For Professor Ryan: Class Participation
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wk2_dq1.docxWEEK TWO - DISCUSSION QUESTION # 1
posted by Linda Moore
Aug 19, 2014, 12:52 AM
· Comment on Aug 26, 2014, 6:43 AM
Re: WEEK TWO - DISCUSSION QUESTION # 1
Aug 26, 2014, 6:43 AM
A company with a high quality of earnings rating is one that provides full and transparent financial information. This has become important in the light of recent financial scandals such as Enron. Some companies use different accounting methods which makes it difficult for potential investors to accurately compare performance across organizations. Other companies, such as Cisco use Pro Forma statements which excludes certain accounting factors. A company with a high quality of earnings rating makes it easier for investors to understand the real performance of a company.
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Accounting tools for business decision making (4th ed.). : John Wiley & Sons Inc.
· Comment on Aug 27, 2014, 2:24 AM
Re: WEEK TWO - DISCUSSION QUESTION # 1
posted by Linda Moore
Aug 27, 2014, 2:24 AM
Andrew - It is important to keep our data true and reality based. By making sure we give our readers the truth, we can be counted on as a business and the decisions made can be made with confidence. Also we want to know that the sales data is not inflated, and it can be repeated month after month. For example, if we sell a piece of machinery in a month and have a huge gain, this has to be explained. We cannot assume this is a normal state of affairs, because then our readers will think we have higher income, when this is actually an extraordinary item.
· Comment on Aug 27, 2014, 12:53 PM
Re: WEEK TWO - DISCUSSION QUESTION # 1
posted by ANDREW WAREING
Aug 27, 2014, 12:53 PM
The company I work for was de-listed several years ago due to poor financial reporting by the parent company. It took many years and expensive auditors to get re-listed. Since that time the company has invested heavily in financial control and audit procedures which everybody in the company is responsible for. Even though this company actually did nothing wrong the lack of confidence and the impact to revenue that came about as a direct result was considerable.
· Comment on Aug 26, 2014, 8:16 AM
Anna: WEEK TWO - DISCUSSION QUESTION # 1
posted by ANNA WEBB
Aug 26, 2014, 8:16 AM
Readers of financial statements require complete and comprehensive information for analysis. A company with a high quality of earnings will provide such. Factors that may affect (reduce) quality of earnings include straying from generally accepted accounting procedures, using pro forma earnings as sustainable income to look good, and using improper recognition by offering customers huge discounts to show good earnings in one period yet results in lesser earnings in subsequent periods. It is important to understand these factors because managers may unknowingly violate SEC guidelines in their efforts to make the numbers look good.
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Accounting: Tools for business decision making (4th ed.). NJ: John Wiley & Sons
· Comment on Aug 26, 2014, 12:38 PM
Re: WEEK TWO - DISCUSSION QUESTION # 1
posted by Mark Pollack
Aug 26, 2014, 12:38 PM
High Quality of earnings defines a company that is fully transparent and doesn't intentionally misguide others with their dealings. This is important idea to understand because mush like the other protective devices we have as investors, this is another arrow in the quiver. The government cant protect us from bad investing, but they can put resources in place to give us the best and most accurate data.
This process can be affected by the type of accounting used at the organization. The book discussed the difference between FIFO and LIFO and how that one process could change results by 26%. As an investor or employee accountant, these concepts are important to understand and follow guidelines.
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Accounting: Tools for business decision making (4th ed.). NJ: John Wiley & Sons
· Comment on Aug 26, 2014, 3:40 PM
Re: WEEK TWO - DISCUSSION QUESTION # 1
posted by DONALD DENNIS
Aug 26, 2014, 3:40 PM
High quality of earnings are the amount of earnings gained based on higher product sales, or lower product costs, rather than earnings gained from inflation.
Gains due to inflation = low quality
Gains due to increased sales or lower costs = high quality
This is important to understand because it gives a fair aspect of the companies business, rather than looking good on paper due to external forces. These earnings and their quality measures the value of the company in the current as well as the future state of performance.
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Accounting: Tools for business decision making (4th ed.). NJ: John Wiley & Sons
· Comment on Aug 28, 2014, 6:36 PM
Re: WEEK TWO - DISCUSSION QUESTION # 1
posted by JASON YORGENSEN
Aug 28, 2014, 6:36 PM
Class,
I wonder how much inflation has to account for profits in businesses. I can imagine that a business will use any profits as a way to leverage success within the business. I think that businesses should be held accountable for ensure they are showing there profits in an appropriate way. I think that inflation should never be used to help show business growth.
Jason Yorgensen
· Comment on Aug 26, 2014, 9:40 PM
posted by patricia surber
Aug 26, 2014, 9:40 PM
The definition of high quality of earnings is presenting users clear and accurate information in the financial statements so that they users are not confused or thinking that are being mislead in any way. Investors and creditors wants information that is reliable so a company needs to make sure that they do not have information in the financial statement that in questionable. If the investors and creditors think that the information is not accurate then they will lose confident in the financial statements and the company will lose capital.
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2011). Accounting: Tools for business decision making (4th ed.). NJ: John Wiley & Sons
· Comment on Aug 27, 2014, 2:27 AM
posted by Linda Moore
Aug 27, 2014, 2:27 AM
Patricia - very true; we have to be clear and thorough regarding our data; so that decisions can be based on the real information. If we inflate sales, for example, we may attract more investors temporarily. However, we will lose them in the long run when they realize this figure is not repeatable, and was artificially inflated. Confidence from the public, banks and investors is very important, and we want to keep this reputation for our organization.
· Comment on Aug 27, 2014, 8:34 PM
posted by patricia surber
Aug 27, 2014, 8:34 PM
In any situation, if a person is honest they get respect and trust from the listener because they were truthful even if they speak of their flaws. A business is not always going to make a profit so high that every creditor or investor would not even look at the financial statements. A business earns respect and trust for being honest. The only reason that a business would wise to be dishonest is if they do not think that the creditors or investors will not be impressed with their financial statements. As soon as a business is caught being dishonest then the creditors and investors will never want to do business with them again so why take the risk.
· Comment on Aug 28, 2014, 10:35 AM
posted by JASON YORGENSEN
Aug 28, 2014, 10:35 AM
Class,
I agree with you a lot of can be understood by a person when talking to them. I also believe thst a lot can be understtod by a businees from the CEO and other leaders within the company.The business will take direction from the leadership. There decisions will effect the people who get hired in the company. Also it will effect how it operates on a smaller level day to day. I believe that financial sheets are important but knowing and understanding the leadership is also as important. The last thing i would look into is customer feedback. This can demonstrate how the message is being filtered from leadership down.
Jason Yorgensen
· Comment on Aug 27, 2014, 5:04 AM
Re: WEEK TWO - DISCUSSION QUESTION # 1
posted by Mark Pollack
Aug 27, 2014, 5:04 AM
I went to the SEC website and there is a tremendous amount of information. I wanted to see what happens when High Quality of Earning is broken and litigation takes place. If you go to http://www.sec.gov/litigation/litreleases.shtml you can see different cases and the outcomes. I read a few of the court proceedings and was very interested on the details uncovered during investigations.You should check out the SEC website if you haven't yet. It was my first time there and very relevant to what we are learning!
· Comment on Aug 27, 2014, 2:33 PM
Re: WEEK TWO - DISCUSSION QUESTION # 1
posted by TIFFANY MINGO
Aug 27, 2014, 2:33 PM
High quality of earnings for a company is when they provide and keep financial records of processes that will affect the overall revenue. In the book it states that the company is transparent which means they have nothing to hide and provide reliable and significant information about their business practices. This is important because it helps them gain a good reputation and potentially more business opportunities because investors would likely be interested in such a trustworthy company. It is also related to amount of earnings they make due to cost and sales and not necessarily the market they are in.
· Comment on Aug 27, 2014, 2:43 PM
Re: WEEK TWO - DISCUSSION QUESTION # 1
posted by JASON YORGENSEN
Aug 27, 2014, 2:43 PM
Class,
High quality earnings are earnings that gained with the largest possible margins. These earnings are typically achieved when the sales of a product go up and the costs go down. To help support these earnings a business will ensure there is transparency within there calculation. This will show that a business is thriving and it is continuing to grow. A business can grow when earnings are not high quality. This growth can be seen through inflation or if the good is linked to a market that is growing. Many businesses want to have a business grow through low costs and larger sales. This will allow the business to gain money that will allow them to save for times that are difficult.
Jason Yorgensen
