Financial Decision Making 8 questions 4 papers

Part 1

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

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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

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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.