DQ1.From Chapter 9,
Fraud Case 9-1. Complete all parts of the case and respond to at least two of
your classmates’ postings.
When a business sells a fully
depreciated asset for its salvage value, is a gain or loss recognized?
How do businesses determine what salvage
values to use for their various assets? Are there “hard and fast” rules for
salvage values?
How
would an organization prevent the kind of fraud depicted here?
DQ2.There are two types
of current liabilities that must be estimated.
Describe them and explain why they must be estimated. How are the financial statements affected if
they are not estimated? Respond to at
least two of your classmates’ postings.
1. Liquidity
ratios. Edison,
Stagg, and Thornton have the following financial information at the close of
business on July 10:
Compute
the current and quick ratios for each of the three companies. (Round
calculations to two decimal places.) Which firm is the most liquid? Why?
2. Computation
and evaluation of activity ratios. The following data relate to Alaska
Products, Inc:
Compute
the accounts receivable and inventory turnover ratios for 19X5. Alaska rounds
all calculations to two decimal places.
3. Profitability
ratios, trading on the equity. Digital Relay has both preferred and common stock
outstanding. The company reported the following information for 19X7:
Compute
the gross profit margin ratio, the return on equity and the return on assets,
rounding calculations to two decimal places. Does the firm have positive or
negative financial leverage? Briefly explain.
4. Horizontal
analysis. Mary Lynn Corporation has been operating for several years.
Selected data from the 20X1 and 20X2 financial statements follow.
Prepare
a horizontal analysis for 20X1 and 20X2. Briefly comment on the results of your
work.
5. Vertical
analysis. Mary Lynn Corporation has been operating for several years.
Selected data from the 20X1 and 20X2 financial statements follow.
Prepare
a vertical analysis for 20X1 and 20X2. Briefly comment on the results of your
work.
6. Ratio
computation. The financial statements of the Lone Pine Company follow.
LONE
PINE COMPANY
Statement
of Income and Retained Earnings
Instructions
Compute
the following items for Lone Pine Company for 20X2, rounding all calculations
to two decimal places when necessary:
a.
Quick ratio
b.
Current ratio
c.
Inventory-turnover ratio
d.
Accounts-receivable-turnover ratio
e.
Return-on-assets ratio
f.
Net-profit-margin ratio
g.
Return-on-common-stockholders’ equity
h.
Debt-to-total assets
i.
Number of times that interest is earned
j.
Dividend payout rate
Focus
of the Final Paper
Write
a five-to seven-page financial statement analysis of a public company,
formatted according to APA style as outlined in the Ashford Writing
Center. In this analysis you will discuss the financial health of this
company with the ultimate goal of making a recommendation to other
investors. Your paper should consist of the following sections:
introduction, company overview, horizontal analysis, ratio analysis, final
recommendation, and conclusions.
Here
is a breakdown of the sections within the body of the assignment:
Company Overview
Provide
a brief overview of your company (one to two paragraphs at most). What
industry is it in? What are its main products or services? Who are
its competitors?
Horizontal Analysis of Income Statement and Balance Sheet
Prepare a three-year horizontal analysis of the income statement and balance
sheet of your selected company. Discuss the importance and meaning of
horizontal analysis. Discuss both the positive and negative trends
presented in your company.
Ratio Analysis
Calculate
the current ratio, quick ratio, cash to current liabilities ratio, over a
two-year period. Discuss and interpret the ratios that you
calculated. Discuss potential liquidity issues based on your calculations
of the current and quick ratios. Are there any factors that could be
erroneously influencing the results of the ratios? Discuss liquidity
issues of competitive companies within the same industry.
Recommendation
Based on your analysis would you recommend an individual invest in this
company? What strengths do you see? What risks do you see? It
is perfectly acceptable to state that you would recommend avoiding this company
as long as you provide support for your position.
Writing
the Final Paper
1. Must
be five to seven double-spaced pages in length, and formatted according to APA
style as outlined in the Ashford Writing Center.
2. Must include a title page with the following:
a. Title
of paper
b. Student’s
name
c. Course
name and number
d. Instructor’s
name
e. Date
submitted
3. Must
begin with an introductory paragraph that has a succinct thesis statement.
4. Must address the topic of the paper with critical thought.
5. Must end with a conclusion that reaffirms your thesis.
6. Must document all sources in APA style, as outlined in the Ashford
Writing Center.
7. Must include a separate reference page, formatted according to APA
style as outlined in the Ashford Writing Center.
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