...Accounting for non-accounting students eighth edition John R. Dyson ACCOUNTING FOR NON-ACCOUNTING STUDENTS Visit the Accounting for Non-Accounting Students, eighth edition Companion Website at www.pearsoned.co.uk/dyson to find valuable student learning material including: G G G G Multiple choice questions to help test your learning Extra question material Links to relevant sites on the web Glossary explaining key terms mentioned in the book We work with leading authors to develop the strongest educational materials in Accounting, bringing cutting-edge thinking and best learning practice to a global market. Under a range of well-known imprints, including Financial Times Prentice Hall, we craft high quality print and electronic publications which help readers to understand and apply their content, whether studying or at work. To find out more about the complete range of our publishing please visit us on the World Wide Web at: www.pearsoned.co.uk ACCOUNTING FOR NON-ACCOUNTING STUDENTS Eighth Edition John R. Dyson Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk First edition published in Great Britain under the Pitman Publishing imprint in 1987 Second edition 1991 Third edition 1994 Fourth edition published under the Financial Times Pitman Publishing imprint in 1997 Fifth edition 2001 Sixth edition 2004 Seventh edition 2007 Eighth...
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...Exam 2 Key SECTION 1 3PM VERSION 2 SECTION 2 4:30PM VERSION 3 1. The 7 percent semiannual coupon bonds of the Garden Supplies Co. are selling for $976, have a face value of $1,000, and have a yield to maturity of 8.079 percent. How many years will it be until these bonds mature? A. 2.50 years b. 3.15 years c. 5.00 years d. 7.85 years e. 10.00 years N = ? = 5/2=2.5; I=8.079;PV=-976;PMT=70/2=35;FV=1000 BLOOMS TAXONOMY QUESTION TYPE: APPLICATION LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: BASIC Ross - Chapter 006 #83 SECTION: 6.1 TOPIC: TIME TO MATURITY TYPE: PROBLEMS 2. You own two bonds. Both bonds pay annual interest, have 8 percent coupons, $1,000 face values, and currently have 8 percent yields to maturity. Bond 1 has 9 years to maturity and Bond 2 has 6 years to maturity. If the market rate of interest rises unexpectedly to 9 percent, Bond _____ will be the most volatile with a price decrease of _____ percent. a. 1; 7.26 B. 1; 6.00 c. 1; 4.49 d. 2; 1.61 e. 2; 3.57 Both bonds have a starting price of $1,000 since their coupon rates are equal to their yields to maturity. All else equal, with longer maturity bond will have the most interest rate risk (Bond 1). Price after interest rate change for Bond 1: N=9;I=9;PV=?=940.05;PMT=80;FV=1000. Percent change in price = (940.05 1000)/1000 = -.05995 = -6% BLOOMS TAXONOMY QUESTION TYPE: ANALYSIS LEARNING OBJECTIVE NUMBER: 2 LEVEL OF DIFFICULTY: INTERMEDIATE Ross - Chapter 006...
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...Overview Sara Lee Corporation has a vision “to be the first choice of consumers and customers around the world by bringing together innovative ideas, continuous improvement and people who can make things happen.” The company’s vision can be summed up simply with their mission: “To simply delight you…everyday.” The company has been trying to achieve these goals since 1939 when the company began. Sara Lee employs a broad differentiation strategy, and has been diversifying since inception, mainly by acquisition. In 2005, the company, in an effort to raise profitability, began to divest eight of its business. The company’s goal was to increase sales to at least $14 billion, and increase operating profit to 12%. The idea was to focus efforts on the good, beverage and household product industry, which were seen as more profitable, and profits would increase. In 2008, Sara Lee launched an initiative called Project Accelerate. This program was designed to cut costs and increase productivity by focusing on overhead costs, streamlining the supply chain and outsourcing. It is expected to save of sum of $350 to $400 million by the end of 2012. By 2010, Project Accelerate had saved the company $180 million. The management team also decided to buyback $2.5 to $3 billion of common shares over a three year period. Despite their efforts, by the end of 2010, Sara Lee has revenues of just $10.8 billion and the operating profit margin was well below the target 12% at 8.5%. In an attempt to boost...
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...the bills, to take a trip, fix up the house, or save for a rainy day. Businesses are no different. But what we call mad money, they call free cash flow. Free cash flow is the remaining cash flows that are available for use by a company to bring added wealth and value to the shareholders after all the bills have been paid. It represents real cash. The presence of free cash flow indicates that a company has cash to expand, develop new products, buy back stock, pay dividends, or reduce its debt. High or rising free cash flow is often a sign of a healthy company that is thriving in its current environment (investinganswers.com). There is an extensive selection of criteria for selecting projects. Some may want to select projects that show instantaneous increases in cash inflow, while others may want to concentrate on long-term growth. Examples of projects include investments in property, plant and equipment, and research and development projects. Bauer Industries, an automobile manufacturer, was presented with a proposal to build a plant that will manufacture lightweight trucks. The plan utilized a cost of capital of 12% to evaluate the project over a ten year period. Based on extensive research, an incremental free cash flow projection (in millions of dollars) was prepared. The net present value of the estimate free cash flow to manufacture the lightweight trucks was determined using the following formula: NPV = -150 + 36 x 1/(.12) (1- 1/〖1.12〗^9 ) + 48/〖1.12〗^10...
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...Key Events/ Case synopsis Palmer Limited is an industrial Mechanical building contracting company from Saskatoon. Michael and Andrea Palmer founded it in 1986. They saved around $ 25,000 to start the business. They currently have 32 employees working under them. The main problem that they are facing now is the volatile market and decline in the housing construction business market in the current year. This is causing them troubles with the bank. Problem Statement and Objectives The Confederation bank is requesting an assessment of financial needs to maintain the bank’s support. Some critical issues that the company is facing are that the company is deviating from its core competencies. They are experiencing Cash flow problems. They are in a high debt right now. They are having a hard time collecting what is owed to them due to the market. The Confederation bank is asking the Palmer brothers to create a financial statement for the year of 1999, which will be the deciding factor for the bank weather to support Palmer Limited or not. They also want to see if Palmer Limited will be able to pay the debt or not. Situation Analysis Porters Five Forces The rivalry amongst existing firms is medium low. The number of competitors is equal and the business is balanced in comparison to all the employees. There is low growth rate, with high exit barriers and relatively low switching costs. The Bargaining power of suppliers is low. There are not many suppliers present in the market...
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...Our 2011 cash flow forecast assumes that the union will accept LL’s revised offer in June and the strike was only for April, 2010 which will not affect fiscal 2011 since the offer would be retroactive to April 30, 2010. Our forecast also assumes that MRL’s cash flows are excluded. Our calculations are in APPENDIX. It shows that cash flow for 2011 is forecasted to be $8,646,000. Furthermore, cash flow is expected to decrease steadily in 2012 and beyond. It is doubtful that LL can remain as a going concern. Our calculations are based on Mark’s assumptions about sales and operating costs reverting back to 2009 levels, as well as our own estimates of non-cash working capital declines and tax rates. Therefore, we cannot assure that our cash flow forecast will be 100% accurate. We should enquire Mark about why he thinks that 2011 sales and operating costs will revert back to 2009 levels, and verify its reliability. If the circumstances change, so will our analysis and conclusion about the Cash flow. Competitor’s offer for LL’s inventory and subsequent liquidation of LL (Finance/Tax) A competitor has offer $28 million for the inventory of LL. We will have to find the current value of LL and compare it with the offer to see if it worth accepting the offer and liquidating. Under the Earnings-Based Approach, we could apply the cash-flow and discounted model by using 20% rate which is the estimated shareholder’s required after-tax return and using the cash flow from 2011...
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...projects with manageable scope, the organization will be able to demonstrate early wins, and the program will gain momentum and appreciation. Another important factor that must be considered while selecting a project is the operational stability of the process. There are different king of methods available for selecting a project based on financial criteria. NPV (Net Present Value), IRR (Internal Rate of Return), Pay-back period method used for project selection. NPV is useful when preparing a capital budgeting project. By NPV we can determine whether the total present value of a project’s expected future cash flows is enough to satisfy the initial cost. When we have an investment that creates differing amounts of annual cash flow then we need to determine rate of return using the Internal Rate of Return. IRR is the rate needed to convert the sum of the future uneven cash flow to...
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...i) According to SCON 6 article 25, assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. Assets has three characteristics: it embodies a probable future benefit that involves a capacity or in combination with other assets, to contribute directly or indirectly to future net cash inflows, a particular entity can obtain the benefit and control others’ access to it and the transaction or other event giving rise to the entity’s right to or control of the benefit has already occurred. Future economic benefit is the essence of an asset (paragraphs 27–31). An asset has the capacity to serve the entity by being exchanged for something else of value to the entity, by being used to produce something of value to the entity, or by being used to settle its liabilities. Expenses are outflows or other using up of assets or incurrence of liabilities (or a combination of both) from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s ongoing major or central operations. Expenses are actual or expected cash outflows that have occurred of will occur as a result of the entity’s central operations. Cost of the goods sold, interest, rent, salaries, depreciation may be given as examples. ii) Costs should be expensed when they have expired or used up and when they have no future economic value. They should be capitalized as assets when costs have not expired and...
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...Analysis of Financial Statements (MBA) Project Instructions Project writing is not a difficult task at all. However, it is an art by which the writer represents his point of view in a way that it looks professional, clear and comprehensive, and finally leaves a long lasting impression on the reader. Ethics of project writings: Project writing has some ethics which must have to be followed by the writer in order to make a professional project. Emphasis on these ethics will make you learn how to write a project in a professional manner. Ethics of project writing include making a main page, writing a preface, giving an acknowledgement, making a table of contents, putting executive summary, giving an introduction to the project, mentioning the contents of the project, concluding it, including all the tables and annexure, and finally writing a bibliography. What this project involves: The idea is to concentrate on doing a full analysis of one firm. Since I suspect that you may have other courses or jobs, what is required here is somewhat less than a full analytical workup. You will be applying some of the financial principles we have discussed in class. A comprehensive outline is given below to make the project. 1. Select a company of your choice as a first step and apply principles that are mentioned below. (I understand that some data will not be available for the firms. However, you have to assume missing figures based on your understanding and our class discussions...
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...Business plan for Strategic Management The Executive summary expresses the type of restaurant or business it wants to become and explains how it can accomplish the goals by setting their mission and objectives. What will be included in the executive summary are the Markets, Services & Products, and Financial status. Generally the market is a big group of individual with different wants and need. Restaurants and Business corporate look through this specific individual to whom will purchase their product and services. The location of the market emphasizes a huge impact on every kind of businesses, whether from a small noodle shop to a big shopping mall, the location is one of the most important aspects to a successful business. In order to create the best service and product, the restaurant or business must know what they are going to sell. Do you want to focus more on your food than your services or do you want to have a balance of both food and services? The menu item is very important since customers generally are persuaded by the image on the paper. Their perception and cognitive thinking influence what is call “stimulus” by which a customer is affected psychologically through their thoughts internally and externally. To achieve success, management must be strong and capable of forecasting the profit and loss of the business. That’s why companies implement objectives and missions to maintain their foundation. The objectives in general, is broader in scope than a...
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...Péter HARBULA CORPORATE GOVERNANCE, SHAREHOLDER STRUCTURES AND VALUE CREATION Summary : This paper analyzes the interaction between shareholder structures and the quality of the corporate governance structure in France using the value creation criterion. Using shareholder structures allows analyzing the performance of French firms and to measure an underperformance of “hard core” and diffuse ownership firms. This paper, updating results from Harbula (2004), also investigates the relationship between performance and shareholder stakes. Keywords: Corporate governance, value creation (EVA, CFROI), enterprise performance, shareholder structures. Classification JEL: G32, G34 Electronic copy available at: http://ssrn.com/abstract=1925045 Péter HARBULA: Corporate governance, shareholder structures and value creation 1. INTRODUCTION The objective of this working paper is to determine whether “hard core” governed firms truly underperform their peers. The main cornerstone of the analysis will be again to introduce the concept of shareholder structures. During the analysis, the common tools developed by corporate finance practitioners were used including, among others, value creation and return to shareholders. By performing this analysis, even if it is not the central point, the underlying question of ownership structure and efficiency will also be considered. I will also include in the analysis, beside the performance measurement tools, an analysis if the evolution...
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...work instead of fishing or golfing. No one should know about your financials better than yourself. Keep on task with every details relating to payrolls, expenditures over certain amounts, approve checks going out, etc. These things must be constantly imbedded in order to have a successful business. The chapter also pinpoints another important factor, “Profits Aren’t Everything, They’re the only thing.” You need to do everything you can to let Profits be positive even if that means firing your family members, or incompetent employees. To ensure survival you must be what the author likes to call “ruthless.” Setting the tone of tough, but fair leader will better you in the long wrong. Another ideal the author has embedded in his book is cash is everything, a small...
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...Executive Summary The firm’s greatest weakness is that it needs to borrow money to maintain operations. This coupled with the need or capital investment to remain competitive puts the firm at significant risk. A basic sensitivity analysis, see chart below, demonstrates that a small decrease in sales would potentially bankrupt the company in a few years. Furthermore, the short term borrowing has increased since 1998; this indicates that the current cash flows cannot handle the companies short term financial needs. This may improve in two to three years if the sales projections are accurate, however, I believe they are very conservative and are another aea of significant risk if there is no equity injection. In conclusion, the firm is taking on too much debt while making more large capital commitments. This coupled with short term cash flow issues (slow AR) an increasing accounts payable the company is exposed to a significant amount of risk an almost certain failure. Our recommendation is that a large equity injection be made and/or the owners evaluate selling the firm to a competitor or other potential buyer. The later may be more beneficial as it appears the current management team is unable to operate efficiently. Simple Ratio Analysis and Comments ROE ROE has increased from '00 o '01 which may be the result of the decrease in equity as a % of NOI annually. Based on the information provided it will continue to decrease over the next two years. ROA ROA has declined;...
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...FP/101 Week 2 1. How does a personal cash flow statement help you organize your finances? 2. What was the most interesting thing you learned about completing this worksheet? 3. Did this worksheet provide you with any ideas about how you may want to change your budget (how much you are spending, saving, or reducing your debt)? The cash flow statement can help me organize my finances by being able to see how much money I am spending, and what I am spending it on. The statement breaks down everything from house related payments all the way to leisure activities like video games and movies. Being able to see what I spent my money on will allow me to make changes for the better or, help me to save money by seeing what I could go without and save that money. There have been plenty of times where I go out and spend more than I planned on spending whether it is on food or at the movies. I can use this chart to set up a budget for these sort of activities and not take any more money than what I budget myself spending. The most interesting thing I learned about this worksheet is, it is not just another assignment, but it can be used in everyday life. I like the idea of going to my computer and checking my monthly chart to see how much I have spent that month. Or I could use the chart to see how much money I have left to spend in a month. The cash flow chart is something that can be used in multiple ways to fit different needs...
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...Coopers) Despite the global economy is unstable and tough market conditions in the UK (volume under pressure and stiff price war), some of the markets where Tesco has presence performed well, such as in Asian markets, the Group reported satisfactory business performance for FY2/2011, with overall group sales, increased by 7% and NBPT increased by 11% yoy respectively to GBP60,931 mio and 3,535 mio respectively. Net profit after tax was GBP2,671 mio, of which GBP2,655 mio was attributable to equity holders of the parent company. Interest expenses felt by 17%, to GBP 483 mio in FY2/11, which representing a continuous reduction in the overall debt level for the group. Furthermore, EBITDA/int. exp improved from 8.88x to 11.25x. Cash Flow Analysis Owing to the satisfactory business growth and improved working capital requirement, Tesco...
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