...Case 27 1. For this question, ignore the forecasted receivables collection pattern in Exhibit 27.4. Using paper and pencil (do NOT use the template), calculate the projected ACP and average daily sales (ADS) under the following conditions: 30% of customers pay on the 10th day 50% of customers pay on the 30th day 20% of customers pay on the 60th day 800,000 units sold per year @ $5 per unit = $4,000,000/360 Remember, since there are no balance sheets or operating statements, you will have to MANUALLY calculate the ACP. Just look at the numbers: 30% pay after 10 days + 50% pay after 30 days + 20% pay after 60 days. What’s the average? Voila! Also, for consistency, use 360 days = one year Answer: ADS= $11,111 ACP= 33 days 2. Given your answers to #1, what is the projected average receivables level on any given day? (HINT: Formula is ACP x ADS) Answer: $366,663 3. Given your answer to #2, and assuming a contribution margin of 20% and short term bank loans of 10% cited in the case study, what would the firm’s balance sheet look like for accounts receivable and notes payable accounts at the end of the year if notes payable are used to finance the investment in receivables? (HINT: A/R on the assets side; notes payable and ? on the other side of the ledger. ANOTHER HINT: What is another name for contribution margin on the balance sheet [i.e., where do the profits show up on a balance sheet]? This is a short answer, not complicated. Only three accounts involved...
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...CONTENTS page Executive Summary Table of Contents Introduction Discussion 1.Research and report on the floors in Queensland 2 Discuss six items 2.1 Items of inventory destroyed or damaged 2.2 Collectability of accounts receivable 2.3 Unfulfilled contract to supply books 2.4 Replacement cost of damaged PP&E 2.5 Cleaning up costs in May 2011 2.6 Receiving Government Assistance Conclusions Recommendations References Appendices EXECUTIVE SUMMARY This research report provides an analysis and evaluation of the current state of Milley Ltd which is a book publisher located in Brisbane. The company's office and warehouse suffered damage during the recent floods and storms. The circumstance resulted accounting issues about the presentation of financial reports for the year ending 31 March 2011. Methods of analysis include background reflection of floods in Queensland to some board members and discussion about six aspects items: damaged inventory, collectability of accounts receivable, unfulfilled contract to supply books, replacement cost of damaged PP&E, cleaning up costs in May 2011 and receiving Government Assistance. By analysing above six items which supported by AASB standards and Framework, the Board of directors will...
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...fiscal year to 30.25%, it is still in-line with the Automobiles industry's norm. Additionally, even though there are not enough liquid assets to satisfy current obligations, Operating Profits are more than adequate to service the debt. Accounts Receivable are typical for the industry, with 24.79 days’ worth of sales outstanding. Last, General Motors Company is among the least efficient in its industry at managing inventories, with 39.08 days of its Cost of Goods Sold tied up in Inventories Year over year, Honda Motor Co., Ltd. has been able to grow revenues from ¥7.4T JPY to ¥9.9T JPY. Most impressively, the company has been able to reduce the percentage of sales devoted to cost of goods sold, SGA expenses and income tax expenses. All of these improvements led to a bottom line growth from ¥211.5B JPY to ¥367.1B JPY Although debt as a percent of total capital increased at Honda Motor Co., Ltd. over the last fiscal year to 48.50%, it is still in-line with the Automobiles industry's norm. Additionally, even though there are not enough liquid assets to satisfy current obligations, Operating Profits are more than adequate to service the debt. Cash Collection is among the best in the industry. At the end of 2013, its uncollected receivables totaled ¥2.2T...
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.... 3 2. Ratio Analysis……………………………………………………………………… 4 2.1 Short-term Solvency Ratio ……………………………………………….. 4 i. Current Ratio……………………………………………………………… 5 ii. Quick Ratio……………………………………………………………….. 6 2.2 Profitability Ratio…………………………………………………………… 6 i. Net profit margin………………………………………………………….. 6 ii. Gross profit margin………………………………………………………. 7 iii. Assets turnover…………………………………………………………… 8 iv. Turn on assets……………………………………………………………. 8 v. Return on ordinary shareholders’ equity…………………………………9 vi. Earning per share…………………………………………………………10 2.3 Efficiency Ratio……………………………………………………………….10 i. Debtors’ turnover…………………………………………………………...10 ii. Average days’ sale uncollected……………………………………………11 iii. Inventory turnover……………………………………………………….....11 iv. Inventory turnover in days………………………………………………. 12 2.4 Long-term Solvency Ratio…………………………………………………. 13 i. Debt to equity……………………………………………………………… 13 ii. Debt to Assets…………………………………………………………….. 14 iii. Leverage Ratio…………………………………………………………… 14 iv. Interest coverage………………………………………………………….15 3. Conclusion…………………………………………………………………………. 15 4. Recommendation…………………………………………………………………. 15 5. Appendices………………………………………………………………………… 18 6. Reference………………………………………………………………………….. 21 Executive Summary This report is written by an accountant. As an accountant in a firm of accountants which specializes in...
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...IIBM Institute of Business Management Financial Management Part one: 1.D 2.C 3.A 4.A 5.C 6.B 7.D 8.A 9.A 10.A Part Two: 1. A process that increases the current net value of business or shareholder capital gains, with the objective of bringing in the highest possible return. The wealth maximization strategy generally involves making sound financial investment decisions which take into consideration any risk factors that would compromise or outweigh the anticipated benefits. 2. Factoring is a financial option for the management of receivables. In simple definition it is the conversion of credit sales into cash.Factoring, a financial institution (factor) buys the accounts receivable of a company (Client) and pays up to 80%(rarely up to90%) of the amount immediately on agreement. Factoring company pays the remaining amount (Balance 20%-finance cost-operating cost) to the client when the customer pays the debt. 3. A financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. 4. The NPV formula solves for the present value of a stream of cash flows, given a discount rate. The IRR on the other hand, solves for a rate of return when setting the NPV equal to zero (0). In other words, the IRR answers the question “what rate of return will I achieve, given the following...
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...foreign term to some managers and so we should first begin by defining this term. Generally working capital represents those current assets such as cash, marketable securities, accounts receivable, inventory and pre-paid expenses. Furthermore net working capital would take the calculation further and reduce working capital by the current liabilities such as accounts payable, short term borrowings and accrued liabilities. Understanding these terms is crucial because a company’s daily activities typically result in dramatic fluctuations in the accounts comprising working capital. The manager’s ability to anticipate the fluctuation and proactively make decisions to curtail the negative impact of such fluctuations will help maintain liquidity even in the toughest of circumstances. A company’s ultimate long-term success is based upon all departments within the organization coming together to fulfill its business purpose or mission. The same ideology should be used in managing the company’s working capital strategies. As stated earlier, working capital comprises various accounts and to minimize risk appropriately the company should first identify what the largest asset comprising working capital is. Since the largest asset on a balance sheet for many companies typically is accounts receivable, we will use this as an example. How does a company develop a working capital strategy and get...
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...Financial Management Part 1 : Multiple choices: 1. The approach focused mainly on the financial problems of corporate enterprise. a. Ignored non-corporate enterprise 2. These are those shares, which can be redeemed or repaid to the holders after a lapse of the stipulated period. c. Redeemable preference shares 3. This type of risk arises from changes in environmental regulations, zoning requirements, fees, licenses and most frequently taxes. b. Domestic risk 4. It is the cost of capital that is expected to raise funds to finance a capital budget or investment proposal. a. Future cost 5. This concept is helpful in formulating a sound & economical capital structure for a firm. c. Designing optimal corporate capital structure 6. It is the minimum required rate of return needed to justify the use of capital. b. Firms point 7. It arises when there is a conflict of interest among owners, debenture holders and the management. d. Agency costs 8. Some guidelines on shares & debentures issued by the government that are very important for the constitution of the capital structure are: a. Legal requirement 9. It is that portion of an investments total risk that results from change in the financial integrity of the investment. b. Default risk 10. _________ measure the systematic risk of a security that cannot be avoided through diversification. a. Beta Part Two: 3. What is Annuity kind of cash flow? Ans : A series of payments of an equal amount at fixed, equal...
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...Financial Management Multiple choices: 1. The approach focused mainly on the financial problems of corporate enterprise. a. Ignored non-corporate enterprise 2. These are those shares, which can be redeemed or repaid to the holders after a lapse of the stipulated period. c. Redeemable preference shares 3. This type of risk arises from changes in environmental regulations, zoning requirements, fees, licenses and most frequently taxes. b. Domestic risk 4. It is the cost of capital that is expected to raise funds to finance a capital budget or investment proposal. a. Future cost 5. This concept is helpful in formulating a sound & economical capital structure for a firm. c. Designing optimal corporate capital structure 6. It is the minimum required rate of return needed to justify the use of capital. b. Firms point 7. It arises when there is a conflict of interest among owners, debenture holders and the management. d. Agency costs 8. Some guidelines on shares & debentures issued by the government that are very important for the constitution of the capital structure are: a. Legal requirement 9. It is that portion of an investments total risk that results from change in the financial integrity of the investment. b. Default risk 10. _________ measure the systematic risk of a security that cannot be avoided through diversification. a. Beta Part Two: 1. What is Annuity kind of cash flow? Ans :...
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...V. ALLEN BARNES Parlin, NJ 08859 PROJECT MANAGER/BUSINESS ANALYST Accomplished, versatile, and effective Project Manager with 10+ years of experience in Financial Analysis, Business Development, Project Management, Team Training, Client Support, and System Implementation across telecommunications and technology companies. Recognized for exceptional ability to research, analyze, and implement innovative processes and system solutions that ensure cost reduction and improvements in efficiencies and performance. A Proven communicator, fostering relations with management, team members, vendors, and customers, consistently achieving profitability and quality goals. Area Of Expertise ◆ Program coordination ◆ Financial management ◆ Custom Software Development ◆ Client Relations &Presentations ◆ Risk management ◆ Procurement ◆ Business & IT Planning ◆ Vendor Management ◆ Requirements Analysis ◆ ROI Analysis & metrics ◆ Costing & Budgeting ◆ Project Scheduling ◆ Financial reporting ◆ Training development ◆ Contract negotiations ◆ Team Building & Mentoring Achievement Highlights ✓ Reduced overtime by 65% and increase productivity by 20% and work force by 10%. ✓ Liaised between 1,200 corporate customers and IT team for all reporting matters, including scoping and planning, design specification and implementation, with 95% in client ratings ✓ Designed and developed training curriculum for...
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...CHAPTER 9 … Receivables Introduction to Receivables A. Receivables are monetary claims against businesses and individuals. These claims arise from selling goods or services on credit or from lending money. 1. Each credit transaction involves a creditor who sells something and obtains a receivable, and a debtor who makes the purchase and has a payable. 2. Exhibit 9-1 is the asset portion of a balance sheet, with receivables highlighted. B. An account receivable or trade receivable represents an amount due from a customer. 1. An account receivable is an amount due from a customer for goods or services sold. 2. The account is classified as a current asset on the balance sheet. 3. A subsidiary ledger includes a separate account for each customer. C. A note receivable is more formal than an account receivable. 1. A note receivable is a written promise to receive cash; a promissory note is a negotiable document that serves as evidence of the receivable. 2. A note receivable may be classified as either current or long-term, depending on its maturity date. D. Other receivables may include loans to employees or subsidiary companies; these may be either current or long-term assets. Objective 1: Design internal controls for receivables A. Internal control over collections of cash on account is important. 1. Cash-handling duties should be separate from cash-accounting...
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...routine problems 2. c. Redeemable preference shares 3. a. Political risk 4. a. Future cost 5. c. Designing optimal corporate capital structure 6. b. Firms point 7. d. Agency costs 8. a. Legal requirement 9. b. Default risk 10. a. Beta Part two- 1. A process that increases the current net value of business or shareholder capital gains, with the objective of bringing in the highest possible return. The wealth maximization strategy generally involves making sound financial investment decisions which take into consideration any risk factors that would compromise or outweigh the anticipated benefits. 2.The selling of a company's accounts receivable, at a discount, to a factor, who then assumes the credit risk of the account debtors and receives cash as the debtors settle their accounts also called accounts receivable financing. Eg:Cons Deciding whether or not to pursue a course of study through an online university is a highly personal decision, factoring in time, finances and the level of self-motivation required (which is often quite considerable, leading some online students to fall short). 3. A financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. Annuities are primarily used as a means of securing a steady cash flow for an individual during their retirement years. 4. Difference between IRR and...
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...Introduction This case study is all about dilemma either want to build up the system or purchase ready software. Rafiq is a final year accounting student at UiTM Shah Alam decided to help his uncle who has a furniture business in Ipoh. Rafiq try to discover the problem that his uncle company faced which is the system used is not updated. Thus this will made the employee faced difficulty in order to record the daily transaction. Rafiq try to investigate the problem by asking several question to his friend and he get several solution for his problem. Which is either want to buy ready system or build up by them? To choose wisely, he needs to do several researches about previous system and also new system. We can see after this what Rafiq do in order get the better result about his problem. Several phase of research he need to do and he must carefully choose the system. This to make sure the system is compatible. 1) Apply SDLC approach to Rafiq situation. System Development Life Cycle (SDLC) is used to organize the large number of activities needed to build a system. It specifies in an orderly manner proceed through these activities to develop systems. In other words, SDLC is a phase that Rafiq’s need to recognize in order to build a new system for his company. There are five phases that Rafiq need to recognize which is system Planning, Analysis, Design, Construction and Maintenance. 1. System Planning * Initiate system planning – strategic and operation...
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... 770 | | | Depreciation | | 85 | | | Earnings before interest and taxes | | 674 | | | Interest expense | | 90 | | | Taxable income | | 584 | | | Income tax expense | | 232 | | | Net income | | $352 | | | | | | | | Dividends | $185 | | | | Addition to retained earnings | $309 | | | | | | | | | | | | | | | | | | | | | | | | Sierra Food Corporation | Balance Sheets | December 31, 2009 and December 31, 2008 | (All Cash are in Millions) | | | | | | Assets | | 2009 | | 2008 | Current assets | | | | | Cash | | $180 | | $124 | Accounts receivable | | 708 | | 475 | Inventories | | 575 | | 573 | Total | | $1,463 | | $1,172 | | | | | | Fixed Assets | | | | | Net fixed assets | | 1729 | | 1664 | | | | | | Total assets | | $3,192 | | $2,836 | | | | | | Liabilities and Owner's Equity | | | | | Current liabilities | | | | | Accounts Payable | | 286 | | 252 | Notes Payable | | 143 | | 216 | Total | | $429 | | $468 | | | | | | Long-term debt and liabilities | | $499 | | $429 | | | | | | Stockholders' equity Common stock paid-in surplus | | 760 | | 602 | ...
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...specifications stipulated in ISO-9001-2000. Objective: To explore the factors responsible for loss of company HMT Bearings Ltd. HMT Bearings began suffering a liquidity crisis in 1999-2000. It worsened 2002 and 2003, primarily due to a massive inventory buildup and accumulation of uncollected receivables. In mid-2002, the government and HMT Group explored shutting down HMT Bearings, taking the losses and pensioning off the employees. But that plan was rejected, out of concern for the impact on employment and high pension costs, and in the face of intense pressure by the Center of India Trade Union in Hyderabad. Rather than shut down HMT Bearings, government-funded bailouts were instituted, debt was converted to equity in order to eliminate the overwhelming interest expense. The key development in 2002 was the decision to seek a strategic investor to buy out the government's by-then 97% ownership after equity conversion. Seeking an Expression of Interest from qualified buyers, an operating background for HMT was developed, along with bid guidelines (expired in August 2002). No buyers were found, losses continued and Bearings' equity went negative by April 2003. In 2006 HMT Bearings Managing Director, Neeraj Mishra made...
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...Unraveling the Details of 10 High-Profile Accounting Scandals written by: ciel s cantoria • edited by: Linda Richter • updated: 12/30/2010 Before digging into the dirty details of each of these major accounting scandals, we’ll take a look at some of the tools that were used to first detect them – including sophisticated accounting systems and advancements in high-tech communication. Technology Fighting Against White Collar Fraud Looking back at the 10 major accounting scandals that changed the business world, it was noted that most of their unraveling came about during the turn of the new millennium, which was a time when the American trade and industries were beginning to experience the benefits and detriments of high-tech computerization. Information storage and communication became sophisticated, which made possible the compilation of hordes of information in an instant. Recording and verification of accounting transactions in realtime were made easier and more accurate, which facilitated the reconciliation of supporting documents versus sources, with very little effort needed. Federal regulators were provided with data that revealed the corrupt practices of high-profile companies and their CEOs. Their bankruptcies became inevitable as the Securities and Exchange Commission (SEC) and financial analysts began to see the signs of irregularities among numerous companies. When the SEC ordered the restatement of their financial reports in accordance with the GAAP rules, it...
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