This choice does, however, affect how individual shareholders’ accounts are reported in the balance sheet. Formally retiring shares restores the balances in both the common stock account and paid-in capital - excess of par to how those balances would have looked if the shares never had been issued. Any net increase in assets produced from the sale and ensuing repurchase is reflected as Paid-in capital—share repurchase. On the other hand, any net decrease in assets resulting from the sale and subsequent repurchase is repeated as a subtraction of retained earnings. Inversely, when a share repurchase is seen as treasury stock, the cost of the treasury stock is naturally disclosed as a decrease in total shareholders’ equity.
2. a. Critique Ace Repair’s current method of estimating its before-tax cost of debt. b. Is the earnings yield (E/P) an appropriate measure of the firm’s cost of equity? 3. a.
ACC 548 Final Exam Answers 1. Under GASB rules for the financial reporting entity a. component units are included if the primary government is financially accountable for their operations B. counties are component units of the state government C. blended and discretely presented component units are to be reported in government-wide financial statements but not in fund financial statements D. component units must be reported in columns (discrete presentation) separate from the funds of a primary government 2. According to GASB Statement No. 44, all of the following is a recommendation category for the CAFR’s statistical section EXCEPT A. financial trends information B. debt capacity information C. comparative information D. operating
Chapter 11 bankruptcy: This form of bankruptcy is for the reorganization, or sometimes called the rehabilitation, of a business. In some cases, individuals can file this form of bankruptcy when they have substantial debts as well as a large amount of assets. Chapter 13 bankruptcy: this chapter is for rehabilitation or reorganization of debt for individuals. This type of bankruptcy does not discharge debt but allows for a process of restructuring the debt to allow for repayment. It is designed only for those who have a regular source of income since debts are stilled paid off in this program (United States Courts, 2011).
The ROE for Sepracor is 33.07%, which means that 33.07 cents of assets are created for each dollar that was originally invested. It measures how Sepracor is using its money. The higher the return on equity, the more funds available to be invested in improving business operations without having to invest more capital. Debt to asset ratio measures the company’s solvency, and the higher the ratio, the lower the borrowing capacity for the company. I would make an investment in the company’s 5% convertible bonds.
Disclosure in notes to financial statements only IV. Choice: A V. Justification: Equity: Stockholder’s equity represents ownership in a company or a company’s net financial assets (assets less liabilities). Stock options represent the privilege to purchase ownership in the company. Option (B) shows this right to ownership in the notes to the financial statements but does not portray how it truly affects the company’s equity. Option (A) provides a clearer picture on how the stock options affect the company’s equity through the balance sheet.
Being able to track sales compared to the previous years’ numbers is a valuable tool in being able to track business. They use this information to forecast on where they think the business will be heading in the next week, month, or year. If the debt percent gets to high then they need to adjust the amount of liabilities that they have to bring that number down. Knowing the times interest earned ratio allows the managers to know at what percent the company is earning interest on its net income. Investors find this information lucrative because the more expendable cash a company has the more likely they are to pay out in dividends for the stock holders..
There are certain steps that need to be taken to insure that CanGo can make profit from year to year. CanGo also operates at a high debt ratio. This means that it is imperative for CanGo to produce efficiently and not lag and any quarter of any year. This will prevent possible bind for cash or losing shareholders trust. CanGo has very low profitability ratios, low turnover ratios and a high debt equity ratio.
This calculates how much of the business is financed through private investors; it is also expressed in percentage form. Generally speaking, as a firm's debt-to-equity ratio increases, it becomes more risky because if it becomes unable to meet its debt obligations, it will be forced into bankruptcy. (Glakas) Of the three companies, Wal-Mart has the lowest total debt ratio (.62) as well as the lowest overall debt to equity ratio (1.65). Target finds itself with similar footing at .65 and 1.89 respectively, however Kroger has over 80% of its operations (.81) financed with debt and has the worst three year average when it comes to debt to equity with 4.40 times.
Therefore, creditworthiness is usually overemphasized in the decision to file for bankruptcy. When a business files for Chapter 7 bankruptcy, after a trustee is appointed, the trustee will sell the business’s assets and distribute the proceeds accordingly. In the event that a business declares bankruptcy, its employees may or may not lose their jobs because divisions of the business may be sold intact or