Question 1
Application Report 1: Prepare a 2-3 page report, double spaced using proper APA writing style, that compares the finances of Ford Motor Company (stock symbol: F) to the finances of General Motors (stock symbol: GM). Why has Ford been so successful, and why has GM been lagging ? Based on your comparative analysis, which senior management team is more effective and efficient in running the respective corporations over the last three years? Your report should include topics we have discussed in the course, such as financial statements, financial ratios, and time value of money concepts. You can find this information in the following sources: "Wall Street Journal," "New York Times," Yahoo Finance, Bloomberg, and company web sites. The company web site will often provide you with the latest fiscal reports in the "investor relations" section. Structure your composition to include a summary of the recent earnings report. Cite financial numbers, such as those that appear on the earnings statements, balance sheets, and statement of cash flow. Relay financial ratios that we discussed in the previous units, such as: One or two Liquidity ratios;One or two Debt Management ratios;One or two profitability ratios; and, Describe the significance of these numbers- what do they indicate ? Explain how your report relates to our course and to practicing managers; it should provide a benchmarking and trend analysis of the firms over a three year period. As always, submit your assignment through this link and please be sure to include your name and date at the top of your submission.
Question 2
1. The decisions that a financial manager makes depends upon a. whether the organization is small or large b. whether the organization is a sole proprietorship or a corporation c. whether it would maximize the value of the owner or owners? stock d. whether it would maximize the profits of the organization 2. Working capital management involves decisions related to the following: a. Should an existing machine be replaced with a new model b. Negotiating credit terms with suppliers c. Signing a contract to build a new office building d. Recommending plans for a new manufacturing plant 3. Ethical behavior is important for business because a. many companies have a code of ethics b. without ethical behavior employees would not be promoted c. many government regulations require ethical behavior d. without ethical behavior markets would be inefficient 4. The primary goal of a well designed management compensation package is to: A. Ensure that management is satisfied B. Ensure management acts in the stockholders? best interest C. Reduce the costs of replacing management D. Eliminate management bonuses tied to stock price 5. Which of the following is the most appropriate goal for the firm? A) Profit maximization B) Revenue maximization C) Tax minimization D) Shareholder wealth maximization 6. The external auditor?s ultimate legal responsibility is to the: A. Client?s CEO B. Client?s audit committee C. Client?s CFO D. Client?s controller 7. All of the following are needed in calculating working capital except: a.) Notes payable b.) Accounts receivable c.) Depreciation d.) Accruals e.) All of the above f.) A, B, & C only 8. All of the following would be considered sources of cash except: a.) Sale of bonds to investors b.) An decrease in inventories c) An increase in accounts payable d.) An increase in accounts receivables e.) A & D only f.) A & C only 9. Doctor Foreman runs a junkyard with his granddaughter Susan. For the first year of business, the junkyard reported a net income of $75,240 on an EBITDA of $112,500. Interest expenses were $2,000 and the firm took a depreciation and amortization charge of $6,000. The tax rate paid by Doctor Foreman's business was: A) 25% B) 28% C) 31% D) 34% 10. Which of the following statements best reflects why companies prepare a balance sheet: A) It provides a snapshot of the profitability of a firm B) It provides a snapshot of the cash position of a firm C) It provides a snapshot of the financial position of a firm D) It is required by GAAP 11. Board Bagels, a small cafe in downtown Pittsburgh, had a net sales of $230,000 for the most recent fiscal year, 65% of which were eaten up by its costs. The firm had some baking equipment that cost $45,000 with a salvage value estimated at $5,000 and was being depreciated over 10 years using the straight-line method. Interest on accumulated loans amounted to $12,000 and the cafe had a net tax rate of 25%. What was it's net income? A. $48,375 B. $17,625 C. $48,000 D. $160,500 12. Old Company paid taxes of $ 20,000 and purchased equipment worth $ 25,000 during the year that ended June 30, 2008. The firm had net income of $400,000 during the year ended June 30, 2008. After paying out $25,000 in dividends, the balance went into retained earnings. If the firm?s total retained earnings were $875,000, what was the level of retained earnings on its balance sheet on July 1, 2007? a) $ 480,000 b) $ 520,000 c) $ 920,000 d) $ 500,000 13. Johnson Corporation has announced that its net income for the year ended June 30, 2008, is $1,000,000. The company had an EBITDA of $ 4,900,000, and its depreciation and amortization expense was equal to $1,500,000. The company?s tax rate is 34 percent. What is the amount of interest expense for the Corporation? a) $ 1,590,749 b) $ 1,884, 849 c) $ 880, 659 d) $ 1,489,500 14. A market value balance sheet can provide: a) management with a more exact statement of the firm?s net income b) investor?s with a better understanding of the cost of the firm?s assets c) misleading information on the earnings per share of most firms d) better information on the stockholder?s equity 15. Common-size financial statements include: I. balance sheets with contents divided by total assets II. income statements with contents divided by net sales or revenues III. cash flow statements with contents divided by depreciation and amortization A. I only B. II only C. I and II D. I, II, and III E. none of the choices are examples of common-size financial statements
Question 3
Practice Set - Blue & Gray Photo Services 3864 Dallas Cowboys Road Suite 10,000 Dallas, TX 75207 (972) 555-3800 (business) (972) 555-3801 (fax) Fed Employer ID 54-000000 State Employee ID 54-000000 State Unemployment ID 54-0000 dallascowboys@bluegray.com www.bluegray.com Business type: sole proprietorship Start accounting period January 20XX Blue & Gray Photo Services completed the following transactions during its first month of operations, September 1, 20XX. Blue & Gray Photo Services, a sole proprietorship, began operations by receiving from the owner $12,000 cash; office equipment valued at $23,000; photographic equipment valued at $45,000; and a vehicle valued at $17,500. The business gave Dallas Cowboys, the owner, capital in the business on Sept. 1. Received a check on Sept. 1 for $12,000 from Tom Landry Country Club to photograph events held at the club over the next 12 months Purchased insurance from Emmitt Smith Insurance, Inc.?$3,600 on Sept. 1 for 12 months On Sept. 1, paid $3,600 rent to Tony Dorsett Realty from Sept. 1, 20XX to December 31, 20XX Purchased photographic supplies from Drew Pearson Camera Suppliers for $564 on account terms net 30 Received $1,635 cash for performing photography services On Sept. 7, purchased office equipment from Terrell Owens Equipment Co. for $3,500 on account Paid miscellaneous expense for $18; paid with check 101 on Sept. 8 Performed photography services Sept. 9 on account for Ed "Too Tall" Jones; $1,500, due in 30 days Received $1,828 cash for performing photography services on Sept. 10 On Sept. 11, paid Roger Staubach Oil Company $500; used check 102 for gas and oil Borrowed $25,000 from Randy White National Bank as a 60-day, 10% note Placed an ad in the Cowboys News Journal on Sept. 13 for $450; paid with check 103 Performed photography services Sept. 14 on account?$4,200 for Aikman Energy Group On Sept. 15, received $4,978 cash for performing photography services Purchased office supplies Sept. 16 on account from Herschel Walker Inc. for $585 Jay Novacek Janitorial Co. provided services for $300; paid check 104 on Sept. 17 Sept. 18, purchased photographic camera equipment for $2,800, photographic supplies for $900 on account from Michael Irvin Camera Suppliers Cowboys withdrew $3,500 for personal use on Sept. 19 Purchased land from Deion Sanders Developers, Inc. for a tract of land for $9,500; paid with check 105 on Sept. 20 Received $6,475 cash for performing photography services on Sept. 21 Paid employee salaries on Sept. 22 for $4,200 Paid Dallas Water Works & Power for $822 with check 106 on Sept. 23 Sept. 24, issued check 107 for $564 to Drew Pearson Camera Supplies in payment of transaction #5 Use the transaction number as the date if a date is not listed in the transaction. For example, in transaction #5, the date should be Sept. 5. Blue & Gray Photo Services Chart of Accounts *Acct. No. Assets 10100 cash 10200 accounts receivable 10300 prepaid rent 10400 prepaid insurance 10500 photographic supplies 10600 office supplies 10700 land 10800 photographic equipment 10900 accumulated depreciation?photographic equipment 11000 office equipment 11100 accumulated depreciation?office equipment 11200 vehicle 11300 accumulated depreciation?vehicle Liabilities 20100 accounts payable 20200 note payable 20300 salary payable 20400 interest payable 20500 unearned photographic service revenue Owner's Equity 30100 Dallas Cowboys, capital 30200 Dallas Cowboys, withdrawals 30300 income summary Revenue 40100 photographic service revenue Expenses 50100 salary expense 50200 rent expense 50300 utilities expense 50400 photographic supplies expense 50500 office supplies expense 50600 insurance expense 50700 depreciation expense?photographic equipment 50800 depreciation expense?office equipment 50900 depreciation expense?vehicle 51000 gas and oil expense 51100 janitorial expense 51200 advertising expense 51300 interest expense 51400 miscellaneous expense *The account numbers do not have to be changed, but missing accounts must be added using any account number. Adjust entries, September 30, 20XX. Adjust unearned photographic service revenue for September. Assume photographic revenue is earned evenly over the entire month (refer to transaction #2). Expired insurance (refer to transaction #3) Expired rent (refer to transaction #4) Photographic supplies on hand September 30, $420 Office supplies on hand September 30, $200 Depreciation on photographic equipment for September, $700 Depreciation on office equipment for September, $500 Depreciation on vehicle for September, $650 Salaries accrued on September 30, $950 Accrue interest on note payable (refer to transaction #12, use a 360-day year). Provide the following documents: chart of accounts general journal general ledger trial balance statement of retained earnings/owner's equity income statement balance sheet post-closing trial balance
Question 4
Module 3: Assignments Problems and Issues 1) Use Excel to complete Problems and Issues 1, 3, 7, 8, 10, and 14 at the end of chapter 7 in the textbook. 8. An investor wishes to ride the yield curve to higher profits on an investment of $1,000. He observes in the market a zero-coupon T-note with one year left to maturity yielding 5 percent and another zero-coupon T-note yielding 7 percent with two years to maturity. What investment strategy should he pursue? Show how this investment strategy would be superior to a simple buy-and-hold strategy. Under what conditions will this strategy succeed? When will it fail? Repeat problem 7, but where the market interest rates are: 7 percent for the 1-year, zero-coupon bond and 5 percent for the 2-year, zero-coupon bond. 10. Calculate the value of duration for a four-year, $1,000 par value U.S. government bond purchased today at a yield to maturity of 15 percent. The bond?s coupon rate is 12 percent, and it pays interest at year?s end. Now suppose the market interest rate on comparable bonds falls to 14 percent. What percentage change in this bond?s price will result? 14. A four-year TIPS bond promises a real annual coupon return of 4 percent and its face value is $1,000. While the annual inflation rate was approximately zero when the bond was first issued, the inflation rate suddenly accelerated to 3 percent and is expected to remain at that level for the bond?s four-year term. What will be the amount of interest paid in nominal dollars each year of the bond?s life? What will be the face (nominal) value of the bond at the end of each year of its life? 2) Use Excel to complete Problems and Issues 2, 4, and 5 at the end of chapter 8 in the textbook. 2. The market yield to maturity on a risky bond is currently listed at 14.50 percent. The risk-free interest rate is estimated to be 9.25 percent. What is the defaultrisk premium, all other factors removed? The promised yield on this bond is 15 percent. A certain investor looking at this bond estimates there is a 25 percent probability the bond will pay 15 percent at maturity, a 50 percent probability it will pay a 10 percent return, and a 25 percent probability it will yield only 5 percent. What is the bond?s expected yield? What is this investor?s anticipated default loss? Will the investor buy this bond? 4. Aaa-rated municipal bonds are carrying a market yield today of 5.25 percent, while Aaa-rated corporate bonds have current market yields of 11.50 percent. What is the break-even tax rate that would make a taxable investor indifferent between these two types of bonds? 5. An investor purchases a 10-year U.S. government bond for $800. The bond?s coupon rate is 10 percent and, at time of purchase, it still had five years remaining until maturity. If the investor holds the bond until it matures and collects the $1,000 par value from the Treasury and his marginal tax rate is 28 percent, what will his after-tax yield to maturity be? 3) Complete Problems and Issues 3, 4, 6, 7 and 8 at the end of chapter 10 in the textbook. 3. How much interest would be earned (on a simple interest basis) from a three-day money market loan for $1 million at an interest rate of 12 percent (annual rate)? Suppose the loan was extended on the third day for an additional day at the going market rate of 11 percent. How much total interest income would the money market lender receive? 4. A government securities dealer is currently borrowing $25 million from a money center bank using repurchase agreements based on Treasury bills. If today?s RP rate is 6.25 percent, how much in interest will the dealer owe the bank for a 24-hour loan? 6. An automobile company, NISSAN, has a temporary cash surplus and lends its funds overnight through a repurchase agreement to a government securities dealer, earning $55,600 in interest income when the RP loan rate stood at 5.70 percent. What was the size of the loan that NISSAN granted to the securities dealer? 7. Ninety-one-day Treasury bills carry an investment return (IR) of 6.25 percent. What is their purchase price? What is their discount rate (DR)? 8. A dealer in government securities is considering buying $875 million in 10-year Treasury notes and $1,425 million dollars in 6-month Treasury bills. Current yields on the T-notes average 7.15 percent, while 6-month T-bill yields average 3.28 percent. The dealer can currently borrow $2,300 million through one-week repurchase agreements at an interest rate of 3.20 percent. Compute the dealer?s expected carry income in each of the following scenarios. (Hint: A spreadsheet can be most useful here. Perform the succession of calculations for the T-note in row 1; the succession of calculations for the T-bill in row 2; and the expenses from the RP in the row 3. Then, compute the carry income from the appropriate columns where income and expenses have been computed for each scenario.) a. The dealer purchases the T-notes and T-bills and finances them with the RP under the terms listed above. Same as part (a) above except that interest rates change to 7.30 percent on the b. T-notes, 5.40 percent on the T-bills and 5.55 percent on the RP, and the dealer must refinance the T-note and T-bill purchases at the new RP rate. c. Same as part (b) above except the dealer had not purchased the T-notes and T-bills until after interest rates changed. d. Repeat part (b) in the case where rates changed to 7 percent on the T-notes, 5.10 percent on the T-bills, and 4.5 percent on the RP. e. Repeat part (b) except the dealer had not purchased the T-notes and T-bills until after the interest rates changed. f. Based on the above results, is it always good for the dealer when interest rates rise? How about when they fall? Please explain. g. Could the dealer have benefited by a short position in case (b) or (d) above? Please explain.
Question 5
Part Three Charles Jackson, the accounting manager at Big Al?s , has just returned from a conference on activity-based costing in Seattle and thinks big Al?s should consider implementing an ABC system at the beginning of Year 2. Charles has identified five primary activities taking place in the production facility at Big Al?s, has traced overhead costs to each activity, and has identified a cost driver for each activity as follows: Estimated Year 2 Overhead Costs Activity Monthly Overhead Cost Cost Driver Material delivery /handling $4,620 # of shipments Assembly of pizzas $5,670 Direct Labor hours Packaging $1,260 Number of pizzas Storage of materials $3,150 Refrigerator space Quality inspections $2,100 Number of inspections Big Al?s gets material for the veggie pizzas twice per week so the veggies can remain fresh and crisp until used in production. Veggie pizzas are also thicker, due to the height of the toppings, than a one topping meat pizza, so more refrigerator space is estimated to be needed. Big Al?s has also determined that meat pizza?s need to be inspected more frequently for quality control due to the much higher volume of production. Charles has estimated the activity for each cost driver as follows: Meat Pizzas Veggie Pizzas Total Number of material shipments 52 108 160 Direct Labor Hours 87,500 7,000 94,500 Number of Pizzas 352,800 25,200 378,000 Refrigerator space (cubic feet) 2,500 500 3,000 Number of inspections 80,000 4,000 84,000 Required A. Using the overhead activity categories identified above, classify Big Al?s overhead costs as unit-level, batch-level, product-level, or facility level. B. Using the preceding activities and cost drivers, calculate a predetermined overhead rate for each activity. C. Using ABC, how much estimated overhead would be allocated to a meat pizza and to a veggie pizza? D. Compare the estimated overhead allocation using ABC to the estimated overhead allocation using direct labor hours. E. What are some of the advantages and disadvantages of using ABC in this case? F. Would you suggest that Big Al?s adopt ABC system? Why? G. Does the information provided by the ABC system give you some insight into areas of cost reduction? What areas have the greatest potential for cost reduction, and what are the potential impacts on the business from these cost reductions? I am in need of help with this please respond to yvonnevand @hotmail.com. Thank you! If you need previous workings on this case let me know and I can send what I have.,Thank you, I await your response. Yvonne V. yvonnevand@hotmail.com
