2) Earnings management might help credibly convey private information about the long-term earnings potential of the firm. 3) Earnings management is used to block communication from insiders to outside investors. 4) Earnings management is undertaken by manipulating discretionary accruals. c. Jones (1991) found that a sample of U.S. firms reported negative discretionary accruals in the year of their application for U.S. government subsidies for victims of unfair foreign competition. Which of the following positive accounting theory (PAT) hypotheses is this finding consistent with?
The Weighted Average Cost of Capital is the average of the costs of a company's sources of financing-debt and equity, each of which is weighted by its respective use in the given situation. By taking a weighted average, it shows how much interest the company has to pay for every marginal dollar it finances. A firm's WACC is the overall required return on the firm as a whole and, it is often used internally by company directors to determine the economic feasibility of expansionary opportunities and mergers. Also, WACC is the appropriate discount rate to use in stock valuation. No, I don’t agree with Cohen’s WACC calculation.
Investors and creditors are examples of external users of accounting information. Investors make the decision to buy, sell, or hold stocks and creditors evaluate the risk of selling on credit or lending
The year-to-date’s net cash provided by operations is $4,717.37 3. The cash balance at the end of period for the current month is $32,060.92 4. The beginning Retained Earnings balance is $189,037.60 5. The ending Retained Earnings balance is $214,102.64 The statement of cash flows information is important to users because what it shows is where the cash came from, what the cash is used for and the overall changes within the cash for the accounting
In the case of Marriot International, Ernst & Young LLP audited and reports their opinion on Marriot International’s 10-K report. “In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Marriot International, Inc. at December 30, 2011 and December 31, 2010, and the consolidated results of its operations and its cash flows for each of the three fiscal years in the period ended December 30, 2011, in conformity with U.S. generally accepted accounting practices.” References Marriot International, Inc. (2012). Report of independent registered public accounting firms. Retrieved from http://investor.shareholder.com/MAR/marriottAR11/financials/ipafreports_1.html 6) Of what use, if any, are the notes to the financial statements? The notes to the financial statements provide basic details about the statements, on the Marriot International, Inc’s 10-K provided detailed & extensive notes.
The statement of cash flows provides current information on the condition of a company during a specific time, representing the information required for all annual reports for external users such as banks, and investors. Statement of cash flows also reflects changes to the balance sheet, cash, and cash equivalents, and is concerned mostly with the flow of cash in and out. This statement is a great tool for external users to analyze the financial position of a company, and whether or not they would be a good investment, a
Prepare in proper form the December 31, 20X0, balance sheet and the 20X0 income statement for Weikart Company. Include the proper amount for additional paid-in capital. Question 6: Source: horngren, et al. (2011). Introduction to management accounting (15th ed., p.722).
The Securities and Exchange Commission is responsible for protecting against the unethical practice of insider trading. One popular example of insider trading is when a CEO of a company sells stock after having knowing that the company will lose a major contract which can have a negative effect on the stock price. 3. Explain how the tax code allows depreciation to contribute to cash flow. (25 points) The Federal Tax Code allows depreciation to
Subtract it? Ignore it?” (Barbarians 369). Obviously, KKR was trying to figure out whether RJR Nabisco was a good investment or not. The debt accrued by an LBO needed to be paid off using cash from the company acquired. The difference between expensing the millions of dollars or recognizing it as revenues would mean a bid of 92 or 96 dollars per share.
The company pays cash upon conversion, and the delivers shares based on a conversion price from that day is calculated on a proportionate basis each day of trading in the relevant conversion period. (b) How can small no-name company issue debt at 2.5% when Coca Cola has to pay 4.25%? A small company can issues loans that rank below other debts, such as convertible senior subordinate notes. If the issuer happens to go bankrupt and looses its assets, then as a subordinate debt the convertible subordinate note will be repaid after other debt securities have been paid. As with all debt securities, however, the note will be repaid before stock.