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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. 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 Final Exam Guide Set 2 (NEW)
1. Financial managers should primarily strive to: 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.
-------------------------------------------
FIN 571 Week 1 Connect Problems (Math and Accounting
Review)
FIN 571 Week 1 Connect Problems (Math & Accounting Review) 1.
Functions Excel will make your life as a finance student much easier.
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
Thomas, Y. 2005-08-27 “Accounting 101 pg. 52 Statement
-------------------------------------------
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. 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.
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FIN 571 Week 1 DQ 1

What is ethics? If you follow all applicable rules and regulations, are
you an ethical person?
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://fina
ncial- Retrieved 2/18/2010
statements.suite101.com/article.cfm/financial_statements_the_p_l.
Retrieved 2/18/2010
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FIN 571 Week 1 DQ 2
Assume that interest rates have increased substantially. 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
Thomas, Y. 2005-08-27 “Accounting 101 pg. 52 Statements
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FIN 571 Week 1 Individual Assignment Business Structures
Watch the "Your Business Structure" and "Corporate Business
Structures" videos on the Electronics Reserve Readings page.
7 How should mixed costs be classified in CVP analysis? What
approach is used to effect the appropriate classification?
According to our class materials all mixed cost must be classified
into their fixed and variable and variable elements. The method that
can be used to determine is called the high/low method. To
determine the variable cost the analysis takes the total cost and
divide it with the low activity level. To get the fixed cost then the

company would have to subtract the total variable with either the
high or low activity level.
9. Cost volume profit CVP analysis is based entirely on unit costs.
Do you agree? Explain.
In my opinion when it comes to making financial decisions for the
company, often times more than one method is used. Cost volume
profit is also based on Volume or level activities, unit selling prices,
variable cost per unit, total fixed and sales mix.
14. You can find the break point in dollars by drawing a horizontal
line to the vertical axis. I you want to find the break even point in
units it will be a vertical line from the break even point to the
horizontal axis.
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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. 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 DQ 1
In order to receive proper credit, please reply to this message when
posting your answers to WK2 DQ1.
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
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 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
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 additionalactivity 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 Individual Assignment Business Structure
Advice
Write a 350 to 700 word response to the following e-mail:
Dear Consultant,
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 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.
Business Plan
By

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 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.
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 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.
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 Connect Problems If the Garnett Corp. has a 15
percent ROE and a 25 percent payout ratio, what is its sustainable
growth rate? 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 DQ 1

Why are interest rates on short-term loans not necessarily
comparable to each other?
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.
-------------------------------------------
FIN 571 Week 3 DQ 2
Optical Supply Company offers credit terms of 2/10, net 60.
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 Individual Assignment Interpreting Financial
Results
Resource: Financial Statements for the company assigned by your
instructor in Week 2.
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/dividendpayo
utratio.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=S
potting+Creative+Accounting+On+The+Balance+Sheet&submit=Sea
rch

-------------------------------------------
Watch the "Concept Review Video: Working Capital Management"
video located in theWileyPLUS Assignment: Week 3 Videos Activity.
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 3 Team Assignment Financial Statement
Interpretation
Select three publicly traded companies. Choose one each from the
following sectors: manufacturing, service, and retail Discussion
Question 1: Post your response to the following:
How would you describe the difference between financial and
managerial accounting? What are the distinguishing features of
managerial accounting?
There are many differences between financial and managerial
accounting. The financial accounting statements are available to
external users such as employees, stockholders, creditors, investors,
etc. This is available to them so that they can monitor the company's
performances quarterly or annually. Managerial accounting provides
financial information for managers and other internal people or
department. Managerial accounting is confidential so it is only
observed by internal users such as management, owner, and will
provided to external users such as the public. Management uses this
for budgeting purposes or to monitor profit loss/gain within the
company. Managerial accounting can be available to them as often

as needed. Managerial accounting statements is a great way for
management to make decisions based on what has been reported.
Another response
The differences between managerial accounting and financial
accounting are distinct. Managerial accounting reports are for those
in managerial and decision making positions. The managers use the
financial report to answer questions, which would advance the
company and its employees. The manager would want to know if
certain investments should be made and should the company
advance an employee's salary. The manager needs the report to
decide if a factory is built or if a certain stock is brought. The financial
accountant has the job of showing the external users such as
creditors and stockholders a picture of the company's stability.
The manager's purpose is to manage by making stable plans,
delegate duties, motivate the workers, and control the atmosphere.
Distinguishing features of managerial accounting are the fact no cpa
will audit the report, and there is no specific frequency of the report.
The reports are done in a need to know basis and for a specific
reason, which is for business purposes. The reports are detailed and
pertain to specific business decisions. The financial accountant need
only be concerned with the company's finances.
DQ2
Select a management function (planning, directing and
motivating, or controlling) and explain how that function relates to
business as a whole. Next, select a different function listed by a
classmate. Discuss with your classmate how the functions you each
selected complement each other.

The management functions that I choose was controlling.
Controlling job is to make sure that the each
department/person is keeping the company's activities or plans on
track and in order to achieve that they must work closely with
Management planning function. Controlling continually compares the
company's performance to make sure that the planned standards
are being met. In my opinion this is known as the "dirty work".
Controlling operations have to know what to look for and how to
keep track of all the company's activities. They have to take actions
and quickly correct any errors and make sure that the company goals
are being achieved in a timely matter or the time that it was planned.
If there are errors it is job of the controlling operations to take quick
action. The controlling operations not only correct errors after it
happens but they also are in charge of foreseeing any potential errors
and act quickly to get that resolved.
Another response
I chose Controlling as part of the management function. The
controlling function relates to business as a whole because it helps
monitoring the 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.
-------------------------------------------

FIN 571 Week 4 Connect Problems Q-1 Even though most corporate
bonds in the United States make coupon payments semiannually,
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.
-------------------------------------------
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. 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 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. 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 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).
Candela Corporation
Axia College of University of Phoenix

Candela Corporation
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)
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.
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.
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.
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.
Reference
Axia College. (2007). Statement of Cash Flows. Retrieved June 14,
2010 from Axia
College, Week Six, ACC 230.
-------------------------------------------

Watch the "Concept Review Video: Stock Valuation" video located in
the WileyPLUS Assignment: Week 4 Videos Activity.
Analyzing Statements of Cash Flows
4.8. Research Problem
Choose five companies from different industries and locate their
statements of cash flows
for the most recent year.
(a) Create a table to compare the dollars provided or used by
operating, investing, and financing activities, as well as the overall
increase or decrease in cash.
(b) Create a second table for each company comparing this same
information for each of the three years presented in that company’s
statement of cash flows. Include an additionalcolumn that looks at
the combined cash flows for all three years.
(c) Write a short analysis of the information gathered. Your
discussion should address, among other things, whether cash flow
from operating activities is large enough to cover investing and
financing activities, and if not, how the company is financing its
activities. Discuss differences and similarities between the companies
you have chosen.
(a) Create a table to compare the dollars provided or used by
operating, investing, and financing activities, as well as the overall
increase or decrease in cash.

STATEMENT OF CASH FLOW ANALYSIS
STARBUCK
S
HARELY
DAVIDSON RITE AID
2008 2008 2008
NET INCOME /
STARTING LINE
$
315.5
$
-
$
(1,079.0)
OPERATING
ACTIVITIES
$
1,258.7
$
(684.7)
$
79.4
INVESTING
ACTIVITES
$
(1,086.6)
$
(393.3)
$
(2,933.7)
FINANCING
ACTIVITIES
$
(184.5)
$
1,293.4
$
2,904.0
CASH
$
(11.5)
$
190.7
$
49.9
(b) Create a second table for each company comparing this same
information for each of the three years presented in that company’s
statement of cash flows. Include an additionalcolumn that looks at
the combined cash flows for all three years.
STARBUCKS
2008 2007 2006
Net Income/Starting Line 315.5 672.64 564.26
Cash from Operating Activities 1258.70 1331.22 1131.63
Cash from Investing Activities
-
1086.60
-
1201.95 -841.04
Cash from Financing Activities -184.50 -171.89 -155.33
Net Change in Cash -11.50 -31.35 138.80
Net Cash - Beginning Balance 281.30 312.61 173.81
Net Cash - Ending Balance 269.80 281.26 312.61

HARLEY
DAVIDSON
2008 2007 2006
Net Income/Starting
Line 0 933.84 1043.15
Cash from
Operating Activities -684.65 798.15 761.78
Cash from Investing
Activities -393.25 391.21 -35.26
Cash from
Financing Activities 1293.39
-
1037.80 -637.02
Net Change in Cash 190.70 164.46 97.42
Net Cash -
Beginning Balance 402.85 238.40 140.98
Net Cash - Ending
Balance 593.56 402.85 238.4
RITE AID
2008 2007 2006
Net Income/Starting
Line
-
1078.99 26.83 1273.01
Cash from Operating
Activities 79.37 309.15 417.17
Cash from Investing
Activities
-
2933.74
-
312.78 -231.08
Cash from Financing
Activities 2903.99 33.72 -272.84
Net Change in Cash 49.61 30.08 -86.75

Net Cash - Beginning
Balance 106.15 76.07 162.82
Net Cash - Ending
Balance 155.76 106.15 76.07
(c) Write a short analysis of the information gathered. Your discussion should
large enough to cover investing and financing activities, and if not, how the com
the companies you have chosen.
Starbucks operating cash flow has gone up in 2007 and decreased a little in 2
side but previously was doing well. The net loss in cash at end of year is decr
there can be a gain.
Harley Davidson's operating cash flow has significantly decreased from 2007
in cash from operating activities is probable from the lack of information supp
buying at this point could have an effect on why the net income is decreasing.
gain.
Rite Aid's operating cash flow has taken a significant decrease as well from pr
cash from financing, the net change in cash is better than it has been in previo
growing needs in medical supplies. This also could reflect the expansion of th
-------------------------------------------

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. Findwhat.com Case - CheckPoint
2. ACC 230
3. Findwhat.com has recorded the 135 percent increase in the
revenue which is mainly due to the business acquired of
Espotting during the year. The different accounting policies are
present for the acquiring firm and the acquired firm. The
company has recorded certain premature revenues for the
amount which advertisers had made only the advance deposit.
As result, the company is recognizing the vendor financing as
revenue. In some places, the gross revenue has been recognized

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