Selected information from the comparative financial statements of Emley Company for the year ended December 31,
2017 2016
Accounts receivable (net) $180,000 $200,000
Inventory 140,000 160,000
Total assets 1,200,000 800,000
Current liabilities 140,000 110,000
Long-term debt 400,000 300,000
Net credit sales 1,330,000 700,000
Cost of goods sold 900,000 530,000
Interest expense 50,000 25,000
Income tax expense 60,000 29,000
Net income 150,000 85,000
Compute each of the following ratios and interpret the results:
In: Accounting
The management of Parachute Corporation is considering dropping
product ABC123. Data from the company's accounting system appear
below:
| Sales | $ | 260,000 | |
| Cost of goods sold | 125,000 | ||
| Building expenses | 88,000 | ||
| Selling and administrative expenses | 75,000 | ||
All building expenses of the company are fully allocated to
products in the company's accounting system. Further investigation
has revealed that $42,000 of the building expenses and $48,000 of
the selling and administrative expenses will not
be incurred if product ABC123 is discontinued.
a. According to the company's accounting system, what are the
operating profits earned by product ABC123?
b. What would be the impact on the company's overall operating
profits if product ABC123 is dropped? Should the product be
dropped?
In: Accounting
B2B Co. is considering the purchase of equipment that would
allow the company to add a new product to its line. The equipment
is expected to cost $380,800 with a 10-year life and no salvage
value. It will be depreciated on a straight-line basis. The company
expects to sell 152,320 units of the equipment’s product each year.
The expected annual income related to this equipment
follows.
| Sales | $ | 238,000 | |
| Costs | |||
| Materials, labor, and overhead (except depreciation on new equipment) | 83,000 | ||
| Depreciation on new equipment | 38,080 | ||
| Selling and administrative expenses | 23,800 | ||
| Total costs and expenses | 144,880 | ||
| Pretax income | 93,120 | ||
| Income taxes (40%) | 37,248 | ||
| Net income | $ | 55,872 | |
If at least an 9% return on this investment must be earned, compute
the net present value of this investment. (PV of $1, FV of $1, PVA
of $1, and FVA of $1) (Use appropriate factor(s) from the
tables provided.)
In: Accounting
The following information pertains to the bank transactions of Crawford Company:
A. Cash on the books as of September 30 was $1,299. Cash, as shown on the bank statement for the same date, was $1,330.
B Bank service charges for September amounted to $9.
C. A deposit of $160, representing cash receipts of September 30, did not appear on the bank statement.
D An NSF check for $80 from a customer, Jack Betz, was returned with the statement.
E. Outstanding checks totaled $240.
F. Interest earned on the account of $40 was reported on the bank statement.
Questions
1. Prepare the bank reconciliation in good form (label all numbers) for Crawford Company as of September 30.
2. Write the amount of cash that should appear on the balance sheet as of September 30.
3. Write the letter(s) of any of the reconciling items that
require journal entries in the accounting records.
In: Accounting
Mini case from the book - Introduction to Corporate Finance 3rd Ed. pg 179 - Valuing stocks
Case - your investment adviser has sent you three analyst reports for a young, growing company named Vegas Chips Inc.. These reports depict the company as spectulative, but each one poses different projections of the company's future growth rate in earning and dividends. all three reports show that vegas chips earned $1.20 per share in the year just ended. There is consensus that a fair rate of return to investors for this common stock is 14% and that management expects to consistently earn a 15% return on the book value of equity (ROE = 15%).
1. Discuss the features(s) that drive the differing valuations of vegas chips. what additional information do you need to garner confidence in the projections of each analyst report?
In: Finance
Case Study – Novelty Creations Howard Booth is disappointed. His company, Novelty Creations has just withdrawn from its latest venture after three unsuccessful months of trying to market a new product. The company markets a range of novelty ‘lifestyle’ products using a direct mail brochure and the internet. Products marketed include a rainwear range for dogs and cats, an automatic odour protection device for bathrooms and ‘make-your-own’ birthday card kits. In its outdoor collection it markets a range of garden lights in the shape of garden gnomes and self-erecting clothes dryers. It has over one hundred individual personal items including nose-hair clippers, blood pressure monitors and earwax removal systems. The company is always looking for new product ideas as the essence of keeping sales moving is novelty and interest. The product just withdrawn after three months in the brochure, and slightly longer on the website, was an extended toenail clipper whereby a person could clip their toe nails without having to bend down. Not all new products succeed, but Booth’s problem is that this is the tenth recent new product failure and he is worried that the company is losing direction. New product ideas come from an in-house team consisting of Booth and two other directors. All are from technical backgrounds. Customers are not consulted at the stage of idea generation as it is felt that they would be unable to grasp many early stage concepts. Idea generation sessions take place on the last Friday of every month and usually result in about ten new ideas being put forward and discussed. As the major shareholder of the company, Booth takes it upon himself to select which, if any, of these ideas should be taken further with a view to including them in the product portfolio. He uses his own judgement in this screening process as he feels that the growth of the company is down to his ‘feel’ for the market. Once a product idea is selected, Booth and his team find someone who can make the product and it is then incorporated in the brochure and on the website. He believes that the best test of a product is whether it sells or not and for this reason no marketing research is conducted before its inclusion in the product portfolio. Once the product is launched, a small sample of customers are contacted randomly and asked to complete a questionnaire regarding their views on this product and other company products. Booth is seriously concerned about recent product failures and is wondering if a different and perhaps more systematic approach to developing new products might be appropriate. He is looking for advice about what the company might be doing wrong and how it might improve its new product development procedures.
Question-
Evaluate the company’s approach to new product development and suggest how the company might improve its success rate for future new products. Do a SWOT analysis.Suggested approach The answer really lies in the fourth and fifth paragraphs i.e. customer are not consulted at the stage of idea generation, and the obviously misguided belief that marketing research is not necessary. Clearly, ‘a feel for the market’ has been successful in the past as it appears that the company has been relatively successful. However, customers are now more discerning as witnessed by new product failures. ‘Brainstorming’ springs to mind as a technique that might be appropriate in vetting new product ideas, ensuring that appropriate personnel are included in such brainstorming sessions, including potential customer. The next technique that springs to mind is ‘focus groups’ consisting of a good moderator and customers who have previously purchased the company’s products.
In: Operations Management
Decision
Do you believe that Nike should use marketing dollars to advance social issues?
Given the negative backlash to the Kaepernick advertisement, what should Nike do now?
Has Nike Gone too Far
The Colin Kaepernick Advertisement
During the opening weekend of the 2018 National Football League (NFL) season, Nike introduced an ad campaign featuring former NFL quarterback Colin Kaepernick. This ad appeared two years after Kaepernick knelt as the US national anthem was played before his team’s games. In Nike’s ad, Kaepernick stated, “Believe in something. Even if it means sacrificing everything,” as an explicit reference to the fact that Kaepernick was no longer playing in the NFL the season after his protest. The ad created a contentious reaction from viewers. Some consumers even posted videos burning Nike gear or cutting Nike’s swoosh (a well-known Nike symbol) off their shoes. Even President Trump tweeted, “Nike is getting absolutely killed with anger and boycotts” (Bieler, 2018). In the midst of the controversy, Nike’s long-running successful advertising campaign “Just Do It” even seemed in jeopardy.
Nike History
Nike was founded as Blue Ribbon Sports in 1964 by a University of Oregon track athlete and his coach to distribute a Japanese shoe. By 1971, the company was manufacturing its own running shoe. The name changed to Nike in 1973 – the same year a design student received $35 for creating the ‘swoosh logo’ and Nike signed its first athlete endorser, tennis player Ilie Nastase. Over the decades, Nike made numerous innovations to its shoes such as air bags and computer chips in the soles. By 2017, Nike, with a 2.8% market share, was the largest supplier and manufacturer of athletic shoes and apparel in the world with North American revenues over $15 billion (Statista, 2018).
Nike’s Socially Relevant Advertising
Nike had long developed advertisements with a social message. When the ‘Just Do It’ campaign first launched in 1988, it featured an 80 year athlete who ran approximately 62,000 miles throughout his lifetime. A year later Nike’s ads featured a Paralympian to advocate for people with disabilities. In 1995, Nike ads featured an HIV-positive runner. In the same year Nike advocated for organized sports for female athletes. More recently, in 2017, Nike featured five Middle Eastern women in sports like boxing and skateboarding. These advertisements enhanced Nike’s reputation as an agent of change through sports.
Colin Kaepernick and the National Anthem
In August 2016, after refusing to stand for the US national anthem before his San Francisco 49ers team exhibition game. Afterward, Kaepernick stated "I am not going to stand up to show pride in a flag for a country that oppresses black people and people of color" (Wyche, 2016). During that game, Kaepernick was booed at every turn - when he entered the field to warm up, when he took a knee, and virtually every time the 49ers offense broke its huddle (Witz-NY Times, 2016). After the game, some fans burned their Kaepernick jerseys. Many argued that, while Kaepernick may be right to be upset by the thousands of people of color killed by police in the US, protesting the flag was not the appropriate way to create change. Others asked why he hates veterans - still others, why he hates America. Yet more people asked why he couldn’t just stick to football (Oluo, Guardian, 2016). His actions reverberated throughout the country, even making it into a presidential campaign speech when Donald Trump said, "Wouldn’t you love to see one of these NFL owners, when somebody disrespects our flag, to say, 'Get that son of bi**h off the field right now. Out. He’s fired!' (Barca, Forbes, 2018).
Reaction to Kaepernick’s kneeling, however, was not universally negative. Numerous NFL players, coaches, and owners stood behind Kaepernick’s right to kneel in protest to acts of injustice against African-Americans. Dallas sportscaster Dale Hansen wrote, "The young, black athletes are not disrespecting America or the military by taking a knee during the anthem. They are respecting the best thing about America” (Willingham CNN 2017).
Consumer Research on the Effect of the Kaepernick Advertisement
As the controversy around Nike’s 2018 ad swirled, several marketing research companies and universities examined immediate effects of the ad on Nike’s reputation:
In the face of these opinion polling numbers however, sales appeared to be increasing rather than decreasing:
Decision
Do you believe that Nike should use marketing dollars to advance social issues?
Given the negative backlash to the Kaepernick advertisement, what should Nike do now?
In: Operations Management
A certain stock market had a mean return of 2.6% in a recent year. Assume that the returns for stocks on the market were distributed normally, with a mean of 2.6 and a standard deviation of 10. Complete parts (a) through (g) below.
a. If you select an individual stock from this population, what is the probability that it would have a return less than 0 (that is, a loss)?
The probability is (Round to four decimal places)
b. If you select an individual stock from this population, what is the probability that it would have a return between -11 and -19?
The probability is (Round to four decimal places)
c. If you select an individual stock from this population, what is the probability that it would have a return greater than -7?
The probability is (Round to four decimal places)
d. If you select a random sample of four stocks from this population, what is the probability that the sample would have a mean return less than 0 (a loss)?
e. If you select a random sample of four stocks from this population, what is the probability that the sample would have a mean return between -11 and -19?
The probability is (Round to four decimal places)
In: Statistics and Probability
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Cascade Company was started on January 1, 2016, when it acquired $60,000 cash from the owners. During 2016, the company earned cash revenues of $35,000 and incurred cash expenses of $18,100. The company also paid cash distributions of $4,000. |
| Required |
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Prepare a 2016 income statement, capital statement (statement of changes in equity), balance sheet, and statement of cash flows under each of the following assumptions. (Consider each assumption separately.)
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In: Accounting
A hospital consortium contracted with a private company to collect fees and maintain health facilities that adjoin their property. Users of the health facility can pay cash of R10 for a daily visit or they can purchase a pass. The pass has a magnetic strip that is swiped through the entrance device each time an individual enters the facility. This subtracts daily fee from the pass balance for each day used. The passes are issued for a fee of R365, which are good for 365 days. Refunds are not issued on the pass. Last year R18,650 was collected for daily visits, R438,000 of annual passes were issued, and R206,225 of pass usage was registered on the scanning equipment. How much should the company recognize as revenue for the year? Explain how the revenue recognition rule should be applied in this case.
In: Accounting