Annual Review Report- Assignment 2

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jwmi_530_course_guide.pdf

JWI 530: Financial Management I Course Guide

©2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWMI 530 Course Guide – Summer 2014   Page 1 of 31  

COURSE DESCRIPTION This course is intended to introduce financial accounting and management accounting. There is no expectation that students have previously studied accounting, but it is expected that students will bring their familiarity with a comprehensive range of business transactions to the course as a context for learning. Financial accounting, covered during the first half of this course, is the branch of accounting that is focused on the preparation of financial reports for users external to the organization. The course will focus on the three primary financial statements that are at the heart of the periodic financial reporting structure: the Income Statement, the Balance Sheet, and the Statement of Cash Flows. The primary purpose of these statements is to provide information to those outside the organization such as current shareholders, potential investors, creditors, analysts, regulators, and some government bodies. By the end of this course, students should feel comfortable looking at a set of financial accounting statements, conducting analysis of the reports, and making conclusions about the financial condition of an organization. Note: This course will address both U.S. Generally Accepted Accounting Principles (GAAP) as well as International Financial Reporting Standards (IFRS). The management accounting half of this course focuses on the use of financial concepts and analytical techniques to provide information for managerial decision-making in organizations. The emphasis in the previous statement is intended to highlight the fundamental difference between this half of the course and the first half that focused on financial accounting. While financial accounting has an external (i.e., reporting) focus, management accounting has an internal (i.e., managerial decision-making) focus. The main topics in this half of the course are the nature and behavior of costs, types and uses of costing systems, short-run and long-run decision-making, and control systems. As financial information is a constant part of the decision-making process in organizations, this half of the course prepares participants for a better understanding of how financial data can be used within an organization as an aid to managerial, financing, marketing, procurement, and similar decisions.

INSTRUCTIONAL MATERIALS Required Resources

Anthony, R.N., Hawkins, D.F., & Merchant, K.A. (2011). Accounting: Text and Cases. 13th edition. New York: McGraw-Hill/Irwin.

Welch, J & Welch S. (2005). Winning. New York: HarperCollins. Reading materials included in the XanEdu Case Pack, if assigned.

JWI 530: Financial Management I Course Guide

©2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWMI 530 Course Guide – Summer 2014   Page 2 of 31  

COURSE LEARNING OUTCOMES

1. Analyze how business transactions are recorded in the financial records of an organization. 2. Identify the accounting principles used to create the Income Statement, Balance Sheet, and

Statement of Cash Flows. 3. Identify the common forms of ratio analysis performed with financial statements in order to

evaluate the financial condition of an organization. 4. Apply key techniques and concepts in measuring the cost of producing goods and services. 5. Determine how capital budgeting is used in long-term financial decisions. 6. Apply management accounting concepts to identify and process relevant financial information for

decision-making purposes. 7. Use technology and information resources to research issues in financial reporting and analysis. 8. Write clearly and concisely about financial reporting and analysis using proper writing mechanics.

CONTACT INFORMATION FOR PROBLEMS OR ISSUES • Have a curriculum-related question? Contact your instructor for assistance. • Have a technology-related question? Contact JWMI Tech Support at (888) 596-5964 x3 or

[email protected] • Have a student services-related question? Contact Student Services at (703) 561-2018

or [email protected]

JWI 530: Financial Management I Course Guide

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WEEKLY COURSE SCHEDULE This 4.5 credit hour Masters level course is designed with the goal of having each student spend 10 – 15 hours in weekly work. This includes preparation, activities, discussions and assignments; live or online; individual or in groups.

Week Preparation, Activities, and Evaluation

1 Basic Financial Accounting & Ratio Analysis During the first five weeks of this course we will focus on the topic of financial accounting. We will start with a brief overview of financial accounting, its origins, and its intended uses. We will introduce the basics of how business transactions are recorded in the General Ledger (GL) and financial records of organizations and how these records are used to create the three basic financial statements. The scope of this first week is significant, but this creates a foundation upon which subsequent weeks are based. Preparation

• Lecture — Basic Financial Accounting & Ratio Analysis

• Readings — Chapter 1, “The Nature and Purpose of Accounting”, pp. 2-20 (skim) — Chapter 4, “Accounting Records and Systems”, pp. 80-98 — Chapter 5, “Revenue and Monetary Assets”, pp. 126-129

• Optional — Good Vibrations, Inc. Exercise

Activities

• Discussion: Poor Financial Reporting (30 points) • Learning Journal (5 points) • Self-Assessment (0 points)

— Self-Assessment 1: Classification & Treatment of GL Accounts Evaluation

• None

JWI 530: Financial Management I Course Guide

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Week Preparation, Activities, and Evaluation

2 Revenue Recognition & The Income Statement We will look at the transactions that lead to how revenues are recognized. The discussion will include the rules of revenue recognition, matching revenues and expenses, and creation of the Income Statement. We will also examine the accounting steps used for determining the costing of manufactured products. Preparation

• Lecture — Revenue Recognition & The Income Statement

• Readings — Chapter 3, “Basic Accounting Concepts: The Income Statement”, pp. 50-68 — Chapter 5, “Revenue and Monetary Assets”, pp. 108-126 — Chapter 6, “Cost of Sales and Inventories”, pp. 141-160  

Activities

• Discussion: Income Statement Limitations (30 points) • Learning Journal (5 points)   • Self-Assessment (0 points)

— Self-Assessment Exercise 2: Business Transactions Evaluation

• None • Reminder: For Assignment 2, choose two companies from the provided listing that

you plan to study and submit your choices to your professor for approval. For more information see the Assignment 2 description.

JWI 530: Financial Management I Course Guide

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Week Preparation, Activities, and Evaluation

3 Current and Fixed Assets on the Balance Sheet We begin with an examination of current assets and their reporting: cash, short-term investments, accounts receivable, and inventory. Next, we will examine key topics in the accounting of fixed assets: tangible and intangible assets, depreciation and amortization, and capitalization versus expensing. Preparation

• Lecture — Current and Fixed Assets on the Balance Sheet

• Readings — Chapter 2, “Basic Accounting Concepts: The Balance Sheet”, pp. 26-44 — Chapter 7, “Long-Lived Nonmonetary Assets and Their Amortization”, pp.

172-194 Activities

• Discussion: Balance Sheet Limitations (30 points) • Learning Journal (5 points) • Self-Assessment (0 points)

— Self-Assessment Exercise 3: Constructing Financial Statements Evaluation

• Assignment 1: Super T-Account file and Creating Financial Statements (100 points)

JWI 530: Financial Management I Course Guide

©2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWMI 530 Course Guide – Summer 2014   Page 6 of 31  

Week Preparation, Activities, and Evaluation

4 Current and Long-term Liabilities on the Balance Sheet This week will focus on the liabilities section of the Balance Sheet. We will begin with an overview of current liabilities: accrued liabilities and short-term debt. Next, we will follow with the accounting steps for dealing with long-term liabilities: bonds, capital leases, and deferred taxes. Preparation

• Lecture — Current and Long-term Liabilities on the Balance Sheet

• Readings — Chapter 8, “Sources of Capital: Debt”, pp. 220-234 (you may find the Appendix useful as well, pp. 234-240) — Chapter 10, “Other Items That Affect Net Income and Owners’ Equity”, pp. 288-300  

Activities

• Discussion: Issuing Bonds (30 points) • Learning Journal (5 points)

Evaluation

• None

JWI 530: Financial Management I Course Guide

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Week Preparation, Activities, and Evaluation

5 Shareholders’ Equity, The Statement of Cash Flows, and Financial Analysis This week we will examine the Shareholders’ Equity section of the balance sheet including stocks, retained earnings and dividends. We will look at the basics of how a large company can combine the financial results from its various operations and holdings into a single consolidated set of financial statements. We will also examine the Statement of Cash Flows, how it is assembled and how the cash flow numbers should be interpreted. Lastly, we will look at the common ratios used to conduct analyses of the financial position of organizations. These ratios are constructed from the three financial statements: Income Statement, Balance Sheet, and Statement of Stockholders’ Equity. Preparation

• Lecture — Shareholders’ Equity & The Statement of Cash Flows

• Readings — Chapter 9, “Sources of Capital: Owners’ Equity”, pp. 256-270 — Chapter 11, “The Statement of Cash Flows”, pp. 314-328, 335-337 — Chapter 13, “Financial Statement Analysis”, pp. 367-386

*   Optional — Financial  Ratios  Analysis  Example    

Activities

• Discussion: Corporate Buyback (30 points) • Learning Journal (5 points)

Evaluation

• None

JWI 530: Financial Management I Course Guide

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Week Preparation, Activities, and Evaluation

6 Cost Analysis & Management – Part 1 During the remaining five weeks of this course we will examine financial accounting from a management perspective. We will start with a brief overview of management accounting and its intended uses. As cost analysis and management is a significant topic within management accounting, two weeks of this course are focused on this topic. The topic of cost terminology will be introduced. The course will focus on understanding the separation of costs into fixed and variable components and the cost planning tools that are based on this categorization are examined. Understanding how costs can also be separated into direct and indirect components and the allocation systems that are part of this is also examined. Preparation

• Lecture — Cost Analysis & Management — Part 1

• Readings — Chapter 15, “The Nature of Management Accounting”, pp. 438-451 (skim) — Chapter 16, “The Behavior of Costs”, pp. 456-477

Activities

• Discussion: Costing Information (30 points) • Learning Journal (5 points)

Evaluation

• Assignment 2: Annual Report Review (225 points)

JWI 530: Financial Management I Course Guide

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Week Preparation, Activities, and Evaluation

7 Cost Analysis & Management – Part 2 This week’s focus is on cost management approaches. Activity-based costing, target costing and product lifecycle costing are all examined. Understanding relevant costs for decision- making is part of this week’s material as well. Preparation

• Lecture — Cost Analysis & Management — Part 2

• Readings — Chapter 17, “Full Costs and Their Uses”, pp. 490-506 — Chapter 18, “Additional Aspects of Product Costing”, pp. 519-549

Activities

• Discussion: Overcoming Costing Hurdles (30 points) • Learning Journal (5 points) • Self-Assessment (0 points)

— Self-Assessment Exercise 4: Cost Analysis & Management Evaluation

• None

JWI 530: Financial Management I Course Guide

©2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWMI 530 Course Guide – Summer 2014   Page 10 of 31  

Week Preparation, Activities, and Evaluation

8 Planning & Control This week we will examine standard costing, budgeting, variance analysis and flexible budgeting as topics within planning and control. We will also look at the role of management accounting to support decentralization within organizations with respect to responsibility center accounting, transfer pricing, and how measurement, and reward systems are linked. Preparation

• Lecture — Planning & Control

• Readings — Chapter 19, “Standard Costs, Variable Costing Systems, Quality Costs, and

Joint Costs”, pp. 571-588 — Chapter 20, “Production Cost Variance Analyses”, pp. 606-618 — Chapter 22, Control: The Management Environment”, 650-665 Activities

• Discussion: Integrating Cost-Based Information (30 Points) • Learning Journal (5 points)

Evaluation

• Assignment 3: Management Accounting Case: West Island Products (100 points)

JWI 530: Financial Management I Course Guide

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Week Preparation, Activities, and Evaluation

9 Discounted Cash Flows & Capital Budgeting Capital budgeting is a key financial tool in the analysis of long-term investment in capital projects in organizations. This week we will reintroduce the concept of the time value of money and review the basics of discounted cash flows as introduced in the financial accounting course. From this starting point, we will examine the capital budgeting techniques of payback, discounted payback, internal rate of return (IRR), and net present value (NPV). Preparation

• Lecture — Discounted Cash Flows & Capital Budgeting

• Readings — Chapter 27, “Longer-Run Decisions: Capital Budgeting”, pp. 840-859 — Time Value of Money & Discounted Cash Flows

• Optional — PowerPoint Deck: Time Value of Money & Discounted Cash Flows

Activities

• Discussion: Evaluating Capital Projects (30 points) • Learning Journal (5 points) • Self-Assessment (0 points)

— Self-Assessment Exercise 5: Cash Flows & Capital Planning Evaluation

• None

JWI 530: Financial Management I Course Guide

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Week Preparation, Activities, and Evaluation

10 Other Concepts & Techniques in Management Accounting Management accounting as a discipline contains a broad collection of analytical tools. This week we will examine a number of these tools. Cost of quality and the Balanced Scorecard are among the topics that will be covered. Preparation

• Lecture — Other Concepts & Techniques in Management Accounting

• Readings — Chapter 23, “Control: The Management Control Process”, pp. 682-695 — Chapter 19, “Standard Costs, Variable Costing Systems, Quality Costs, and

Joint Costs”, pp. 584-585 (Quality Costs) — Chapter 17, “Full Costs and Their Uses”, pp. 505 (Target Costing)

Activities

• Discussion: Quality Measurement (30 points) • Learning Journal (5 points)

Evaluation

• Assignment 4: Management Accounting Case: Cayuga Cookies, Inc. (225 points)

11 Activities  Learning Journal (0 points)

 

JWI 530: Financial Management I Course Guide

©2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWMI 530 Course Guide – Summer 2014   Page 13 of 31  

GRADING SCALE – GRADUATE

Assignment Total Points % of

Grade

Assignment 1: Creating Financial Statements (Due Week 3, Day7)

100 10%

Assignment 2: Annual Report Review (Due Week 6, Day 7)

225 22.5%

Assignment 3: Management Accounting Case: West Island Products (Due Week 8, Day 7)

100 10%

Assignment 4: Management Accounting Case: Cayuga Cookies, Inc. (Due Week 10, Day 7)

225 22.5%

Participation: 10 Discussions worth 30 points each (See separate section below regarding due dates)

300 30%

Participation: 10 Learning Journal entries worth 5 points each (See separate section below regarding due dates)

50 5%

Totals: 1,000 100%

Points Percentage Grade

900 – 1000 90% – 100% A

800 – 899 80% – 89% B

700 – 799 70% – 79% C

0 – 699 0% – 69% F

JWI 530: Financial Management I Academic Submissions and Evaluations

©2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWMI 530 Course Guide – Summer 2014   Page 14 of 31  

Assignment 1: Creating Financial Statements Due Week 3, Day 7 (100 points) The specific course learning outcomes associated with this assignment are:

• Analyze how business transactions are recorded in the financials records of an organization. • Identify the accounting principles used to create the Income Statement, Balance Sheet, and

Statement of Cash Flows.

Similar to the exercise used in the course to introduce how business transactions are recorded in the financial records of an organization and used to produce financial statements, Assignment 1 presents you with an organization’s opening financial position and a series of transactions that take place over a year. You should determine the appropriate manner in which to record these transactions and then produce three financial statements for the organization at the end of the year. Assignment: Danny’s Security Systems, Inc. (DSSI) offers its clients security systems and alarm monitoring services on a retail basis. DSSI specializes in offering the most up-to-date services with the most technologically advanced equipment. For example, the high-end alarm system, called DAS59, is widely recognized as an industry leader. All of the balance sheet items from December 31, 2012, are shown below along with the events that occurred during 2013. Please ignore all taxes (income and sales) in preparing your answer.

Danny’s Security Systems, Inc.

Balance Sheet Items As of December 31, 2012

0.5 points Accounts payable $380,000 0.5 points Accounts receivable $611,000 1.0 points Accumulated depreciation $1,245,000 0.5 points Cash $267,000 0.5 points Common shares $1,152,000 0.5 points Short-term bank loan $125,000 0.5 points Plant, property, and equipment $2,111,000 0.5 points Interest payable $37,000 0.5 points Inventory $850,000 1.0 points Licenses (net) $180,000 0.5 points Long-term bank loan $525,000 0.5 points Goodwill $80,000 0.5 points Retained earnings $304,000 1.0 points Advances from customers $340,000 0.5 points Salaries payable $180,000 0.5 points Short-term investments (trading securities) $180,000 0.5 points Office supplies $9,000

JWI 530: Financial Management I Academic Submissions and Evaluations

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The following events occurred during 2013: A. New credit sales for the year were $1,910,000. B. New cash sales for the year were $333,000. C. DSSI acquired office supplies on credit for $32,000. D. Cash collections from credit sales were $1,720,000. E. Cash payments for items purchased on credit during the year were $344,000. F. Paid $363,000 for administrative expenses during the year. G. DSSI acquired $212,000 of inventory on credit. H. At the end of the year, DSSI owed the bank $19,000 in interest. I. DSSI collected $327,000 of cash advances from customers. J. DSSI offers a “satisfaction guarantee” to its clients for security services. If clients are unhappy with

the services they purchased, they are eligible for free additional security services (i.e., this is a form of “after sales warranty” service). The company estimates that future expenditures of approximately $67,000 will be required to perform these “after sales warranty” activities to keep clients satisfied for services originally rendered to clients in 2013.

K. DSSI spent $125,000 during 2013 on research and development activities related to new services the company could offer clients. It is expected that some of these products would be marketable within one or two years, but nobody is sure which products will be successful.

L. On the last day of business in 2013, DSSI declared an $80,000 dividend, which will be paid sometime in the next year.

M. At the end of the year, DSSI owed its employees a total of $66,000 in wages. N. DSSI paid down the long-term loan by $140,000. O. Sales of $272,000 were earned from prior period cash advances from customers. P. At the end of the year, the market value of the short-term investments was $157,000. Q. A total of $3,000 in office supplies remained on hand at the end of the year. R. DSSI’s policy is to write off all intangible assets over 3 years using straight-line amortization. 2013 is

the second year for amortizing licenses. S. At the end of the year, it was determined that $513,000 of inventory remained on-hand. T. At the end of the year, it was determined that the carrying value of goodwill had declined by $28,000. U. Old equipment, which had originally cost $147,000 and was fully depreciated, was scrapped on the

first day of business of the year. V. DSSI acquired all of the assets and liabilities of Smith Alarms, LLC for $555,000 cash. The assets

included equipment valued at $425,000 (this equipment was carried on the books of Smith Alarms, LLC at $300,000 net), accounts receivable of $230,000, accounts payable of $250,000, and a demand loan of $52,000. There were no intangible assets.

W. DSSI paid salaries to employees of $390,000 in cash. X. Paid the bank $58,000 cash towards interest payments during the year. Y. Depreciation on plant, property, and equipment for 2013 was determined to be $123,000. Z. At the end of the year, the accountant estimated that $22,000 of accounts receivable owed to the firm

would not likely be collected.

JWI 530: Financial Management I Academic Submissions and Evaluations

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Required: Using the Super-T approach discussed in class, open the accounts, record the transactions, and prepare an Income Statement, Balance Sheet, and Statement of Cash Flows (using the direct method) for DSSI as of December 31, 2013, following the generally accepted accounting principles (GAAP) covered in the course to date. Your submission for this assignment should include the following documents:

1. Super-T worksheet showing all opening balances and how the transactions (a) through (z) were recorded. (Note: the purpose of submitting this document is to be able to see how you recorded the transactions necessary to prepare the three financial statements listed below.)

2. A Balance Sheet for DDSI as of December 31, 2013. 3. An Income Statement for DDSI for the year ending December 31, 2013. 4. A Statement of Cash Flows for DSSI for the year ending December 31, 2013.

Grading:

Assignment Points Percentage Grade 90 – 100 90% – 100% A 80 – 89 80% – 89% B 70 – 79 70% – 79% C 0 – 69 0% – 69% F

    Points: 100 Assignment 1: Creating Financial Statements

Criteria Explanation of Grading

1. Use the information provided in the assignment to create and use the necessary General Ledger accounts to prepare the three required financial statements. Weight: 70%

Use a Super-T worksheet to record the provided Balance Sheet opening values and record transactions (a) through (z). There are 10 points available for correctly recording the opening values in the Super-T worksheet. There are 60 points available for correctly recording transactions (a) through (z) in the Super-T worksheet.

2. Prepare a Balance Sheet for DDSI as of December 31, 2013. Weight: 10%

Prepare a Balance Sheet as a separate document. Use all of the appropriate formatting and presentation norms necessary to create a Balance Sheet. (10 points)

3. Prepare an Income Statement for DSSI for the year ending December 31, 2013. Weight: 10%

Prepare an Income Statement as a separate document. Use all of the appropriate formatting and presentation norms necessary to create an Income Statement. (10 points)

4. Prepare a Statement of Cash Flows (using the direct method) for DSSI for the year ending December 31, 2013. Weight: 10%

Prepare a Statement of Cash Flows as a separate document. Use all of the appropriate formatting and presentation norms necessary to create a Statement of Cash Flows. (10 points)

JWI 530: Financial Management I Academic Submissions and Evaluations

©2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWMI 530 Course Guide – Summer 2014   Page 17 of 31  

Assignment 2: Annual Report Review Due Week 6, Day 7 (225 points) The specific course learning outcomes associated with this assignment are:

• Analyze financial statements using financial ratios. • Analyze and evaluate cash flows over time. • Use technology and information resources to research issues in financial management. • Write clearly and concisely about financial management using proper writing mechanics.

Required: This project requires that you conduct a financial analysis of two, comparable organizations chosen from the provided listing. Let your professor know which two companies you plan to study before the end of Week 3, as your selection must be approved. The professor reserves the right to limit the number of students comparing the same two organizations. Assignment:

1. Carefully review the annual reports for both organizations. Comment on what approach each company has taken in reporting to its shareholders. (This requirement is purposely broad to give you the freedom to talk about anything under the broad title of “reporting to shareholders”).

2. Using the provided Excel spreadsheet, prepare a ratio analysis for both companies including a trend analysis for three years. Comment on the significance of the ratios for each company (do they indicate that things are all right, do they suggest that problems exist, or is it likely that problems will occur in the future?). Comment specifically on the similarities and differences among the ratios calculated for both companies and comparison to any benchmark.

3. Prepare an analysis of the cash flow statements for both companies. 4. List and discuss the importance of the two most significant accounting policies adopted by the

two organizations (you should select the same two policies for both organizations). Explain the options selected by both companies and comment on any differences that you see. Explain what other policies the organizations could have selected and state why you think they selected one policy over another.

5. Provide the URL’s for each company’s Annual Report. Your assignment should adhere to these guidelines:

• Write in a logical, well-organized formal business style. Use Times New Roman font size 12 or similar, double space, and leave ample white space (i.e., 1-inch margins) per page.

• All references must follow JWMI style guide and works must be cited appropriately. Check with your professor for any additional instructions on citations. Reference pages are not included in the assignment page length.

• On the first page or in a header, include the title of the assignment, the student’s name, the professor’s name, the course title, and the date.

• Faculty members have discretion to penalize for assignments that do not follow these guidelines. Check with your individual professor if you feel the assignment requires a much longer or shorter treatment than recommended.

JWI 530: Financial Management I Academic Submissions and Evaluations

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Grading: Grading for this assignment will be based on answer quality, logic/organization of the paper, and language and writing skills, using the following rubric:

Assignment Points Percentage Grade 202 – 225 90% – 100% A 180 – 201 80% – 89% B 157 – 179 70% – 79% C

0 – 156 0% – 69% F   Points: 225 Assignment 2: Annual Report Review

Criteria Unacceptable 0-69% F

Fair 70-79% C

Proficient 80-89% B

Exemplary 90-100% A

1. Compare and contrast the approach to reporting to shareholders taken by each company. Examine topics such as: use of graphics, presentation format, tone, detail, length, and required versus additional content. Weight: 20%

Did not submit or incompletely analyzed the reporting approach.

Partially analyzed the reporting approach.

Satisfactorily analyzed the reporting approach.

Thoroughly analyzed the reporting approach.

2. Analyze the financial statements using financial ratios (i.e., calculate and discuss similarities and differences in trends, benchmarks). (Use the ratios covered in Week 4 and any other relevant ratios listed on pp. 380-381 of the text that the provided Excel spreadsheet calculates for you.) Weight: 30%

Did not submit or incompletely analyzed the financial ratios.

Partially analyzed the financial ratios.

Satisfactorily analyzed the financial ratios.

Thoroughly analyzed the financial ratios.

3. Analyze the cash flow statements (i.e., calculate and discuss similarities and differences in trends). Discuss how these patterns reflect on the stated strategies of the organizations. Your analysis should answer such questions as: Where is the cash coming from? How is it being used? What are the long-range implications? Weight: 20%

Did not submit or incompletely analyzed the cash flow statements.

Partially analyzed the cash flow statements.

Satisfactorily analyzed the cash flow statements.

Thoroughly analyzed the cash flow statements.

4. Discuss the most significant accounting policies adopted by the two organizations e.g., revenue recognition; inventory valuation. (Note: you should select the same two policies for both organizations.) Explain the choices made by both companies and comment on any differences that you see. Weight: 20%

Did not submit or incompletely analyzed two significant accounting policy choices.

Partially analyzed two significant accounting policy choices.

Satisfactorily analyzed two significant accounting policy choices.

Thoroughly analyzed two significant accounting policy choices.

JWI 530: Financial Management I Academic Submissions and Evaluations

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5. Clarity, writing mechanics, and formatting requirements. Weight: 10%

Multiple mechanics errors or much of the text is difficult to understand and fails to follow formatting instructions. The text does not flow.

Several mechanics errors make parts of the text difficult to understand; the text does not flow or the discussion fails to justify conclusions and assertions.

More than a few mechanics errors or text flows but lacks conciseness or clarity; assertions and conclusions are generally justified and explained.

Few mechanics errors; text flows and concisely and clearly expresses the student’s position in a manner that rationally and logically develops the topics.

JWI 530: Financial Management I Academic Submissions and Evaluations

©2014 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWMI 530 Course Guide – Summer 2014   Page 20 of 31  

Assignment 3: Management Accounting Case: West Island Products Due Week 8, Day 7 (100 points) The specific course learning outcomes associated with this assignment are:

• Apply key techniques and concepts in measuring the cost of producing goods and services. • Apply management accounting concepts to identify and process relevant financial information for

decision-making purposes. • Use technology and information resources to research issues in financial management. • Write clearly and concisely about financial management using proper writing mechanics.

Assignment: West Island Products (WIP) is a divisionalized furniture manufacturer. The divisions are autonomous segments with each division responsible for its own sales, cost of operations, and equipment acquisition. Divisional performance is evaluated annually based on ROI. Each division serves a different market in the furniture industry. Because the markets and products of the divisions are so different, there have never been any transfers between divisions. The Commercial Division of WIP, manufacturers furniture for the restaurant industry. The Commercial Division plans to introduce a new line of counter chair units featuring a cushioned seat. Roberta Katz, the Commercial Division manager, has discussed the manufacturing of the cushioned seats with Nathan Danielson of the Office Division. They both believe a cushioned seat currently made by the Office Division for use on its deluxe office stool could be modified for use on the new counter chair. Consequently, Katz asked Danielson for a price for 100-unit lots of the cushioned seats. The following conversation took place about the price to be charged for the cushioned seats. Danielson: “Roberta, we can make the necessary modifications to the cushioned seat easily. The

raw materials used in the new counter chair seat are slightly different and should cost about 10 percent more than those used in our deluxe office stool. However, the labor time should be the same because the seat fabrication process is the same. I would price the cushioned seat at our regular rate: full cost plus a 30 percent mark-up. According to my calculations, that would be $2,053 per lot of 100 seats.”

Katz: “That’s higher than I expected, Nathan. I was thinking that a good price would be your variable manufacturing cost. After all, your fixed costs will be incurred regardless of this job. In addition, I have received a quote from one of the Commercial Division’s regular suppliers to provide us with the counter seats at $1,900 per lot of 100 seats.”

Danielson: “Roberta, I am at full capacity. By making the cushioned seats for you, I have to cut my production of deluxe office stools. Thankfully, the labor time freed by not having to fabricate the frame and assemble the deluxe stool can be shifted to the production of an economy stool. I would like to sell the cushioned seats to you at my variable cost, but I have excess demand for both products. I don’t mind changing my product mix to the economy model and producing the cushioned seats for you as long as I don’t change my division’s overall profitability. Here are my standard costs for the two stools and a schedule of my manufacturing overhead.” (See Exhibits 1 and 2.)

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Katz: “I guess I see your point, Nathan, but I don’t want to price myself out of the market. I understand the need to maintain your division’s overall profitability, so let’s look at a price that utilizes variable costs, plus any net opportunity costs from the shifted production. In addition to pricing, I am also concerned about delivery. We will need the counter seats within two weeks of placing our order or we risk losing some important potential customers. Our outside supplier claims that they can meet our timing needs.”

Danielson: “Oh-oh. That lead-time is a bit short considering the production re-scheduling we need to do. I can’t promise you a lead-time shorter than four weeks at the moment.”

Katz: “There are quite a few issues that need to be addressed here, Nathan. As we have no previous experience in transferring goods between our divisions, I think we should speak with the controller at corporate headquarters before we can agree on a transfer price.”

Exhibit 1 – Office Division Standard Costs and Prices Deluxe

Office Stool Economy

Office Stool Direct materials:

Framing ................................................................................... $ 7.35 ............................................................................................................................................. $ 6.50 Cushioned seat ....................................................................... 6.40 — Molded seat (purchased) ......................................................... — ............................................................................................................................................. 6.00

Direct Labor: Frame fabrication (0.5 hrs. @ $7.50/hr.) ................................. 3.75 ............................................................................................................................................. 3.75 Cushion fabrication (0.5 hrs. @ $7.50/hr.) .............................. 3.75 ............................................................................................................................................. — Assembly (0.5 hrs. @ $7.50/hr.) .............................................. 3.75 ............................................................................................................................................. 3.75

Manufacturing overhead ($10.00/DLH) ......................................... 15.00 ............................................................................................................................................. 10.00 Total standard cost ........................................................................ $ 40.00 ............................................................................................................................................. $ 30.00 Selling price (including 30% mark-up) ........................................... $ 52.00 ............................................................................................................................................. $ 39.00

Exhibit 2 – Office Division Manufacturing Overhead Budget

Overhead Item Description Amount Supplies ..................................... Variable ................................................................................................................................ $ 370,000 Indirect labor .............................. Variable ................................................................................................................................ 375,000 Supervision ................................ Fixed ..................................................................................................................................... 150,000 Power ......................................... Variable ................................................................................................................................ 180,000 Heat and light ............................. Fixed ..................................................................................................................................... 120,000 Property tax & insurance ........... Fixed ..................................................................................................................................... 130,000 Depreciation ............................... Fixed ..................................................................................................................................... 1,100,000 Employee benefits ..................... Variable ................................................................................................................................ 575,000 Total overhead ...................................................................................................................... $ 3,000,000 Capacity in direct labor hours (DLH) .................................................................................... 300,000 Overhead rate per direct labor hour ..................................................................................... $ 10.00

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Required: Your goal is to examine this situation and recommend a course of action for Roberta Katz and Nathan Danielson.

1. In an Excel spreadsheet or neatly hand-written notes uploaded as a PDF file, a. Demonstrate your calculations of a transfer (selling) price for the cushioned seats to the

Commercial Division. You should re-examine Nathan Danielson’s calculation and also calculate one that meets Roberta Katz’s request for a price based on variable and net opportunity costs Based on information provided, determine/confirm a transfer price that meets Danielson’s objective regarding maintaining the profitability of the Office Division.

2. In a Word document, a. Discuss pros and cons of each option (i.e., in-sourcing and out-sourcing). Include in your

discussion what you believe the corporate controller is likely to recommend and why. b. Discuss how you would suggest that the company handles such transfer disputes in the

future (i.e., what policies would you suggest putting in place). Make sure your recommendation includes financial policies around setting a transfer price range. Support your suggestion by examining the advantages and disadvantages of its adoption.

Grading: Grades for this assignment will be based on answer quality of calculated/examined transfer price, logic/organization of the paper, and language and writing skills, using the following rubric:  

Assignment Points Percentage Grade 90 – 100 90% – 100% A 80 – 89 80% – 89% B 70 – 79 70% – 79% C 0 – 69 0% – 69% F

                           

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  Points: 100 Assignment 3: Management Accounting Case: West Island Products

Criteria Unacceptable 0-69% F

Fair 70-79% C

Proficient 80-89% B

Exemplary 90-100% A

1. Re-examine Nathan Danielson’s calculation of the seat cushion’s transfer (selling) price to the Commercial Division as compared to Roberta Katz’s request for a price based on variable and opportunity costs. Based on the information provided, determine/confirm a transfer price that would meet Danielson’s objective regarding the profitability of the Office Division. Weight: 50%

Did not submit or incompletely analyzed the transfer (selling) price.

Partially analyzed the transfer (selling) price.

Satisfactorily analyzed the transfer (selling) price.

Thoroughly analyzed the transfer (selling) price.

2. Discuss the pros and cons of each option (i.e., in-sourcing and out-sourcing) noting at least 2 pros and 2 cons for each. Include in your discussion what you believe the corporate controller is likely to recommend and why. Weight: 20%

Did not submit or incompletely analyzed the pro’s and con’s of each option.

Partially analyzed the pro’s and con’s of each option. Provided fewer than 2 pros and 2 cons or each option.

Satisfactorily analyzed the pro’s and con’s of each option. Provided 2 pros and 2 cons for each option.

Thoroughly analyzed the pro’s and con’s of each option. Provided more than 2 pros and 2 cons for each option.

3. How would you suggest that the company handles such transfer disputes in the future (i.e., what policies would you suggest putting in place)? Make your recommendations by writing a Transfer Price Policy and include financial policies around setting a transfer price range. Support your suggestion by examining the advantages and disadvantages of its adoption. Weight: 20%

Did not submit or incompletely analyzed recommendations for handling the transfer pricing process.

Partially analyzed recommendations for handling the transfer pricing process.

Satisfactorily analyzed recommendations for handling the transfer pricing process.

Thoroughly analyzed recommendations for handling the transfer pricing process.

4. Clarity, writing mechanics, and formatting requirements. Weight: 10%

Multiple mechanics errors or much of the text is difficult to understand and fails to follow formatting instructions. The text does not flow.

Several mechanics errors make parts of the text difficult to understand; the text does not flow or the discussion fails to justify conclusions and assertions.

More than a few mechanics errors or text flows but lacks conciseness or clarity; assertions and conclusions are generally justified and explained.

Few mechanics errors; text flows and concisely and clearly expresses the student’s position in a manner that rationally and logically develops the topics.

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Assignment 4: Management Accounting Case: Cayuga Cookies, Inc. Due Week 10, Day 7 (225 points) The specific course learning outcomes associated with this assignment are:

• Determine how capital budgeting is used in long-term financial decisions. • Apply management accounting concepts to identify and process relevant financial information for

decision-making purposes. • Use technology and information resources to research issues in financial reporting and analysis. • Write clearly and concisely about financial reporting and analysis using proper writing mechanics.

Assignment: Sophie Morgan, President of Cayuga Cookies, Inc. (CCI), was trying to decide whether to expand the company by adding a new product line. The proposal seemed likely to be profitable and adequate funds to finance it could be obtained from outside investors. CCI had long been regarded as a well-managed company. It had succeeded in keeping its present product lines up to date and had maintained a small but profitable position in a highly competitive industry. The amount of capital presently employed by the company was approximately $4,000,000, and was expected to remain at this level whether the proposal for the new product line was accepted or rejected. Net income from existing operations amounted to about $400,000 a year, and Morgan’s best forecast was that this would continue to be the income from present operations. Introduction of the new product line would require an immediate investment of $400,000 in equipment and $250,000 in additional working capital. A further investment of $100,000 in working capital would be required a year later. Sales of the new product line would be relatively low during the first year, but would increase steadily until the sixth year. After that, changing tastes and increased competition would probably begin to reduce annual sales. After eight years, the product line would probably be withdrawn from the market. At that time, the company would dispose of the equipment and liquidate the working capital. The net cash value of the steps to close the product line at that time would be about $350,000. The low initial sales volume, combined with heavy promotional outlays, would lead to heavy losses in the first two years, and no net income would be reported until the fourth year. The profit forecasts for the new product line are summarized in Exhibit 1. Morgan was concerned about the effect this project would have on CCI's overall reported profitability over the next three years. On the other hand, "eyeballing" the figures in Exhibit 1 led Morgan to guess that if the proposal were analyzed using after-tax cash flows discounted at 10 percent, the project might well show a positive net present value, and hence could be a worthwhile investment opportunity.

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Exhibit 1

Income Forecast for New Product Line

Year Forecasted Incremental Cash Flow

from Operations1

(1)

Depreciation Expense on

New Equipment2

(2)

Forecasted Incremental

Income Before Tax

(3) = (1 + 2)

Income Tax3 at 40%

(4)

Forecasted Incremental Net Income After Tax4

(5) = (3 + 4) 1 (350,000) (50,000) (400,000) 160,000 (240,000) 2 (100,000) (50,000) (150,000) 60,000 (90,000) 3 0 (50,000) (50,000) 20,000 (30,000) 4 200,000 (50,000) 150,000 (60,000) 90,000 5 500,000 (50,000) 450,000 (180,000) 270,000 6 1,000,000 (50,000) 950,000 (380,000) 570,000 7 900,000 (50,000) 850,000 (340,000) 510,000 8 600,000 (50,000) 600,000 (240,000) 360,000

Notes:

1. In this column, numbers in parentheses indicate cash outflow. 2. In this column, numbers in parentheses indicate an expense (i.e., something that reduces profits).

For the purpose of this analysis, we may use these depreciation figures for the determination of both Net Income and Income Tax that will be paid to the government.

3. When forecasted incremental income before taxes is negative, the firm is entitled to a tax rebate at 40%, either from taxes paid in previous years or from taxes currently due on other company operations. Therefore, in this column, numbers in parentheses indicate taxes paid to the government and numbers not in parentheses indicates tax rebates received from the government.

4. In this column, numbers in parentheses indicate a net loss produced by the new product line and numbers not in parentheses indicate a net profit made by this new product line.

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Required: In an Excel spreadsheet or neatly hand-written notes uploaded as a PDF file,

1. Calculate the nominal and discounted payback periods for this proposed project. 2. Calculate the net present value and internal rate of return of the proposed project.

In a Word document,

1. Referring to your analysis in parts (1) and (2), what is your recommendation regarding the

proposed project under the following three scenarios (note: comment on any similarities or differences in your recommendations across these three scenarios):

a. If CCI was a private company, owned entirety by Sophie Morgan? b. If CCI was a publicly owned company, with shares owned by a large number of small

investors, and Morgan purely a salaried administrator? c. If CCI was a wholly owned subsidiary of a much larger company and Morgan expected to

be a candidate to succeed one of the parent company's top executives who will retire from the company in about two years from now?

Grading: Grading for this assignment will be based on answer quality, logic/organization of the paper, and language and writing skills, using the following rubric:

Assignment Points Percentage Grade 202 – 225 90% – 100% A 180 – 201 80% – 89% B 157 – 179 70% – 79% C

0 – 156 0% – 69% F  

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Points: 225 Assignment 4: Management Accounting Case: Cayuga Cookies, Inc.

Criteria Unacceptable 0-69% F

Fair 70-79% C

Proficient 80-89% B

Exemplary 90-100% A

1. Calculate the nominal and discounted payback periods for this proposed project. Weight: 10%

Did not submit or incompletely analyzed the nominal and discounted payback periods for this proposed project.

Partially analyzed the nominal and discounted payback periods for this proposed project.

Satisfactorily analyzed the nominal and discounted payback periods for this proposed project.

Thoroughly analyzed the nominal and discounted payback periods for this proposed project.

2. Calculate the net present value and internal rate of return of the proposed project. Weight: 50%

Did not submit or incompletely analyzed the net present value and internal rate of return of the proposed project.

Partially analyzed the net present value and internal rate of return of the proposed project.

Satisfactorily analyzed the net present value and internal rate of return of the proposed project.

Thoroughly analyzed the net present value and internal rate of return of the proposed project.

3. Using the metrics calculated in Parts (1) and (2), offer a detailed recommendation on whether or not CCI should pursue this proposed project under three different organizational scenarios (as described in the requirements). Discuss and explain any similarities or differences between these recommendations. Weight: 30%

Did not submit or incompletely analyzed whether or not the proposed project should be pursued under three organizational scenarios.

Partially analyzed whether or not the proposed project should be pursued under three organizational scenarios.

Satisfactorily analyzed whether or not the proposed project should be pursued under three organizational scenarios.

Thoroughly analyzed whether or not the proposed project should be pursued under three organizational scenarios.

4. Clarity, writing mechanics, and formatting requirements. Weight: 10%

Multiple mechanics errors or much of the text is difficult to understand and fails to follow formatting instructions. The text does not flow.

Several mechanics errors make parts of the text difficult to understand; the text does not flow or the discussion fails to justify conclusions and assertions.

More than a few mechanics errors or text flows but lacks conciseness or clarity; assertions and conclusions are generally justified and explained.

Few mechanics errors; text flows and concisely and clearly expresses the student’s position in a manner that rationally and logically develops the topics.

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WEEKLY DISCUSSION QUESTION EXPECTATIONS A central part of the benefit of earning an MBA degree in an Executive MBA program comes from the incredible peer-to-peer learning opportunities that are possible when a group of experienced managers and professionals extend their learning together. Discussion questions are an integral element of the online learning experience. They support higher-level learning through the application and analysis of concepts, evaluation of other points of view, independent research, synthesis of information, and linking information to personal experiences and/or goals.

The practice of referencing ideas that are not one’s own is an important part of constructing high quality discussion question responses. Referring to a source often distinguishes “personal” versus “informed” opinions. Students are highly encouraged to use outside resources when appropriate. Regularly utilizing research and outside sources supports the powerful habit of making decisions based on the synthesis and evaluation of available, relevant information. Organizations benefit from individuals willing and able to analyze situations comprehensively and critically. When incorporating resources into the response, citations are necessary as they allow others to locate the resource(s). All citations may be done informally by providing a link or referencing the author and title. Remember, readers must be able to locate the resource by referring to the citation.

Discussion Question Grading Criteria

Each week students are required to answer one discussion question and respond to peer posts. Grades are assessed on both the quality and timeliness of posts. Use the following criteria to guide and evaluate your discussion question responses.

Criteria 1: Original Post, initial, major response to a discussion question (15 points)

• Author an original post by midnight Wednesday, day 3 • Responses are logical, clear, and complete. • Opinions and assertions are well-supported with application of course material, professional

experience, and outside resources as appropriate. • Sources and references are cited in a manner that allows others to locate the resource. For

example, “Jack Welch, Winning” would be an acceptable way to informally cite a text. An example of an informal citation for a digital resource would be to include the URL such as; http://www.website.com.

• Responses include a thought-provoking question or comment designed to evoke meaningful participation from peers.

• Posts are completed on time.

Criteria 2: Respond to fellow students (15 points) • Author posts in response to the main posts of at least two classmates by midnight Sunday,

day 7. • Responses add value to peers’ posts and community learning. • Responses are candid, clarify ideas, and challenge assumptions and/or offer alternative

perspectives. • Responses include a thought-provoking question or comment designed to evoke meaningful

participation from peers.

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• Posts are completed on time.

WEEKLY LEARNING JOURNAL EXPECTATIONS

Reflective learning is an active process and a form of internal inquiry that extends the relevance of learning and deepens our understanding of practices to our work and everyday lives. As such, a learning journal entry is required at the end of most weeks. Use this opportunity to reflect on attempts to improve or plans to improve your professional practices relative to course learning. Explore your understanding, assess your assumptions, develop and refine your ideas and beliefs, and improve your daily practices. Learning Journal Grading Criteria Use the following criteria to guide and evaluate your learning journal entries. Criteria 1: One Learning Journal Entry (5 points)

• Author a reflective post by midnight Sunday, day 7. • Reflective responses discuss how the week’s learning and practice have impacted their

understanding of practices and assumptions. • Reflective responses describe changes made to their daily practices or plans to do so and

the implication of those changes. • Posts are completed on time. • This is a pass or fail activity. A post that fits the criteria results in 5 points. A post that does

not fit the criteria, or no posting at all, results in 0 points.

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ACADEMIC SUBMISSIONS AND EVALUATIONS Students in the Jack Welch Management Institute Executive MBA program have, on average, 15 years of organizational experience prior to starting the program. For many, it has been some time since they were students and there are aspects of being a student that may no longer be familiar or intuitive. Specifically, the topics of preparing academic submissions and interpreting academic evaluations may require some discussion in order to be fully understood. ACADEMIC SUBMISSIONS: Content & Form The most important characteristic of any work our students submit for evaluation is content. The professors who grade our students’ work will be guided by questions such as: does the submission address the required question(s) for the assignment; are the observations/analyses/calculations included in the submission appropriate and contribute to the case or position the student is making; does the submission make appropriate use of sources to establish or reinforce relevant points or conclusions? Ultimately, the time and effort students devote to composing a submission for academic evaluation should be focused on ensuring that the submission content is substantive and squarely addresses the requirements for the submission. With respect to assembling this content, it is important to consider the originality of the work submitted. For most of our participants, the most recent frame of reference they have developed for preparing and developing reports has been in a business setting. In that setting, the quality of the content of a business report is judged primarily on its usefulness. A report that can be very useful for a business purpose may or may not contain very much original work of the author. In contrast, academic writing and submissions are not intended to achieve an organizational goal but to be part of achieving a student’s learning goal. Academic submissions are part of a process that includes learning, assessment, and credentialing. For these reasons, the work submitted by a student for evaluation must be substantially the original work of that student. In other words, a critical basis on which the content of an academic submission is evaluated is originality. Of course, academic writing regularly references the work of other authors. These sorts of citations can demonstrate that a paper is “well researched”. The most common opportunities to reference other works in an academic paper come when: a specific fact is being raised and the source of that information is provided for confirmation; a quote from a relevant source or individual is helpful in making a point; a reference is made to demonstrate differences in opinion on some position described in the paper. It should go without saying that the use of any material written by others requires the author of the submission to use appropriate referencing and citation formats. Failing to cite the sources of material written by others is plagiarism and a breach of academic integrity. However, even when properly cited, students using material written by others must do so in a manner that does not dilute the originality of their submission. While no specific formula or ratio will be provided to our students regarding the proportion of any submitted work that is originally composed by the student versus quoted from other sources, students should appreciate that the large majority of any work they submit for evaluation is expected to be original work composed by the student.

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The other characteristic of any work submitted for academic evaluation that will be considered is the form of the submission. While the issues of content and originality discussed above are more important characteristics for a submission, ensuring that any submission is well written, free of grammatical or spelling mistakes, neatly and consistently formatted, and uses proper citation formats will help ensure that a student can be eligible for a higher grade. Certainly, the evaluation of even the most compelling content will be impacted negatively if the form of the presentation is poor. If a student is ever unsure of the expectations for the content or form of an academic submission, the very first line of inquiry to answer these questions is the course professor. There is no better source than the course professor and all of the faculty members at JWMI are keen and sincerely interested in supporting our students at all times.