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Study Resources (Business Management)

    Question 8.   1.Estimate the average expected life of Philips’ investments in development at the end of 2008. 2.Using the estimate derived under i, what adjustments should an analyst make to the 2008 beginning balance sheet and 2008 income statement to immediately expense all development outlays and derecognize the development asset? 3.What adjustments should.
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  Question 7.   In response to the deregulation of the European airline industry during the 1980s and 1990s, European airlines followed their U.S. peers in starting frequent flier programs as a way to differentiate themselves from others. Industry analysts, however, believe that frequent flyer programs had only mixed success. Use the competitive.
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  Question 3.   Sven Broker, an analyst with an established brokerage firm, comments: “The critical number I look at for any company is operating cash flow. If cash flows are less than earnings, I consider the company to be a poor performer and a poor investment prospect.” Do you agree with this.
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  Question 11.   As the CFO of a company, what indicators would you look at to assess whether your firm’s noncurrent assets were impaired? What approaches could be used, either by management or an independent valuation firm, to assess the value of any asset impairment? As a financial analyst, what indicators would.
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  Question 5.   Bill Simon says, “We should get rid of the IASB, IFRS, and E.U. Company Law Directives, since free market forces will make sure that companies report reliable information.” Do you agree? Why or why not?     Question 6.   Juan Perez argues that “learning how to do business analysis and valuation using financial.
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  Question 14.   Refer to the British American Tobacco example on provisions in this chapter. The cigarette industry is subject to litigation for health hazards posed by its products. In the U.S., the industry has been negotiating a settlement of these claims with state and federal governments. As the CFO for U.K.based.
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  Question 2(b).   What features of accounting, if any, would make it costly for dishonest managers to make the same changes without any corresponding economic changes?     Question 3.   The conservatism (or prudence) principle arises because of concerns about management’s incentives to overstate the firm’s performance. Joe Banks argues, “We could get rid of conservatism.
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    Problem 2. Fashion Retailers’ Key Accounting Policies   1.Based on your knowledge of the fashion retail industry, discuss for each of the above accounting policies why the accounting policy is considered as ‘‘key’’ by one or more of the eight fashion retailers. 2.Discuss which economic, industry, or firm-specific factors may explain the observed.
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  Question 3.   One of the fastest growing industries in the last twenty years is the memory chip industry, which supplies memory chips for personal computers and other electronic devices. Yet the average profitability has been very low. Using the industry analysis framework, list all the potential factors that might explain this.
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Question 1.   Matti, who has just completed his first finance course, is unsure whether he should take a course in business analysis and valuation using financial statements since he believes that financial analysis adds little value given the efficiency of capital markets. Explain to Matti when financial analysis can add value,.
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  Problem 1. The Neuer Markt   1.Do you think that exchange market segments such as the EuroNM markets can be a good alternative to venture capital? If not, what should be their function? 2.This chapter described four institutional features of accounting systems that affect the quality of financial statements. Which of these features.
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  Problem 1. The European Airline Industry   1.Evaluate how the rivalry among existing firms has developed after 2004. 2.Evaluate the influence of rising fuel prices on the AEA airlines’ profitability between 2003 and 2006. If fuel prices had not increased after 2003, what would have been the pre-interest breakeven load factor in 2006.
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    Question 9.   What approaches would you use to estimate the value of brands? What assumptions underlie these approaches? As a financial analyst, what would you use to assess whether the brand value of £5.2 billion reported by consumer goods company Reckitt Benckiser plc in 2011 for its health and personal care.
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  Question 4.   Joe argues: “Your analysis of the five forces that affect industry profitability is incomplete. For example, in the banking industry, I can think of at least three other factors that are also important; namely, government regulation, demographic trends, and cultural factors.” His classmate Jane disagrees and says, “These three.
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  Problem 4. H&M’s and Burberry’s Non-Current Assets (updated 1/2011)   1.Two measures of the efficiency of a firm’s investment policy are (a) the ratio of land, buildings and equipment to sales and (b) the ratio of depreciation to sales. Calculate both ratios for H&M and Burberry based on the reported information. Which.
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  Problem 2. Fair Value Accounting for Financial Instruments   1.Discuss how the changes in the reclassification rules affect the balance between noise introduced in accounting data by rigidity in accounting rules and bias introduced in accounting data by managers’ systematic accounting choices. 2.The move from marking to market to marking to model during.
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Question 1.   Refer to the Lufthansa example on asset depreciation estimates in this chapter. What adjustments would be required if Lufthansa’s aircraft depreciation were computed using an average life of 25 years and salvage value of 5 percent (instead of the reported values of 12 years and 15 percent)? Show the.
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  Question 10.   In early 2003 Bristol-Myers Squibb announced that it would have to restate its financial statements as a result of stuffing as much as $3.35 billion worth of products into wholesalers’ warehouses from 1999 through 2001. The company’s sales and cost of sales during this period was as follows:   2001  2000.
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  Question 6.   In 2011, Puma was a very profitable sportswear company. Puma did not produce most of the shoes, apparel and accessories that it sold. Instead, the company entered into contracts with independent manufacturers, primarily in Asia. Puma also licensed independent companies throughout the world to design, develop, produce and distribute.
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  Question 4.   In 2005 France-based food retailer Groupe Carrefour has a return on equity of 19 percent, whereas France-based Groupe Casino’s return is only 6 percent. Use the decomposed ROE framework to provide possible reasons for this difference.   ROE can be decomposed in three steps, as follows:   Net Profit 1. ROE = Shareholders’ Equity   Net.
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  Problem 2. Impairment of non-current assets   1.What balance sheet adjustments should an analyst make if she decided to record an additional write-down of €1.41 billion in the December 2000 financials? 2.What effect would this additional write-down have on EM.TV’s depreciation expense in 2001? (Assume that the adjustments to EM.TV’s balance sheet are.
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  Question 6.   When bringing operating lease commitments to the balance sheet, some analysts assume that in each year of the lease term depreciation on the operating lease assets is exactly equal to the difference between (a) the operating lease payment and (b) the estimated interest expense on the operating lease obligation. i.Explain.
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  Question 5.   Examples of European firms that operate in the pharmaceutical industry are GlaxoSmithKline and Bayer. Examples of European firms that operate in the tour-operating industry are Thomas Cook and TUI. Rate the pharmaceutical and tour operating industries as high, medium, or low on the following dimensions of industry structure: (1).
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    Problem 3. Euro Disney and the First Five Steps of Accounting Analysis   1.Identify the key accounting policies (step 1) and primary areas of accounting flexibility (step 2) for Euro Disney. 2.What incentives may influence management’s reporting strategy (step 3)? 3.What disclosures would you consider an essential part of the company’s annual report, given.
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Question 1.   Many firms recognize revenues at the point of shipment. This provides an incentive to accelerate revenues by shipping goods at the end of the quarter. Consider two companies, one of which ships its product evenly throughout the quarter, and the second of which ships all its products in the.
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  Problem 1. Merger accounting   1.Discuss why, from an analyst’s point of view, purchase accounting is preferable over pooling accounting. 2.What adjustments should an analyst make to GlaxoSmithKline’s 2006 beginning balance sheet to correct for the distortions from using pooling accounting?(Assume that GlaxoSmithKline’s marginal tax rate is 30 percent. Note that the international.
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  Question 5.     2012 2011 INCOME STATEMENT     Sales 0.0 0.0 Cost of Sales (function) 0.0 0.0 SG&A (function) 0.0 0.0 Cost of Materials (nature) 0.0 0.0 Personnel Expenses (nature) 0.0 0.0 Depreciation and Amortization (nature) 0.0 0.0 Other Operating Income, Net of Other Operating Expenses (function) 0.0 0.0 Other Operating Income, Net of Other Operating Expenses (nature) 0.0 0.0 Interest Expense 0.0 0.0 Interest.
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  Question 7.   Four steps for business analysis are discussed in the chapter (strategy analysis, accounting analysis, financial analysis, and prospective analysis). As a financial analyst, explain why each of these steps is a critical part of your job and how they relate to one another.         .
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  Question 2.   At the beginning of 2011, the Rolls-Royce Group reported in its footnotes that its plant and equipment had an original cost of £2,538 million and that accumulated depreciation was £1,497. Rolls-Royce depreciates its plant and equipment on a straight-line basis under the assumption that the assets have an average.
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  Question 15.   Refer to the Carlsberg example on post-employment benefits in this chapter. Discuss the components of the pension expense. In your opinion, is it reasonable to exclude some components of the change in the unfunded obligation from earnings? Is the calculation of the pension charge in the income statement appropriate.
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  Question 3.   A finance student states: “I don’t understand why anyone pays any attention to accounting earnings numbers, given that a ‘clean’ number like cash from operations is readily available.” Do you agree? Why or why not?     Question 4.   Fred argues: “The standards that I like most are the ones that eliminate all.
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  Question 10.   There are very few companies that are able to be both cost leaders and differentiators. Why? Can you think of a company that has been successful at both?     Question 11.   Many consultants are advising diversified companies in emerging markets, such as India, Korea, Mexico, and Turkey, to adopt corporate strategies proven.
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  Question 5.   Joe Investor claims: “A company cannot grow faster than its sustainable growth rate.” True or false? Explain why.     Question 6.   What are the reasons for a firm having lower cash from operations than working capital from operations? What are the possible interpretations of these reasons?         .
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  Question 12.   On December 31, 2011, Germany’s largest retailer Metro AG reported in its annual financial statements that it held inventories for 52 days sales. The inventories had a book value of €7,608 million. How much excess inventory do you estimate Metro is holding in December 2011 if the firm’s optimal.
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  Question 4.   Dutch Food retailer Royal Ahold provides the following information on its finance leases in its financial statements for the fiscal year ended January 1, 2012:   Finance lease liabilities are principally for buildings. Terms range from 10 to 25 years and include renewal options if it is reasonably certain, at the.
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  Question 7.   ABC Company recognizes revenue at the point of shipment. Management decides to increase sales for the current quarter by filling all customer orders. Explain what impact this decision will have on the following:   Days’ receivable for the current quarter. Increase, provided that, prior to the transaction, quarterly sales are less.
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  Question 13   On December 31, 2010 and 2011 Deutsche Telekom AG had net trade receivables in the amount of €6,766 million and €6,455 million, respectively. The following proportion of the receivables was past due on the reporting date:     2010 2011 Not past due on the reporting date (48.7%) 2,295 (49.4%) 3,109 Past due on the reporting date (51.3%).
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1.  .      The process of giving employees full authority and responsibility for completing assigned tasks is known as                             . 2.People who own all or part of at least two independent businesses at the same time are known as                                           entrepreneurs. 3.         Overly close supervision of subordinates is referred to.
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  Problem 3. Audi, BMW and Skoda’s research and development   1.Estimate the average economic lives of the car manufacturers’ development assets. What assumptions make your estimates of the average economic lives consistent with those reported by the manufacturers? 2.The percentages of R&D expenditures capitalized fluctuate over time and differ between car manufacturers. Which.
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