...Issues 1. What do you think is happening at Lloyd's and The Emporium? 2. What financial ratios and questions raised in your analysis of the two companies' financial statement support your opinions? Facts Lloyd's is a quality furniture company, its headquarter is located in Scranton, Pennsylvania, and manufactured a limited line of high-quality home furnture for distribution to department stores, independent home furnishing retailers, and regional chains. The other company is The Emporium department store in St. Paul. In March 2002, Richard Allan , an assistant credit analysis for the Quality Furniture Company. He was concerned about the changes in tow of accounts in Minnesota--Lloyd's, Inc and the Emporium department store. He therefore brought the credit folders of these two customers to the attention of Watt Ralpson. Lloyd's retailed quality home furniture from three locations - one is in the downtown section of Minneapolis and the other in nearby suburban area. Sales were somewhere seasonal, with a slight downturn in the midsummer months and a slight upturn in the December holiday season. Lloyd's sale were 75% from cash and credit card and 25% from six months installment terms. Installment term called for 25% down and the balance in equal monthly payments over a six month period. There are four shareholders before June 2001, two of four original partners sold their shares in the company to the two remaining owners. Lloyd's had been a customers for over 30 years,...
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...XI THE RESERVE BANK’S ACCOUNTS FOR 2010-11The balance sheet of the Reserve Bank expanded significantly during the year, mainly reflecting the impact of liquidity management operations undertaken by the Bank. The income from foreign assets declined for the second successive year, reflecting the low interest rates in international markets. The decline in income from foreign assets in 2010-11 was, however, more than offset by earnings from domestic assets which have expanded. While the Bank’s gross income increased by 12.73 per cent to ` 37,070.12 crore in 2010-11, there was a 3 per cent increase in total expenditure to ` 8,655.22 crore. After meeting the needs of necessary transfer to the Contingency Reserve and the Asset Development Reserve, `15,009 crore was allocated for transferring to the Government.XI.1 The size of the Reserve Bank’s balance sheet increased significantly in 2010-11 (July-June) mainly on account of its liquidity management operations. On the liability side, the expansion was on account of a large increase in notes in circulation as also an increase in banks’ deposits with the Reserve Bank in line with the deposit growth in the banking system (see Box II.6). On the asset side, there was a significant increase in Bank’s portfolio of domestic assets in the form of government securities on account of open market purchases, repo purchases and disinvestment of Government of India’s surplus balance parked with the Reserve Bank. The increase in foreign currency assets...
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...Kimmel, Weygandt & Kieso - Sample Exam 1 Name: __________________________ Date: _____________ 1. Which financial statement would best indicate whether the company relies on debt or stockholders' equity to finance its assets? A) Statement of Cash Flows B) Retained Earnings Statement C) Income Statement D) Balance Sheet 2. Stockholders' equity A) is usually equal to cash on hand. B) is equal to liabilities and retained earnings. C) includes retained earning and common stock. D) is shown on the income statement. 3. Which of the following activities involves collecting the necessary funds to support the business? A) Operating B) Investing C) Financing D) Delivering 4. Issuing shares of stock in exchange for cash is an example of a(n) A) delivering activity. B) investing activity. C) financing activity. D) operating activity. 5. Which of the following is not a principal type of business activity? A) Operating B) Investing C) Financing D) Delivering 6. Which of the following is not a common way that managers use the balance sheet? A) To analyze the balances of assets, liabilities, and stockholders' equity throughout the accounting period B) To determine if the cash balance is sufficient for future needs C) To analyze the balance between debt and common stock financing D) To analyze the balance of accounts receivable on the last day of the accounting period Page 1 Kimmel, Weygandt & Kieso - Sample Exam 1 7. Ashton Company began the year with retained earnings of $210,000...
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... 205 Fair value of plan assets 175 There is no balance in prepaid/accrued pension costs. Required: a. Calculate the funded status of the plan (see definition under ASC (was old SFAS 158 for funded status). Is the plan overfunded or underfunded? b. If the projected benefit obligation provides the appropriate measure of the company’s obligation for pension benefits and the assets in the fund are viewed as satisfying all or part of that obligation, what is Penny Pincher’s liability, if any, for the pension plan at year-end? Briefly explain, citing the conceptual framework’s definition of liabilities in your explanation. c. What amount will Penny Pincher have to report in its balance sheet? Is it an asset or liability? ANSWER a. Calculate the funded status of the plan (see definition under ASC (was old SFAS 158 for funded status). Is the plan overfunded or underfunded? The overfunded or underfunded status is measures as the difference between the projected benefit obligation and the fair value of the assets at the period end date. The accumulated benefit obligation does not include the present value of the future benefits for non-vested employees. FASB requires that the funding status be determined using the projected benefit obligation that includes the non-vested benefits. Fair value of assets. $175 Projected benefit obligation $205 ...
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...BUS 424 Auditing Summary of Key Audit Planning Concepts Dr. Miller I. GAAP versus GAAS/SAS Generally Accepted Accounting Principles (GAAP) – Consists of Statements of Financial Accounting Standards (SFAS) created by FASB to guide the preparation of financial statements. Generally Accepted Auditing Standards (GAAS) – 10 general standards representing a framework from which AICPA can provide interpretations. They are organized into 3 groups – General Qualifications, Field Work Performance, and Reporting Results. They are broad guidelines. General Qualifications: 1. Adequate training & proficiency – technically qualified and experienced with the industry 2. Independence in mental attitude – both in fact and in appearance 3. Due professional care – auditors are professionals responsible for fulfilling their duties diligently and carefully. Field Work Performance: 1. Adequate planning & supervision – to ensure adequate audit and proper supervision of assistants. 2. Understanding the client’s internal control system – to determine the adequacy of client’s system to provide reliable data and safeguarding assets and records. 3. Sufficient competent evidence – how much and what types of evidence to accumulate for given set of circumstances. Requires professional judgment. Reporting Results: 1. Determine whether statements are prepared in accordance with GAAP. ...
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...a) Barnes plans to use the ratios in Exhibit 1 as the starting point for discussions with SKI’s operating executives. He wants everyone to think about the pros and cons of changing each type of current asset and how changes would interact to affect profits and EVA. Based on the Exhibit 1 data, does SKI seem to be following a relaxed, moderate, or restricted working capital policy? A través del Current, Quick, Turnover Cash and Securities y el DSO ratio podemos notar que SKI equipment tiene una política relajada ya que el uso de capital de trabajo es un poco menor que las ventas de la empresa. b) How can one distinguish between a relaxed but rational working capital policy and a situation in which a firm simply has a lot of current assets because it is inefficient? Does SKI’s working capital policy seem appropriate? Reducir riesgos, deudas o inventario excedente nos ayuda a saber cuando una política relajada es adecuada y no es una falla en la administración, pero la empresa parece tener buenas rotaciones, pero el capital de trabajo consume las ganancias. c) Assume that SKI’s payables deferral period is 30 days. Now, calculate the firm’s cash conversion cycle. INVENTORY CONVERSION PERIOD | 75.7 | RECEIVABLESCONVERSION PERIOD | 45.6 | PAYABLES CONVERSION PERIOD | 30 | CCC | 91.4 | d) What might SKI do to reduce its cash and securities without harming operations? In an attempt to better understand SKI’s cash position, Barnes developed a cash budget. Data ...
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...According to “Financial Accounting, sixth edition”, cash flow “permits a company to expand operations, replace worn assets, take advantage of new investment opportunities, and pay dividends to its owners”. Analyzing cash flow enables one to understand what happened to cash and cash equivalents throughout a specific period – how to the beginning balance of cash become the ending balance. The statement classifies cash flow in three different categories; operating activities, investing activities, and financing activities. To better understand and prepare the statement manipulating the balance sheet equation is a must. Assets can be further broken down into cash/cash equivalents and noncash asset. It is important to note that any change in cash also results in a change of liabilities, stockholder’s equity or noncash assets. With all of this, the “new” equation follows, change in cash = change in liabilities + change in SE – change in noncash assets. Cash flows from operating activities relate directly to revenues and expenses on the income statement. Examples of cash inflow activities include cash received from customers, dividends and interest on investments. Examples of outflows would be salaries, wages and income taxes. There are two methods in which one can present operating activities on the statement. It is important to note that both methods will provide the same number. The first is the direct method. This method “reports components of cash flow as gross receipts...
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...Kenaston Convenience Store The Kenaston Convenience Store (KCS) is a local convenience store located near a subdivision in Regina. KCS offers food staples, basic household goods, newspapers and magazines, candy, drinks, and snacks. KCS opened several years ago and is owned and operated by the Wu family. The store has been very successful and now that the neighbourhood has matured and the population large enough a major chain of convenience stores, Community Mart Ltd. (CML), is interested in buying KCS so that it can establish a presence in the area. It is CML’s usual practice to only move into an area once the population density has reached a certain level. It prefers to buy out an existing convenience store in an area because it gets the benefit of an established location and eliminates a competitor. You are CML’s location evaluator. It’s your job to make contact with the owners of established convenience stores that CMS might be interested in and evaluate their suitability for acquisition. Your preliminary evaluation of KCS is that it is a potential candidate for acquisition and your initial discussions with Mr. Wu were favourable. Mr. Wu has agreed to allow you to look at KCS’s most recent income statements. The income statements are presented below: |Kenaston Convenience Store | |Income Statements for the years ended March 31, | | ...
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...DYNASHEARS Memorandum 1. With the limited amount of data, the forecasts shown in case Exhibits 1 and 2 seem fairly reasonable; however, looking at a whole, the pro forma income statement and balance sheet provided by Mr. Sheehan have a few questionable points: a. Net Sales – even though the forecast numbers are based on the typical seasonality of the firm’s sales performance of previous year. The forecast performances are much higher than the actual. b. Profit and retain earnings – closely relate to forecast, these forecast also inaccurate c. Inventory – with sales under perform, the inventory forecasts are also inaccurate. With much higher inventory than anticipated, especially in January 1991, the residual between actual and forecast is 924,000, which is a very big different. These excess inventories became illiquid assets, thus increased the liabilities which have a negative effect on the company’s financial health. Nevertheless, with lack of previous years’ financial data in addition to the unpredictable recession of the economy, it is hard to say whether or not these data were exaggerating. 2. Risk assessment a. Liquidity – as of March 1991, the current and cash ratio of Dynashears are 5.99 and 0.38, which are not bad numbers. The ratios shows that Dynashears’ current assets are still well cover (almost 6 to 1 ratio) over its increasing liabilities due to illiquid assets and that it still has sufficient cash for optimum operation. b. Long-term debt ratio – as of March 1991...
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...NiCE Working Paper 09-108 April 2009 Quality of Financial Reporting: measuring qualitative characteristics Ferdy van Beest Geert Braam Suzanne Boelens Nijmegen Center for Economics (NiCE) Institute for Management Research Radboud University Nijmegen P.O. Box 9108, 6500 HK Nijmegen, The Netherlands http://www.ru.nl/nice/workingpapers 1 Abstract We construct a compound measurement tool to comprehensively assess the quality of financial reporting in terms of the underlying fundamental qualitative characteristics (i.e. relevance and faithful representation) and the enhancing qualitative characteristics (i.e. understandability, comparability, verifiability and timeliness) as defined in ‘An improved Conceptual Framework for Financial Reporting’ of the FASB and the IASB (2008). The operationalization of these qualitative characteristics results in a 21-item index. Using 231 annual reports from companies listed at US, UK, and Dutch stock markets in 2005 and 2007, we test our compound measurement tool on internal validity, inter-rater reliability (Krippendorff’s alpha) and internal consistency (Cronbach’s alpha). Our findings suggest that the measurement tool used in this study is a valid and reliable approach to assess the quality of financial reports. The measurement tool contributes to improving the quality assessment of financial reporting information, fulfilling a request from both the FASB and the IASB (2008) to make the qualitative characteristics operationally...
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...3 JANUARY 2012 DAY 3 KEY TAKEAWAYS * Basic data is created at the enterprise (client) level. General data is at the client level and is therefore the same for the entire enterprise. Purchasing data is created at the purchasing organization level. MRP’s are created at the plant level. * A company code is the smallest organizational unit for which accounting can be carried out. The balance sheet and income statement are generated at this level. With no cost center, there would be no accounting data. * The Organizational Structure for Financial Accounting (FI) consists of Client (entire enterprise), Company Code, and Credit Control Area. * The Material Management Organizational Structure consists of Client, Company Code, Plant, Valuation Area, Storage Locations, Purchasing Organization, and Purchasing Group. * Reconciliation Accounts are part of the General Ledger. Examples are Accounts Receivable (customers) and Accounts Payable (vendors). Entries to these accounts are system generated. * Account Groups include Balance Sheet Accounts, Reconciliation Accounts, and Income Statement/Profit and Loss Accounts. They are grouped by similar characteristics. * The Vendor Master can be created in accounting or in purchasing. The vendor master can also be created centrally, in which it will be created in both accounting and purchasing. * The Fiscal Year Variant determines the organization’s fiscal year. For example, K1 = Calendar...
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...International Research Journal of Finance and Economics ISSN 1450-2887 Issue 30 (2009) © EuroJournals Publishing, Inc. 2009 http://www.eurojournals.com/finance.htm Fundamental Analysis Strategy and the Prediction of Stock Returns Jaouida Elleuch* Faculty of Economics and management sciences (FSEG), University of Sfax, Tunisia E-mail: Elleuchj@yahoo.fr Abstract This paper examines whether a simple fundamental analysis strategy based on historical accounting information can predict stock returns. The paper’s goal is to show that simple screens based on historical financial signals can shift the distribution of returns earned by an investor by separating eventual winners stocks from losers. Results show that historical accounting signals can be used to improve the entire distribution of future returns earned by an investor. In fact, despite the overall down activity of the market over the sample period chosen, results reveal that fundamental accounting signals can be used to discriminate from an overall sample generating future negative returns of -0,116 a winner portfolio that provide positive future return of 0,019 from a loser one generating a negative return of -0,229. The over-performance of the winner portfolio seems to be attributable to the ability of the fundamental signals to predict future earnings. In fact, results show that fundamental signals have a positive and significant correlation with future earnings performance and that the winner portfolio have a future...
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...experienced quarterly data changes unlike the real world where changes occur daily. Due to this fact, any adjustments made were in the rears ultimately costing the company money. Although, the company ended with a substantial cash balance and a small profit, sustainability, is crucial when looking forward at the broader picture. Who, what, where and how should be the rallying cry going forward. In this highly competitive marketplace the company must decide who is it’s ultimate customer, what it wants to be, a big, intermediate or small company and what it wants to produce, where it wants to sell and lastly how is this product going to manufactured profitably. This must be accomplished while maintaining a strong cash flow, a solid balance sheet along with a market plan that maintains and progressively increases market share. 1.) Reviewing the budgets and pro-forma The utilization of budgets and pro-forma are a must if a manager is to maintain positive...
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...HALF YEARLY REPORT 2009-10 MARICO BANGLADESH LIMITED Half Yearly Report 2009-10 Marico Bangladesh Limited Balance sheet (un-audited) as at 31 March 2010 2010 Taka Assets Non-current assets Property, plant and equipment Cost Less: Accumulated depreciation Asset under construction Intangible assets Deferred tax assets Total non-current assets Current assets Inventories Goods in transit Accrued interest Investments Advances and deposits Advance income tax Fixed deposit Cash and cash equivalents Total current assets Total assets Equity and liabilities Shareholders equity Share capital Share premium Accumulated profit Total shareholders equity Non-current liabilities Provision for gratuity Total non-current liabilities Current liabilities Short term loan Liability for expenses Interest payable Income tax payable Trade creditors Payable to holding company Other liabilities Total current liabilities Total equity and liabilities 2009 Taka 465,132,551 177,097,672 288,034,879 11,266,759 2,196,993 13,463,752 301,498,631 606,288,971 103,623,873 52,647,281 12,611,120 34,735,758 133,567,146 1,565,318,522 73,089,338 2,581,882,008 2,883,380,639 358,129,851 87,168,786 270,961,065 65,000,000 12,610,744 609,231 78,219,975 349,181,040 455,461,843 179,072,508 48,406,023 100,000,000 41,474,311 86,021,441 1,037,340,522 238,727,661 2,186,504,309 2,535,685,349 315,000,000 252,000,000 1,186,695,731 1,753,695,731 8,088,052 8,088,052 224,329,040 64,938,904 442,500 239,275,393...
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...About the Company Ratio Analysis Ratio Analysis involves methods of calculating and interpreting financial ratios to analyze and monitor the firm’s performance. The basic inputs to ratio analysis are the firm’s income statement and balance sheet. Financial ratios are designed to helps one evaluate a financial statements. (A) Liquidity Ratio: Liquidity Ratio measures a firm’s ability to satisfy its short term obligations as they come due. Bellow we have shown the liquidity ratio of the Confidence Cement. For the year 2002, 2003.2004.2005 & 2006. 1. Current Ratio: The current ratio is a widely used measure for calculating a company’s liquidity and short term debt paying ability. Generally, the higher the current ratio, the more liquid the firm is considered to be. The current ratio is sometimes referred to as the working capital ratio. The current ratio is only one measure of liquidity. Ratio Formula 2002 2003 2004 2005 2006 Current Ratio Current Asset Current Liabilities 1.45 times 1.21 times 1.09 times 1.12 times 1.17 times Interpretation Here we have calculated the current ratio of the Confidence Cement for 5 years. Here we considered current asset = Stores + book debits+ other transactions. And we considered current liabilities = creditors + proposed dividend + other accounts. Here we have seen that for Confidence Cement all the current ratios have the minimum ability to meet the short term obligations. Hopefully we see that from 2002...
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