Financial Decision Making 8 questions 4 papers
Required Resources
Text
Epstein, L. (2014). Financial decision making: An introduction to financial reports [Electronic version]. Retrieved from https://content.ashford.edu/
· Chapter 2: The Balance Sheet
Articles
Ford Motor Company. (2014). Ford Motor Company 2012 annual report (Links to an external site.) https://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf
. Retrieved from http://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf
Harper, D. (n.d.). Financial statements: The system (Links to an external site.) https://www.investopedia.com/terms/c/cashflowstatement.asp
. Investopedia. Retrieved from http://www.investopedia.com/university/financialstatements/financialstatements2.asp
Question 1 – 250 words
Referencing this week’s readings and lecture, what information is provided in the balance sheet? What is a common-sized balance sheet and how do you create one? For your final project company, does anything stand out on the balance sheet?
Question 2 – 250 words
Your friend, Liz, loves to shop at Target and is now interested in investing in the company. Tom, another friend, has told her that Target’s debt structure is risky with obligations of nearly 74% of total assets. Liz sees that debt on the balance sheet is 65% of total assets and is confused by Tom’s comment. Write an explanation to Liz discussing the debt structure of Target and why Tom thinks Target is risky. Be sure to explain clearly what information appears on financial statements, as well as what information does not appear directly on the financial statements. Use the information below in your discussion.
At fiscal year-end February 2, 2008, Target Corporation had the following assets and liabilities on its balance sheet (in millions):
|
Current liabilities |
$11,782 |
|
Long-term debt |
15,126 |
|
Other liabilities |
2,345 |
|
Total assets |
44,560 |
Target reported the following information on leases in the notes to the financial statements:
Total rent expense was $165 million in 2007, $158 million in 2006, and $154 million in 2005, including percentage rent expense of $5 million in 2007, 2006, and 2005. Most long-term leases include one or more options to renew, with renewal terms that can extend the lease term to more than 50 years. Certain leases also include options to purchase the leased property.
Future minimum lease payments required under non-cancellable lease agreements existing at February 2, 2008, were:
|
Future Minimum Lease Payments (in Millions) |
Operating Leases |
Capital Leases |
|
2008 |
$ 239 |
$ 12 |
|
2009 |
187 |
16 |
|
2010 |
173 |
16 |
|
2011 |
129 |
16 |
|
2010 |
123 |
17 |
|
After 2010 |
2, 843 |
155 |
|
Total future minimum lease payments |
$3694 (a) |
$232 |
|
Less: Interest (b) |
|
(105) |
|
Present value of minimum capital lease payments |
|
$127 (c) |
(a) Total contractual lease payments include $1,721 million related to options to extend lease terms that are reasonably assured of being exercised, and also include $98 million of legally binding minimum lease payments for stores that will open in 2008 or later. (b) Calculated using the interest rate at inception of each lease. (c) Includes current portion of $4 million.
PAPER 1
Balance Sheet – Ford Motor Company
In a two- to three-page paper (not including the title and reference pages), explain the purpose of a balance sheet and analyze Ford Motor Company’s balance sheet from its 2012 Annual Report (Links to an external site.) https://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf
. In your analysis, you must determine the financial ratios and compare them to industry standards.
Part 2
Required Resources
Text
Epstein, L. (2014). Financial decision making: An introduction to financial reports [Electronic version]. Retrieved from https://content.ashford.edu/
· Chapter 3: The Income Statement
Article
Ford Motor Company. (2014). Ford Motor Company 2012 annual report (Links to an external site.). Retrieved from http://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf
Recommended Resources
Articles
Harper, D. (n.d.). Financial statements: Cash flow (Links to an external site.) https://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf
. Investopedia. Retrieved from http://www.investopedia.com/university/financialstatements/financialstatements3.asp
Harper, D. (n.d). Financial statements: Earnings (Links to an external site.) https://www.investopedia.com/terms/c/cashflowstatement.asp
. Investopedia. Retrieved from http://www.investopedia.com/university/financialstatements/financialstatements4.asp
Loth, R. (2011, October). Understanding the income statement (Links to an external site.) https://www.investopedia.com/articles/04/022504.asp
. Investopedia. Retrieved from http://www.investopedia.com/articles/04/022504.asp
Question 1 – 250 words
Referencing this week’s readings and lecture, address the following:
· What are the two causes of an increasing or decreasing sales number?
· Discuss all the reasons that might explain an increase or decrease in gross profit.
Question 2- 250 words
|
Analyzing an Income Statement |
Income statements are presented in the table below for the Elf Corporation for the years ending December 31, 2010, 2009, and 2008. Write a one-paragraph analysis of Elf Corporation’s profit performance for the period. Create a common-sized income statement for the three years. What conclusions can you draw from the different parts of the statement? What are the causes and effects of Elf's performance for those three years?
Elf Corporation Income Statements for the Years Ending December 31
|
(in millions) |
2010 |
2009 |
2008 |
|
Sales |
$700 |
$650 |
$550 |
|
Cost of goods sold |
350 |
325 |
275 |
|
Gross profit |
350 |
325 |
275 |
|
Operating Expenses: |
|
|
|
|
Administrative |
100 |
100 |
100 |
|
Advertising and marketing |
50 |
75 |
75 |
|
Operating profit |
$200 |
$150 |
$100 |
|
Interest expense |
70 |
50 |
30 |
|
Earnings before tax |
$130 |
$100 |
$ 70 |
|
Tax expense (50%) |
65 |
50 |
35 |
|
Net income |
$ 65 |
$ 50 |
$ 35 |
PAPER 2
Income Statement – Ford Motor Company
In a two- to three-page paper (excluding the title and reference pages), explain the purpose of an income statement and how it reflects the firm’s financial status. Include important points that an analyst would use in assessing the financial condition of the company. Also, analyze Ford Motor Company’s income statement from its 2012 Annual Report (Links to an external site.) https://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf
.
Part 3
Required Resources
Text
Epstein, L. (2014). Financial decision making: An introduction to financial reports [Electronic version]. Retrieved from https://content.ashford.edu/
· Chapter 4: Elements of a Statement of Cash Flows
Article
Ford Motor Company. (2014). Ford Motor Company 2012 annual report (Links to an external site.) https://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf
. Retrieved from http://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf
Recommended Resources
Article
Heakal, R. (2010, May). What is a cash flow statement? (Links to an external site.) https://www.forbes.com/2010/05/27/cash-flow-statement-personal-finance-securities-analysis.html
Forbes. Retrieved from http://www.forbes.com/2010/05/27/cash-flow-statement-personal-finance-securities-analysis.html
Website
AccountingCoach. (2014). Cash flow statement (explanation) (Links to an external site.) https://www.accountingcoach.com/cash-flow-statement/explanation
. Retrieved from http://www.accountingcoach.com/cash-flow-statement/explanation/1
· Read Parts 1 through 8
Question 1 – 250 words
Referencing this week’s readings and lecture, describe the following terms as they relate to the statement of cash flows: cash, operating activities, investing activities, and financing activities. What can creditors, investors, and other users glean from an analysis of the statement of cash flows?
Question 2 – 250 words
Using the table below, explain the difference between net income and cash flow from operating activities for Techno in 2009 and analyze their cash flows for 2008 and 2009.
|
(in thousands) |
2009 |
2008 |
|
Net income |
$ 316,354 |
$ 242,329 |
|
Noncash charges (credits) to income |
|
|
|
Depreciation and amortization |
68,156 |
62,591 |
|
Deferred taxes |
15,394 |
22,814 |
|
|
$ 399,904 |
$ 327,734 |
|
Cash Provided (Used) by Operating Assets and Liabilities: |
|
|
|
Receivables |
(288,174) |
(49,704) |
|
Inventories |
(159,419) |
(145,554) |
|
Other current assets |
(1,470) |
3,832 |
|
Accounts payable, accrued liabilities |
73,684 |
41,079 |
|
Total Cash Provided by Operations |
$ 24,525 |
$ 177,387 |
|
Investment activities |
|
|
|
Additions to plant and equipment |
(94,1760) |
(93,136) |
|
Other investment activities |
14,408 |
(34,771) |
|
Net investment activities |
($ 79,768) |
($ 127,907) |
|
Financing activities |
|
|
|
Purchases of treasury stock |
(45,854) |
(39,267) |
|
Dividends paid |
(49,290) |
(22,523) |
|
Net changes in short-term borrowing |
125,248 |
45,067 |
|
Additions to long-term borrowings |
135,249 |
4,610 |
|
Repayments of long-term borrowings |
|
(250,564) |
|
Net financing activities |
$ 165,353 |
($ 262,677) |
|
Increase (decrease) in cash |
$ 110,110 |
($ 213,197) |
|
Beginning cash balance |
78,114 |
291,311 |
|
Ending cash balance |
$ 188,224 |
$ 78,114 |
PAPER 3
Cash Flow Statement – Ford Motor Company
In a two- to three-page paper (not including the title and reference pages), explain the purpose of a cash flow statement and how it reflects the firm’s financial status. Include important points that an analyst would use in assessing the financial condition of the company. Also, analyze Ford Motor Company’s cash flow from its 2012 Annual Report (Links to an external site.) https://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf
.
Part 4
Required Resources
Text
Epstein, L. (2014). Financial decision making: An introduction to financial reports [Electronic version]. Retrieved from https://content.ashford.edu/
· Chapter 5: Evaluating the Quality of Financial Reports
Recommended Resources
Articles
Miller, P. B. W. (2002, April). Quality financial reporting: Finding customer focus through the power of competition (Links to an external site.) https://www.journalofaccountancy.com/Issues/2002/Apr/QualityFinancialReporting.htm
. Journal of Accountancy. Retrieved from http://www.journalofaccountancy.com/Issues/2002/Apr/QualityFinancialReporting.htm
Turner, L. E. (2000, March 23). Speech by SEC staff: Charting a course for high quality financial reporting (Links to an external site.) https://www.sec.gov/news/speech/spch356.htm
. U.S. Securities and Exchange Commission. Retrieved from http://www.sec.gov/news/speech/spch356.htm
Question 1 – 250 words
Referencing this week’s readings and lecture, describe the quality issues related to reporting revenue. What is the importance of understanding various inventory valuation methods in determining the quality of reported profits?
Question 2 – 250 words
Even though firms follow the accounting rules (GAAP) when presenting their financial statements, it is still possible for conflicts of interest to exist between what management wants investors and creditors to see and the economic reality of transactions. Explain how this can occur.
PAPER 4
Auditing
Auditors have come into a department as part of a company-wide audit prior to issuing an audit opinion for the company’s financial reports. In a one- to two-page paper (not including the title and reference pages), explain what the staff should expect the auditors to do. Be sure to include the requirements of the Sarbanes Oxley Act in your explanation.