Kitty Company is planning its operations for next year, and the CEO wants you to forecast the firm's additional funds needed (AFN). Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year?
| Last year's sales = S0 |
$200,000 |
Last year's accounts payable |
$50,000 |
|
| Sales growth rate = g |
40% |
Last year's notes payable |
$15,000 |
|
| Last year's total assets = A0* |
$127,500 |
Last year's accruals |
$20,000 |
|
| Last year's profit margin = PM |
20.0% |
Target payout ratio |
25.0% |
In: Finance
Kitty Company is planning its operations for next year, and the CEO wants you to forecast the firm's additional funds needed (AFN). Data for use in your forecast are shown below. Based on the AFN equation, what is the AFN for the coming year?
| Last year's sales = S0 |
$200,000 |
Last year's accounts payable |
$50,000 |
|
| Sales growth rate = g |
40% |
Last year's notes payable |
$15,000 |
|
| Last year's total assets = A0* |
$127,500 |
Last year's accruals |
$20,000 |
|
| Last year's profit margin = PM |
20.0% |
Target payout ratio |
25.0% |
In: Finance
A company wants to get a bullet proof luxurious limousine for its CEO. The limousine would cost $1 million to buy. The limousine will be depreciated at a rate of $100,000 per year for tax purposes. Suppose the limousine could be sold off in five years for $500,000. Suppose also that the firm could alternatively sign a five-year operating lease for the limousine with lease payments of $150,000 per year. Each payment would be due at the beginning of the year. The company’s effective tax rate is 25 percent. The before –tax rate of borrowing is 8 percent. Cash Flows in $ Year 0 1 2 3 4 5 Initial Cost After tax lease payment Forgone tax shield Forgone salvage value Column Total (b). Determine Net Present Value of Leasing assuming payments are made annually and make a lease or buy decision.
In: Accounting
Assume you are the financial controller of a new established
company. The CEO has asked your choice of accounting policy
regarding the measurement of intangible assets at the time of
recognition and after the acquisition.
Required:
State your choice of accounting policy regarding the measurement of
intangible assets at the time of recognition and after the initial
acquisition. Explain the reason (s) of your choice (s). You should
provide comments regarding the choice of accounting method.
In: Accounting
Short answer questions
Assume you are the financial controller of a new established company. The CEO has asked your choice of accounting policy regarding the measurement of intangible assets at the time of recognition and after the acquisition.
Required:
State your choice of accounting policy regarding the measurement of intangible assets at the time of recognition and after the initial acquisition. Explain the reason (s) of your choice (s). You should provide comments regarding the choice of accounting method.
In: Accounting
Assume you are the financial controller of a new established company. The CEO has asked your choice of accounting policy regarding the measurement of intangible assets at the time of recognition and after the acquisition.
Required:
State your choice of accounting policy regarding the measurement of intangible assets at the time of recognition and after the initial acquisition. Explain the reason (s) of your choice (s). You should provide comments regarding the choice of accounting method.
In: Accounting
A fast food company CEO claims that 19% of university students regularly eat at one of their restaurants. A survey of 145 students showed that only 21 students regularly eat at one of their restaurants. Assuming the CEO's claim is correct, determine (to 4 decimal places):
1. the standard error for the sampling distribution of the
proportion.
2. the probability that the sample proportion is no more than that
found in the survey.
In: Economics
examine Microsoft's statement of cash flows. Assume you work for this company and the CEO approached you and asked for advice on how to improve the cash position of the company. Provide at least two recommendations you would offer and discuss how these could directly impact cash flow.
June 30, 2019, June 30, 2018
Changes in operating assets and liabilities 3,866 20,467
Adjustments to reconcile net income to 12,945 27,313
net cash from operations
Net cash from operations 52,185 43,884
Net cash from (used in) financing (36,887) (33,590)
Net cash used in investing (15,773) (6,061)
Net change in cash and cash equivalents (590) 4,283
Cash and cash equivalents, end of period 11,356 11,946
In: Accounting
A new CEO was hired to revive the floundering Champion Chemical
Corporation. The company had endured operating losses for several
years, but confidence was emerging that better times were ahead.
The board of directors and shareholders approved a quasi
reorganization for the corporation. The reorganization included
devaluing inventory for obsolescence by $106 million and increasing
land by $5 million. Immediately prior to the restatement, at
December 31, 2018, Champion Chemical Corporation’s balance sheet
appeared as follows (in condensed form):
|
CHAMPION CHEMICAL CORPORATION Balance Sheet At December 31, 2018 ($ in millions) |
|||
| Cash | $ | 23 | |
| Receivables | 42 | ||
| Inventory | 234 | ||
| Land | 44 | ||
| Buildings and equipment (net) | 94 | ||
| $ | 437 | ||
| Liabilities | $ | 252 | |
| Common stock (336 million shares at $1 par) | 336 | ||
| Paid-in capital—excess of par | 69 | ||
| Retained earnings (deficit) | (220 | ) | |
| $ | 437 | ||
Prepare the journal entries appropriate to record the quasi reorganization on January 1, 2019. Record revaluation of inventory. Record revaluation of land. Record the entry to eliminate a portion of deficit against available additional paid in capital.Record the entry to eliminate the remainder of the deficit against common stock. Prepare a balance sheet as it would appear immediately after the restatement.
In: Accounting
You are the CEO of a mid-size manufacturing company that produces sporting equipment. For several years, you have been struggling to keep your company profitable in an increasingly competitive market. The company is the major employer in your small city of 35,000 people. It is critical to the city’s economy.
Recently, a major sporting equipment company informed you of their desire to acquire your company. There are many possible advantages to such an acquisition. It could save the company. A team from the larger company has begun working with you, your management team, and your Board to hammer out the details for this proposed acquisition. Everyone on your side is favorable to this move and the other company’s terms seem generous.
As with many consumer product businesses, annual revenues for your company are dependent on strong holiday sales. A few days ago, the VP for Quality Assurance and a few of the engineers reported that they had discovered a defect in the safety helmets you produce. The report further indicated that there is a small percentage chance that a portion of the helmet support webbing could fail in a severe crash. There is an even smaller chance of an injury resulting from such a failure since most of the supports would remain intact. Also, it is industry knowledge that no helmet can protect against the most catastrophic of crashes. To date, no injuries have been reported for consumers wearing your helmets. These helmets account for about 60% of the company’s revenues. It is late August and you are already fulfilling the holiday orders for most of your large retail chain customers. You have some decisions to make.
You reflect on the fact that a major dip in revenue could jeopardize the pending acquisition. Furthermore, given the timing, such a loss of revenue could endanger the company as it now exists. It might even make it necessary to enter into bankruptcy. The economic impact on your employees and on the city at this time of year would be disastrous.
What should you do?
You can order that all current production be stopped, pay overtime to your engineers to design a fix, and pay overtime to the operators to catch up from the lost production time. This will result in lower profits, but they would likely be manageable.
You can pay shipping costs for all inventories already delivered to your retail merchant customers so that the helmets can be returned for expedited modifications and redelivered in time for the holiday sales. This would have a greater negative impact on profits.
You could issue a public recall of all defective helmets. This would be devastating for both revenues and profits and would most likely kill the proposed acquisition
Write a short essay. What would you do? What stakeholders would be harmed and which ones would likely benefit. Why would you choose this course of action? What are the ethical implications of your decision?
In: Operations Management