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Discussion Question 1:
Based on what you know about accounting, what role do you see it playing in business operations?
How dependent do you think a business is on its accounting department? Why?
Accounting plays many important roles especially when it comes to

business operations. Accounting is mainly responsible for almost all of the
financial needs of the business. It keeps track of all spending, profit and
loss that the company inquires.
The business is very dependent on it accounting department. Accounting
department is responsible for monitoring more than the cash flow, it also
works closely with IRS, government to make sure that everything is being
done correctly (payroll, taxes, etc). The accounting side of the business can
be considered to be the lungs of the company next to the heart.
Why are ethics so important in the field of accounting?
Wow where should I start? First of all the when dealing with accounting
there must be consistent clear communication between the business and
the accounting department. Honesty is always the best policy. Good
ethnics keeps the business running at its top level. The company's
personal information, employee information could be given to the wrong
hands and it can destroy the company. A good accounting department
has way too much to lose and they will not want to risk a horrible reputation
in the field.
Another response
People bring all their financial information to an accountant who in turn looks through
all of it with a fine tooth comb. People need to know that they can trust this person
with all of their personal information. Most licensed professionals swear to a code of
ethics, whether they follow them or not is up to that professional. Unfortunately
there are many out there that do not and they ruin the trust for other professionals.
Accountants really need to have the trust of their clients being that they work with
peoples taxes and finances and need much information from their clients.
Another response
Ethics are important in the field of accounting for

several reasons. Ethics mean different things to
differnt depending on the role of the accountant.
If an accountant is hired by an individual or a
business, that accountant is trusted with the
finances of the person or business. The
accountant is trusted to give an honest account
of finances and not to defraud or jeopardize that
individuals or companies relationship with the
government, creditors of financiers. Individuals
and businesses also trust the ethics of
accountants insofar that they do not disclose
their information to those that do not have a
right to it. Finally, In the accounting profession,
much like many other professional service
professions, an accountants reputation is the
continuing source of employment. If they are
knows to have a bad or even flexible ethical code
then they can develop a bad reputation and
experience a loss of business.
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ACC 291 Final Exam Guide (New)
Based on what you know about accounting, what role

do you see it playing in business operations? How
dependent do you think a business is on its accounting
department? Why?
Financial Statements
Today, I will be describing a balance sheet, income

statement, retained earnings statement, and statement
of cash flows and how a company uses these financial
statements as a tool to make future decisions for the
company.
Balance Sheet
A balance sheet a statement sheet that reports the
companys financial balances of the business. This
sheet includes the companys total of assets and
liabilities. It is used for all three types of business sole
proprietorship, business partnership and corporate
business companys. Creditors rely on this financial
sheet to determine if the company will be able to
repay.
Income Statement
An Income Statement is a financial statement that
shows the companys profit and losses. It basically
shows all the companys gains and losses that were
made during a period of time. After the company
deducts the expenses from the revenue then you will
get a total net income. This is a great statement to use
especially because this will show investors how much
net income is the company bringing in, or how
financially stable the company truly is.
Retained Earnings Statements
Retained Earnings Statements reports the changes to
the retained earnings (net income in a corporation)
during a certain time period. This financial statement
shows dividends, profits and loses. Investors and
Lenders monitor the retained Earning Statements
especially when it comes to monitoring dividends.
Some invest use this tool to see if the company is
paying high/low dividends. Retained Earnings
Statement is part of the balance sheet under
Stockholders equity.
Statement of Cash Flow

Statement of Cash Flows provides information
regarding the companys cash receipts. This statement
gives a detailed account of the operating, investing and
financial activities of the company. It also allows
investors a chance to observe how financially stable
the company is so that they can make a choice if they
want to take a risk on investing into the company. Also
the accounting department needs this statement in
order to see if the company has enough money for
payroll uses.
All four of these financial statements are all extremely
important tools to use in the business. Another
statement that was not listed but is often used is called
comparative statements. Comparative statement gives
a side by side comparison of the financial statements
above.
Reference
http:yourdictionary.com /accounting_statements.org
Retrieved 1/28/10
Thomas, Y. 2005-08-27 Accounting 101 pg. 52
Statements
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ACC 291 Final Exam Guide 1

we have another New set of Final Exam Guide which could be found
on this link
Financial Statements
Compare and contrast sole proprietorships, partnerships, and

corporations.
Sole proprietorships means that a business that owned by one person.
That includes and not limited to all profits and losses, debts and
unlimited liability, all will come from the solely one owner and not a
group or in this case a partner or co-owner etc. Partnerships are seen
much differently than sole proprietorships. Partnerships is a business
that owned by more that one person/s. This is the number one
difference from being a sole proprietorship or sole owner. Basically,
two or more people come together and split the cost, debts, and
liability. Corporations is an business that has separate entity owned
by stockholders. The huge difference between corporations and the
other two is that they are owned by stockholders. Stockholders make
decisions that is first best for their company, secondly the company
that they have together.
Why would a entrepreneur want to choose one over the other?
An Entrepreneur is a person that wants to start a business with their
vision and have more power of the decision making. The best choice
for an entrepreneur is to choose sole proprietorship out of all the
three choices. The first and most important reason is because it is
much easier to start a business as sole proprietorships. Sole
proprietorship takes all the profit that and doesn't have to split it
between any other owners or corporations.
If I was to start a new business which one would I choose?
In this case it depends on the type of business. My case I will be
opening a hair salon and I would prefer sole partnerships. i choose
that because I want to be in control and I don't want to split the profit.
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ACC 291 Final Exam Guide

ACC 291 Final Exam Study Guide
Question 207
On January 1, a machine with a useful life of five years and a

residual value of $40,000 was purchased for $120,000. What is the
depreciation expense for year 2 under the double-declining-balance
method of depreciation? Current assets
When it comes to a company's classified balance sheets you
will find current assets sheet. Current assets is cash or cash
equilivants that the company will use. What you will find on a
current asset sheet is Cash and equilvants, Short term
investments, Accounts receivables, and other assets.
Long-term investments
Long-term investments when it comes to balance sheet are
investments that the company intends to hold onto. The
investments that are listed are as follows, bonds, stocks and
cash. You will also find short-term investments in the company.
The difference between short-term and long-term investments
is that the short-term investments will be sold and the long-term
investments normally the company will choose to keep it.
Property, plant, and equipment
Property, plant, and equipment are what the company calls
"fixed assets". Property, plant and equipment are assets that
can not be easily converted into cash. These are basically
items such as company car (used to deliver products),
computers and copier machine, and freezer used for
restaurants.
Intangible assets
Intangible assets are non-monetary items that can not be seen
or touched. For example, trademarks, copywriters, patents and
goodwill. Intangible assets are normally listed in the separate
assets.
references
http://www.investopedia.com/terms/i/intangibleasset.asp
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ACC 291 Week 1 Assignment Comparative Analysis Problem

Purpose of Assignment The purpose of this assignment
is to help you understand the basics of financial
statement analysis using financial ratios on the assets
section of the balance sheet, data interpretation, and
how ratios are used to gain insight For Discussion
Question 1: Post your response to the following:
When reviewing a financial report, why should
information be reliable, relevant, consistent, and
comparable?
In other words, why are these accounting
characteristics important?
What kinds of problems could be created if a
financial report is not reliable, relevant, consistent, or
comparable?
It is extremely vital that the company has accurate
financial reporting. This information determines
whether or not to invest in your company's stock. This
information will help them decide if it is profitable to
invest or not to invest in your company based what is
in your financial history. The information must be
relevant because it will help the company, investors
and lenders make decisions. It helps answer questions
like, "how stable is your company", or "what future
does this company have". The information should be
reliable. In other words the information that is reported
must be able to be verified, backed up with truthful
information. Comparable occurs when different
companies use the same accounting principles. This
makes it much easier to compare results between
company's. Consistency happens when the company
uses the same accounting method every year. When
the financial statements are reported each year, it
paints a financial picture of where the company is
headed now and in the future.
What kinds of problems will occur if the information

does not include these things?
Falsified or manipulated statements doesn't only effect

the company but it also to name a few effects the
lenders, creditors, investor's, etc. This will result in the
company not having a faithful representation.
Another response
The main objective of generating financial information
is providing useful information that can be used in
decision-making... only if this information is relevant,
reliable, comparable, and consistent, can it be useful
for decision makers. (Kieso, 2003).
Relevance gives a basis for making decisions that will
impact the future of a business, and it confirms and
corrects expectations from the past. If the information
makes a difference in making decisions, it is relevant.
Reliability means that the information can be depended
on and it can be proven to be free of error, and the
information is factual. The information cannot favor
one set of users over another. CPAs audit financial
statements to ensure reliability.
Comparability is also an important characteristic of
financial reporting... this happens when different
businesses use similar accounting principles, making it
much easier for one to compare companies, and the
method used in a business must be disclosed to the
users of the information to enable the users to convert
the information as accurately as possible.
Consistency simply means that the business uses the
same accounting principles on a yearly basis...
consistently. This helps decision makers analyze a
company's trends. A company can change the
methods used if they can justify the change, showing
that the new method is more useful for analysis. If the
method is changed, it must be disclosed in the notes
that go with the statements to show users a lack of
consistency.
These characteristics are very important to a
business... decisions cannot be made based on
incorrect information, and everyone involved in a
business venture of any kind, whether they be
management, owners, or investors and creditors, as
well as consumers, etc. must be able to rely on the
financial information provided in order to make any
type of decision. Without this information, it is difficult
to imagine any business succeeding, even for a short
time.
Examples of problems that could occur without reliable,
relevant, consistent, or comparable information
includes not being able to get loans or investments;
management could make decisions that cause
irreparable damage to entire operations, consumers
could easily lose faith and cut their ties... the
possibilities are endless for companies that lack these
qualities in their financial reporting.
DQ2
For Discussion Question 2: Post your response to
the following:
How does information from financial reports
influence business decisions?
Why is it important for business managers to
understand the information found on financial reports?
How does information from financial reports influence

business decisions?
Once the information from the financial reports have

been posted then a team will review the
company's financial history to see what decision were
profitable or not. The decisions that were made
previous to the financial reports being posted will show
which way the company needs to go to continue to
remain #1.
Why is it important for business managers to

understand the information found on financial reports?
IT is extremely important for he business managers to

understand the information found on the financial
reports. The business managers are going to be the
people that are going to make decisions for the
company. They need to know how to interpret the
financial reports and come up with different strategies
that will continue to make the company money.
Another response
The information from financial reports influences
business decisions because it shows where the
company stands. The managers use the information
from the financial report compared to the current year
from the previous year, whether the company growths
or losses. It is very important for business managers to
understand the information found on financial reports
because the information from the financial reports
enables business managers to see how to improve and
keep the business afloat. It also gives business
managers an insight what came in and went out and
the total operating cost of the company as well as
cutting cost in a certain areas. The information from
the financial reports helps the manager manages the
business accurately.
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ACC 291 Week 1 Discussion Question 1

How would you describe the entries to record the disposition of
accounts receivables?
Axia College Material

Appendix B
Cash Management Matrix
Directions: Using the matrix, list how each of the principles of

internal control works, and give an example for each. Next, list how
each of the principles of cash management works, and give an
example for each.
Principles of Internal Control How it Works Example
Establishment of responsibility Happens when the company My job, Our

assigns one person to be in is the only o
control of a specific job or a restocking
have authority to make Sales team to
decisions. the customer
Segregation of duties This is when the company has A church- Yo

more than one person to who count th
control a task or job then you hav
writes down
was received
Documentation procedures Evidence or proof of all My job we d

company transactions shingles to o
we make the
to leaving an
customer sig
Delivery fo
Physical, mechanical, and Allows the company to control Our job has
electronic controls assets through physical or Cisco and th
electronic based systems or employees b
programs. lunches. Als
long the CSR
or working.
Physical con
security gua
identification
Independent internal Any information that can be My job has a

verification reviewed , compare, and our inventor
reconciliation by a employee someone say
shorted on th
go back and
inventory an
numbers in
physical cou
the numbers
Other controls Bonding of employees, Our compan

company protects against recently beca
abuse of assets. the company
card for pers
not work rel
Principles of Cash How it Works Example

Management
Invest idle cash Occurs when any My fathers

excess funds or cash company makes
needs to be invested, wise investments
and it turns around
in his favor
Plan the timing of A company wants to During the

major expenditures make sure that there recession profits
is money set aside dropped lower than
for major cash expected so some
needs companies pulled
from these funds
Delay payment of When a company Ok, when times are

liabilities pays the bills at an tough at home and
appropriate time not bills are due I
late and not too organize the bills by
soon. which bills needs to
be paid the soonest,
because if I pay the
bills too early I will
cut off my excess
funds that could be
used for something
else
Keep inventory levels Happens when a Sees Chocolate

low company keeps the factory has to make
inventory low so sure that they are
that it will continue not over producing
to bring profit or making too much
or else the sit and
the company will
lose money
Increase the speed of Money that is owe When a customer

collection on to the company by places a order for a
receivables other people or product and has not
customers is money paid yet, the
that can not be company can not
counted towards the count the money as
companies funds theirs until it is
received.
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How are bad debts accounted for under the direct write-off method?
Internal Cash Control

By
Kamilah Crooms
Accounting 220
Jess Stern
Internal Cash Control
The accounting department receives from sales invoices once a

month. Most of the information is missing on the invoices.
The accounting department relies on each department within the

company and all the information has to be submitted completely and
in a timely matter. In this scenario most of the information that has
been turned in has information that is missing on the invoices. I
would say that the internal controls that are not being followed are
Documentation procedures. Company documentation is very
important and must be turned in complete. These documents show
proof of delivery or proof of services to the customer. Any incomplete
documents can be very costly and can cause a delay in the company
being paid for any services rendered. For example, one of the
requirements in a transportation department is to make sure that the
drivers verify the load and sign for the load prior to leaving the yard,
these documents says that the load left in good condition. Well, it so
happened that we allowed a driver to leave without signing the
paperwork. This caused a delay in accounting because we had to get
signatures from the driver and the customer which took a month later
to complete.
Rob, Sue, and Bob use the same cash register at the donut shop.
Rob, Sue, and Bob all use one register has often turned into not the
best decision ideally for the company. It can increase the risk for the
drawer being short and it will be hard for the company to find out
which employee or employees had shorted the register. The internal
controls that are not being followed are Establishment of
responsibility. Happens when the company assigns one person to be
in control of a specific job or have authority to make decisions (pg
161 Internal Control and Cash). When the company signs one person
to be responsible over the register it will allow the company to hold
that one person responsible for any shortages.
Sam does the ordering of materials at the beginning of every month
and pays the bill.
In this case Sam is ordering materials and paying all the bills. This
process is actually known as related activities (pg 162 Internal
Control and Cash). This occurs when one person is doing two
different responsibilities just like Sam. The internal Control that is
not being applied is Segregation of Duties. It is better for the two to
be a separate responsibility because it will minimize the billing
errors.
Bank reconciliations are done by the person who is responsible for

all cash responsibilities.
The problem with this scenario is that the same person is responsible
for all cash responsibilities, why is this person doing the only one that
does this job? Having one person take on such a major responsibility
increases the chances of embezzlement and thief. The internal control
that is not being applied is rotating employees duties and requiring
employees to take vacations. One person should not be completely in
control of one job, the company should encourage vacations or
switching positions to prevent incorrect handling of the companys
valuable information.
New checks came in and are left on the shelf with other supplies.
This is a tough scenario because there are all sorts of internal

controls that are not being used in this case. I would say in my
opinion that the first internal control that comes to my mind that is
not being applied is bonding of employees who handle cash.
Every employee that works near or with expensive equipment should

be held reliable or responsible for the companys assets. Bonding of
employees who handle cash protects the company by insuring that the
employee is or isnt a risky applicant (background checks) or
reassuring that the employee that they will be prosecuted to the fullest
extinct if they are found guilty of thief. For example, I had worked at
Mc Donalds and
there were my shift managers and one employee that were caught
with stealing money from the company. This situation had happen
very differently. The armor truck dropped off a deposit that belonged
to another company (armors mistake) but they signed it. Those
employees thought that nothing was going to be traced back to them
but the little did they know, all evidence traced back to them. They
each received jail time, and felony records.
Everyone has access to the computer system and the last audit was
seven years ago by the former accountant
This scenario has two things that are going on at the same time. I
will first start off with the computer system and how everyone has
access to the computer. The internal control that is not being applied
is Physical, Mechanical, and Electronic Controls. This allows the
company to control assets through physical or electronic based
systems or programs. It is extremely important for a company to
invest in computer or informational protection for the company and
for their employees. Todays technology age most companies are
investing in a computerized program. This will help protect from
internal errors and external protection. For example, all companies
invest in a virus protection this will ensure that the companys
information is protected and not in the wrong hands.
Invest idle cash
Invest idle cash occurs when any excess funds or cash needs to be
invested. The money should be highly invest and risk free. For
example, a major company should make investments with their assets
into profitably investments and risk free.
Plan the timing of major expenditures
This is when a company sets aside money for major cash needs. We
live in a world that things happen daily. A good company would set
aside emergency funds. For example, during a terrible thunderstorm,
the winds practically ripped off the roofing shingles off a commercial
business. The company will be able to use the money for emergency.
Delay payment of liabilities
Delay payment of liabilities is when a company pays bills not too
soon and not late. This allows the company to have money available
for bills that that really need to be paid allowing excess funds to be
free for other uses.
Keep inventory levels low
This occurs when the company keeps the inventory low so that it will
bring in more profits. For example, if the managers at a fast-food
over plan and fix too many hamburgers and the customers dont buy
it, then the food will go bad and the company will lose profit.
Increase the speed of collection on receivables

This occurs when money is owed to the company, the company cannot
claim these until the funds have been received. Some companies offer
incentives to encourage customers to pay early or on time. For
example, my job encourages their customers by letting them know
that there will be a price increase on or after a certain date and this
really works because the customers want to pay at a lower price.
References:
http:yourdictionary.com /accounting_statements.org Retrieved

2/13/2010
Thomas, Y. 2005-08-27 Accounting 101 pg. 52 Statements
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ACC 291 Week 1 Wileyplus Assignment E8-4, E8-11, BYP8-
1, and BYP8-2 (New)

Wiley Plus Assignment Week 1
E8-4, E8-11, BYP8-1, and BYP8-2 in MS Excel
Exercise 8-4 Wainwright Company
Exercise 8-11 Fedex Corporation

Income statement is a financial statement that shows how much money is coming
from product sales and services prior to any expenses being taken out. Both internal
and external users such as managers and investors are able to access this. For
example, if a investor wanted to see if the company made money or lost money they
would use this financial statement report.
Balance sheet shows what condition the company is currently in. whereas the other
financial statements only came monthly or annually. For example, what if the
management planning team wanted to see the company's current assets, ownership
equity and liabilities? All they have to do is run the balance sheet report.
CVP income statement or Cost Volume statement reports or monitors the effects of
the changes in cost and volume when it comes to the company profits. For example,
I work at a manufacturing plant for roofing shingles. The CVP analyst studies the cost
which includes but not limited too, manufacturing, material, labor cost. This financial
statement report would help the management team budget the cost of manufacturing
goods.
Statement of cash flow tracks the movement of cash coming in or out of the
business. This financial statement will show if the company made cash or not, or if
the net income increased or decreased. For example, the owner or the management
department will use this to determine if the company has earned enough money to be
able to for any expenses.
Retained earnings statements is a percentage that is kept by the company to be
reinvested or to be used to pay debts. For example, if a company was looking to
expand their business by purchasing top of the line equipment they can use this
statement to see how much money the company has put away.
References:
http://www.investopedia.com/terms/r/retainedearnings.asphttp://financial- Retrieved
2/18/2010
statements.suite101.com/article.cfm/financial_statements_the_p_l. Retrieved
2/18/2010
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ACC 291 Week 2 - Fordyce and Atwater (New)

P10-5A
Fordyce Electronics issues a $400,000, 8%, 10-year mortgage note

on December 31, 2007. The proceeds from the note are to be used in
financing a new research laboratory. The terms of the note provide
for semiannualinstallment payments, exclusive of real estate taxes
and insurance, of $29,433. Payments are due June 30 and December
31. 7 How should mixed costs be classified in CVP analysis? What
approach is used to effect the appropriate classification?
According to our class materials all mixed cost must be classified into
their fixed and variable and variable elements. The method that can
be used to determine is called the high/low method. To determine the
variable cost the analysis takes the total cost and divide it with the
low activity level. To get the fixed cost then the company would have
to subtract the total variable with either the high or low activity level.
9. Cost volume profit CVP analysis is based entirely on unit costs. Do
you agree? Explain.
In my opinion when it comes to making financial decisions for the
company, often times more than one method is used. Cost volume
profit is also based on Volume or level activities, unit selling prices,
variable cost per unit, total fixed and sales mix.
14. You can find the break point in dollars by drawing a horizontal
line to the vertical axis. I you want to find the break even point in
units it will be a vertical line from the break even point to the
horizontal axis.
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ACC 291 Week 2 Assignment Financial Reporting Problem,
Apple Inc

is to help you understand the basics of financial
statement analysis related to the assets section of the
balance sheet, data interpretation, and how financial
information is obtained to understand how a company
accounts for its long-lived assets. Assignment Steps
Resources: Financial Accounting: Axia College Material
Appendix C
Budgets Matrix
Directions: Using the matrix, define each of the

budgets listed and briefly describe its uses.
Budget Definition Describe its

uses
Sales budget Estimate of The sales
the expected budget shows
sales for the dollars and
period. All of units. This will
the other allow
budgets management
depend on the to see how
sales budget. many units will
This is where be produced
all the other for the period
budgets will
start from
Production A production Shows
budget of units management
needed to be how many
produced in units will be
order to meet produced
the projected during each
sales budget period
and what
amount is
needed to
fulfill
inventory
demands
Direct Is the Shows
materials estimated management
budget quantity or how much raw
cost of the raw materials that
materials that is already on
is needed in hand and or
order to that needs to
produce the be ordered to
units required meet inventory
to fulfill demands.
inventory
Direct labor A estimate of Shows how
budget cost and many hours,
quantity of how many
direct labor laborers
needed in needed to
order to meet produce the
production units for that
budget period.
Management
will decide
what will be
the right
amount of
laborers
needed and if
the company
will be able to
meet the
budget
Manufacturing An estimated This list all
overhead expected overhead cost
budget amount of involving cash
manufacturing disbursement
cost for the in a quarter
budget period
Selling and Anticipated Shows area of
administrative selling and budget
expense administrative expenses that
budget expenses in are not listed
the budget other than
period manufacturing.
Expenses such
as marketing,
promotion cost
etc for the
budget period
Budgeted Estimate of Is a very
income expected important tool
statement profitability of because it
operations in a shows the
budget period company
estimated
profit for the
budget period.
Cash budget A projection of Cash budget
expected cash helps
flows in and management
out of the keep a tally or
business. total of all
cash balances.
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What are the differences among valuation, depreciation, amortization,
and depletion?
Discussion Question 1: Post your response to the following:
How would you describe the difference between financial and

managerial accounting? What are the distinguishing features of
managerial accounting?
There are many differences between financial and managerial
accounting. The financial accounting statements are available to
external users such as employees, stockholders, creditors, investors,
etc. This is available to them so that they can monitor the company's
performances quarterly or annually. Managerial accounting provides
financial information for managers and other internal people or
department. Managerial accounting is confidential so it is only
observed by internal users such as management, owner, and will
provided to external users such as the public. Management uses this
for budgeting purposes or to monitor profit loss/gain within the
company. Managerial accounting can be available to them as often as
needed. Managerial accounting statements is a great way for
management to make decisions based on what has been reported.
Another response
The differences between managerial accounting and financial
accounting are distinct. Managerial accounting reports are for those
in managerial and decision making positions. The managers use the
financial report to answer questions, which would advance the
company and its employees. The manager would want to know if
certain investments should be made and should the company advance
an employee's salary. The manager needs the report to decide if a
factory is built or if a certain stock is brought. The financial
accountant has the job of showing the external users such as creditors
and stockholders a picture of the company's stability.
The manager's purpose is to manage by making stable plans, delegate

duties, motivate the workers, and control the atmosphere.
Distinguishing features of managerial accounting are the fact no cpa
will audit the report, and there is no specific frequency of the report.
The reports are done in a need to know basis and for a specific
reason, which is for business purposes. The reports are detailed and
pertain to specific business decisions. The financial accountant need
only be concerned with the company's finances.
DQ2
Select a management function (planning, directing and
motivating, or controlling) and explain how that function relates to
business as a whole. Next, select a different function listed by a
classmate. Discuss with your classmate how the functions you each
selected complement each other.
The management functions that I choose was controlling.
Controlling job is to make sure that the each
department/person is keeping the company's activities or plans on
track and in order to achieve that they must work closely with
Management planning function. Controlling continually compares the
company's performance to make sure that the planned standards
are being met. In my opinion this is known as the "dirty work".
Controlling operations have to know what to look for and how to keep
track of all the company's activities. They have to take actions and
quickly correct any errors and make sure that the company goals are
being achieved in a timely matter or the time that it was planned. If
there are errors it is job of the controlling operations to take quick
action. The controlling operations not only correct errors after it
happens but they also are in charge of foreseeing any potential errors
and act quickly to get that resolved.
Another response
I chose Controlling as part of the management function. The
controlling function relates to business as a whole because it helps
monitoring the firms performance to make sure the planned goals are
being met. Managers need to pay attention to costs versus
performance of the organization. let say, if the company has a goal of
increasing sales by 10% over the next two months, the manager may
check the progress toward the goal at the end of month one. If they
are not reaching the goal the manager must decide what changes are
needed to get back on track.
-----------------------------------------------------

What types of industries have unearned revenue?
Why is unearned revenue considered a liability?
Cost, Volume, and Profit Formulas
By
Kamilah Crooms
Due February 28, 2010
Explain the components of cost-volume-profit analysis.

The components of cost volume-profit analysis consist of Level or
volume of activity, Unit Selling Price, Variable Cost per unit, total
fixed costs, and Sales mix.
What does each of the components mean?
Level or volume of activity is the activity that causes change or

behavior when it comes to the cost. Unit selling Price is the cost for
the product basically how much each unit is selling for. The Variable
Cost per unit is something that can change depending on the activity.
The total fixed cost does stay the same as activities change but differ
per unit. The Sales mix is basically what the name says. Its a mixture
of sale items when more than one product sold the sales will remain
the consistent.
Based on the formulas you have reviewed, what happens to

contribution margin per unit when unit selling prices increase?
Contribution margin is the amount of revenue left over after
subtracting the variable cost. So basically Unit sales price
subtracting or minus variable cost.
Illustrate your explanation with an example from a fictitious

company of how an increase in unit selling prices might affect
contribution margin.
Kellys Sweetheart Flowers
The owner of Kellys Sweetheart Flowers is selling their bouquet of

flowers for $10 per unit. The Variable Cost per unit is $4.00. The
contribution margin will be ($10-$4) = $6. If the sells price
increases to say $15, then the contribution margin will be ($15-$6)
= $9 per unit.
When fixed costs decrease, what does this do for sales? Illustrate
your explanation with an example from a fictitious company.
Kellys Sweetheart Flowers
When the fixed cost decreases, the contribution margin ratio the net
income and sales will increase.
For example,
The flowers are $10 per unit. The variable cost per unit is $4.00.
The contribution margin will be ($10-$4) = $6. The fixed cost is $3.
We subtract Contribution margin Fixed Cost= Net income. The
net income is $3.00.
Define contribution ratios
The contribution margin ratio is the contribution margin per unit
margin divided by the unit selling price.
What happens to contribution ratios as one of the components

changes?
Shown in the example above, if one or more of the components

changes is will cause the net income to increase or decrease.
Reference
statements.suite101.com/article.cfm/cost_volume_profits*the_p_l.
Retrieved 2/28/2010
//http:yourdictionary.com /CVP.org Retrieved 2/26/2010
Thomas, Y. 2005-08-27 Accounting 101 pg. 52 Statements
-----------------------------------------------------
ACC 291 Week 2 Individual WileyPLUS Assignment Week
Two

we have another New set of week 2 Willeyplus assignment which
could be found on this link

You know how important it is to create budgets for your
household. How does budgeting help management make good
business decisions?
Budgeting is a very important skill that can be applied to everyday
life and also when it comes to making good business decisions. I
really like the way our class resources says about Budgeting.
Budgeting is used as a planning tool used by management to make
good decision for the company. If a company is successful than
more than likely that means that the management team is very good
at managing the company finances. Budgeting helps management
plan ahead, defines what is most important, shows warning signs,
reach a company target without over or under budgeting and etc.
Another response
In a business, a budget helps a business make good decisions
because they are used by the company to plan for future events and
coordinate the events and duties in the company. They also gives
objectives used to evaluate the performance of the company on each
level which can help to make future decisions that will not hurt the
company based on the projected objectives. It can also be used to
alert the company of possible problems or negative trends in the
company that need to be addressed so that there is a clear picture of
the overall health of the company before decisions are made. The
budget helps the company to be able to make an informed decision
when making one. It is there in order to make sure that making a
decision like taking on another company will not hurt the company
and is something that the compnay can sustain based on the budget.
DQ2
What are some of the different types of budgets?
Describe in detail one type of budget covered in the text.
Describe what the budget is used for and what information

it provides a business.
Then, as you respond to your classmates, discuss how the

budget you described relates to the budgets they described.
Discuss how a business benefits from each of the budgets.
There are many different types of budgetting. For example, there

sales budget which allows management to see how many units that
need to be produced, production budget which will allows everyone
to see how many units are going to be produced in or needed to be
produced in order to meet the inventory for that budget period. One
budget that I can describe in detail is called the direct labor budget
and this budget shows how many people, hours is needed in order to
meet the required budget for that period. This will give management
an idea of how much money is needed such as paying the cost of
labor. The company benefits by each of these budgets because it will
help manage just how much money it will cost the company during
this period. Management can also see if there are different ways to
cost the company out of pocket cost down during this period.
Another response
I chose to write about the Production Budget. The Production
Budget shows the cost of each unit needed to produce an item or
manufacture a product. The formula used by the Production Budget
:
Budget sales units + Desired ending finished goods units -

Beginning finished goods units = Required production units.
An example would be, every Easter the bakeries in the Bronx loads
up on Hot Cross Buns. My mother and grandmother would buy
these tasty sweet breads,and eat them for breakfast. I personally
would like to eat them every week but, they are only sold during the
Easter season. Maybe, it has something to do with the glazed cross
on the top.
Every Easter Holiday, there appears these Hot Cross Buns and the
bakeries production department allows for the purchases for items
needed to make the buns. After Easter has gone, Hot Cross Buns
are not included in the budget.
-----------------------------------------------------
ACC 291 Week 2 IndividualWileyPLUS PracticeCh 8,9,10
Quiz

Resource:WileyPLUS
Complete the WileyPLUS Week Two Practice Quizzes
for chapters 8, 9, and 10. Submit your results through
the Gradebook ASSIGNMENTS What is a Flexible
budget?
A Flexible budget is a budget that change or is
flexible during different levels or activity. Unlike the
static budget which is a budget based on one activity
level, the flexible budget is based off of more than one
activity level.
The steps to development a flexible budget is :

a) Identify the activity index, and the range of
activity
b) Find out what the variable cost, and determine
the variable cost per unit
c) Find out what the fixed cost and determine the
budgeted amount for each unit
d) Organize the budget for selected additional
activity within the appropriate range
The information found on a flexible budget
cannot begin with the master budget. The flexible
budget uses the same guidelines the original budget.
The budget consists of Sales, Cost of Goods Sold,
Selling Expenses, General and Administrative
Expenses, Income Taxes, and finally the Net Income.
The information on the budget is a great tool to
be used for evaluation performances. The flexible
budget can be used for monthly comparison purposes.
Also during the process that management is identifying
the activity index and the range of activity it will allow
them to see the cost of direct labor hours for that
budget period.
-----------------------------------------------------
ACC 291 Week 2 Learning Team Weekly Reflection

Discuss the objectives for Weeks One and Two. Your
discussion should include the topics you feel
comfortable with, any topics you struggled with, and
how the weekly topics relate to application in your
field.
Capstone Discussion Question: Post your
response to the following:
Think back over what you have studied
and learned in this course. Do you have a new
perception of or appreciation for the field of
accounting and how it contributes to business?
Explain.
To be perfectly honest with you I truly had no
clue what accounting did for a company and how
important it was. I always thought that
accounting only dealt with payroll. In fact
accounting does much more that just payroll and
monitor company supplies (coffee, paper, pens &
pencils). The accounting sets budgets for the
entire company, monitors outflow and inflow of
profits, plans budgets for each department, and
much more. When I first begun this class I was
really nervous, I truly thought that I was going to
have a hard time understanding the accounting
but I happy to say that I was wrong. I understood
every part of this course.
On a personal note I would like to thank you Jess.

If it wasn't for your pep talk I probably would had
gave up. You are truly a great instructor. I wish
you all the best! God Bless
Another response
Accounting has taken a whole new meaning to
me in my vocabulary. Prior to this course, I just
took accounting as a calculator and crunching
numbers. I now have a new respect for
accounting and all the aspects that are involved.
I never once took into consideration profit, sales,
revenue, and balance sheets also being included
with accounting. There is so much more involved
with accounting, and had I not taken this course
I would have never known. Accounting is a very
important part of running a business. I feel that
it is imperative to all people thinking of opening
a business should take some type of accounting
class to become more aware of how to run the
accounting part of a business.
-----------------------------------------------------
ACC 291 Week 2 Wileyplus Assignment P8-3A, BE9-11,
DI9-5, E9-7, E9-8, BYP9, P9-2A (New)

P8-3A, BE9-11, DI9-5, E9-7, E9-8, BYP9, P9-2A.
Problem 8-3A: Bosworth Company
Brief Exercise 9-11: Nike, Inc.
Do It! 9-5
Business Plan
By
Kamilah T. Crooms
The name of my business is called DestinyWear. DestinyWear is a urban fashion
clothing company for woman, men and youth. DestinyWear specializes in making clothing
for every occasion. My name is Kamilah Crooms and I am the owner and CEO of
DestinyWear.My goal is to ensure that my company will be succesfull in all areas and in
each department. In order for me to make sure that the company was going to begin in the
right direction I had to priortize what was most important in establishing my business plan.
The main priority is that I had to first choose the appropriate business structure, a high
demanding product, and most of all an outstanding accounting team.
Business Structure
Upon establishing DestinyWear I had to decide which business struture that I felt was
best for me to pursue. I decided that as a Entreprenuer the best choice for me abd the
direction of the company would be for me to be sole proprietorship. Sole proprietorship
allowed me to be the sole owner of DestinyWear. The first and most important reason that I
wanted sole proprietorship is because it is much easier to start a business as sole
proprietorships. Sole proprietorship takes all the profit that and doesn't have to split it
between any other owners or corporations. I also want the power to make and change
decisions along the way without having to first consult anyone else.
DestinyWear Products
DestinyWear products will range from jeans, shirts, accessories and shoes. The
company will first start off with its most profitable product and that will be the DestinyWear
designer jeans line. The jeans line has over twenty different jeans designs
from straight leg, baggy, cargo, overalls, shorts and much more. The jeans line will provide
services within the United States and Canada and will eventually service International
customers. The DestinyWear jeans line will have its own building. In this building the bottom
floor will consist of the factory and the top floor will have the different departments such as
management, marketing and most importantly the accounting department.
DestinyWear Accounting Department
The accounting plays a major role in establishing my company DestinyWear. The

accounting department does more than managing and reporting the companys financial
documents it is the greatest tool in establishing my business. The key to a powerful
accounting department here at DestinyWear is applying the principles of internal control.
These principles consist of establishment of responsibilities, segregation of responsibilities,
documentation procedures, Physical, mechanical, and electronic controls, Independent
internal verification and other controls such as Bonding of employees. In order to ensure
that this business plan works DestinyWear has to hire nothing but the best qualified
employees.
DestinyWear Accounting Staff
DestinyWear accounting team of fine employees will all be hired through the
company. There are several requirements that have to be met in order for myself as the
owner and Human Resource department to even consider the applicant for accounting. We
looked for characteristics, education and work history experience. The first and far most
important qualifying requirements are education. The applicant has to have a Bachelor
BA/BS in accounting degree a plus if he or she has a masters.
The second requirement is experience. The applicant must have the minimum of five
years of experience working in accounting. He or She must have knowledge and
employment experience of working with financial statements, cash management and internal
control. Employees must be experienced in Invest idle cash, planning the timing of major
expenditures, delay payment of liabilities keeping inventory levels low, and increasing the
speed of collection on receivables. In the category of experience we had to hire applicants
according to the position that had to be filled in accounting. For example, if a position in
accounting such as management or supervisory needed to be filled, then we would look for
years of experience in management or supervisory positions. I personally prefer that every
employee have some type of management experience.
Last but not least, the employees characteristics. It is a must that every accounting staff
member has and applies professionalism, great ethic and moral skills, accuracy, and most
importantly punctuality, and reaching company deadlines. These characteristics are very
important to have at DestinyWear.
DestinyWear Accounting Management Team
The DestinyWear accounting management team will be reporting to me and to the

other head staff each week to report updates and any new changes. The management team
is responsible to have all the different types of budgeting reports that includes Sales, Labor,
etc. Management must follow the responsibility reporting system for each department. The
managers will use the companys financial information to predict outcomes of the business. I
require a report from each responsibility center, cost center, profit center and investment
center to be reported each month. Management is responsible to ensure that the company
does not over or under budget and if any changes it must be reported immediately.
Conclusion
DestinyWear will be a very successful team not only because of the products that we
produce but because of having a great accounting team. With the help of accounting team I
DestinyWear products will be in every wardrobe in America.
REFERENCES
//http:yourdictionary.com /CVP.org Retrieved 3/20/2010
Thomas, Y. 2005-08-27 Accounting 101 pg. 52

Statements. March 19, 2010
Drucker, P. Managing in the next society 2002. retrieved

march 19,2010
-----------------------------------------------------
ACC 291 Week 3 Assignment The Liabilities Section of

OBrians Balance Sheet

is to help you understand the balance sheet
presentation for the liabilities of a company.
Assignment Steps Resources: Financial Accounting:
Tools for Business Decision Making Prepare the
liabilities section of OBrians balance sheet using the
following information: Accounts payable $157,000
Week 1 DQ 1
Due Tuesday, Day 2
Go to the U.S. Securities and Exchange Commissions

Web site at http://www.sec.gov and the Financial
Accounting Standards Boards Web site
athttp://www.fasb.org. Identify the mission and main
activities of each organization. Then, analyze the
similarities and differences between the roles of each
entity. Which entity has more influence over financial
statement reporting? Explain your answer.
According to the SEC website their mission is to protect
investors, maintain fair, orderly, and efficient markets,
and facilitate capital formation. The SEC also requires
public companies to disclose meaningful financial and
other information to the public. This provides a
common pool of knowledge for all investors to use to
judge for themselves whether to buy, sell, or hold a
particular security. The SEC is concerned primarily with
promoting the disclosure of important market-related
information, maintaining fair dealing, and protecting
against fraud.
According to the FASB website the mission of the FASB

is to establish and improve standards of financial
accounting and reporting that foster financial reporting
by nongovernmental entities that provides decision-
useful information to investors and other users of
financial reports. Since 1973, the Financial Accounting
Standards Board (FASB) has been the designated
organization in the private sector for establishing
standards of financial accounting that govern the
preparation of financial reports by nongovernmental
entities
The major difference in the SEC and the FASB is that

the SEC deals with reporting of financial statements for
all industries while the FASB deals mainly with the
private nongovernmental entities. Both are concerned
with the fairness of financial reports and work in the
interest of the public. I believe that the SEC has more
influence over financial statement reporting because
they can bring civil action against companies and
individuals for violations of securities laws. Although
according to the FASB website, the Commissions
policy has been to rely on the private sector for this
function to the extent that the private sector
demonstrates ability to fulfill the responsibility in the
public interest.
Response 2
Go to the U.S. Securities and Exchange Commissions
Web site at http://www.sec.gov and the Financial
Accounting Standards Boards Web site
athttp://www.fasb.org. Identify the mission and main
activities of each organization. Then, analyze the
similarities and differences between the roles of each
entity. Which entity has more influence over financial
statement reporting? Explain your answer.
U.S. Securities and Exchange Commission (SEC)
According to the SECs website The mission of the
U.S. Securities and Exchange Commission is to protect
investors, maintain fair, orderly, and efficient markets,
and facilitate capital formation(U.S. Securities and
Exchange Commission, 2010, Para. 1).
The main activities of the SEC are to interpret
federal securities laws; issue new rules and amend
existing rules; oversee the inspection of securities
firms, brokers, investment advisers, and ratings
agencies; oversee private regulatory organizations in
the securities, accounting, and auditing fields; and
coordinate U.S. securities regulation with federal, state,
and foreign authorities. (U.S. Securities and Exchange
Commission, 2010)
Financial Accounting Standards Board (FASB)
According to the FASBs website The mission of the
FASB is to establish and improve standards of financial
accounting and reporting that foster financial reporting
by nongovernmental entities that provides decision-
useful information to investors and other users of
financial reports. That mission is accomplished through
a comprehensive and independent process that
encourages broad participation, objectively considers
all stakeholder views, and is subject to oversight by the
Financial Accounting Foundations Board of Trustees
(Financial Accounting Standards Board, n.d., Para. 3).
The main activities of the FASB are to identify
financial reporting issues based on
requests/recommendations from stakeholders or
through other means. The FASB Chairman decides
whether to add a project to the technical agenda, after
consultation with FASB Members and others as
appropriate, and subject to oversight by the
Foundation's Board of Trustees. The Board deliberates
at one or more public meetings the various reporting
issues identified and analyzed by the staff. The Board
issues an Exposure Draft to solicit broad stakeholder
input. (In some projects, the Board may issue a
Discussion Paper to obtain input in the early stages of a
project) The Board holds a public roundtable meeting
on the Exposure Draft, if necessary. The staff analyzes
comment letters, public roundtable discussion, and any
other information obtained through due process
activities. The Board redeliberates the proposed
provisions, carefully considering the stakeholder input
received, at one or more public meetings. The Board
issues an Accounting Standards Update describing
amendments to the Accounting Standards Codification
(Financial Accounting Standards Board, n.d.).
Both the SEC and the FASB have the same goals of
fairness, accuracy, and understandability of financial
accounting and reporting. Both agenecys accomplish
these goals in the best interest of the overall public.
The differences between the SEC and the FASB is that
the FASB regulates financial reporting in the private
sector of businesses (but are subject to the rules and
regulations of the SEC) and the SEC deals with
regulating the financial reporting of publicly held
corporations.
I believe that the SEC has the greatest influence over
financial statements reporting because they have the
final approval on all changes of the rules and
regulations. The Sec can also bring civil or
administrative enforcement actions against individuals
and companies in violation of the securities laws.
References
Financial Accounting Standards Board. (n.d.). Facts
about FASB. Retrieved July 15, 2010, from Financial
Accounting Standards
Board:http://www.fasb.org/facts/index.shtml#mission
U.S. Securities and Exchange Commission. (2010, May
3). The Investors Advocate: How the SEC Protects
Investors, Maintains Market Integrity, and Facilitates
Capital Formation. Retrieved July 15, 2010, from U.S.
Securities and Exchange
Commission: http://www.sec.gov/about/whatwedo.shtml
Week 1 DQ 2
Due Thursday, Day 4
Search the Internet or the Online Library for
information about the Sarbanes-Oxley Act. A useful
guide to some of these provisions is located
at http://www.soxlaw.com. Summarize at least two
provisions of the law, and discuss your interpretation of
these provisions with your classmates. Do you think
this law will make financial statements more reliable?
Also, discuss how Sarbanes-Oxley establishes
boundaries to ensure ethical practices. What does the
law allow or prohibit, and why?
The Sarbanes-Oxley act has many provisions to give

companies guidelines for responsible, and ethical
financial reporting. One of those provisions is listed in
Section 302 of the act. The provision is that periodic
statutory financial reports be certified that signing
officers have reviewed the reports, the report does not
contain any untrue, or misleading information. The
financial statements fairly present the financial
condition. The signing officers are responsible for
internal controls. A list of all deficiencies in internal
controls, and a list of fraud involving employees, and
anything that could negatively affect the internal
controls.
Another provision pertains to the "management
assessment of internal controls". This provision
ensures that information is published in annual reports
regarding the adequacy of internal controls, structure
and procedures.
The Sarbanes-Oxley act is designed to help companies
promote ethical accounting procedures. The act gives
guidelines as to how financial statements are
reported. The act requires verification that officers
within the company have checked the information in
the reports for accuracy and true. The act also
requires that the companies have internal controls in
place to ensure ethical reporting practices. The main
thing that the Sarbanes-Oxley promotes is
transparency in reporting.
Response 2
Section 802 of the Sarbanes-Oxley Law defines the
penalties that may be assessed against individuals who
failed to comply with the Act. An individual could be
subject to 20 years in jail for altering, destroying,
mutilating, concealing, falsifying records, documents or
tangible objects. Guilt is define by the intent to impede
a legal investigation. This part of the law gets to the
heart of how Arthur Anderson reacted by destroying
documents important to Worldcom. The law further
defines that any accountant who knowingly violates
their ethics by wilfully violates the requirements of
maintenance of all audit or review papers. These
papers are subject to review up to five years.
The second Section that I reviewed was the Section

302. This actually is my favorite part of the law
because it directly holds the officers and directors
accountable for the accuracy of reporting in their
financial statements. It defines that the management
must review and understand the financial statements
and sign that they are true and accurate. It also holds
the management accountable for the internal controls,
requiring any deficiencies to be reported. In the past
directors of companies relied heavily on the internal
officers, management, to report the company
performance without questioning the accuracy or
taking their role on oversight committees seriously.
They could hide behind a veil of trust of the key
leaders. This Section clearly puts the responsibility for
the Board to remain independent of the executives and
function more effectively on the respective oversight
committees they serve. The example I would share is
what happened in WorldCom. The company leaders
shared what they wanted to with the Board, who
trusted implicitly the top leaders. Had they questioned
their legal representation or auditors, they potentially
could have uncovered the fraud that was committed by
the creation of shell companies, with WorldCom
employees as stockholders.
I would love to think this law would protect the

investing community. Financial reporting has improved
to some extent. Unfortunately the scams still
continue. Example would be Barney Madoff or what
happened in the financial mortgage industry. These
unethical practices were conducted after Sarbanes
Oxley was implemented. Madoff was able to provide
false financial information to investors. Financial
industry was allowed to get to aggressive in
underwriting and product suite. Fines and penalties
are deterrents. Ethics still must be inherent in an
individual and company. Laws and requirements are a
guide. There will never be enough auditors, inspectors
or oversight boards to catch all of the fraud in the
corporate community.
The law prohibits falsifying information, failing to notify

of material changes, and destruction of records.
-----------------------------------------------------

Why does a company choose to form as a corporation?
Lucent Technologies
Axia College of University of Phoenix

Lucent Technologies is a company based on networking for service
providers, government, and enterprises worldwide (Lucent
Technologies, n.d., Para 1). The products and services they work with
are separated into three categories; service and maintenance,
wireless mobility networking, and wire line networking. Lucent
Technologies is backed by Bell Labs, which does research and
development in networking technologies.
During the years of 2001 to 2003 this company has experienced a
decrease in demand because of other companies loss or capital used
toward spending. This is mainly due to a downturn in the economy. As
an investor this information is necessary to know because it explains
the decrease or increase in sections of the balance sheet. In order to
compare the growth or decline of the companys profit, an investor
must change a balance sheet into a common-size balance sheet. First
when looking at the balance sheet an investor will see that the amount
of paid in capital has increased from the year of 2003 to 2004, the
assets have increased, but the liabilities have decreased. When
running a debt/asset ratio it is noticed that this ratio drops from 1.2 in
2003 to 1.0 in 2004. This shows the companys risk is low when
concerning financial leverage, usually when the debt ratio is less than
one percent it is financed mainly by company equity, so this company
is close to being debt free from creditors.
After changing the balance sheet to a common-size balance sheet
there are several factors an investor will look at. The current assets
have dropped to .48 from .49 in 2004. This does not show harm to the
company because only the accounts receivable dropped while the rest
of the current assets increased. This means the company is not in as
much danger of default on money owed to it. It does have a rise in
marketable securities. The one concern in the assets is the increase of
prepaid cost of pensions and goodwill. Goodwill can be used for tax
breaks but prepaid pensions cannot benefit the company.
When looking at the liabilities section an investor will see a drop in
pension and liabilities and an increase in long term debt, both of
these could be affected because of the drop in the economy. Long term
liabilities are often increased to help a company control interest rate
increases so as an investor cutting back on pension liabilities cuts
back cost to the company and watching interest rate increase show
the company is concerned with its earning and investors. This would
be encouraging or an investor. The stockholders deficit shows a drop
in accumulated deficits from -1.43 to -1.22 and total deficits of -.26 to
-.08. This shows the company is working to control any money loss
and turning it to the companys advantage. Overall it shows the
company is still earning a profit although small. With an increase of
assets and a drop in liabilities the company is showing it is working
in a low risk capital.
After reviewing this information, a creditor or investor must be able
to compare this company to the industry totals. By comparing how
this company compares to other companies similar to it, a person can
see if it is competitive and worth taking a risk. Running ratios will
also show if the company is capable of paying off any debts it has or
if it can acquire the needed cash in case of emergencies. Overall as
an investor, I would say this company would be worth investing in.
Reference
Axia College. (2007). Understanding Financial Statements. Retrieved
May 10, 2010 from Axia College, Week 2 Assignment, ACC/230.
-----------------------------------------------------

Why is preferred stock referred to as preferred?
What are some of the features added to preferred stock that make it
more attractive to investors?
Differentiating Depreciation Methods
There is one main difference between straight line depreciation and

accelerated depreciation. Straight line is decided by taking the cost of
the assets, figuring out the salvage cost when the use of the asset is
finished and how many years of use the asset has. A person then takes
the cost minus salvage and divides the remainder by the number of
years of use. This amount is the depreciation expense subtracted each
year from the cost. The accelerated depreciation does not have the
same amount of deprecation subtracted each year. It does have the
cost minus salvage value to figure out the amount to use but is then
divided out differently. A person takes the sum of the years of a
products useful life, such as three years is 3 + 2 + 1 = 6, then a
person would divide the depreciation amount by 3/6 the first year, 2/6
the second and finally 1/6 for the final year. So the amount of
depreciation expense is larger to smaller with accelerated and equal
amounts for straight line.
The advantages of straight line method are it is easier and faster to
figure. The advantage of accelerated method is it is more accurate
when figuring depreciation expense. The accelerated method has an
advantage and disadvantage concerning taxes. A company can use
the accelerated method to take advantage of bigger tax breaks at the
beginning of an assets life, but since this amount drops during the
lifespan if the company needs added tax breaks it will not receive
them from these assets in the future. With the straight line method the
amount of tax breaks are even through the life of the product. Most
companies choose this form of depreciation for reporting purpose on
taxes but will use the accelerated method to figure taxable income.
As mentioned before the advantage of straight line depreciation is it is
easier to figure and uses the same total each year for deduction of
depreciation expense but the disadvantage is that if use for taxable
income and reporting a company does not get a bigger tax break at
the beginning of the assets life when they have just put out the cost for
the item and may need a bigger tax break.
-----------------------------------------------------
ACC 291 Week 3 Individual WileyPLUS Assignment

Preparing an Income Statement

The companies net income is profitable when the sales exceed the
cost of goods sold. In this, the gross profit is $761k. This is
beneficial to the company. Though we took the cost of goods away
from the net sales there are still other areas which need to take a
piece of the pie. For this company, once the SG&A and depreciation
are taken out, the company still contains a profit of $290k. But the
buck does not stop there. Once the interest income and interest
expense are adjusted the balance before earnings and taxes is
$290k. After taxes are taken out, the company is left with a net
profit of $174k.
In this case I think the company has achieved success with a net
profit of $174k. If the company were unable to be profitable, the
company would eventually go out of business. We would be able to
tell if the company was not profitable by looking at each section
individually. The cost of goods sold is what stands out for me. If we
pay more to make the product then we are actually selling it for,
there is no profit to be made. So, I think it should all start there.
-----------------------------------------------------
ACC 291 Week 3 Individual WileyPLUS Practice Quiz Ch.
11,12

Resource:WileyPLUS
Week 3 DQ 1
Due Tuesday, Day 2
Post your answer to Problem 3.5 on p. 109 (Ch.

3). How might the information contained within
the stockholder equity statement be used for
management and investor decision-making?
Provide specific examples of situations in which
the stockholder equity information might be
used.
The statement of stockholders equity provides

the changes in the equity accounts during the
accounting period more in depth than the
balance sheet. The information found on the
statement of stockholders equity includes
retained earnings, common and preferred stock,
and additional paid in capital. Management uses
the statement of stockholders equity to ensure
they are reaching their goal of maximizing
shareholder's equity. The use of market ratios
help with the analysis of the statement of
stockholders equity, such as earnings per share,
price-to-earnings, dividend payout, and dividend
yield. These ratios will help both management
and investors in analyzing the company. For
example, if I were looking to invest in a
companys stocks I would utilize all of the
financial ratios, as well as the market ratios. The
earnings per share ratio is calculated before the
price to earnings ratio, P/E, because the earnings
per share ratio is used in the second. If a
company pays dividends, the dividend payout
ratio will come in handy. It tells us The
percentage of earnings paid to shareholders in
dividends (Investopedia, 2010, p. 1).
References
Investopedia. (2010). Dividend Payout Ratio.
Retrieved August 3, 2010, from
Investopedia:http://www.investopedia.com/terms/d/dividendpay
outratio.asp
Response 2
Explain what can be found on a statement of
stockholders equity.
The major elements of stockholders' equity
include capital stock, paid-in capital, retained
earnings, treasury stock, unrealized loss on long-
term investments, and foreign currency
translation gains and losses.
How might the information contained within the

stockholder equity statement be used for
management and investor decision-making?
Provide specific examples of situations in which
the stockholder equity information might be
used.
Management may look at the stockholders

equity statement retained earnings section to
determine if company should borrow money for
capital investments or finance it through various
forms of equity. It may also be used by the
stockholder to evaluate the compensation paid
to the company officers. Investors may also look
at the statement for cumulative net unrealized
gains and losses before purchasing stock in the
company. Investors are also interested in the
paid in capital because they can compare it to
the additional paid in capital and the difference
between the two values will equal the premium
paid by investors over and above the par value of
the shares.
DQ 2
Week 3 DQ 2
Due Thursday, Day 4
Provide an example from the text or the Internet

that demonstrates a situation in which a
companys net profits appeared good in the
statements, but the gross or operating profits
presented a different picture. Discuss how this
might have occurred. Respond to the following
question, addressed in Problem 3.6 on p.
109 (Ch. 3): Why is the bottom-line figure, net
income, not necessarily a good indicator of a
firms financial success? Look for indicators like
liquidity or solvency to answer this discussion
question.
An example that demonstrates the situation is

Enron. Enrons financial statements did not show
all the expenses and costs. Instead of showing
them on the income statement they made entries
so the cost and expenses would post in the
balance sheet. The same was done with the
revenues. This way it would be less expenses
and the net profit appeared good. Many debts
and losses were not reported in the financial
statements. From the third quarter of 2000
through the third quarter of 2001, the directors
fraudulently used reserve accounts within Enron
Wholesale to mask the extent and volatility of its
windfall trading profits, particularly its profits
from theCalifornia energy markets; avoid
reporting large losses in other areas of its
business; and preserve the earnings for use in
later quarters. By early 2001, Enron Wholesale's
undisclosed reserve accounts contained over $1
billion in earnings. The head of the company
improperly used hundreds of millions of dollars
of these reserves to ensure that analysts'
expectations were met. In addition, Skilling and
others improperly used the reserves to conceal
hundreds of millions of dollars in losses within
Enron's EES business unit from the investing
public.This would show the creditors that Enron
was making profits and its position was solid.
The net income is not necessarily a good
indicator of a firms financial success because
the income statement only shows the profit or
loss at a period of time and does not show the
whole picture of the company. The Balance
Sheet, Statement of cash flow, Statement of
shareholders equity and the Income Statement
all together give the real picture of the business.
Each one of them shows different aspects of the
business. These statements show where the
income is actually coming from; is it from sales
or from loans the company is borrowing? If the
company is selling a building or any other asset
but that does not mean that it is selling more
products and making profit. Looking at the
Income Statements the company might be
making profit but at the same time it is
extremely leveraged.
Response 2
A companys net income is not the whole picture,
just part of it. There are lots of things that
contribute to the net income that may not be
significative to the companys success. If the
value of a dollar has a sudden change that can
affect the bottom line if the company happens to
hold the medium of exchange that can benefit by
the change that might occur. The company can
falsely inflate the bottom line. A companys net
income is coupled with liabilities, cash flow, and
selects financial ratios. Looking at it this way is a
much better way of seeing what the companys
success is like. A company can change up many
things to make it look like their income is better.
These things that can be changed are single
sales events, cash infusion, or false financial
statements. Some things like debt that a
company has, the companys cash on hand, their
capital assets conditions, or even their sales
trends. To figure the success of the company,
you must look at the whole picture. One thing
cannot tell you all the facts of the companys
affairs. You cannot tell the net income of the
company just from the bottom line. Look at all
the financial records.
Response 3
Provide an example from the text or the Internet
that demonstrates a situation in which a
companys net profits appeared good in the
statements, but the gross or operating profits
presented a different picture. Discuss how this
might have occurred. Respond to the following
question, addressed in Problem 3.6 on p.
109 (Ch. 3): Why is the bottom-line figure, net
income, not necessarily a good indicator of a
firms financial success? Look for indicators like
liquidity or solvency to answer this discussion
question.
Net income is not necessarily a good indicator of
a firms financial success because they have
ways to manipulate it by increasing their
revenues or hiding some of their expenses. For
investors trying to decide where to invest their
money, they need to look more into assessing
how the company came up with the numbers
they presented.
An example of this situation is when Laribee

Wire Manufacturing Co. exaggerated in recording
their inventory value which allowed them in
acquiring loans from six banks totaling to about
$130 million using it as collateral. At the same
time, they reported $3 million in net income for
the period, but in actuality they lost $6.5 million.
This company showed a higher net income by

reporting fake inventory in which its value was
overstated and transferred over to their income
statement. When the banks assessed their
financial statements, it was enough to sway
them into lending the loans they needed.
Reference:
Investopedia. (2010). Spotting Creative
Accounting On The Balance Sheet. Retrieved
fromhttp://www.investopedia.com/search/searchresults.aspx?
q=Spotting+Creative+Accounting+On+The+Balance+Sheet&submi
t=Search
-----------------------------------------------------

Discuss the objectives for Week Three. Your discussion
should include the topics you feel comfortable with,
any topics you struggled with, and how the weekly
topics relate to application in your field.
STOCK DIVIDEND
Stock Split
University of Phoenix
Stock Dividend
In the present time, the stock dividend has
become important concept. When dividend is
given in form of stock, it is called stock dividend.
In this form of dividend, the cash does not use. It
is important, when the corporation declares
stock dividend, the market value of the share
decreases because the number of stock
increases. The many companies prefer stock
dividend due to the tax benefit. If the individual
gets stock dividend, he does not pay any tax on
stock dividend. Thus the stock dividend reduces
tax burden. On the other hand, the ownership of
investors also spurs up in the company because
the number of holding share increases. There is
also disadvantage of stock dividend. The market
value of the share decreases, so the market
value of holding also decreases (Kennon, 2009).
The ABC Company is leading company in its
industry. The number of outstanding share of the
company is one million. On the other hand, the
number of investors is five millions. The value of
market capitalization is $100 million. The
management declares 20% stock dividend. Thus
the 200000 shares will be distributed as a stock
dividend. The number of outstanding share will
be increased by 200000 and the new total
number of outstanding stock will be 1.2 million.
On the other hand, the new value per share in
the market will be $83.33 (100 million/1.2
million). This example is taken from below
mentioned link:
Stock Split
The stock split is also an important concept.
When the management wants to increases
number of shares, the management follows this
method. In this method, the face value of the
share is split and number of share gets
increased. Due to increment in number of
outstanding share, the market value of per share
also gets affected but the total market
capitalization of the company does not affect.
Both stock split and stock dividend increase
number of outstanding shares but both are
different due to the accounting treatment. In the
stock split, the investors do not get any real
benefit. It is also known as non-cash distribution
of dividend. The motto behind stock split is to
increase trading of the shares in the market
(Baker, 2009)
For example, the face value of per share is
$100 and the total outstanding shares are 100
million. If the management of the company
announces stock split in ratio of 1:2, the total
outstanding shares will be increased by 100
million, thus the new total number of the share
will be 200 million. On the other hand, the face
value of the share will reduce by 50%. So the
new face value of the share will be $50. Due to
effect of stock split, the holding share of the
investor will also increase in the prorate basis. If
the investor has 10 shares, now he will have 20
shares. It is important thing that the total issued
capital will not be changed. The illustration of
stock split has been got from following link:
Reverse Stock Split
The reverse stock split is just opposite of stock
split. In this process, the management reduces
the number of outstanding shares. The company
increase face value of the share. In this method
corporation decides a ratio such as 2:1. Thus the
company accumulates two shares in one share.
In this method, the total market value of
company does not change. Due to reverse stock
split, the earning per share and face value of per
share rises. Thus the reverse stock split provides
just opposite result from stock split. It is
important question, why company selects this
method. When the management seems that the
face value of the share is less as compared to
competitors then the company goes for this
method to make its share value to equal to
competitors shares face value. It is also a
sound strategy to increase treading of shares. If
the face value of share is too cheap in
comparison to competitors, the investors will be
discouraged for investment. For increasing the
confidence of investors, the management uses
this method (Mladjenovic, 2009).
For example, an investor holds 100 shares of XYZ
Company and the face value per share is $50. If
the management go for reverse stock split
option and declares one share for 10 shares then
the holding of the individual will reduce 9 shares
for every 10 shares. Thus the new holding of the
investor will be 10 (100/10) shares but the face
value per share will be $500. It is also important
that the total market capitalization will remain
as same as before reverse split. The example of
the reverse split is take form below mentioned
link: http://www.sec.gov/answers/reversesplit.htm.
References
Baker, H. K. (2009). Dividends and Dividend
Policy. John Wiley and Sons.
Kennon, J. (2009). All About Dividends. Retrieved
May 31, 2010, from
http://beginnersinvest.about.com/od/dividendsdrips1/a/aa040904_2.
htm
Mladjenovic, P. (2009). Stock Investing for
Dummies. Dummies.
-----------------------------------------------------
ACC 291 Week 3 Wileyplus Assignment P9-7A, E10-5, E10-
8, E10-13, E10-22, E10-24, BYP10, P10-9A, P10-13A,
IFRS10-4 (New)

P9-7A, E10-5, E10-8, E10-13, E10-22, E10-24,
BYP10, P10-9A, P10-13A, IFRS10-4.
Exercise 10-5: Olinger Company
Exercise 10-8: Ortega Company
Exercise 10-13: Romine Company
Exercise 10-22: Cole Corporation

Costco Wholesale Corporation
If we look at the financial statements of the

company we can find that the company is
financially strong. Its strength are:
It has enough amount of current asset to repay its

current liability. The current ratio of the company
8.18 indicates that the company has $8.18 liquid
asset to repay its $1 of current liability.
The operating cost of the company is increasing

because the company is able to reduce its
expenses.
Cash from operating activity has increased for the

company.
Apart from this strength the company also has

some weakness in its financial statement:
Increasing inventory indicates that the company

inventory conversion period is increasing.
The cash from investing activity shows that the

company cash outflow is more in the short term
investment i.e. in non operating activity.
The overall has for the year 2008 has declined for
the company.
Net Income:

If we look at the trend in net income of the

company we can find that the company net
income looks fluctuating but it has improved it net
income in 2008 as compared to 2007.
Debt ratio as a percentage of total assets:
If we look at the debt ratio as percent of total asset

we can find that the debt ratio is declining in 2008
as compared to 2007 i.e. the company is
increasing equity to finance debt.
Debt as a percentage of total equity:
As we can see that the debt as percent of total

equity is declining in 2008 as compared to 2007
i.e. the company is increasing equity in its capital
structure.
As we can see that there is nothing negative in

2008 for the company and this is the reason it has
positive trend as compared to 2007. Hence there is
no need to correct anything for the company.
-----------------------------------------------------
Why are companies required to prepare a statement of cash flows?
Analyzing an Income Statement
The net income of Kodak has decreased a bit; it appears that the
company is more profitable. By conducting a side by side analysis
from 2004 to 2003 the company has increased in current assets and
decreased in total assets. It appears that the company went down in
property, plant and equipment net as well as discontinued operations.
So, despite the decrease in total assets it looks like the company has
made a good decision.
The company has also decreased its total liabilities by about 4%. I
believe this to be good because the short term borrowings and long
term debt has decreased. To me, this means that the company is
tightening their belt and paying off old debt.
Total shareholders equity has down a little bit in dollars, but on the
percentage level the companys percentage has gone up. I believe this
is because the company issued $104k more shares in 2004 than in
2003. The company has the same amount of shares outstanding in
2004 that it did in 2003 as well. Retained earnings on the stock have
gone up in 2004 as well. I believe this is contributed by the more
shares that have been issued.
I believe the profitability of the company is under good standings.

They appear to be making the necessary adjustments in the company
to stay with in a profitable income.
-----------------------------------------------------

What are some common ratios used to analyze financial information?
Which are the most important?
Cash Flow Statement Analysis
Cash Flow Statement Analysis
The cash flow statement is important financial statement of the

corporation. The cash flow statement states from where cash has
come and where cash has been gone. Thus the cash flow statement
makes a relationship between beginning balance and ending balance
of cash. The cash flow statement is prepaid on the basis of income
statement and balance sheet of the company. The Little Bit Incs
beginning cash balance including marketable securities was $24000.
On the other hand, the ending cash balance including marketable
securities of the company was $40000 (Weygandt, Kimmel & Kieso,
2009).
The net income of the company was $5500 during 2009. The company
generated cash inflow from operating activity is less as compared
cash out flow from operating activities. The company generated
$9000 negative cash balance in operating activity section of the cash
flow statement. On the other hand, in the investment section, the firm
has also negative cash balance. The firm has $7000 negative balance
in investment section of the cash flow statement. The Little Bit Inc
made investment during the year instead of selling of assets. Last
section of the cash flow statement is financing activity section. In
which, all finance related activities come. The corporation sold some
shares and borrowed some money from outside lenders therefore the
company has positive case balance by $32000 in financing activity
section.
Reference
Weygandt, J.J.,Kimmel, P.D. & Kieso, D.E. (2009). Managerial

Accounting: Tools for Business Decision Making. John Wiley and
Sons.
-----------------------------------------------------
ACC 291 Week 4 Individual WileyPLUS Assignment

Week 5 DQ 1
Due Tuesday, Day 2
In what ways does the statement of cash flows relate to the balance
sheet and income statement?
It is important to understand what we are doing with the numbers and

the results these numbers give us because the result is the information
that will be available to us from financial statements. Although some
want to see the income statement and ignore the other statements we
need to use them together to see the total picture of what is happening
to our business. The relationship between the numbers on the
financial statements shows us everything we need to know about the
business.
The income statement shows income and expenses for a period of

time and if we are making or loosing money. The balance sheet
compares the assets to liabilities and shows how much money the
business would have if everything is sold today.
The statement of cash flow might be the most critical statement
because there is plenty of information we can gain form it. This
statement relates with the income statement on operating activities to
see if they are generating cash or not. It is related to the balance
sheet on how much cash is used in investing activities. In relationship
with the balance sheet the cash flow statement shows what cash is
provided or used by financing activities. It will tell us how much debt
has been paid and will indicated if we are using more debt or have
paid down the credit line.
When the business makes a sale or receives payment for a sale on

credit that is an inflow. A sale shows up as income on the profit and
loss statement and as an inflow on the cash flow statement. It also
shows up either as cash or accounts receivable on the balance sheet.
Also, how quickly we can collect on accounts receivable will play a
big role in the cash flow. When the business spends money, it shows
up as an expense in the profit and loss statement and as an outflow on
the cash flow statement. It also shows up on the balance sheet as a
decrease in cash, or an increase or decrease in liabilities, depending
on what the expense represents.
Response 2
In what ways does the statement of cash flows relate to the
balance sheet and income statement?
The cash flow statement relates to the income statement and balance
sheet. The net income from the income statement is listed on the
statement of cash flows. Operating activities are analyzed on the
statement of cash flows; this section of the statement reconciles the
net income to the actual cash the company received from or used
during operations. The second section of the statement of cash Flows
is the cash flow from investing activities which include purchase or
sale of assets. The last section in the Statement of Cash Flows is the
cash flows from financing activities that includes raising cash by
selling stocks/bonds or borrowing from backs; or cash out flows from
paying back loans. The balance sheet shows the different account
balances at the end of the accounting period. The statement of cash
flows reflects changes in the accounts listed on the balance sheet
between accounting periods. The net cash from operating, financing,
and investing activities are added up to calculate the net change in
cash.
Week 5 DQ 2
Due Thursday, Day 4
Discuss how the statement of cash flows is utilized by investors. If you

were an investor reviewing a statement of cash flows, what section
might interest you most? Why? Discuss the circumstances in which
other sections of the statement might be important to an investor.
Prior to making an investment in a company, one would want to

understand the decisions the owners are making to fund the
operations of the company daily. Maintaining sufficient cash to
acquire new product, pay overhead, and satisfy generated sales would
be the predominant need of the company. Second need would be for
the company to have sufficient cash to remain competitive. This may
require cash to invest in research and development, increase
inventory as new product introduction, improve efficiency in plant
and equipment, or cash to satisfy prior borrowing obligations. By
reviewing the statement of cash flow, the investor can determine if the
company is generating sufficient cash internally to fund operations or
are they requiring outside injection of cash to finance the short fall in
cash needed to operate the company. Last, the investor can review
the statement of cash flow to better understand the leverage of the
company and the requirement for repayment of debt, or dividends to
reward prior investments.
Response 2
Discuss how the statement of cash flows is utilized by investors. If you
were an investor reviewing a statement of cash flows, what section
might interest you most? Why? Discuss the circumstances in which
other sections of the statement might be important to an investor.
The statement of cash flow is utilized by investors because it has all

information integrated from the balance sheet and the income
statement. The statement of cash flow is used by an investor to see if
the operating activities are greater than the net income to have
earnings that are called high quality. If operating activities are
less, then a red flag will be raised as to why the net income is not
becoming cash. Another reason would be investors believe cash is the
best. The statement shows all cash coming and going from the
business. If the company generates additional cash than what is being
used, then the company can reduce their debt, acquire another
business, or buy some of the stock back. The last reason why would be
that financial models are based upon the statement of cash flow.
If I was an investor reviewing a statement of cash flows the section
that might interest me the most would be the operating activities. I
would like to know how the company was doing and what areas need
to be improved to have more cash generated in the business. All the
sections are important to an investor so they can see the complete big
picture of their investment.
-----------------------------------------------------
ACC 291 Week 4 IndividualWileyPLUS Practice

Resource:WileyPLUS
Analyzing Statements of Cash Flows
4.8. Research Problem

Choose five companies from different industries
and locate their statements of cash flows
for the most recent year.
(a) Create a table to compare the dollars
provided or used by operating, investing, and
financing activities, as well as the overall
increase or decrease in cash.
(b) Create a second table for each company
comparing this same information for each of the
three years presented in that companys
statement of cash flows. Include an additional
column that looks at the combined cash flows for
all three years.
(c) Write a short analysis of the information
gathered. Your discussion should address, among
other things, whether cash flow from operating
activities is large enough to cover investing and
financing activities, and if not, how the company
is financing its activities. Discuss differences and
similarities between the companies you have
chosen.
(a) Create a table to compare the dollars

provided or used by operating, investing, and
financing activities, as well as the overall
increase or decrease in cash.
STATEMENT OF CASH FLOW ANALYSIS
HARELY
STARBU DAVIDSO
CKS N RITE AID
2008 2008 2008
NET INCOME /
STARTING $ $ $
LINE 315.5 - (1,079.0)
OPERATING $ $ $
ACTIVITIES 1,258.7 (684.7) 79.4
$
INVESTING (1,086. $ $
ACTIVITES 6) (393.3) (2,933.7)
FINANCING $ $ $
ACTIVITIES (184.5) 1,293.4 2,904.0
$ $ $
CASH (11.5) 190.7 49.9
(b) Create a second table for each company

comparing this same information for each of the
three years presented in that companys
statement of cash flows. Include an additional
column that looks at the combined cash flows for
all three years.
STARBUCKS
2008 2007 2006
Net Income/Starting 315. 672.6 564.

Line 5 4 26
Cash from Operating 1258 1331. 1131
Activities .70 22 .63
- - -
Cash from Investing 1086 1201. 841.
Activities .60 95 04
- - -
Cash from Financing 184. 171.8 155.
Activities 50 9 33
-
11.5 - 138.
Net Change in Cash 0 31.35 80
Net Cash - Beginning 281. 312.6 173.
Balance 30 1 81
Net Cash - Ending 269. 281.2 312.
Balance 80 6 61
HARLEY
DAVIDSON
2008 2007 2006

Net
Income/Starti 933. 1043
ng Line 0 84 .15
Cash from -
Operating 684. 798. 761.
Activities 65 15 78
Cash from - -
Investing 393. 391. 35.2
Activities 25 21 6
Cash from - -
Financing 1293 1037 637.
Activities .39 .80 02
Net Change in 190. 164. 97.4
Cash 70 46 2
Net Cash -
Beginning 402. 238. 140.
Balance 85 40 98
Net Cash -
Ending 593. 402. 238.
Balance 56 85 4
RITE AID
200 200
8 7 2006
Net - 26. 1273

Income/Startin 107
g Line 8.99 83 .01
Cash from
Operating 79.3 309 417.
Activities 7 .15 17
Cash from - - -
Investing 293 312 231.
Activities 3.74 .78 08
Cash from -
Financing 290 33. 272.
Activities 3.99 72 84
-
Net Change in 49.6 30. 86.7
Cash 1 08 5
Net Cash -
Beginning 106. 76. 162.
Balance 15 07 82
Net Cash - 155. 106 76.0
Ending Balance 76 .15 7
(c) Write a short

analysis of the
information gathered.
Your discussion should
address, among other
things, whether cash
flow from operating
activities is large
enough to cover
investing and
financing activities,
and if not, how the
company is financing
its activities. Discuss
differences and
similarities between
the companies you
have chosen.
Starbucks operating cash flow has gone up in 2007 and

Starbucks looks a on the down side but previously was d
decreasing from the previous year. This could mean tha
Harley Davidson's operating cash flow has significantly

on an upward cycle from 2006. The decrease in cash fro
information supplied for net income. With the economy
point could have an effect on why the net income is dec
coming year could reflect a positive gain.
Rite Aid's operating cash flow has taken a significant de

taking in cash from investing and cash from financing, t
previous years. Rite Aids net gain in cash could be from
also could reflect the expansion of the company.
-----------------------------------------------------

Discuss the objectives for Week Four. Your discussion
Findwhat.com Case - CheckPoint

ACC 230
Findwhat.com has recorded the 135 percent
increase in the revenue which is mainly due to
the business acquired of Espotting during the
year. The different accounting policies are
present for the acquiring firm and the acquired
firm. The company has recorded certain
premature revenues for the amount which
advertisers had made only the advance deposit.
As result, the company is recognizing the vendor
financing as revenue. In some places, the gross
revenue has been recognized while in another,
the net revenue has been recognized. The
network click revenue is recognized at gross
level while the private level revenue is taken at
net level. Some of the revenue expenditures
have been recognized as the capital
expenditures.
Revenue for set up network fee is treated as
deferred revenue and is recognized over a period
of time. The company is very inconsistent with
regards to its accounting policies in terms of
recognition of revenue. The provision and
treatment of amount for doubtful debt is also not
satisfactory. When a customer clicks on a
sponsored advertisement, the whole of the
revenue due to him is recognized. The company
is having a very high amount of doubtful debt
balance at the end of the year ending December
31, 2004.
-----------------------------------------------------
ACC 291 WEEK 4 Stockholders Equity Section of the
Balance Sheet (Lachlin Corporation Balance Sheet)

is to help you become familiar with examining the
stockholders' equity section of the balance sheet.
Assignment Steps Resources: Financial Accounting:
Tools for Business Decision Making Answer the
following questions in 1,050 words using the Lachlin
Corporation Balance Sheet (partial) below: Week 7 DQ
1
Due Tuesday, Day 2
Post your answer to Study Question 5.2 on p. 180 (Ch.
5). As you read your classmates responses, consider
the following scenario: If you compared two different
companies that utilized two different valuation
methods, how might the quality of the results differ?
Also, comment on the difficulty of making comparisons
between two firms that use different valuation
methods.
Understanding the different inventory methods is

crucial. First the person that establishes the inventory
needs to determine which method to use. LIFO, or
FIFO. LIFO means Last in First Out. This means that
when a purchase is made, and sales are recorded the
newest product is used first. So if I bought 10 combs at
$2 on December 1st, and then I buy 5 combs at $2.50
on December 10th. When sales are made I am going
to record sales using the $2.50 until I sell through the 5
combs that were purchased on the 10th, and then the
cost will go to the previous purchase price of $2 until
those 10 combs are sold through. FIFO is just the
opposite. Meaning that goods are used in the order
that they are received. The first items ordered, are the
first items sold. Either method will pass an audit. It is
important to note though that managers can't switch
back and forth between the two methods. Profit will
vary depending on which method is being used. Say
you sold only 6 combs at $3 each. Using the LIFO
method this would equal $3.50 profit. If you used the
FIFO method, this would result in a $6.00 profit.
Response 2
5). As you read your classmates responses, consider
the following scenario: If you compared two different
companies that utilized two different valuation
methods, how might the quality of the results differ?
Also, comment on the difficulty of making comparisons
between two firms that use different valuation
methods.
It is very important to understand which inventory
valuation method is being used to determine the profit
numbers quality. The balance sheet, statement of cash
flow and income statement can be directly impacted by
the valuation method that used to determine the costs
of inventory. The three methods that are used are FIFO,
LIFO and Average Cost. The valuation ratios can be
dramatically affected depending on the inventory
valuation that is being used over a long-term period;
especially because prices are likely to rise. When using
FIFO you can increase net income, but then at the
same time raise the amount taxes that business is
obligated to pay. When using LIFO the inventory can be
obsolete because they are old this will result in lower
net revenue because the products pricing is higher. The
Average Cost results usually fall between LIFO and
FIFO. The bottom line can be affected mainly by the
inventory analysis and the ratio results that are formed
from that analysis. It is easier to compare companies
that are in the same line of business, so I believe that
quality of results would differ tremendously if different
valuation methods were used. If you use LIFO that
company may seem unattractive but they are
performing well, as for FIFO it may look good as for
profit, but may not be performing well.
DQ 2
Week 7 DQ 2
Due Thursday, Day 4

5). Discuss the consequences of poor quality reporting.
What has the U.S. government done to improve the
quality of reporting after recent financial scandals such
as Enron?
I think that the significance is that the analysts only

see this one HUGE transaction. The events that
actually led up to this large transaction actually took
place over a 2 year period. These items should have
been written off as they occurred. Wall Street would
not have known that the executives refused to write off
these accounts when they should have. Wall Street
only see's the one large transaction. If the company
would have been more honest in their reporting they
would have seen (more than likely) that there were
many accounts over a two year period that should have
been written off at different periods. So the analysts
would not have seen a pattern of recurring write-
offs. If the analysts only see the one transaction they
are less likely to be able to paint an accurate picture of
the financial standing of the business for investors, or
potential investors. If the investors could see that
there were many accounts that had to be written off
maybe their investing decisions would have been
different. The regulation of the accounting field has
grown by leaps and bounds since the Enron
scandal. The government has implemented several
agencies and regulations to ensure honesty in
accounting practices. SOX is one example of an agency
that has been put into place to ensure honesty in
accounting. SOX implements things like internal
controls, and accountability for CEO's and CFO's.
Response 2
I believe the impact and importance of this write-off
event is a very big matter. It is obvious how they
handled it that it was a scandal from the start. I think
that everyone involved had a big role in how things
played out. To me I think of the investors as a really
big hit to this but also feel that audit committees have
to be held responsible as well. It has been shown over
many examples that adit oversights are happening to
financial reporting. Although I do feel they are getting
better and tighter due to conforming tightly with the
GAAP requests. I feel over time the accounts
receivable should have been written off in smaller
increments and not all taken by $405 million at once.
Maybe that isn't correct but it would have been easier I
would think to take the receivables over time.
Response 3
Wall Street should have read the footnotes and seen
that the write off was for accounts receivables and
should have been reported in the allowance for
doubtful accounts. Every company that allow sales on
credit face doubtful accounts; therefore, the write off
may reoccur. The significance of this transaction is that
WorldCom want to cover up the $405 million dollars
that it was unable to collect from its customers, but
WorldCom wrote off a large sum of money rather
recording the write-off as needed and the analyst over
looked it. Depending on how the company policy is for
writing off accounts, from 1998 to the 3rd quarter in
2000 is 11 quarters. If the company wrote off bad
accounts quarterly it should have wrote off
36,818,181.82 per quarter. Investors would not want to
continue to invest into a company that has poor
collection skills, or poor management. Unusual items
are simply for those items that are not recurring
operating expenses. Bad debts do not fall under this
category. Since the Enron and WorldCom scandals
many rules and regulations have been put in place by
the government such as SOX. More people are being
held accountable for their actions and consequences
follow poor quality reporting such as fudging the
books.
-----------------------------------------------------
ACC 291 Week 4 Wileyplus Assignment Do It! 11-1, E11-5,
E11-7, BYP11-1, BYP11-2, P11-5A, P11-8A (New)

Do It! 11-1, E11-5, E11-7, BYP11-1, BYP11-2,
P11-5A, P11-8A.
Do It! 11-1
Exercise 11-5 Garcia Corporation
Exercise 11-7 Pele Company
Presenting to Stakeholders
Presenting to Stakeholders
Financial statements provide insight into the companys current status
and lead to the development of policies and strategies for the future (Axia,
2007). Financial statements and notes to the financial statements should be used
to analyze the company. For instance, what do the financial statements reveal
about why the company has requested a loan or purchased items on credit?
What is the firms capital structure and what does the firm have outstanding?
How well can the company pay back debt? What recourses are used to pay debt?
What is the companys performance record and are there any future expansions?
What are the expected returns and how successful is the company compared to
industry averages? Which areas of operations contributed to the companys

success, and what are the strengths and weaknesses of the company? What
changes can be made to improve the future performance of the company?

Key financial ratios will assist in determining the information requested.
Liquid ratios measure a firms ability to meet cash needs as they arise. The
current ratio is a good tool to use because it measures the ability the firm has to
pay debts when due. The current ratio for REC is at 2.4 times for 2007, although
it is down from 2006 the company is still able to pay current debt when due.
Cash flow ratio considers cash flow from operating activities has increased from
2006, and this indicates an improvement in short-run solvency. Average
collection period has gone down 5 days within the last year. The cash conversion
cycle gives in-site on why the cash flow has improved or decreased, in this case
the conversion period for REC has improved by 26 days.
Activity ratios measure the liquidity of specific assets and the efficiency of
managing assets. Accounts payable turnover is up seven times from the prior
year and inventory turnover is also up .25 from last year. Accounts payable
turnover is down 9.05 from 12.10 in 2006. This means that the company is
taking longer to repay payables. The fixed asset turnover and total asset
turnover ratios are used to assess managements skills in generating sales from
investments in assets. The fixed asset turnover has dropped slightly, but the
total asset turnover has risen slightly. The increase in total asset turnover comes
from improvements in inventory and accounts receivable turnover.

Leverage ratios measure the extent of a firms financings with debt
relative to equity and its ability to cover interest and other fixed charges (Axia,
2007). Debt ratio, long-term debt to total capitalization and dept to equity have
all raised slightly implying a slightly riskier capital structure. The times interest
earned and the cash interest coverage have increased since 2006. The interest
payments can be covered 7.4 times this year. The cash interest has improved
due to the operating profits and cash from operations. The fixed coverage ratio is
also important in cases where companies use operating leases. In this case, the
fixed charges have increased slightly.

Profitability ratios are used to measure the overall performance of a firm
and its efficiency in managing assets, liabilities, and equity. The ratios used are
the gross profit margin, operating profit margin and net profit margin. All of
which have improved for REC. As well as the cash flow margin, return on total
assets, return on equity and cash return on assets. Over all the company seems
to be in well financial standings and looking toward a profitable year.
Reference
Axia College. (2007). The Analysis of Financial Statements. Retrieved June 28,
2010,
from Axia College, Week Eight, ACC 230.
-----------------------------------------------------

Why do corporations buy back their own stock?
What does it tell you about the corporation?
Analysis of Scenarios:
Debt Scenario would increase the debt ratios from to 50%. Equity
Scenario would reduce the debt ratio to 40%. With Debt option,
earnings per share would be higher. Interest declines to 2.86 times
with the Debt option while times interest earned increases to 3.75
times with the Equity option. Either option exhibits a good use of
financial leverage because for both, the financial leverage index
being greater than 1. However, it is higher using the Debt option.
-----------------------------------------------------
ACC 291 Week 5 Individual Effect of Unethical Behavior
Article Analysis

Write a 350- to 700-word article analysis in which you
identify situations that might lead to unethical
practices and behavior in accounting.
Interpreting Financial Ratios
Luna Lighting, a retail firm, has experienced

modest sales growth over the past three years
but has had difficulty translating the expansion
of sales into improved profitability. Using
three years financial statements, you have
developed the following ratio calculations and
industry comparisons. Based on this information,
suggest possible reasons for Lunas profitability
problems.
Industry
2009 2008 2007 2009

Current 2.3X 2.3X 2.2X
2.1X
Average collection period 45 days 46 days
47 days 50 days
Inventory turnover 8.3X 8.2X
8.1X 8.3X
Fixed asset turnover 2.7X 3.0X
3.3X 3.5X
Total asset turnover 1.1X 1.2X
1.3X 1.5X
Debt ratio 50% 50% 50%
54%
Times interest earned 8.1X 8.2X
8.1X 7.2X
Fixed charge coverage 4.0X 4.5X
5.5X 5.1X
Gross profit margin 43% 43%
43% 40%
Operating profit margin 6.3% 7.2%
8.0% 7.5%
Net profit margin 3.5% 4.0%
4.3% 4.2%
Return on assets 3.7% 5.0%
5.7% 6.4%
Return on equity 7.4% 9.9%
11.4% 11.8%
Based on this information, some possible
reasons for Lunas profitability problems are
suggested as under:
a) Net Profit margin of the company has
degraded and this might be due to decrease
in the net income of the company due to
increase in expenses. This needs to be
improved upon by cost control and cost
reduction.
b) Return on equity of the company has
degraded further and this also indicates that
there is a decrease in the net income of the
company due to increase in expenses. This
needs to be improved upon by cost control
and cost reduction.
c)Fixed charge coverage has fallen, which
means that the debt payment along with
interest might have increased and this will
also lead to decrease in the net income of
the company and thus degrading the
profitability position of the company.
d) Operating profit margin has dropped
even though gross profit margin has
remained constant. It means that the
operating expenses are higher and need to e
controlled to improve the profitability of the
company.
e) The fixed assets turnover and the return
on assets have also degraded; this also
indicates decrease in the net income of the
company.
-----------------------------------------------------
ACC 291 Week 5 Individual WileyPLUSAssignment

we have another New set of week 5 Willyplus assignment which
ACC 291 Week 5 Wileyplus Assignment E7-3, E12-1, E12-8, P12-

9A, P12-10A, E13-3, E13-4, IFRS13-1, P13-2A (New)
Capstone Discussion Question

Due Tuesday, Day 2
What have you learned in this course about the process of

analyzing financial statements?
I have learned that there is a lot more to analyzing financial

statements than I thought. This class has made me question my
decision to go into the accounting field. I feel inadequate after
taking this class. I am not an articulate, or analytical person. I
tend to get confused easily and do better at putting the information
together than I am at figuring out what it all means. This is my last
block of classes before my Bachelor program starts, and I don't
know if I am ready, or if I even want to continue. Analyzing
financial statements takes a very detail oriented mind, and one that
is great at problem solving. It is critical to understand the financial
statements, and how they relate to one another. There is a lot of
information that is not as obvious as it would seem. Looking at the
bottom line will not give a good picture of how a company is doing
financially. It is important to know the how and why the bottom
line looks the way that it does.
Response 2
I have learned that it takes someone that has the patience, tenacity,
and motivation to truly analyze the statements. If you go about it not
wanting to do the work you wont give a good analysis. I found that
you have to be willing to dig deeper than most would to get a full
picture of the company. I found that it is not an easy task to
complete. For me the process is a tedious one. I don't think I would
want to go into that type of accounting where I have to analyze the
statements of a company. I think for me I would be better in
specialized accounting like A/P or A/R. I am better at figuring out
problems and figuring out ways to make them better. I am better at
specific tasks so for me I wouldn't want to analyze the statements. I
am glad to have learned how, because at some point I am sure it will
come in handy.
Response 3
All financial statements are essential documents because they tell
what has happened to a business over a period of time but most
users of financial statement are more concerned about what will
happen in the future. Stockholders and creditors are concerned
with future earnings and dividends and company's future ability to
repay its debts. Management is concerned with the company's
ability to finance future expansion.
Working as a bookkeeper I do all the steps in monthly cycles
consisting of entering transactions into the journals, working with
A/R, A/P, payroll and preparing the reports, but I have not been able
to analyze the reports the way I learned in this class. I learned how
important is to monitor and interpret the results. I learned how to
compare financial statements of a company with a company from
the same industry and point out the differences and similarities.
This class taught me the importance of analyzing the Income
Statement, Balance Sheet, Cash Flow Statement and Stockholders
Equity each one individually. I learned how essential is the quality
reporting and how useful this quality is in business decision
making. I learned about key financial ratios: liquidity ratios,
activity ratios, leverage ratios, and profitability ratios. All these
ratios are valuable as analytical tools and will help me indicate the
areas of strength and weakness in a business. Even though I
learned the information step by step in this class I tent to go over
every single chapter all over again to better absorb the material.
This class taught us the potential of some management
manipulations of financial statements, thus following the general
accounting rules, being honest, ethical and professional are the
ways on leading to safe and profitable decisions.
-----------------------------------------------------
ACC 291 Week 5 Learning Team Ratio Analysis Memo

Resource:Virtual Organizations
Click the Virtual Organization link on the student
website to access the Virtual Organizations.
Evaluating Financial Health 1

Evaluating Financial Health
Apple Inc. (AAPL)

Apple Inc. (AAPL)
Apple is one of the strong market participants of
computer industry. It also involve in
manufacturing of telecom devices, software and
other peripherals. It enjoys full advantage of USA
as home country, as it has a strong retail
network of 273 physical stores whose majority is
in USA, beside the E-retail outlet around the
globe. The diversified product portfolio
empowers the apple to strive in tough
competition against Dell, HP & Compaq
(Electronista, 2010). Amongst its competitor
Apples outclass profitability is witnessed of its
effective diversification efficient reach of product
to customer and state of an art Research and
Development.
Managements Strategy
It is clear from the financial and the strategic
analysis of the Apple Inc. that the management
of the company believes in continued research,
innovation and product development. It may be
the sole reason that why the firm avoids the cash
dividend and rely over the stock options. Besides
the hardware business of computer the apple is
also focus on developing application software
operating system, and all such software
application which added the value of its product.
The management is of the view that R&D,
integrated marketing channels and its product
diversification is the source of competitive edge
against rivals of its industry. Management is
aware of the need of the investment in the
promotion and advertisement activities; it
increases the brand equity, brand loyalty and
awareness about the products. Management also
considers focusing on the retail store as it is the
source to remain in contact with customer and a
way to market the product directly; it is also a
way to cross sell the market to customer.

Financial returns in Comparison to Industry
An investor is always keen to know about the
profitability. Hence we start with the assessment
of profitability. Apple Inc. has shown a
tremendous improvement in net sales and
profitability since 2005 to 2009. In 2008 the net
income increases 75.07% and in 2009 increases
34.58% shown that Apple cop. is continuously
enhancing its profit. Company earning P\S is also
at increasing trend. In 2009 basic EPS is 9.22
from 6.94 last year, and it was 4.04 in 2007. It
should be noted that no cash dividend is
announced since 2005, although stock base
benefit and compensation is given. An increase
in return on asset has been observed in 2009
i.e.26.96% against 19.33% last year while
industries average is 19.8. Hence Apple is
leading the Industry from this angle. Return on
equity is 18.92% into 2009 lower than 33.40% of
industry benchmark, meaning apple is at lower
leverage with a roe increase of 4.03% this year
(Hardware Marketplace, 2010).
Financial Risk and Industry
At this stage of our analysis we extend our
findings to assessment of risk associated with
the investment opportunities in APPLE Inc.
Analyzing the liquidity we observed that Apple
has a sound ability to meet its short term
obligation. It is revealed by the healthy current
ratio of 2.74 for the year 2009; it is improved
from 2.46 of the last year 2008. If we had a glace
on the industry it reflects a standard of 2.5. In
the computer equipment industry a very low
inventory has been observed. That is why the
acid test ratio fall lightly below the current ratio
i.e. acid test ratio is 2.70 for the year 209 in
comparison to 2008, which were 2.43. If we
compare the acid test of 2009 i.e. 2.70 with
industry average, which is 2.5 (msn.com, 2010).
On the liquidity
situation it is stated that the risk avoider will be

glad to look at the satisfactory liquidity position.
As far as the solvency risk is concern in the
long run the debt equity ratio is 0.11 for the year
2009, which is increased from 0.08 of 2008. Here
it is important to refer to the industry average of
0.07 (OnlyHardwareBlog, 2010). Hence it is
apparent that though the APPLE Inc. is more
risky in the long run, but it does not sound like
the alarm.
Cash Flow Analysis
Due to the increase in sale the operation of
the firm expanded, and hence besides other
assets, the requirement of the cash also
increases in 2009. $1.11 billion is generated from
operations, which is 5.87% higher than the last
year. The deferred tax expense in 2009 is v1040
million this noon cash expense last year it was
39 million and 78 million in 2007 (Electronista,
2010).
The company actively invests in marketable
securities that not only improve its liquidity, but
rather give a room to meet hazardous need of
raw inventory at any point of time. Investing
activities gives negative balance $ 17.434 billion.
It is also clear from the cash flow that firm does
not announce any dividend in cash, rather it
takes a tax benefit form stock base benefit;
secondly, firm keeps healthy cash in hand.
Apple and its Main Competitor
When comparing the Apple with its major
competitor like Dell & HP, Apple marks higher
price earning ratio of 19.10 times that is greater
than Dell and HP, which is 16 times and

18.3 times respectively. We analyze the share
price to book value it is 5.71 times; again higher
than 4.1 times of Dell and 1.38 times of HP.
Cause of higher market price is the retention of
profit and stock base benefits. Apple also has
high capitalization; the date is $ 250.0 billion
(Electronista, 2010).
Apples Performance and Economy
Global economic recession is on the way to
recovery, although Europe and America needs
some more time to normalize. However,
reasonable growth is observed in emerging
market like Brazil, Malaysia, India and China.
Triad block recorded a poor growth. What is
going to be with the world economic outlook is
the global economy is going to revive with the
V shape pattern or its recovery would be like
expanded U as some economist say growth will
be slow. I am of the view that Apple Inc. should
more focus on the emerging market like India,
China, South Pacific region countries. So Apple
needs to exploit more and more opportunities
outside the USA. I am optimistic that the idea of
direct marketing will work out side the USA as
well. Hence Apple needs to introduce maximum
retail store outside the USA.
It is important to look at trend analysis and

industry comparisons as a means of determining
if it is the best time to expand or stay put and to
see how its future products will be accepted by
the public.
References
Electronista. (2010). Apple only US computer
builder to outgrow industry average. Retrieved
July 2, 2010, from
http://www.electronista.com/articles/10/06/04/isuppli.sees.apple.at.3
4pc.world.market.share/
Hardware Marketplace. (2010). Computer
Hardware. Retrieved July 2, 2010 from
http://www.hardwaremarketplace.com/computer-hardware/
msn.com. (2010). Apple Inc: Key Ratios.
Retrieved July 2, 2010 from
http://moneycentral.msn.com/investor/invsub/results/compare.asp?
Page=PriceRatios&Sy
mbol=AAPL
OnlyHarwareBlog. (2010). Highest debt to equity
ratio in the computer hardware industry
detected in shares of international business
machines. Retrieved July 2, 2010 from
http://onlyhardwareblog.com/?p=2107
your ratio calculations and your horizontal and vertical
analysis. In your memo, address the following
questions:
What do the liquidity, profitability, and solvency

ratios reveal about the companys financial
position?
Which users may be interested in each type of

ratio?
What does the collected data reveal about the

companys performance and position?
-----------------------------------------------------

Discuss the objectives for Week Five. Your discussion
Financial Analysis
Wal-Mart Stores Incorporated operates chain of
retail stores in USA as well as outside the USA.
The first Wal-Mart store was opened by Sam
Walton in Arkansas in USA in 1962. Within a
span of five years; he opened more stores and he
number increased to 24 stores across Arkansas.
The incorporation of Wal-Mart Stores
Incorporated was done in 1969. Wal-Mart grew in
the United States of America by opening of more
stores in to the country. The company not only
opened the stores across Arkansas but also
across the United States of America (Wal-Mart
Corporate, 2010).
Wal-Mart was opposed by the unorganized retail
business holders in the USA as their business
was affected by opening Wal-Mart stores. The
company also opened its first store outside the
USA in South America in 1995. Wal-Mart wanted
to spread itself not only to the USA, but in other
countries as well. In 2006, the company was
having 3800 stores in USA and more than 2980
stores outside USA making it one of the largest
retail chains in the world. This corporation was
also having a vision to establish itself in to a
global entity. Wal-Mart was one of the first
companies to operate in the organized retail
sector (Fishman, 2006). The modes of entry
used by the company were different for different
countries. Wal-Mart used the mode of entry in to
various countries according to the rules and
regulations prevailing in to that country (Wal-
Mart Stores Inc: Financial Statement, 2010).
The sales of the company for the financial year
ending in January 2010 are 413.8 billion dollars
and income for the same period is 14.7 billion
dollars. The quarterly sales growth for the
company has been 5.90%, while the industry
average is 6.80 %. The five-year annual growth
in the sales of the company has been recorded at
7.50 % while five year annual growth of income
is 6.58 %. By analyzing the financial statements
of WalMart Incorporated, we find that debt
equity ratio of Wal-Mart is 0.71 on 31st January
2010, which is 0.68 for the industry. It means
the proportion of debt of the company in its
capital structure is lesser than the equity. The
company is less leveraged so the interest burden
on the company is minimal. Wal-Mart has
capacity to borrow from the market for its CAPEX
in the future. The interest coverage ratio is 13
times in January 2010, which is 21.9 for the
industry. Wal-Mart needs to improve profitability
to improve interest coverage ratio for the
reduction of risk of the lenders of the company
(Wal-Mart Stores Inc: Financial Statement, 2010).
The total revenues received by the organization
in the year ending January 2010 were $408.2
billion whereas revenues in the year ending
January 2009 were $404.3 billion dollars. The
revenues in the year ending January 2008 stood
at $377 billion dollars. Thus, it can be easily
analyzed that the total revenues of the
organization has grown over the years steadily.
This has also impacted the net income of the
organization and thus, increments could also be
seen in the net income of the organization. Net
Income, which stood in the year ending 2008 at
$12.7 billion, increased to $13.4 billion for the
year ending 2009 and again increased to $14.3
billion in the year ending 2010 (Wal-Mart Stores
Inc: Financial Statement, 2010).
Again if cash flow statement of the organization
is analyzed it can easily be viewed that the cash
flow from operating activities have always
increased from the last three years. The cash
flow from operating activities stood at $20.6
billion in the year ending 2008 has increased to
$23.1 billion for the year ending 2009 and too
further increased to $26.2 billion for the year
ending 2010. But the cash flow from investing
and financing activities has seen positive and
negative fluctuations both. Here where net cash
outflow from investing activities has decreased
first and increased later again. For the year
ending 2008, it stood at $15.6 billion which
decreased to $10.7 billion but again increased to
$11.6 billion. Again the net cash outflow from
financing activities increased constantly since at
the end of year 2008, it stood at $7.4 billion
which further for the year ending 2009 increased
to $9.9 billion and further increased to $14.1
billion for the year ending 2010 (Wal-Mart Stores
Inc: Financial Statement, 2010).
Wal-Marts return on equity has improved in the
last three years, which is a good sign for the
shareholders of the company. It was 19.9% in
January 2008, which increased to 20.3 % in 2009
and then again marginally increased to 20.4 % in
2010. The return on asset has also shown the
same trends in the last three years. In 2008 the
return on asset was 7.9 %. It increased to 8.1 %
in 2009 and then further increased to 8.4 % in
2010. It shows the increase in the efficiency in
the utilization of the assets of the company. The
net profit margins have been almost the same in
the last three years in the company. It was 3.4 %
in 2008, 3.3 % in 2009 and 3.5 % in 2010 (Wal-
Mart Stores Inc: Financial Statement, 2010).
The price to sales ratio and price to book value
ratio have shown negative trends in the last
three years, which shows that the stock of the
company is available at cheap price as compare
to the price it was carrying three years back. The
price to sales ratio, which was 0.55 in 2008, was
decreased to 0.46 in 2009 and then improved to
0.51 in 2010. Similarly, price to book value ratio
reduced from 3.12 in 2008 to 2.83 in 2009 and
then improved marginally to 2.86 in 2010. This
represents the better opportunity available for
the shareholders to invest in to the stock of the
company. The book value per share of the
company has also increased in the last three
years. It was 16.26 dollars per share in 2008,
which increased to 16.63 dollars per share in
2009 and further improved to 18.69 dollars per
share in 2010. This represents the increase in
the retained earnings of the shareholders in the
company (Shim & Siegel, 2007).
Wal-Marts current assets level has shown
stability in the last three years for the company,
which shows the lesser investment in current
assets for the company even with the increased
sales. In 2008 the cash and marketable securities
available with the company was 48020 million
dollars, which increased to 48949 million dollars
in 2009 and then decreased to 48331 million
dollars in 2010.
Quantitative Analysis holds huge significance
while evaluating the financial health of the
organization. Three types of techniques are used
for quantitative analysis. The three techniques
are trend analysis, common-size analysis and
ratio analysis. Trend analysis is one of the
significant quantitative analysis tools that assist
in analyzing the financial health of the company
as compared to its previous years. The year on
year trends in the financial statements are
studied to analyze whether organization is
improving upon its past performance or it is
further going down (Brigham & Houston, 2007).
Common-Size analysis is another quantitive
analysis tool again one of another tool that helps
in making evaluation of the financial health of
the company as against its competitors. The
financial statements of the company and its
industry competitors are compared by taking a
common base and then performance is analyzed
as against the competitors. It helps in knowing
whether the organization is performing better
than its competitors or not. Ratio analysis is also
used to evaluate the financial statements of an
organization. This analysis is used to interpret
the performance shown in the financial
statements of the organization. The ratio
analysis helps the organization compare
performance over the years or in the same year
(Brigham & Houston, 2007).
Quantitative Analysis is used by the company
and its stakeholders to analyze the financial
performance of the organization. Trend analysis
is used by the company, the shareholders and
the investors to analyze the performance of the
company over the years. Common-Size analysis
is used by the competitors, management, and
investors to evaluate the organization that is
performing better whereas ratio analysis is used
specifically by all the stakeholders to interpret
clear and well defined results shown in the
financial statements of the company (Brigham &
Houston, 2007).
These techniques help to evaluate the liquidity
or short-term solvency. By using current ratio,
one can analyze the effectiveness of the liquidity
position of the organization. Profitability of the
organization is also analyzed through
profitability ratios, common-size analysis, as it
helps to know the organizations profits earned
by the company as compared to others. Trend
analysis and ratio analysis with the help of
different asset turnover ratios and trends could
easily analyze that assets are effectively used or
not (Brigham & Houston, 2007).
Wal-Marts current stock price is 50.56 dollars.
The stock has gone up as high as 56.27 dollars,
and as low as 47.35 dollars in the last year. The
earnings per share of the company which was
3.16 dollars per share in 2008, was increased to
3.35 dollars in 2009. Earnings per share further
increased to 3.76 dollars in 2010. The analysis
shows the improvement in the earnings of the
company in the last three year. The current price
earnings ratio of the company is 13.2 which is
less than the industry average of P/E ratio of 15
times (Wal-Mart Stores Inc (WMT), 2010).
Analyzing the stock of the company from the
investment point of view, we can estimates that
the fundamentals of the company are very
strong. The stock has return on equity, return on
assets better than the industry average of 22.9
% and 9.1 % respectively. The company has given
a better annual average return on asset and
return on equity in the last five years as
compared to the industry. The company has a
debt equity ratio and net profit margin, which is
less than the industry. However, Wal-Mart is
improving on the efficiency front. As a result,
Wal-Mart stock is recommended for investment.
References
Brigham, E.F. & Houston, J.F. (2007).
Fundamentals of Financial Management. (11th
ed.). Cengage Learning.
Fishman, C. (2006). The Wal-Mart Effect: How the
World Most Powerful Company Really Works--
and How it's Transforming the American
Economy. Penguin Group
Shim, J.K. & Siegel, J.G. (2007). Schaum's Outline
of Financial Management. (3rd ed.). McGraw-Hill
Professional.
Wal-Mart Corporate. (2010). History. Retrieved
July 25, 2010 from
http://walmartstores.com/AboutUs/297.aspx
Wal-Mart Stores Inc: Financial Statement (2010).
Retrieved May 31, 2010, from
http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?
Symbol=WMT
Wal-Mart Stores Inc. (WMT) (2010). Retrieved
May 31, 2010, from http://finance.yahoo.com/q/co?
s=WMT+Competitors

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