...Eric Rhoads Overstock.com - Competition from substitutes is high in a .com business model. It limits the margins you can charge as it is easy to just go to other websites from your own couch. Rivalry between established competitors is a real concern in the online retailer business. Overstock has Amazon and Ebay as direct competitors. Amazon focuses more on new merchandise but if they see great sales by Overstock they can use their current supply chain to start delivering the “overstocked” items with little core change to their business. Ebay is focused more on used items and would have a harder time adjusting its business model to compete with Overstock make parallel. Threat of entry is also a concern. At this time (2004), internet stocks are trading at a premium and capital can be collected from venture capitalists without the normal scrutiny of having to show profits. They also do not require a huge capital investment in a storefront. The buyer’s bargaining power is on the lower side because they do not buy at big volumes but “bargain” by substitutes (see a). The supplier’s bargaining is what overstock.com uses as its competitive advantage. The suppliers want to move the inventory as fast as possible and are willing to take a loss just to get some return on the inventory. The long-term structure of internet retailing has a hard time showing showing a constant profit. The margins are very small as the competition is intense and the bar of entry is low. It is amplified...
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...Financial Statement Restatement Paper Justina Kabanuk University of Phoenix ACC/537 Financial Accounting Steven Hall July 5, 2010 Financial Statement Restatement Paper Financial statement users depend on accurate financial statements from corporations to make proper decisions in regard to financial activities. In rare situations, financial statement users find that the information they had depended on for their decisions was not accurate. Companies required to restate their financial reports risk losing the trust and confidence of the financial statement users. Overstock.com is an example of a company that knows the effects of restating their finances all too well. Following is an overview of the issues that led to the most recent restatements of Overstock.com’s financial statements. Additionally discussed are the accounting principles involved, the effect of the errors and changes to the financial statements, and the effects on the company’s stockholders. In October 2008, Overstock.com publicly announced that it would be restating financial results for a five-and-a-half-year period. The needed revisions to Overstock.com’s Q1 2003 to Q2 2008 financial statements were estimated to reduce revenues by $12...
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...amount of errors being discovered within the financial statements of publicly held companies has risen. One such error was announced by the internet sales company Overstock.com in early 2009. Due to an accounting error, partners of the company were under billed by $1.8 million dollars over the course of 2008. Overstock chose to record this entry incorrectly which falsely ballooned the company’s revenues; in turn, causing them to record an incorrect profit of $1.0 million for the year ended December 31, 2008. Had this entry been booked correctly and within the guidelines of the generally accepted accounting principles (GAAP), Overstock would have recorded its earnings correctly, showing a loss of $0.8 million. This shows us how important restating a financial statement correctly is so important. A financial statement restatement occurs when a company, either voluntarily or under prompting by its auditors or regulators, revises its public financial information that was previously reported. A financial statement also occurs when there needs to be a change in accounting principles or there is an error. The number of financial restatements by public companies has increased in the recent years due to increased scrutiny following the well-known accounting scandals at Enron and WorldCom, amount others. The restatement usually involves a completely new audit and in some cases may affect future financial statements in the coming year. The main purpose to restating the financial statement...
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...C H A P T E R 8 VALUATION OF I NVE NTOR I E S : A COST-BASIS APPROAC H LEARNING OBJECTIVES After studying this chapter, you should be able to: •1 •2 •3 •4 •5 •6 •7 •8 •9 •10 Identify major classifications of inventory. Distinguish between perpetual and periodic inventory systems. Identify the effects of inventory errors on the financial statements. Understand the items to include as inventory cost. Describe and compare the cost flow assumptions used to account for inventories. Explain the significance and use of a LIFO reserve. Understand the effect of LIFO liquidations. Explain the dollar-value LIFO method. Identify the major advantages and disadvantages of LIFO. Understand why companies select given inventory methods. Inventories in the Crystal Ball A substantial increase in inventory may be a leading indicator of an upcoming decline in profit margins. Take the auto industry as an example. Detroit’s inventories have been growing for several years because the domestic manufacturers like to run the factories at full capacity, even if they are not selling cars as fast as they can make them. The current arrangement is particularly tough for General Motors. It overproduces and then tries to push the sales with incentives and month-long “blow-out” sales. GM is hoping that the ever-growing market will cover the problem until customer demand grows to the point where the cars are purchased without so many incentives. But recently, all that was growing was GM inventories...
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