7X 3.0X 3.3X
3.5X
Total asset turnover 1.1X 1.2X 1.3X
1.5X
Debt ratio 50% 50% 50% 54%
Times interest earned 8.1X 8.2X 8.1X
7.2X
Fixed charge coverage 4.0X 4.5X 5.5X 5.1X
Gross profit margin 43% 43% 43%
40%
Operating profit margin 6.3% 7.2% 8.0% 7.5%
Net profit margin 3.5% 4.0% 4.3% 4.2%
Return on assets 3.7% 5.0% 5.7% 6.4%
Return on equity 7.4% 9.9% 11.4%
11.8%
Based on this information, some possible reasons for Lunas profitability

problems are suggested as under:
a) Net Profit margin of the company has degraded and this might be due to
decrease in the net income of the company due to increase in expenses.
This needs to be improved upon by cost control and cost reduction.
b) Return on equity of the company has degraded further and this also
indicates that there is a decrease in the net income of the company due to
increase in expenses. This needs to be improved upon by cost control and
cost reduction.
c) Fixed charge coverage has fallen, which means that the debt payment
along with interest might have increased and this will also lead to
decrease in the net income of the company and thus degrading the
profitability position of the company.
d) Operating profit margin has dropped even though gross profit margin has
remained constant. It means that the operating expenses are higher and
need to e controlled to improve the profitability of the company.
e) The fixed assets turnover and the return on assets have also degraded;
this also indicates decrease in the net income of the company.
------------------------------------------------

Watch the "Corporate Finance Video: Stable Money Makers" located

in the WileyPLUS Assignment: Week 6 Videos Activity.
Capstone Discussion Question
Due Tuesday, Day 2
What have you learned in this course about the process of

analyzing financial statements?
I have learned that there is a lot more to analyzing financial statements

than I thought. This class has made me question my decision to go into the
accounting field. I feel inadequate after taking this class. I am not an
articulate, or analytical person. I tend to get confused easily and do better
at putting the information together than I am at figuring out what it all
means. This is my last block of classes before my Bachelor program
starts, and I don't know if I am ready, or if I even want to
continue. Analyzing financial statements takes a very detail oriented mind,
and one that is great at problem solving. It is critical to understand the
financial statements, and how they relate to one another. There is a lot of
information that is not as obvious as it would seem. Looking at the bottom
line will not give a good picture of how a company is doing financially. It is
important to know the how and why the bottom line looks the way that it
does.
Response 2
I have learned that it takes someone that has the patience, tenacity, and motivation to truly
analyze the statements. If you go about it not wanting to do the work you wont give a good
analysis. I found that you have to be willing to dig deeper than most would to get a full
picture of the company. I found that it is not an easy task to complete. For me the process is
a tedious one. I don't think I would want to go into that type of accounting where I have to
analyze the statements of a company. I think for me I would be better in specialized
accounting like A/P or A/R. I am better at figuring out problems and figuring out ways to
make them better. I am better at specific tasks so for me I wouldn't want to analyze the
statements. I am glad to have learned how, because at some point I am sure it will come in
handy.
Response 3
All financial statements are essential documents because they tell

what has happened to a business over a period of time but most
users of financial statement are more concerned about what will
happen in the future. Stockholders and creditors are concerned
with future earnings and dividends and company's future ability to
repay its debts. Management is concerned with the company's
ability to finance future expansion.
Working as a bookkeeper I do all the steps in monthly cycles
consisting of entering transactions into the journals, working with
A/R, A/P, payroll and preparing the reports, but I have not been
able to analyze the reports the way I learned in this class. I
learned how important is to monitor and interpret the results. I
learned how to compare financial statements of a company with a
company from the same industry and point out the differences
and similarities. This class taught me the importance of analyzing
the Income Statement, Balance Sheet, Cash Flow Statement and
Stockholders Equity each one individually. I learned how essential
is the quality reporting and how useful this quality is in business
decision making. I learned about key financial ratios: liquidity
ratios, activity ratios, leverage ratios, and profitability ratios. All
these ratios are valuable as analytical tools and will help me
indicate the areas of strength and weakness in a business. Even
though I learned the information step by step in this class I tent to
go over every single chapter all over again to better absorb the
material. This class taught us the potential of some management
manipulations of financial statements, thus following the general
accounting rules, being honest, ethical and professional are the
ways on leading to safe and profitable decisions.
------------------------------------------------
FIN 571 Week 6 Team Assignment Capital
Budgeting Assignment, Part 2 (New Heritage
Doll)

The executive team of New Heritage Doll has
completed the decision making for capital budgeting
for the firm. Now the team must decide which decisions
and approach were the best for the company.
Evaluating Financial Health 1
Evaluating Financial Health
Apple Inc. (AAPL)


Apple Inc. (AAPL)
Apple is one of the strong market participants of computer industry. It also
involve in manufacturing of telecom devices, software and other peripherals. It
enjoys full advantage of USA as home country, as it has a strong retail network of
273 physical stores whose majority is in USA, beside the E-retail outlet around
the globe. The diversified product portfolio empowers the apple to strive in tough
competition against Dell, HP & Compaq (Electronista, 2010). Amongst its
competitor Apples outclass profitability is witnessed of its effective
diversification efficient reach of product to customer and state of an art Research
and Development.
Managements Strategy
It is clear from the financial and the strategic analysis of the Apple Inc.
that the management of the company believes in continued research, innovation
and product development. It may be the sole reason that why the firm avoids the
cash dividend and rely over the stock options. Besides the hardware business of
computer the apple is also focus on developing application software operating
system, and all such software application which added the value of its product.
The management is of the view that R&D, integrated marketing channels and its
product diversification is the source of competitive edge against rivals of its
industry. Management is aware of the need of the investment in the promotion
and advertisement activities; it increases the brand equity, brand loyalty and
awareness about the products. Management also considers focusing on the retail
store as it is the source to remain in contact with customer and a way to market
the product directly; it is also a way to cross sell the market to customer.

Financial returns in Comparison to Industry
An investor is always keen to know about the profitability. Hence we start
with the assessment of profitability. Apple Inc. has shown a tremendous
improvement in net sales and profitability since 2005 to 2009. In 2008 the net
income increases 75.07% and in 2009 increases 34.58% shown that Apple cop. is
continuously enhancing its profit. Company earning P\S is also at increasing
trend. In 2009 basic EPS is 9.22 from 6.94 last year, and it was 4.04 in 2007. It
should be noted that no cash dividend is announced since 2005, although stock
base benefit and compensation is given. An increase in return on asset has been
observed in 2009 i.e.26.96% against 19.33% last year while industries average is
19.8. Hence Apple is leading the Industry from this angle. Return on equity is
18.92% into 2009 lower than 33.40% of industry benchmark, meaning apple is at
lower leverage with a roe increase of 4.03% this year (Hardware Marketplace,
2010).
Financial Risk and Industry
At this stage of our analysis we extend our findings to assessment of risk
associated with the investment opportunities in APPLE Inc. Analyzing the liquidity
we observed that Apple has a sound ability to meet its short term obligation. It is
revealed by the healthy current ratio of 2.74 for the year 2009; it is improved
from 2.46 of the last year 2008. If we had a glace on the industry it reflects a
standard of 2.5. In the computer equipment industry a very low inventory has
been observed. That is why the acid test ratio fall lightly below the current ratio
i.e. acid test ratio is 2.70 for the year 209 in comparison to 2008, which were
2.43. If we compare the acid test of 2009 i.e. 2.70 with industry average, which
is 2.5 (msn.com, 2010). On the liquidity
situation it is stated that the risk avoider will be glad to look at the
satisfactory liquidity position.

As far as the solvency risk is concern in the long run the debt equity ratio
is 0.11 for the year 2009, which is increased from 0.08 of 2008. Here it is
important to refer to the industry average of 0.07 (OnlyHardwareBlog, 2010).
Hence it is apparent that though the APPLE Inc. is more risky in the long run, but
it does not sound like the alarm.

Cash Flow Analysis
Due to the increase in sale the operation of the firm expanded, and hence
besides other assets, the requirement of the cash also increases in 2009. $1.11
billion is generated from operations, which is 5.87% higher than the last year.
The deferred tax expense in 2009 is v1040 million this noon cash expense last
year it was 39 million and 78 million in 2007 (Electronista, 2010).

The company actively invests in marketable securities that not only
improve its liquidity, but rather give a room to meet hazardous need of raw
inventory at any point of time. Investing activities gives negative balance $
17.434 billion. It is also clear from the cash flow that firm does not announce any
dividend in cash, rather it takes a tax benefit form stock base benefit; secondly,
firm keeps healthy cash in hand.

Apple and its Main Competitor
When comparing the Apple with its major competitor like Dell & HP, Apple
marks higher price earning ratio of 19.10 times that is greater than Dell and HP,
which is 16 times and
18.3 times respectively. We analyze the share price to book value it is 5.71 times;
again higher than 4.1 times of Dell and 1.38 times of HP. Cause of higher market
price is the retention of profit and stock base benefits. Apple also has high
capitalization; the date is $ 250.0 billion (Electronista, 2010).

Apples Performance and Economy
Global economic recession is on the way to recovery, although Europe and
America needs some more time to normalize. However, reasonable growth is
observed in emerging market like Brazil, Malaysia, India and China. Triad block
recorded a poor growth. What is going to be with the world economic outlook is
the global economy is going to revive with the V shape pattern or its recovery
would be like expanded U as some economist say growth will be slow. I am of
the view that Apple Inc. should more focus on the emerging market like India,
China, South Pacific region countries. So Apple needs to exploit more and more
opportunities outside the USA. I am optimistic that the idea of direct marketing
will work out side the USA as well. Hence Apple needs to introduce maximum
retail store outside the USA.

It is important to look at trend analysis and industry comparisons as a
means of determining if it is the best time to expand or stay put and to see how
its future products will be accepted by the public.

References
Electronista. (2010). Apple only US computer builder to outgrow industry
average. Retrieved
July 2, 2010, from
http://www.electronista.com/articles/10/06/04/isuppli.sees.apple.at.34pc.world.m
arket.share/
Hardware Marketplace. (2010). Computer Hardware. Retrieved July 2, 2010 from
http://www.hardwaremarketplace.com/computer-hardware/
msn.com. (2010). Apple Inc: Key Ratios. Retrieved July 2, 2010 from
http://moneycentral.msn.com/investor/invsub/results/compare.asp?
Page=PriceRatios&Sy
mbol=AAPL
OnlyHarwareBlog. (2010). Highest debt to equity ratio in the computer hardware
industry
detected in shares of international business machines. Retrieved July 2,
2010 from
http://onlyhardwareblog.com/?p=2107
FIN 571 Week 6 Working Capital Simulation

Managing Growth, Part 2 (New Heritage Doll)

The executive team of New Heritage Doll has
completed the decision making for capital budgeting
for the firm. Now the team must decide which decisions
and approach were the best for the company. Analysis of
Scenarios:
Debt Scenario would increase the debt ratios from to 50%. Equity Scenario
would reduce the debt ratio to 40%. With Debt option, earnings per share would
be higher. Interest declines to 2.86 times with the Debt option while times
interest earned increases to 3.75 times with the Equity option. Either option
exhibits a good use of financial leverage because for both, the financial leverage
index being greater than 1. However, it is higher using the Debt option.

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FIN 571 Final Exam Guide (New)

FOR MORE CLASSES VISIT

Accounting plays many important roles especially when it comes to

Why are ethics so important in the field of accounting?

Ethics are important in the field of accounting for

FOR MORE CLASSES VISIT

Today, I will be describing a balance sheet, income statement, retained earnings

Statement of Cash Flow

http:yourdictionary.com /accounting_statements.org Retrieved 1/28/10

FOR MORE CLASSES VISIT

FOR MORE CLASSES VISIT

FOR MORE CLASSES VISIT

Falsified or manipulated statements doesn't only effect the company but it

For Discussion Question 2: Post your response to the following:

How does information from financial reports influence business decisions?

IT is extremely important for he business managers to understand the

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Internal Cash Control

Internal Cash Control

of the information is missing on the invoices.

the information has to be submitted completely and in a timely matter. In this

followed are Documentation procedures. Company documentation is very important

one of the requirements in a transportation department is to make sure that the

which took a month later to complete.

followed are Establishment of responsibility. Happens when the company

responsible for any shortages.

a separate responsibility because it will minimize the billing errors.

vacations or switching positions to prevent incorrect handling of the companys

who handle cash.

received jail time, and felony records.

years ago by the former accountant

physical or electronic based systems or programs. It is extremely important for a

company to invest in computer or informational protection for the company

and external protection. For example, all companies invest in a virus

in the wrong hands.

Invest idle cash

Plan the timing of major expenditures

Delay payment of liabilities

paid allowing excess funds to be free for other uses.

Keep inventory levels low

company will lose profit.

Increase the speed of collection on receivables

http:yourdictionary.com /accounting_statements.org Retrieved 2/13/2010

Thomas, Y. 2005-08-27 Accounting 101 pg. 52 Statements

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Watch the "Your Business Structure" and "Corporate Business

Cash Management Matrix

Principles of Internal Control How it Works

Documentation procedures Evidence or proof of all company My job we deliv

Other controls Bonding of employees, company Our company fir

FIN 571 Week 2 Connect Problems

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How would you describe the difference between financial

The manager's purpose is to manage by making stable plans, delegate duties,

Discussion Question 2: Post your response to the following:

Select a management function (planning, directing and

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Cost, Volume, and Profit Formulas

Due February 28, 2010

The components of cost volume-profit analysis consist of Level or volume of activity,

What does each of the components mean?

Illustrate your explanation with an example from a fictitious company of how an

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