...Ocean Manufacturing Case Solutions Acct 4080 Ocean Manufacturing Case 1. 1) Obtain and review financial information about the prospective client: annual reports, interim statements, registrations statements, Form 10-k’s, and reports to regulatory agencies. 2) Detailed criminal background checks of senior managers. 3) Evaluate the public accounting firm’s independence with regard to prospective clients. 4) Inquire of the prospective clients’ bankers, legal counsel, underwriters, analysts, or other persons who do business with the entity for information about the entity and its management. 5) Consider the need for individuals possessing special skills or knowledge to complete the audit (e.g., IT auditor, valuations specialist, industry specialist) 2. Overall, after calculating a few of Ocean Manufacturing ratios and comparing them with the industry, the company’s figures are not performing up to others in the industry. ROE = NI/Stockholder Equity (2011,2010)= 8.9% and 7.1% ROA = NI/Assets= 4.5% . 3.8% Both return on equity and assets are lower than industry ratios but are improving. Accounts Rec Turnover—could not calculate without % of credit sales from cash sales. Profit Margin = Operating income/ Sales(rev) = 5.5%, 6.0% PM are also low compared to the industry average. 3. There are a few non-financial items the company should consider. a) The VP of finance was charged with a misdemeanor related to illegal gambling. Raises...
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...Case 1: Ocean Carriers Our first case study is entitled Ocean Carriers (HBS Case No. 9‐202‐027) by Erik Stafford et al. Please go to the Harvard Business Publishing website http://hbsp.harvard.edu . The case is copyright‐protected and can be purchased after registration. Please register at the Harvard Business Publishing website with a student account. After login, make use of the following link: https://cb.hbsp.harvard.edu/cbmp/access/42497623. Integrate answers/discussions to the following questions into your memo (Please don’t write separate answers for each question, and also the order when you answer them is not relevant. Your memo should consist of one comprehensive and well‐structured text.) Assume that Ocean Carriers uses a 9% discount rate for its investments. Questions: 1. Do you expect daily spot hire rates to increase or decrease next year? 2. What factors drive average daily hire rates? 3. How would you characterize the long‐term prospects of the capesize dry bulk industry? 4. Should Ms Linn purchase the $39M capesize? Make 2 different assumptions. First, assume that Ocean Carriers is a U.S. firm subject to 35% taxation. Second, assume that Ocean Carriers is located in Hong Kong, where owners of Hong Kong ships are not required to pay any tax on profits made overseas and are also exempted from paying any tax on profit made on cargo uplifted from Hong Kong. 5. What do you think of the company’s policy of...
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...Discoount rate Ship life (years) Scrap value Initial investment M€ Depr./year 9% 25 6720000 39000000 1291200 Pinja Ruonala 241364 Case Ocean Carriers Since the consulting firm fee (200 000 USD) and internal marketing study expenses (150 000 USD) already occurred and thus are sunk costs, they are not taken into account in the investment calculations. Those expenses will realize, no matter whether the investment will be done or not, so they are not relevant. Net present value calculation was done in order to give a recommendation for Ocean Carriers whether to purchase of the $39M capsize. Only change in new working capital was taken into account in the calculations. I used the provided expected daily hire rates for the revenue calculation for the lifetime of the vessel. Annual hire revenue ( expected income) was calculated by deducting the days the vessel spent in maintenance and multiplying the remaining days with the daily hire rate. Annual growth of 4,03% was taken into account in the operating costs. Depreciation was added back in the calculations because of it not having a cash flow effect. Depreciation was added back in the calculations because of it not having a cash flow effect. Since the NPV of the investment is negative in the first setting (when tax rate is 38%), I advise Ocean Carriers not to purchase the capesize. However, in Hong Kong setting when there is no requirement to pay tax on profits, the investment is very profitable. Year Initial investment Accumulated...
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...4080Ocean Manufacturing Case1.1) Obtain and review financial information about the prospective client: annual reports, interim statements, registrations statements, Form 10-k’s, and reports to regulatory agencies.2) Detailed criminal background checks of senior managers.3) Evaluate the public accounting firm’s independence with regard to prospective clients.4) Inquire of the prospective clients’ bankers, legal counsel, underwriters, analysts, or other persons who do business with the entity for information about the entity and its management.5) Consider the need for individuals possessing special skills or knowledge to complete the audit (e.g., IT auditor, valuations specialist, industry specialist)2. Overall, after calculating a few of Ocean Manufacturing ratios and comparing them with the industry, the company’s figures are not performing up to others in the industry. ROE = NI/Stockholder Equity (2011,2010)= 8.9% and 7.1%ROA = NI/Assets= 4.5% . 3.8%Both return on equity and assets are lower than industry ratios but are improving.Accounts Rec Turnover—could not calculate without % of credit sales from cash sales. Profit Margin = Operating income/ Sales(rev) = 5.5%, 6.0%PM are also low compared to the industry average. 3. There are a few non-financial items the company should consider. a) The VP of finance was charged with a misdemeanor related to illegal gambling. Raises questions about the tone at the top and the integrity of management. b) The company is struggling...
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...The Charles H. Kellstadt Graduate School of Business DePaul University FIN 555: Financial Management Thomas M Carroll Phone: 312.362.8826 Office: Loop Campus tcarroll@depaul.edu Case Study Questions Capital Budgeting In Practice Ocean Carriers These questions relate to the Ocean Carriers case in your course packet. You can find the data for this case on the course website in a spreadsheet named: Ocean Carriers Exhibits.xls. This case provides the opportunity to make a capital budgeting decision by using discounted cash flow analysis to make an investment and corporate policy decision. Ocean Carriers is a shipping company evaluating a proposed lease of a ship for a three-year period beginning in 2003. The proposed leasing contract offers very attractive terms, but no ship in Ocean Carrier’s current fleet meets the customer’s requirements. The firm must decide if future expected cash flows warrant the considerable investment in a new ship. 1. Do you expect daily spot hire rates to increase or decrease next year? Give the reasons for your choice. Which are the factors that drive average daily rates? What does this imply in terms of your cash flow projections? Daily hire rates are determined by supply and demand, as well as the size, age, and efficiency of the ships in service. Due to a high number of vessels expected to be delivered in 2001, as well as the fact that imports for iron and coal were expected...
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...Acct 4080 Ocean Manufacturing Case 1. 1) Obtain and review financial information about the prospective client: annual reports, interim statements, registrations statements, Form 10-k’s, and reports to regulatory agencies. 2) Detailed criminal background checks of senior managers. 3) Evaluate the public accounting firm’s independence with regard to prospective clients. 4) Inquire of the prospective clients’ bankers, legal counsel, underwriters, analysts, or other persons who do business with the entity for information about the entity and its management. 5) Consider the need for individuals possessing special skills or knowledge to complete the audit (e.g., IT auditor, valuations specialist, industry specialist) 2. Overall, after calculating a few of Ocean Manufacturing ratios and comparing them with the industry, the company’s figures are not performing up to others in the industry. ROE = NI/Stockholder Equity (2011,2010)= 8.9% and 7.1% ROA = NI/Assets= 4.5% . 3.8% Both return on equity and assets are lower than industry ratios but are improving. Accounts Rec Turnover—could not calculate without % of credit sales from cash sales. Profit Margin = Operating income/ Sales(rev) = 5.5%, 6.0% PM are also low compared to the industry average. 3. There are a few non-financial items the company should consider. a) The VP of finance was charged with a misdemeanor related to illegal gambling. Raises questions about the tone at the top and the integrity...
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...Do you think ocean pollution is an issue? Well, over two thirds of Earth's surface is covered by water and all of it has been affected by some sort of pollution. Ocean pollution causes many chemicals and foreign substances to get into our air, water, and food, killing the wildlife and affecting the cleanliness of our waters; it is extremely important for us to all come together in order to stop ocean pollution. "The single biggest problem in reaching international agreement on a topic lies in convincing sovereign nations with different goals, opposing political systems, and fluctuating positions in day-to-day politic that their interests all lie in the same direction" (Cousteau 106). Pollution gets into the ocean from many sources but has...
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...1. Five procedures an auditor should perform in determining whether to accept a client. a. The firm’s independence in fact and in appearance. (required) b. Qualifications of the firm to undertake the engagement. c. Management of the reporting entity is honest and not involved in illegal acts. (required) d. The client’s financial reporting system, and internal control system, will provide fairly presented financial statements. e. Communicate with the previous auditor after receiving permission from the client. This can be found in AU315. (required) 2. Ratios Return on Equity 2011 2010 2009 8.94 7.11 6.28 Return on Assets 2011 2010 2009 4.54 3.77 3.39 Assets to Equity 2011 2010 2009 1.97 1.88 1.85 Accounts Receivable Turnover 2011 2010 2009 11.69 13.11 14.02 Average Collection Period 2011 2010 2009 31.23 27.85 26.03 Inventory Turnover 2011 2010 2009 6.08 4.51 3.47 Days in Inventory 2011 2010 2009 59.9 80.88 104.98 Debt Ratio 2011 2010 2009 .49 .47 .46 Debt to Equity Ratio 2011 2010 2009 .97 .88 .85 Times interest earned 2011 2010 2009 4.7 4.24 6.23 Current ratio 2011 2010 2009 1.85 1.91 1.69 Profit margin 2011 2010 2009 5.5 6.0 4.7 Differences to be aware of: 1. Low return on equity in comparison. 2. Low return on assets in comparison. 3. Accounts receivable is high in comparison. 4. Inventory turnover is low in comparison...
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...floc settles to the bottom of the water supply, due to its weight. This settling process is called sedimentation. Filtration: Once the floc has settled to the bottom of the water supply, the clear water on top will pass through filters of varying compositions (sand, gravel, and charcoal) and pore sizes, in order to remove dissolved particles, such as dust, parasites, bacteria, viruses, and chemicals. Disinfection: After the water has been filtered, a disinfectant (for example, chlorine, chloramine) may be added in order to kill any remaining parasites, bacteria, and viruses, and to protect the water from germs when it is piped to homes and businesses. Throughout history humans have been directly or indirectly influenced by the oceans. Ocean waters...
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...The first major threat to coral reefs is global warming or climate change. The warming of the oceans is detrimental for coral reefs because they are very particular about what water temperature they live in. Also the warming of the oceans causes glacier to melt, thus causing rising seas. " The Intergovernmental Panel on Climate Change has found that sea level is rising at a rate of .12 inches per year—60 percent faster than the .08 inches per year it predicted in 2007" (Global Reef Threats). Rising seas causes coral reefs to be deeper in the ocean. As something gets further away from the surface it common sense that it will receive less light. This will cause the coral reefs to grow slower. This is a problem considering some coral reefs already...
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...miles of coastline in Alaska. And within six hours of the spill, 10.6 billions of gallons of crude oil have been spilled into the ocean. The specific damage of these pollutants to animals in the ocean is mentioned in the article “Who is responsible for marine debris? The international politics of cleaning our oceans”. Plastic debris and trash caused malnutritions in sea animals, since the consumption of waste in the ocean make them feels like they are full and no longer need to in. While in fact, the plastic and trash they consumed have no nutritious values to keep the sea animals healthy. Plastic debris can also caused damage to internal organs of these animals, causing internal bleeding that can lead to a premature dead. And according to the EPA, also...
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...Human History of Fishery Exploitation and Marine Trophic Dynamics The World's Oceans cover approximately 70% of the Earth's surface; and has been an integral part of human history and development (Brett, Clausen). These large bodies of water are filled with marine life, and provide mankind with food as well as various ecological services. The vast resources and value of the world's oceans have been depended on by the human race virtually since its origin. In early history, marine vegetation and fish were harvested on a subsistence level. As mankind progressed, and populations increased, the nature of there relationship with marine environments shifted from a subsistence based practice to that of a commercial nature. Fish were no longer harvested on a level relative to the individuals and families it provided for, but became an industry tethered to supply and demand. This change altered the dynamics between man and the oceans when commercial fishing effectively became a "commodities market" (Brett, Clausen). Certain species carried higher values than others and fishing practices became exploitive as the supply was thought to be endless within the huge bodies of water. However, at the time marine ecology was little understood and thus sustainable fishing practices were ignored as well as the not yet realized affects the commercial fishing industry had on trophic dynamics. As commercial fishing developed and spread along with population increase, intensive extraction...
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...of Plastic Chokes the Seas” written by Kenneth R. Weiss, he discusses the rapid spread of trash pollution, specifically plastic, in our oceans. Weiss not only addresses the spread of pollution, but also the damaging consequences it has in our ecosystem. In the following paper, I will address the threats of plastic debris gyres throughout the oceans, the vast amount of synthetic nets threatening wildlife, the spills and toxic chemicals in plastic pellets, and our nation’s obsession in materialism. Unlike natural disasters, most environmental threats are caused by human beings. Human population increases yearly, and with it increases consumption and demand. The more and more humans consume the more affordable we want things to be and the easier it becomes to eliminate objects as they appear useless. The idea of useless objects and easy elimination has caused Americans to produce about 4.5 pounds of trash daily containing anything from food, glass, textiles, plastics, metals and etc. (Eitzen, Zinn, and Smith 89). While our cities have tried to make every household “go green”, it seems quite simple to throw away trash all in one container rather than those provided to us for special purposes (i.e. recycling bin, yard waste and hazardous containers). This trash that gets collected weekly, sometimes more often, ends up in gyres in the world’s oceans, taking centuries to break down and eaten by albatross and other marine mammals (Weiss:2006). Synthetic nets are now the traps for plastic...
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...In the short story Driftglass, Samuel Delany portrays the life of Cal Svenson, a former depth gauger with the International Aquatic Corp. the story unfolds in the ocean with the characters attempting to highlight the transition that occurs throughout life. The person gets through to old age gaining experience and teaches it to the young interns. Characters such as Ariel, Tork, and Cal work in spaces under the water which the author describes as,” complex for fall all to comprehend while the military unit continues to use technology so as to be able to live under water due to displacement” (Delany 102). The script attempts to show the impact of technology on the daily lives of people. The symbolism in the use of biological creatures alludes to the changes and alterations due to shift and modernization of technology. The story teaches about the respect that the young people should give to the experienced players. Ariel seems disappointed upon learning that upon hitting puberty the boys and girls relocate to Aquatic Corp...
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...While John Aldridge is stuck in the Atlantic Ocean all alone, he has to rely on his fishing communities and positivity to survive while he faces unmanageable situations. He was out on his boat, the Anna Mary, in the middle of the night trying to prepare for the lobster they would catch the next morning. His partner, Anthony Sosinski was sound asleep on the lower deck waiting for the morning to come. When all of a sudden, John Aldridge was trying to pull off four hundred pounds of coolers to open a hatch, and the handle snaps. He flies backward to the end of the wide open boat as a consequence slides right off it and he was stuck, stuck in the boundless Atlantic Ocean. The fisherman starts yelling for assistance and no one answers, it is as...
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