...outstanding share calculations. A company making a public offering usually creates treasury stock. Not all shares are approved for sale. Some shares are held back and used to create extra cash later. Another reason some shares are held back is to ensure controlling interest. Treasury stocks are created when a company does a buyback. This is beneficial to shareholders because it lowers the number of outstanding shares located in the shareholder equity section of the balance sheet, often seen as a negative number there. The company debits Treasury Stock and credit Cash. Cash paid to buyback stock is recorded in the contra-equity account. Stock Splits A stock split is the number of outstanding shares of stock increased; with no impact on any of the equity account balances. The increases in the number of stock will decrease the market price. Companies do this to keep shares at a reasonable price and attract potential investors. No accounting entry is necessary when a stock split occurs. Stock splits do not dilute the ownership interests of existing shareholders. Reverse stock splits can occur when the company reduces the number of shares outstanding. A memorandum note is enter to indicate the change in shares and changes in par value. Retained Earnings Retained earnings do not represent surplus cash left over after payment of dividends. It demonstrates what the company did with their profits; the amount of profit reinvested in the business since the company started. The profits...
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...You Are an Investment Analyst Jennifer Nixon Financial Accounting Accounting 557 June 16, 2013 Dr. Alfred C. Greenfield, Jr. Introduction In this paper, I am a representative from Beacon Consulting and Accounting Services. I will be performing a complete evaluation of the Pepsi and Coca Cola companies. I’ve been assigned to complete a stock market analysis that will be presented to a client as part of a professional consultation process. Background information for both companies will included in the analysis in order to provide a summary of each company. Another part of my analysis will include the examination of stock trends for both companies as well as the stock trends that will be based from the initial public offering day to January 1, 2012. I will also display current events that are surrounding both companies to better assist in the analysis. Finally, the financial statements of each company will be analyzed. After all of the information has been gathered, it will be reviewed in order to make a recommendation as to which company will be the best investment opportunity for the client. Analyze each company’s history, product / services, major customers, major suppliers, and leadership and provide a synopsis of each company. Coca Cola was founded in 1886, John Pemberton invented the first prototype of soda. Over a century later, The Coca-Cola Company has produced more than 10 billion gallons of syrup. The company is the world’s leading manufacturer...
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...Chapter 4 Cash Flow and Financial Planning ( Instructor’s Resources Overview This chapter introduces the student to the financial planning process, with the emphasis on short-term (operating) financial planning and its two key components: cash planning and profit planning. Cash planning requires preparation of the cash budget, while profit planning involves preparation of a pro forma income statement and balance sheet. The text illustrates through example how these budgets and statements are developed. The weaknesses of the simplified approaches (judgmental and percent-of-sales methods) of pro forma statement preparation are outlined. The distinction between operating cash flow and free cash flow is presented and discussed. Current tax law regarding the depreciation of assets and the effect on cash flow are also described. The firm’s cash flow is analyzed through classification of sources and uses of cash. The student is guided in a step-by-step preparation of the statement of cash flows and the interpretation of this statement. This chapter ties in every person’s need to set goals, estimate income, and budget expenditures to the firm’s need to effectively engage in these activities. ( Answers to Review Questions 1. The first four classes of property specified by the MACRS system categorized by the length of the depreciation (recovery) period are called 3-, 5-, 7-, and 10-years property: |Recovery Period |Definition ...
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...Table 1 for Iron Eagle Corporation. (a) Compute (i) Current assets (ii) Current liabilities (iii) Working capital, (iv) Shareholders’ equity for the corporation. (b) If the firm had a net income of $550,000 after taxes, what is the earning per share? (c) When the firm issued its common stock, what was the market price of the share? | | |Table 1. Balance Sheet Statement as of December 31,2009 | |Assets | |Cash $160,000 | |Marketable securities 210,000 | |Accounts receivable 160, 000 | |Inventories 60,000 | |Prepaid taxes and insurance 40,000 | |Manufacturing plant at cost $620,000 ...
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...Final Paper ACC 205 September 29, 2014 Walmart Company Overview Walmart helps people around the world save money and live better -- anytime and anywhere -- in retail stores, online and through their mobile devices. Each week, more than 245 million customers and members visit our nearly 11,000 stores under 71 banners in 27 countries and e-commerce websites in 10 countries. With fiscal year 2014 sales of approximately $473 billion, Walmart employs 2.2 million associates worldwide. Horizontal Analysis of Income Statement and Balance Sheet Fiscal year ends in January. USD in millions except per share data. | 2011-01 | 2012-01 | 2013-01 | 2014-01 | TTM | Revenue | 100.00% | 100.00% | 100.00% | 100.00% | 100.00% | Cost of revenue | 74.74% | 74.98% | 75.13% | 75.18% | 75.21% | Gross profit | 25.26% | 25.02% | 24.87% | 24.82% | 24.79% | Operating expenses | | | | | | Sales, General and administrative | 19.21% | 19.08% | 18.94% | 19.18% | 19.25% | Total operating expenses | 19.21% | 19.08% | 18.94% | 19.18% | 19.25% | Operating income | 6.05% | 5.94% | 5.93% | 5.64% | 5.53% | Interest Expense | 0.52% | 0.52% | 0.48% | 0.49% | 0.49% | Other income (expense) | 0.05% | 0.04% | 0.04% | 0.02% | 0.02% | Income before income taxes | 5.58% | 5.46% | 5.49% | 5.18% | 5.07% | Provision for income taxes | 1.80% | 1.78% | 1.70% | 1.70% | 1.69% | Minority interest | 0.14% | 0.15% | 0.16% | 0.14% | 0.16% | Other income | 0.14% | 0.15% | 0.16% | 0.14%...
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...strategy of wealth maximization usually includes creating financial investment decisions that bring into any risk which is bigger than expected benefits. The objective of wealth maximization is commonly accepted goal of a corporation. As stated by this objective, the manager should be the one who makes decisions that maximize the wealth of shareholders. In other words, this is also to make the shareholder’s investment profitable. Shareholders’ wealth will be maximized when a decision made by manager raises the NPV (net present value). The NPV means the difference between present value of the benefits and present value of the costs. A decision which has a positive net present value will create wealth for shareholders and a decision that has a negative net present value will create loss of wealth for shareholders. Therefore, only those decisions that have positive net present value must be accepted. Forecasting financial requirements and acquiring necessary funds is also important in financial planning. In a business, there are some requirements which need to be prepared within a budget. A budget is financial plan on how the different sides of...
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...subsidiary company should be listed under “investments” and should not be listed under current assets because it will be held for longer than one year. Treasury stock is not an asset, it is supposed to be presented under the stockholders equity section of the balance sheet as a deduction of common stock and should include the class, number of shares, and the basis of valuation. Buildings and land should not be together and the reserve for depreciation, which should be “accumulated depreciation”, should be a subtraction of only buildings. Cash surrender value of life insurance should be listed under investments and not under other assets. Reserve for income taxes should be called “tax payable”. Customer’s accounts with credit balances should not be included as its own part of the balance sheet because it would be a deduction of accounts receivables. Unamortized premium on bonds payable should be included under long-term liabilities as an addition to bonds payable. Deferred credits should not be listed on the balance sheet. Bonds payable should include its interest rate; interest payments dates, and maturity date should be shown. Common stock should include the number of shares authorized, issued and outstanding. Earned surplus should be called retained earnings. Cash dividends declared should be on the retained earnings statement as a reduction of retained earnings. These are the issues that...
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...Finance Final Review: Part 1 of 3 Accounting 101 Financial statements The reason you need to understand how a financial statements works is because it summarizes the financial information of a firm (firm’s operating performance.) such as its assets, how the firm generates and uses cash (good to know if you are an investor, tells you if the firm is being stupid or not with their money) and changes to stockholder’s wealth. This is why publicly traded companies are required to file annual (yearly) reports that inform investors (you) about their operations and financial conditions. The type of financial statements that are important to financial analysis are the balance sheet, income statement and statement of cash flows. Balance Sheet The balance sheets shows a firm’s assets and the financing mix (liabilities and equity) use to obtain those assets. HINT: the financing mix is the cost of capital. Remember that hellish equation, ka = (wd)(kd)(1-t) + (wp)(kp) + (we)(ke). This is where the weighted (Wd, Wp, We) comes from. The accounting equation must hold true for the balance sheet: Assets = Liabilities + equity The balance sheet shows a snapshot of the firm’s status on a specific date Income Statement The income statement illustrate what revenues the firm collects, the expenses required to support revenues, and the firm’s profitability over a specified period of time. Income statement reflect performance over a period of time. This is where you can calculate the EPS...
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...succeeded McDonald in 1989 and started developing a long range strategic plan for FPL. Broadhead simplified the quality control program. He wanted FPL to focus on its core business and made plans to sell several non-utility businesses that the group held. Broadhead started an aggressive capital expenditure program of $6.6 billion for expansion. To cut costs, Broadhead flattened the organization and eliminated about 4000 positions from 1991 to 1993. Broadhead’s strategic plans were successful and by 1994 FPL became the largest utility in Florida and the fourth largest in the country. FPL’s sales growth exceeded the national average and this trend was expected to continue over the next five years. California proposal on retail wheeling had a large impact on the electric utilities...
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...FEMSA 2007: THE FINANCIAL STATEMENT ANALYSIS IMPACT OF DIFFERENCES IN MEXICAN AND US GAAP 1. Compute the following ratios for 2007 using the financial statements prepared using Mexican FRS and expressed in pesos. [Assume the weighted average number of shares outstanding is 17,891,000] a. Current Ratio: Current assets/Current liabilities b. Inventory Turnover: Cost of Goods Sold/Average Inventory c. Profit Margin on Sales: Net Income/Net Sales d. Debt to Assets Ratio: Total Liabilities/Total Assets e. Book Value per Share: Common Stockholders’ Equity/Outstanding Shares 2. Compute the same ratios listed in 1 using the amounts expressed in US$. What are the implications for international financial statement analysis? The importance for credit analysts to consider in reviewing Mexican financial statements is because the net effect of inflation accounting will be to produce financial statements that will not have the conservative bias of statements produced under U.S. GAAP. For example, some of the differences will show on the balance sheet where in Mexican statements all non-monetary assets are restated at current value and the disclosure requirements on Mexican statements are not as comprehensive as in the U.S. When considering the notes to the financial statements in Mexico these notes may contain information about contingent liabilities, debt maturities, and loan covenants - information of vital importance to determining the long-term...
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...sales is more than twice what the company is currently brining in. The company will need to review several factors to determine if this type of an increase is even possible to make by adding an additional product of making cedar doll houses to try to supplement the income. There are several factors that need to be taken into consideration before any determinations can be made and before production of the doll houses could begin at all. Some of those possible set backs are: quality, competition, completion, and raw materials. Just looking at the numbers the company wants to grow starting a new product line does not appear to be a viable option at the moment but the correct answer would not be known for sure until all the numbers are run, a cash flow statement is created, the NPV is determined, and all potential risk factors are determined. When the company is trying to decide if they want to add an additional product line to their factories they need to look at several different factors before any decisions can be made on if or how they should go ahead with the new product line. Some of these considerations are quality, competition, completion times and raw materials. Quality needs to be considered because the company already has a set standard for quality it gives its customers and they do not want to risk lowering that quality perception because of a new product line they bring out. If the quality if not up to at least the same standards as their other lines they risk losing...
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...Six Flag Corporation Financial Position Group Project Bus 500: Fundamental of Finance Dr. Roberto Castaneda * Table of Contents * Background * Competitors Financial Comparison * Challenges/Opportunity * Six Flags Corporation Financial * Summary * Financial Reports Background Six Flags was founded by Angus Wynne in1961. The first Six Flags was located in Texas; it now has 19 parks across the United States, Mexico and Canada. The name Six Flags was taken from its first property where six countries flags flew over Texas during the state’s history. The first Six Flags was called Six Flags over Texas. Six Flags has become the world’s largest amusement park, based on the quantity of properties. Six Flags offers its guest an affordable, thriving experience to enjoy with their friends and families. “The inventive theming afforded guests a chance to experience places and times that previously only existed in their imaginations, including cowboy culture, French and Spanish cultures, and even southern belles and pirates.” “Our 19 theme, water and zoological parks across North America are better than ever, offering today's families and teens a complete one-stop diversified entertainment destination, from industry-leading thrill rides to water attractions, themed areas, children's areas, parades, concerts and shows, restaurants, games and merchandise outlets.” Six Flags provides an experience like no other, there are so...
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...Supply Chain Final cumulative balanced scorecard ending with Quarter 4 is below. Cumulative industry results for last four quarters ending in quarter: 4 | | Minimum | Maximum | Average | House Personal Computer | Total Overall | 0.00 | 749.39 | 17.00 | 0.00 | Financial Performance | -73.50 | 211.50 | 13.68 | -22.62 | Market Performance | 0.00 | 0.65 | 0.16 | 0.32 | Marketing Effectiveness | 0.00 | 0.82 | 0.33 | 0.62 | Investment in Future | 0.00 | 468.30 | 1.44 | 1.46 | Wealth | -2.12 | 5.21 | 0.67 | 0.21 | Human Resource Management | 0.00 | 0.84 | 0.35 | 0.73 | Asset Management | 0.00 | 3.59 | 0.54 | 0.57 | Manufacturing Productivity | 0.00 | 1.00 | 0.36 | 0.45 | Financial Risk | 0.00 | 1.00 | 0.45 | 0.82 | Income statement from Quarter 5 performance report, showing Quarters 1-4. Income Statement | | Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | 'Gross Profit | ' Revenues | 0 | 984,606 | 1,949,789 | 2,276,192 | '- Rebates | 0 | 39,400 | 62,450 | 67,950 | '- Cost of Goods Sold | 0 | 933,305 | 1,551,810 | 1,613,631 | '= Gross Profit | 0 | 11,901 | 335,529 | 594,611 | | | | | | 'Expenses | ' Research and Development | 60,000 | 0 | 60,000 | 0 | '+ Advertising | 0 | 66,500 | 164,857 | 171,182 | '+ Sales Force Expense | 0 | 111,230 | 134,665 | 156,251 | '+ Sales Office Expense | 220,000 | 120,000 | 320,000 | 200,000 | '+ Marketing Research | 0 | 15,000 | 15,000 | 15,000 | '+ Shipping | 0 | 19,077 | 30,593...
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...bookstore but soon diversified, selling DVDs, CDs, videos, software, electronics, apparel, and more. The company CEO Jeff Bezzos incorporated the company in July 1994 and the site went online as Amazon.com in 1995. Current assets and liabilities provide an in-depth look at where they stand financially using balance sheets and income statements. Information on what cash equivalents are will also be included in this examination of Amazon. An explanation of why the information is important to potential creditors, investors, and employees will also be included in this analysis of Amazons financial standings. The assets listed under the Amazon’s current assets are listed in proper order because the assets are listed from most liquid asset to least liquid asset. Assets are the things a company owns. They are the resources of a company that have been acquired through transactions and have future economic value that can be measured in dollars. Assets are classified into Current and Non-Current. Current Assets are those that an entity expects to use within a year of when they were reported. Things that are current assets are cash, inventory, and receivables. Non-Current Assets those whose benefits are expected to last more than a year from when they were reported. Things that are non-current assets are property, machines, and vehicles. Classification of assets is used in order to evaluate a company’s health by examining how well assets are performing. Some asset classes include fixed...
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...and Statement of Cash Flows ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics 1. Disclosure principles, uses of the balance sheet, financial flexibility. Classification of items in the balance sheet and other financial statements. Questions 1, 2, 3, 4, 5, 6, 7, 10, 18, 22, 23, 25 11, 12, 13, 14, 15, 16, 18, 19 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 1, 2, 3, 8, 9, 10 Brief Exercises Exercises Problems Concepts for Analysis 4, 5 2. 1, 2, 3 3. Preparation of balance 4, 7, 8, 9, sheet; issues of 16, 17, 20, format, terminology, 21, 24 and valuation. Statement of cash flows. 25, 26, 27, 28, 29, 30, 31, 32 12, 13, 14, 15, 16 4, 5, 6, 7, 11, 12, 17 1, 2, 3, 4, 5, 6, 7 3, 4, 5 4. 13, 14, 15, 16, 17, 18 6, 7 6 Copyright © 2010 John Wiley & Sons, Inc. Kieso, Intermediate Accounting, 13/e, Solutions Manual (For Instructor Use Only) 5-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives 1. 2. 3. Explain the uses and limitations of a balance sheet. Identify the major classifications of the balance sheet. Prepare a classified balance sheet using the report and account formats. Determine which balance sheet information requires supplemental disclosure. Describe the major disclosure techniques for the balance sheet. Indicate the purpose of the statement of cash flows. Identify the content of the statement of cash flows. Prepare a basic statement of cash flows. Understand the usefulness of the statement of cash flows. 12, 13...
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