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FIN 571 Final Exam Guide (New)
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1.A proxy fight occurs when: the board of directors disagree on the
members of the management team
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 company’s financial balances of the
business. This sheet includes the company’s total of assets and liabilities. It is used for all
three types of business sole proprietorship, business partnership and corporate business
company’s. 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 company’s profit and losses. It
basically shows all the company’s 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 company’s 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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FIN 571 Final Exam Guide Set 2 (NEW)
1. Financial managers should primarily strive to: 2. The process of
planning and managing a firm's long-term assets is called: 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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FIN 571 Week 1 Connect Problems (Math and Accounting
Review)
FIN 571 Week 1 Connect Problems (Math & Accounting Review) 1
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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FIN 571 Week 1 Connect Problems (Week 1 Problem Set)

FIN 571 Week 1 Connect Problems (Week 1 Problem Set) 1.The
ultimate control of a corporation lies in the hands of the corporate:
president. board of directors. chairman of the board. chief executive
officer. stockholders. 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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FIN 571 Week 1 DQ 1

What is ethics
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 company’s
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 company’s assets. Bonding of
employees who handle cash protects the company by insuring that
the employee is or isn’t 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 Donald’s 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. Today’s 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 company’s
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 don’t 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
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FIN 571 Week 1 DQ 2
Assume that interest rates have increased substantially. 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 assigns
one person to be in
control of a specific
job or have
authority to make
decisions.
My job, Our Sales
department is the
only one that can
waive a restocking
fee. It allows the
Sales team to be in
control of the
customers returns
Segregation of duties This is when the
company has more
than one person to
control a task or job
A church- You have
people who count
the offering and
then you have
someone who writes
down and logs in
what was received
Documentation
procedures
Evidence or proof of
all company
transactions
My job we deliver
ship shingles to our
customers, and we
make the driver sign
prior to leaving and
we make the
customer sign a
“Proof Of Delivery”
form
Physical, mechanical,
and electronic
controls
Allows the company
to control assets
through physical or
electronic based
systems or
programs.
Our job has a
system called Cisco
and this tracks the
employees breaks
and lunches. Also,
monitors how long
the CSR have been
ready or working.

Physical control
would be the
security guard, they
require
identification prior
to entry.
Independent internal
verification
Any information that
can be reviewed ,
compare, and
reconciliation by a
employee
My job has a way of
tracking our
inventory and when
someone says that
they were shorted
on their order we
can go back and
track the inventory
and compare the
numbers in the
system and a
physical count to
determine if the
numbers were
incorrect
Other controls Bonding of
employees, company
protects against
abuse of assets.
Our company fired
a girl just recently
because she had
used the company
card business card
for personal us that
was not work
related.
Principles of Cash
Management
How it Works Example
Invest idle cash Occurs when any
excess funds or cash
needs to be invested,
My father’s
company makes wise
investments and it

turns around in his
favor
Plan the timing of
major expenditures
A company wants to
make sure that there
is money set aside
for major cash
needs
During the recession
profits dropped
lower than expected
so some companies
pulled from these
funds
Delay payment of
liabilities
When a company
pays the bills at an
appropriate time not
late and not too
soon.
Ok, when times are
tough at home and
bills are due I
organize the bills by
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
low
Happens when a
company keeps the
inventory low so that
it will continue to
bring profit
See’s Chocolate
factory has to make
sure that they are
not over producing
or making too much
or else the sit and
the company will
lose money
Increase the speed of
collection on
receivables
Money that is owe to
the company by
other people or
customers is money
that can not be
counted towards the
companies funds
When a customer
places a order for a
product and has not
paid yet, the
company can not
count the money as
their’s until it is
received.
--------------------------------------------

FIN 571 Week 1 Individual Assignment Business Structures
Watch the "Your Business Structure" and "Corporate Business
Structures" videos on the Electronics Reserve Readings page. 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://finan
cial- Retrieved 2/18/2010
statements.suite101.com/article.cfm/financial_statements_the_p_l.
Retrieved 2/18/2010
--------------------------------------------
FIN 571 Week 2 Connect Problems
FIN 571 Week 2 Connect Problems 1.Sankey, Inc., has current assets
of $4,230, net fixed assets of $25,700, current liabilities of $3,500,
and long-term debt of $14,400. 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
Discussion Question 2: Post your response to the following:

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 firm’s 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.

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FIN 571 Week 2 DQ 1
In order to receive proper credit, please reply to this message when
posting your answers to WK2 DQ1.
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. It’s 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.
Kelly’s Sweetheart Flowers
The owner of Kelly’s 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.
Kelly’s 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
--------------------------------------------
FIN 571 Week 2 DQ 2
Suppose rf is 5% and rM is 10%. According to the SML and the
CAPM, an asset with a beta of −2.0
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.
--------------------------------------------
FIN 571 Week 2 Individual Assignment Business Structure
Advice
Write a 350 to 700 word response to the following e-mail:
Dear Consultant,
I am currently starting a business and developing my business plan.
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
expected sales for
the period. All of the
other budgets
depend on the sales
budget. This is
where all the other
budgets will start
from
The sales budget
shows dollars and
units. This will allow
management to see
how many units will
be produced for the
period
Production budget A production of
units needed to be
produced in order to
meet the projected
sales
Shows management
how many units will
be produced during
each budget period
and what amount is
needed to fulfill
inventory demands
Direct materials
budget
Is the estimated
quantity or cost of
the raw materials
that is needed in
order to produce the
units required to
fulfill inventory
Shows management
how much raw
materials that is
already on hand and
or that needs to be
ordered to meet
inventory demands.
Direct labor budget A estimate of cost
and quantity of
direct labor needed
in order to meet
production
Shows how many
hours, how many
laborers needed to
produce the 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
overhead budget
An estimated
expected amount of
manufacturing cost
for the budget
period
This list all overhead
cost involving cash
disbursement in a
quarter
Selling and
administrative
expense budget
Anticipated selling
and administrative
expenses in the
budget period
Shows area of
budget expenses that
are not listed other
than manufacturing.
Expenses such as
marketing,
promotion cost etc
for the budget period
Budgeted income
statement
Estimate of expected
profitability of
operations in a
budget period
Is a very important
tool because it shows
the company
estimated profit for
the budget period.
Cash budget A projection of
expected cash flows
in and out of the
business.
Cash budget helps
management keep a
tally or total of all
cash balances.
--------------------------------------------
FIN 571 Week 2 Individual Assignment Ethics and Finance
The Sarbanes-Oxley Act of 2002 (SOX) was passed as the result of the
Enron scandal and other instances of accounting fraud. This act was
passed to strengthen the role of the Securities and Exchange
Commission (SEC). Discussion Question 1: Post your response to the
following:

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

Discussion Question 2: Post your response to the following:
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.
--------------------------------------------
FIN 571 Week 2 Individual Assignment Ratio Analysis
Problems
Ratio Analysis
(Individual Assignment)
You may use excel or word.doc format for this assignment.
Please post your homework as a word.doc or excel file in the class
discussion section below by the due date.
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.
--------------------------------------------
FIN 571 Week 2 Learning Team Reflection

Read the Ethics case, "A Sad Tale: The Demise of Arthur Anderson"
located in the WileyPLUS Week Fundamentals of Corporate Finance
Chapter readings.
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.
--------------------------------------------
FIN 571 Week 3 Connect Problems If the Garnett Corp. has a 15
percent ROE and a 25 percent payout ratio, what is its sustainable
growth rate?
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 company’s 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 master’s.
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
company’s 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
 --------------------------------------------
FIN 571 Week 3 DQ 1

Why are interest rates on short-term loans not necessarily
comparable to each other? Week 1 DQ 1
Due Tuesday, Day 2
Go to the U.S. Securities and Exchange Commission’s Web site
at http://www.sec.gov and the Financial Accounting Standards
Board’s 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 Commission’s 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 Commission’s Web site
at http://www.sec.gov and the Financial Accounting Standards
Board’s 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 SEC’s 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 FASB’s 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 Foundation’s 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.
--------------------------------------------
FIN 571 Week 3 DQ 2

Optical Supply Company offers credit terms of 2/10, net 60 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 company’s 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 company’s
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 company’s 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.
--------------------------------------------
FIN 571 Week 3 Individual Assignment Interpreting Financial
Results

Resource: Financial Statements for the company assigned by your
instructor in Week 2.
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 product’s 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.
--------------------------------------------
Watch the "Concept Review Video: Working Capital Management"
video located in theWileyPLUS Assignment: Week 3 Videos Activity.
Preparing an Income Statement

Coyote, Inc. Company
Multi-Step Income Statement
200x 201x 202x
Net Sales 1,833,000$
Cost of Goods Sold 1,072,000
Gross Profit 761,000 - -
Selling and Administrative Expenses 454,000
Advertising
Depreciation and Amortization 14,000
Repairs and Maintenance
Operating Profit 293,000 - -
Other Income (Expense)
Interest Income 13,000
Interest Expense (16,000)
Earnings Before Interest and Taxes 290,000 - -
Income Taxes 116,000
Net Earnings 174,000$ -$ -$
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.
--------------------------------------------
FIN 571 Week 3 Team Assignment Financial Statement
Interpretation
Select three publicly traded companies. Choose one each from the
following sectors: manufacturing, service, and retail.
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:
1. 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.
2. The operating cost of the company is increasing because the
company is able to reduce its expenses.
3. Cash from operating activity has increased for the company.
Apart from this strength the company also has some weakness in its
financial statement:
(i) Increasing inventory indicates that the company inventory
conversion period is increasing.
(ii) The cash from investing activity shows that the company
cash outflow is more in the short term investment i.e. in non
operating activity.

(iii) 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.
--------------------------------------------
FIN 571 Week 4 Connect Problems Q-1 Even though most corporate
bonds in the United States make coupon payments semiannually,
bonds issued elsewhere often have annual coupon payments. 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
company’s 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/dividendpayout
ratio.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 stockholder’s 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 company’s 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 firm’s financial success?” Look for indicators like liquidity or
solvency to answer this discussion question.
An example that demonstrates the situation is Enron. Enron’s
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 firm’s 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 company’s 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 company’s 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 company’s 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 company’s 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 company’s 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 company’s 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 company’s 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 firm’s financial success?” Look for indicators like liquidity or
solvency to answer this discussion question.
Net income is not necessarily a good indicator of a firm’s 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=Spo
tting+Creative+Accounting+On+The+Balance+Sheet&submit=Search
--------------------------------------------
FIN 571 Week 4 DQ 1
A firm uses a single discount rate to compute the NPV of all its
potential capital budgeting projects, even though the projects have a
wide range of nondiversifiable risk
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 competitor’s share’s 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.
--------------------------------------------
FIN 571 Week 4 DQ 2
Phyllis believes that the firm should use straight-line depreciation for
a capital project because it results in higher net income during the
early years of the project’s life. 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 Inc’s
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.
--------------------------------------------
FIN 571 Week 4 Individual Assignment Analyzing Pro Forma
Statements
Decide upon an initiative you want to implement that would increase
sales over the next five years, (for example, market another product,
corporate expansion, and so on).

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 company’s 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.
--------------------------------------------

Watch the "Concept Review Video: Stock Valuation" video located in
the 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.
--------------------------------------------
FIN 571 Week 4 Team Assignment Operating Leverage and
Forecasting

Operating Leverage and Forecasting Problems Team Assignment
Please complete the following problems. When calculating earnings
per share and PE ratios, please show your work. This problem is
similar to the examples shown in the lecture.
1.
2.
3. Candela Corporation
4. Axia College of University of Phoenix
5.
6. Candela Corporation
7. Candela Corporation and Subsidiaries have been
working for over 34 years developing and commercialize
aesthetic laser systems that allow physicians and personal
care providers to treat a variety of cosmetic and medical
conditions such as removal of spider veins, scars, stretch
marks, warts, as well as hair removal and age spots,
freckles and tattoos. Other skin treatments such as
psoriasis and acne and acne scars are also treated. (Axia
College, 2007)
8. Going from top to bottom on The Candela Corporation
and Subsidiaries Consolidated Statement of Cash Flows; for
the operating activities, 2002 shows an alarming loss in
the net income while 2003 and 2004 for the company are
showing a significant and steady climb in the net income.
In 2004 there was a new category added called Provision
for the disposal of discontinued operations and the
category has caused an increased the account for 2004.
Loss from discontinued operations grew from 2002 to 2003
but had a significant decline for 2004. Depreciation has
increased over the last 3 years as well. Provision for bad
debts increased significantly too, but an increase in bad
dept is expected as revenue increases. The provision for

deferred taxes shows the company went from a loss in
2002 and 2003 to show there was no tax loss in 2004. The
tax benefit from exercised stock options has practically
doubled sense 2003. The changes in assets and liabilities
for the last 3 years have been up and down. Receivables
have increased, notes receivable decreased, and
inventories have increased. Other current assets, other
assets have also increased. Accounts payable has made a
significant decrease in the last 3 years as well as accrued
payroll expenses. The accrued payroll decreasing could
mean that the amount of employees over the years has
decreased as well. The accrued warranty costs have
increased as well; this could mean that the company
renewed equipment warranties. The net cash provided by
operating activities looks to have gone from a loss in 2002
to a large profit in 2003 and then a decrease, yet still a
profit for 2004. It appears on the operations level that
management needs to do more to regulate the company’s
finances so there is not an up and down variance each
year.
9. The cash flow from investing activities shows me that in
the last three years they had large amount of investments
in 2002 and 2003 but now they are letting them decrease.
10. The cash flow from financing activities states that the
proceeds from issuance of common stock have increased
significantly from 2002 to 2003 and rose a little more in
2004. The repurchases of stock has not happened sense
2002 and the principle payment of long-term debt grew in
2003 from 2002 and shows no activity for 2004. Same goes
for the net borrowing on line of credit; it appears that
Candela Corporation is current on payments to line of
credit. So, the net cash from financial activities looks great
for 2004. The cash and cash equivalents for each year have
increased steadily.

11. After reviewing the consolidated statement of cash
flows for Candela Corporation, I believe the company is
making a profit, but perhaps need some control over their
operating activities.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.Reference
31.
32.Axia College. (2007). Statement of Cash Flows. Retrieved
June 14, 2010 from Axia
33.College, Week Six, ACC 230.
34.
35.
36.
37. --------------------------------------------

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