related to Finance and Accounting

ii. July 18: Inventory purchased, 800 units @ $24 per unit.

iii. July 25: Inventory purchased, 700 units @ $26 per unit.

iv. The Delta company sold 1,400 units during the month of July.

Compute inventory on July 31, 2016 and cost of goods sold for the month of July using following inventory costing methods:

a. FIFO (1,400 units sold, each unit is worth $20. Total: 28,000)

b. LIFO (1,400 units sold, each unit is worth$ 26. Total 36,400)

c. $23.7

4. The Theta company manufactures silicon boards that are used in preparing small, medium and large size electronic circuits. The company is considering to reduce its cost by automating some of its manufacturing tasks. This automation requires the installation of a new equipment. The relevant information for net present value (NPV) analysis of investment in new equipment is given below:

i. Cost of equipment: $72,000

ii. Expected annual cost savings to be provided by new equipment: $40,000

iii. Useful life of the equipment: 6 years

iv. Salvage value at the end of 6 years: $0

v. Discount rate: 12%

Should the new equipment be purchased?

Capital cost is 72,000

Year 1CF (72,000*0.893) + year 2CF(72,000*1.690) + year 3CF(72,000*2.402) + year 4CF (72,000*3.037)+ year 5CF(72,000*3.603) + year 6CF(72,000*4.111) = NVP

NVP = 1,132,992

Present value of an annuity of $1 in arrears table

5. The ECG company sells lightweight tables. One table is sold for $45. Variable and fixed expenses data is given below:

i. Variable expenses per unit: $18

ii. Fixed expenses per year: $540,000

a. Compute contribution margin ratio (CM ratio).

b. Compute break-even point in dollars using CM ratio computed in part 1.

6. The American company purchased a wheel loader for $150,000 on January 1, 2018. The information regarding usability and life of the loader is given below:

i. Estimated salvage value: $10,000

ii. Estimated useful life: 10 years

iii. Estimated productive life in hours: 20,000 hours

iv. The wheel loader was used for 2,000 hours during the year 2018.

Calculate depreciation expense for the year 2018 using activity or unit-of-production method of depreciation.

7. The following data has been extracted from the financial statements of two companies – company A and company B.

Calculate the current ratio of each company and compare their liquidity positions.

Company A current ratio =

Essay Questions

Each answer should be no more than 500 words. You will be graded on correctness as well as the clarity of your answer.

1. A few years after graduating from the LMU School of Law, you’ve managed to secure a prestigious general counsel position at a large regional coffee company, Rooster’s Roasters, with over fifty locations in Los Angeles. Rooster’s is hoping to enter the online coffee market and sell coffee to citizens in other cities, states and even countries. Following your morning run through Venice Beach before work, sporting LMU’s newest alumni sweater, a customer also in line at your favorite smoothie shop asks you what kind of law you do. After your answer, the customer says, “My friend works at an elite law firm that specializes in traffic accidents, I know it’s one of the best because I see their ads all over the city on buses and billboards. My friend told me that real lawyers go to court, and unless you need to go to court, lawyers are a waste of money and unnecessary.”

Relying on the resources taught in this class, address the assertion that outside of litigation, lawyers do not contribute value.

2. In the context of negotiations, what is leverage? What role does it play in achieving negotiated agreements? Does leverage exist objectively or is it merely a perception or “mindset?”

the leverage in the negotiation is a position to the lawyer where he can easily influence the other party in the negotiation. If I am negotiating someone and I have the leverage it means that I have the prime move. In other words, I have the upper hand to determine how I want the negotiation to go. Where in this leverage there are many types also, you have the positive and the negative leverage. The positive leverage is when you have the ability to give what the other opponent wants. Which means that you can satisfy anything they need. In this case you have a positive leverage. The negative leverage is more of a threat strategy to win the negotiation at your best BANTA. Like you start pretending that you are accepting losses where these losses are gains in other matters to your negotiation. Both are right, the leverage exists objectively and it is also a state of mind where you have to look for the thing the other opponent wants and you try to satisfy these needs in your favor. As for the normative leverage you stand on the norms to encourage consensus. Listing your alternatives will improve your position as evaluating the alternatives is very important towards your leverage. Identifying your BANTA and calculating your reservation value is very important to see how willing you are to accept the lowest value deal. Also there are many styles for negotiation which might help your leverage including but not limited to the competing style, accommodative style, avoiding style and collaborative style.

3. Choose three financial ratios. For each, give its definition, explain what it reveals, why it might be useful and at least one business situation in which it might be used.

· - liquidity ratio: you have current and quick. It measures an entity’s ability to meet its short-term obligations or any amounts that are due in the upcoming 12 months. The level of necessary liquidity varies by industry and within each company as every entity is unique in its financial situation and needs. These kinds of ratios are very important for small organizations, so they can look of the short-term obligations. Also, Common liquidity ratios include the quick ratio, current ratio, and days sales outstanding. For example, internal analysis regarding liquidity ratios involves using more than accounting periods that are reported using the same accounting methods. Looking into previous time periods to current operations allows analysts to track changes in the business. In general, a higher liquidity ratio shows a company is more liquid and has better coverage of outstanding debts. It is also used exactly when a company get into many loans and short-term obligations, they have to use this ratio just to be on the safe side.

· - profitability ratios: it does measure the entity’s ability to generate profits from its own recourses. And generally, the higher profitability ratio is better. Higher ratio results are often more favorable, but ratios provide much more details when compared to results of other companies, the company's own historical performance, or the industry average. You have the profit margin (net income / revenue) which is Gross margin measures how much a company makes after accounting for COGS. And the return on assets (net profit / total asset) is Profitability is helps relative to costs and expenses and analyzed in comparison to help to see how effective a company is making assets to generate sales and profits. And it is best used by the companies that has a big number of equities to shareholders.  it would not be useful in a scenario where a company wants to compare a retailer's fourth-quarter gross profit margin with its first-quarter gross profit margin because they are not directly comparable.

· Leverage ratio: it focusses on the balance sheets and calculate the entity’s ability to meet the long-term obligations and it’s best used by the big companies. Common leverage ratios include the debt-equity ratio, equity multiplier, degree of financial leverage, and consumer leverage ratio. Which also function in two parts. Debt to equity (total liabilities / shareholders equity) and interest coverage (EBIT/ total interest expense) before any merger or accusation the company have to see its ability to cover all the financial obligations and how they can declare there selfs with no debt at all.

4. Compare and contrast three principal methods used to value acquisitions: asset based, comparable companies and discounted cash flow. For each, explain its strengths and weaknesses and give an example of the kind of context in which it might be used.

5. What is the “time value of money” principle? Give three situations in which a lawyer (in a professional capacity) would need to understand the implications of this principle.

6. Explain the difference between risk and exposure, in a business context. Then, discuss the ways in which one’s relationship to risk influences decisions. In managing risk, are there any common mistakes one should try to avoid? Are there common mistakes one can guard against in decision making?

· The deference between risk and exposure is that risk is the probability a certain situation will come pass and lead to an undesired outcome. The types of risk are pure risks and speculative risks. Pure risks are unexpected risks that cannot be control, such as unexpected death and natural disasters. Speculative risks are voluntary risks that have an uncertain outcome, such as business investments or new product introductions for example. The exposure is the extent to which that situation may affect the company. To calculate risk exposure, analysts use this equation: (probability of risk occurring) X (total loss of risk occurrence) = risk exposure. There are many relationships to influence the decision if there was risk within in that decision. The process of identifying and ranking risks, to determine which are hard and above the organization's risk tolerance or threshold and require attention, and then to select the risk management action to take in response. You must cover Ranking or prioritizing the most important risks and look over the risk environment for changes in the risk rankings or for new risks, and updating the risk assessments, priorities, and mitigations. To avoid are a lot of things but mainly while making a decision that involves some risk you must clearly and carefully be aware of not setting correct expectations and try to create your own risk management framework. Furthermore, plan a response to any occurred risk and what might be the consequence for this decision in order to maintain a good business.

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