Set up - You were hired in the role of accounting lead a couple of years ago by a privately held company.

You report directly to the CEO. The company sells its products through a dealer distribution network.

Revenue is booked at the time shipment occurs. Under standard practice, revenue will be booked as of

the last day of the month if the shipment will occur within 1 or 2 days of the new month. On occasion,

revenue may be booked if the product is ready for shipment but the dealer/customer does not wish to

take shipment due to a holiday or vacation schedule. (So, if the shipment does not occur only because it

is inconvenient for the dealer/customer to receive it, the customer is charged a nominal “warehousing”

fee and revenue will be recognized in such situations; shipment will occur as soon as it’s convenient for

the dealer/customer to receive the shipment upon their return to the workplace.) Since the company is

privately held, it does not require a financial audit but it does receive an annual financial review by an

independent CPA firm.

The Issue - At quarter end, you receive a call from your boss instructing you to book a $100,000 sale,

sending the invoice to a dealer/customer. On April 4, you send the invoice dated the last day of the

month (3/31) and you give the dealer/customer an additional 30 days to pay since the product had not

yet shipped as of April 4. The dealer/customer replies that as of April 5, he still does not have a

purchase order for the $100,000 sale but hopes to get one soon. In addition, if he cannot get the

purchase order, he hopes to get a purchase order elsewhere for basically the same products for a

hopefully similar price.

In addition, at the end of 2017, there was an order to be secured by a letter of credit. The CEO wants the

almost $100,000 sale in 2017. You let the CEO know you’re hesitant to book this in 2017 since the order

has not shipped and no letter of credit has been sent yet. There are also tax ramifications (i.e., the

company will fare better booking the sale in 2018 due to the more favorable tax treatment of

corporations under the new tax legislation). The CEO replies that before he decides, he wants to see

how the numbers shake out. He decides he wishes the revenue to appear in 2017.

There were some other bookings of revenues with various dealer/customers in quarter 1 totaling

approximately $150,000, for which letter of credit documentation had not yet been received. The

dealer/customers had not yet authorized shipment because the required documentation had not yet

cleared all channels (it was not due to holiday/vacation reason inconvenience), but the CEO said to

consider these transactions “warehoused” and book the revenue.

In addition to the fact that the review of 2017 is still ongoing, the company is looking to sell

approximately 20% of its stock to a publicly traded company. The 2017 financials have been provided to

the potential buyer (marked “unreviewed”) and the potential buyer has been asking for the quarter 1

results of 2018.

Get with your group. What is your view of the entire situation? What do you do? Be sure to pay

attention to rules/regs that lead you to feel there is an ethical problem here.

1. Determine the facts of the situation. This involves determining the "who, what, where, when, and how."

2. Identify the ethical issue and the stakeholders. Stakeholders may include shareholders, creditors, management, employees, and the community.

3. Identify the values related to the situation. For example, in some situations confidentiality may be an important value that may conflict with the right to know.

4. Specify the alternative courses of action.

5. Evaluate the courses of action specific in step 4 in sterms of their consistency with the values identified in step 3. This step may or may not lead to a suggested course of action.

6. Identify the consequences of each possible course of action. If step 5 does not provide a course of action, assess the consequences of each possible course of action for all of the stakeholders involved.

7. Make your decision and take any indicated action.

Locate the balance sheet of a publicly-traded corporation online in its annual report (10-K). Identify your company in the title of your discussion and answer the following questions: What were the total current assets this year and last year for the company you chose? What were the total current liabilities this year and last year for the company you chose? Calculate the Current Ratio for this year and last year for the company you chose. Analyze your company's current ratio (is it good/bad; how does it compare to the prior year, etc.) Include a link to the URL from which you located the company's annual report. In your replies to your classmates, compare your company's Current Ratio to their company's Current Ratio. Report which company has the better ratio and why. What are some factors you believe affect the ratio?

Fields Laboratories holds a valuable patent (No. 758-6002-1A) on a precipitator that prevents certain types of air pollution. Fields does not manufacture or sell the products and processes it develops. Instead, it conducts research and develops products and processes which it patents, and then assigns the patents to manufacturers on a royalty basis. Occasionally it sells a patent. The history of Fields patent number 758-6002-1A is as follows.

Based on execution of a royalty contract in March 2007, the patent is deemed to be economically viable. Fields assumed a useful life of 17 years when it received the initial precipitator patent. On January 1, 2009, it revised its useful life estimate downward to 5 remaining years. Amortization is computed for a full year if the cost is incurred prior to July 1, and no amortization for the year if the cost is incurred after June 30. The company’s year ends December 31.

1. The carrying value of patent No. 758-6002-1A on December 31, 2004? ________
2. The carrying value of patent No. 758-6002-1A on December 31, 2008? ________
3. The carrying value of patent No. 758-6002-1A on December 31, 2011? ________

1. In 1994, baseball management and the players union failed to come to an agreement and the management initiated a work stoppage. The two sides did not come to an agreement until 1995. As a result less baseball games were played in both the 1994 and 1995 season. The 1994 and 1995 data seem to be outside the pattern of the rest of the data. Determine if these two data points are influential by:

a) Plot the regression line from the full data set on the on the scatter plot. The regression equation is: Wins = 24.5 + 0.08Runs, mark it “ALL SEASONS”

b) ​​​​​​​Plot the regression line from data set without the partial seasons on the on the scatter plot. The regression equation is: Wins = 43.3 + 0.05RUNS, mark it “ONLY FULL SEASON”. Do the partial seasons seem to be influential? Explain.

c) Using the linear regression model for “ALL GAMES” in the Red Socks data, Wins = 24.5+ 0.08 Runs. Consider the data for the year 2004, (Runs = 949, Wins = 98) Calculate the residual for this year.

d) The coefficient of determination = 67.2% for the Red Socks data. Find the linear correlation coefficient. Round your answer to 2 decimal places.

XYZ is a privately held firm whose forecasted earnings per share (EPS) are $5.63, and suppose the average price/earnings (P/E) ratio for a set of similar publicly traded companies is 13.3. Estimate the intrinsic value of XYZ stock.

(Round your answer to the nearest 2 decimal points. For example, if your answer is $12.345, then enter 12.35 in the answer box.)

XYZ is a privately held firm whose forecasted earnings per share (EPS) are $5.42, and suppose the average price/earnings (P/E) ratio for a set of similar publicly traded companies is 14.7. Estimate the intrinsic value of XYZ stock.

(Round your answer to the nearest 2 decimal points. For example, if your answer is $12.345, then enter 12.35 in the answer box.)

Financial ratios are essential to provide an accurate valuation of a firm. Select a publicly traded firm of your choice. Select one ratio each in the areas of (a) performance, (b) activity, (c) financing, and (d) liquidity warnings. Provide an evaluation of the selected firm's strengths and weaknesses. Based on the ratios you selected, how well does your chosen firm perform? Explain.

Financial ratios are essential to provide an accurate valuation of a firm. Select a publicly traded firm of your choice. Select one ratio each in the areas of (a) performance, (b) activity, (c) financing, and (d) liquidity warnings. Provide an evaluation of the selected firm's strengths and weaknesses. Based on the ratios you selected, how well does your chosen firm perform? Explain.

Select a publicly traded firm of your choice that enjoys a large shareholder base. What challenges may this firm have encountered (or is likely to encounter) in terms of (a) incorporating ethics into financial management practices, and (b) maintaining/sustaining ethical practices in the face of internal or external (market) pressures? Frame your response relative to the financial manager's fiduciary duty to maximize shareholder's wealth.