ACC4320 Week 3 D1

The Board of Directors were worried over the dwindling financial performance and precarious financial position of the Company. The company products were ageing; the economic depression biting harder as a result of the fluctuating exchange rate due to Brexit. The Company imports 60% of the goods sold in Garden City. The fluctuating exchange rate had affected the company’s importation. Consequently, the revenue of the Company dropped significantly. You are required to: A) Calculate the following ratios for the year ended September 30, 2015 and 2016 in Columnar form: i)Return on Capital employed ii) Total assets turnover iii)Quick Ratio iv) Debt Equity Ratio v)Fixed interest cover vi)Earnings Yeld vii) Price Earnings Ratio Viii) Dividend Yield

“Too big to fail” was a common buzz phrase during the Great Recession. The idea behind it is that certain businesses are so important to an economy that disastrous consequences would result if they were allowed to fail and so government intervention is necessary. How is the concept of moral hazard relevant here?

Which of the following is an example of “cookie jar” accounting?  a) A company creates cash reserves in profitable years so the money can be used to offset poor earnings in bad years to give the impression that the company is consistently achieving earnings goals and meeting investor expectations. b)A company intentionally misapplies GAAP and, if caught, argues that the earnings effect is “immaterial” and the error is not worth correcting. c)A company takes a one-time charge against income in order to reduce assets, which results in lower expenses in the future. d) A company recognizes revenues before it is appropriate to do so.

1. Identify two warning signals that could have negative implications with respect to the company’s ability to generate cash flows to meet its future needs. In each case, explain why the signal you have identified could reflect a cash flow problem. 2. At the annual general meeting of White Star, the managing director, Ms. Rose Dawson, made the following statement: ‘ Recently a number of articles in the financial press have questioned the financial position of our company. This criticism is totally unjustified. Net profit was $25 million and total assets have increased by $160 million. These results show that 2019 was a very successful year for White Star. ’ Comment on Ms. Dawson’s statement.   Info:   WR: 2018  = 380m 2019 = 395 m CR: 2018 = 1.8m 2019 = 1.6m QR: 2018 = 1.2m 2019 = 0.9m Debt-to-equity ratio: 2018 = 0.85 times 2019 = 0.68 times Return-on-equity ratio: 2018 = 8.33 % 2019 = 12.26% Earnings per share: 2018 = 0.312m 2019 = 0.475m   Net operating profit after tax is $25…

The Board of Directors were worried over the dwindling financial performance and precariousfinancial position of the Company. The company products were ageing; the economicdepression biting harder as a result of the fluctuating exchange rate due to Brexit. TheCompany imports 60% of the goods sold in Garden City. The fluctuating exchange rate hadaffected the company’s importation. Consequently, the revenue of the Company droppedsignificantly.You are required to:A) Calculate the following ratios for the year ended September 30, 2015 and 2016 in Columnarform:i) Return on Capital Employedii) Total Assets Turnoveriii) Quick ratioiv) Debt Equity Ratiov) Fixed Interest covervi) Earnings Yieldvii) Price Earnings RatioViii) Dividend Yield  The first 3 has been calculated : Return on capital employed for 2016 is 40.32% and for 2015 is 86.84%. 2016 2015 Capital employed = 96500-43800 =52 700 Capital employed = 107500-60000 = 47500 Return on capital employed = 21250/52700 x 100…

The Board of Directors were worried over the dwindling financial performance and precariousfinancial position of the Company. The company products were ageing; the economicdepression biting harder as a result of the fluctuating exchange rate due to Brexit. TheCompany imports 60% of the goods sold in Garden City. The fluctuating exchange rate hadaffected the company’s importation. Consequently, the revenue of the Company droppedsignificantly.   Write a brief and formal technical report to the Board of Directors to assess theperformance, liquidity and stability of company using only:i) Return on Capital Employedii) Total Assets Turnoveriii) Quick Ratioiv) Fixed Interest Coverv) Debt Equity Ratio

There are claims that the central bank caused the recession, and due to them, production has dropped below the optimum level, and inflation has gone up. What would you say to defend the central bank? Explain in detail.

The fallout from the financial crisis of 2008 included an overheated real estate market, fueled by home purchase incentives, poor lending practices, and securitization through high-risk, mortgage-backed securities, which led to a near collapse of global capital markets. As a consequence, many have argued that if the financial institutions had been required to report their loans (and loan-backed investments) at fair value instead of cost, large losses would have been reported earlier. This would have signaled regulators to the problems in the mortgage markets and therefore minimized the losses to U.S. taxpayers. Instructions Explain how reported accounting numbers might affect an individual’s perceptions and actions. Cite two examples.

In 2008, the United States began to witness one of the worst recessions since the 1930s. The collapse of the housing bubble in 2006 led to a massive decline in real estate prices, affecting consumers and institutions, especially banking and financial entities. Severe liquidity shortfalls in the United States as well as other global markets led to a serious credit crisis. During the credit crisis of 2008-2009, several banks and other businesses went through a reorganization process or were forced to liquidate. Consider the following example: In January 2009, American electronics retailer Circuit City Inc. closed all of its stores and sold all of its merchandise. Source: "Circuit City to Shut Down." CNN Money. Cable News Network, n.d. Web. August 31, 2010. http://money.cnn.com/2009/01/16/news/companies/circuit_city This is an example of: O Reorganization O Liquidation

In 2008, the United States began to witness one of the worst recessions since the 1930s. The collapse of the housing bubble in 2006 led to a massive decline in real estate prices, affecting consumers and institutions, especially banking and financial entities. Severe liquidity shortfalls in the United States as well as other global markets led to a serious credit crisis. During the credit crisis of 2008–2009, several banks and other businesses went through a reorganization process or were forced to liquidate. Consider the following example: In May 2009, General Motors started closing 2,600 of its retail outlets and finally filed for bankruptcy in June. It emerged from the bankruptcy protection by July 2009, after it received funding from the US government, the Canadian government, United Automobile Workers Union, and GM bondholders. Source: Farfan, Barbara. “General Motors Chapter 11 Bankruptcy Overview and Details.” About.com, Retail Industry. About.com, n.d. Web. August 31, 2010.…

The "mark to market" rule     (a) Created an unrealistic picture of the financial health of some banks.     (b) Required banks to recognize in their balance sheet decrease in value of assets as their price declined in the market, instead of waiting until the asset was sold.     (c) Caused the net worth of some banks to decline significantly and making it impossible for the banks to make loans.     (d) All the above.     (e) Only (b) and (c) are true.

1. Help me selecting the right answer. Thank you

How does a deterioration in balance sheets of financialinstitutions and the simultaneous failures of these institutions cause a decline in economic activity?

What has led to the downturn of the financial industry, and therefore the decrease of finance jobs?

Ethical Issue: Moss Exports is having a bad year. Net Income is only $60,000. Also, two important overseas customers are falling behind in their payments to Moss, and Moss's Accounts Receivable are ballooning (these two customers owe Moss $80,000 combined). The company desperately needs a loan. The Moss Exports Board of Directors is considering ways to put the best face on the company's financial statements. Moss's bank closely examines cash flow from operating activities. Daniel Peavey, Moss's Controller, suggests reclassifying the receivables from the two overseas customers as long-term assets. He explains to the Board that removing the $80,000 increase in Accounts Receivable from current assets will increase the net cash provided by operations.This approach may help get Moss the loan. 1. Using only the amounts given, compute net cash provided by operations, both without and with the reclassification of the receivables. Which reporting makes Moss look better? In showing your math,…