ACC 808

Spring 2021

Mini Case #3

1. Read the case Auto Mart available on D2L. You do not need to read the publications on securitizations
that are referenced in the case. In other words, read the case without referring to the recommended
online documents (unless, of course, you want to). We will use this case to discuss securitizations in
class. Please be prepared to participate in the discussion.

2. Using the Excel spreadsheet available on D2L, present a detailed analysis of the auto loans receivable,
and allowance for uncollectible accounts, presented in Exhibit 1. Specifically, compute the following
ratios for each year:
a. Auto loans receivable as a percentage of sales
b. Year-to-year growth in sales
c. Year-to-year growth in receivables
d. Loans receivable turnover (auto loans generated/average accounts receivable)
e. Days credit sales outstanding (365/Loans receivable turnover)
f. Bad debt expense as a percentage of receivables written off
g. Allowance for uncollectible accounts as a percentage of auto loans receivable
Note: Credit sales are equivalent to auto loans generated.
 Please submit your answers in a Word document, preferably using a table. You can copy tables from
your Excel file into a Word document.

 While you do not need to submit your Excel file, we will discuss it in class.

3. Based on your analysis, do you think there is evidence of earnings management? Why or why not (link
your answer back to at least two ratios)?

 Please submit your answer in the same Word document used for question two.