When Daniel Rowe, Prestige Telephone President, become obligated to report to shareholders that their return on investment was the lowest it had been in seven years, he felt it was time to assess whether or not to continue operating Prestige Data Services. The original idea of selling unused computing time was sound. At its core, the profit potential for Prestige Data Services appears to outweigh the opportunity cost. Missteps experienced during the subsidiary launch such as inaccurate customer research, faulty budgeting for salaries / lack of discipline in sticking to budget, and equipment delay issues all point to a lack of attention to critical detail. If equipment delays resulted in lost business, were other alternatives considered such as rental equipment or outside hosting for a limited period of time?
What was PacifiCorp Worth before its acquisition by Berkshire? Are we overpaying? We are not overpaying for PacifiCorp. We purchased PacifiCorp, from Scottish Power plc, for $5.1 billion in cash and $4.3 billion in liabilities and preferred stock, for a total of $9.4 billion. Since PacifiCorp is not a publicly traded company, we must use valuation multiples from comparable firms to determine the value of the firm.
As business operations declined post the 1st quarter in 2000, CFO Sullivan used the following accounting tactics to achieve targeted performance: 1. Accrual releases: Accounting principles require companies to estimate expected payments from line costs and match them with revenues in the income statement. Throughout 1999 and 2000, Sullivan told staff to release accruals which too high compared to the relative cash payments. Over a 7 quarter period between 1999 and 2000, Worldcom released $3.3 billion worth of accruals. 2.
Activity Base Costing Jessie Jones Accounting 599 Professor Carr July 17, 2011 Evaluate the advice that Chuck Davis gave to Leonard Bryner and explain whether you agree or disagree with the advice. Leonard gave Chuck information without investigating or taking a look at the problem with their firm. Leonard was attempting to see why they were losing market share to the company’s competitors because they were losing bidding wars. Chuck felt the current policies to controlling cost were adequate and chose not to evaluate the company using Activity Based Costing (ABC). ABC is a method of evaluating the cost of providing products and services by activity.
"It all depends on the assumptions." To see just how good some of the new metrics are at valuing acquisitions, we asked both Stern Stewart and HOLT Value Associates LP to calculate a fair value for Snapple at the time of its acquisition by Quaker, using only data that was publicly available at that time. Stern Stewart declined, citing its former consulting relationship with Quaker, but HOLT agreed to take on the assignment using its CFROI (cash flow return on investment) methodology. First, some background. In valuing a company whose CFROI is higher than average, HOLT assumes those returns will gradually fade toward the market norm because of competitive pressures.
1 Terry Wilcox The Lack of Our Directors Duty to Care Week 8 – Individual Work 1 Everest University December 6, 2013 2 I am the company ombudsman and my job entails investigating complaints of wrongdoing on the part of the corporate directors and officers. It is also my job to decide whether there is a violation of the law and deal with the wrong doers accordingly. Jane, one of our shareholders, alleges that our director’s decided to invest in the firm’s growth relying heavily on negligently relied upon officers’ faulty financial reports. This caused Goody to borrow to meet its obligations, resulting in a drop in its stock price. In a corporation a board of directors are usually hired by shareholders every 1 to 3 years and it is the responsibility of the directors to make sure they exercise duty of care and duty of loyalty.
This shows us that discounting the machine will not bring positive cash flows to the buying company. This GRAPH shows us that even though they would’ve met their 5 years maximum plan this opportunity of an investment would not be good because the values we get from the Buyers DCF is less than the current cost of the investment. I would have to decline this bid. Year | Number of Plates | Old Price Per Plate | New Price Per Plate | Buyer Cash Flow | Buyer DCF | Seller Cash Flow | Seller DCF | 1 | 225 | 5.00 | $2.00 | ($5,325) | ($5,325) | $2,335 | $2,335 | 2 | 225 | 5.15 | $2.06 | $695 | $695 | $329 | $329 | 3 | 225 | 5.30 | $2.12 | $716 | $716 | $342 | $342 | 4 | 225 | 5.46 | $2.19 | $738 | $738 | $357 | $357 | 5 | 225 | 5.63 | $2.25 | $760 | $760 | $371 | $371 | Year | Number of Plates | Old Price Per Plate | New Price Per Plate | Buyer Cash Flow | Buyer DCF | Seller Cash Flow | Seller DCF | | | | Totals | $584 | $584 | $3,734 | $3,734 | Client-Specific Parameters | | | | | | | Salvage Value (new machine) | $3,000 | | Salvage value of a new
2: The background in the United Kingdom In the 1960’s confidence was lost in accounting procedures. Shareholders were unaware of hidden problems which were only exposed after takeovers or when companies went into administration (Elliot and Elliot 2006) The GEC takeover of AEI in 1967 exposed inconsistencies in accounting procedures. “The pre-takeover accounts prepared by the old AEI directors, differed materially from the post takeover accounts prepared by the new AEI directors” (Elliot and Elliot 2006). AEI produced a £10m profit forecast in 1967, which had the backing of the auditors. However, when GEC took over AEI it forecast a loss of £4.5 million.
Historically, December sales represented only 3% of yearly sales, but this year they mushroomed to over 25% of yearly sales. CCL would like to defer the profit on what they consider to be "excess" sales generated as the result of the looming price increase. CCL believes that 2001 sales will be lower because of the bottlers' overstocking to beat the January price increase. Management of CCL is convinced that bottlers are overstocking due to the frank and open discussions that they have had with the bottlers. If deferring this revenue will not be acceptable to the company's auditors, management would prefer to treat these "excess" sales as consignment sales, with the recognition of revenue taking place in 2001 or when the bottler eventually sells this product.
The entries were booked as “capital expenditures” on the balance sheet instead of an expense. According to "What Went Wrong at Worldcom" (2002), “Such expenses must be immediately recognized in the period incurred, unlike expenditures which can legitimately be capitalized as assets and depreciated over their useful life.”(para. 7) The transfer of funds from one account to another led to over $3 billion in cost, this accounting was not justified by GAAP. The reason for this was to hide the earnings that were plummeting and to keep their stock at a high so that they may attract more investors. The company inflated the assets and made the entries seem as though they had income.