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FIN 571 Final Exam Guide (New)
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1.A proxy fight occurs when: the board of directors disagree on the
members of the management team. For this week's checkpoint we
had to look up three job postings in the field of accounting. I'm glad
that I got this opportunity because it actually opened my eyes and
expanded my knowledge in the accounting field. The three job
positions are listed below. The first job title was Senior Internal
Auditor. A Senior Internal Auditor responsibilities is to plan and
perform financial, operational audits, and identify business process
risk. This job position only specified that the pay was well over 100k a
year!!!! Qualifications BA/BS, and minimum of 3-4 years public
accounting. The second job posting was a Tax Manager. Tax
Manager is responsible for conducting basic tax research, maintain
tax records and ensure proper tax accounting. This position requires a
BA in Accounting, and a minimum of 7-8 years of expereience.The job
pay is listed as 120k!!! The third job posting was Assistant Corporate
Controller- SR Management. Assistant Corporate Controller- SR
Management position Inventory Accounting for North America,
Credit management for North America and Corporate accounting for
Latin America, responsible for assuring accuracy of inventory and
sales and works closely with external auditors on receivable audits.
The requirements for this position is as follows, BA/BS, public
accounting experience preferred, Strong verbal and written
communication. For the Assistant Corporate Controller- SR
Management the salary pay starts at 110k-130k with bonus and
benefits.
I didn't know that Accounting career actually paid this much. I might
think about changing my careers.

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FIN 571 Final Exam Guide Set 2 (NEW)
1. Financial managers should primarily strive to: 2. The process of
planning and managing a firm's long-term assets is called: 3. Which
one of the following actions by a financial manager creates an
agency problem For Discussion Question 1: Post your response to the
following:
When reviewing a financial report, why should information be
reliable, relevant, consistent, and comparable?
In other words, why are these accounting characteristics
important?
What kinds of problems could be created if a financial report is
not reliable, relevant, consistent, or comparable?
It is extremely vital that the company has accurate financial
reporting. This information determines whether or not to invest in
your company's stock. This information will help them decide if it is
profitable to invest or not to invest in your company based what is in
your financial history. The information must be relevant because it
will help the company, investors and lenders make decisions. It helps
answer questions like, "how stable is your company", or "what future
does this company have". The information should be reliable. In other
words the information that is reported must be able to be verified,
backed up with truthful information. Comparable occurs when
different companies use the same accounting principles. This makes it
much easier to compare results between company's. Consistency

happens when the company uses the same accounting method every
year. When the financial statements are reported each year, it paints
a financial picture of where the company is headed now and in the
future.
What kinds of problems will occur if the information does not include
these things?
Falsified or manipulated statements doesn't only effect the company
but it also to name a few effects the lenders, creditors, investor's, etc.
This will result in the company not having a faithful representation.
Another response
The main objective of generating financial information is providing
useful information that can be used in decision-making... only if this
information is relevant, reliable, comparable, and consistent, can it
be useful for decision makers. (Kieso, 2003).
Relevance gives a basis for making decisions that will impact the
future of a business, and it confirms and corrects expectations from
the past. If the information makes a difference in making decisions, it
is relevant.
Reliability means that the information can be depended on and it can
be proven to be free of error, and the information is factual. The
information cannot favor one set of users over another. CPAs audit
financial statements to ensure reliability.
Comparability is also an important characteristic of financial
reporting... this happens when different businesses use similar
accounting principles, making it much easier for one to compare
companies, and the method used in a business must be disclosed to
the users of the information to enable the users to convert the

information as accurately as possible.
Consistency simply means that the business uses the same
accounting principles on a yearly basis... consistently. This helps
decision makers analyze a company's trends. A company can change
the methods used if they can justify the change, showing that the
new method is more useful for analysis. If the method is changed, it
must be disclosed in the notes that go with the statements to show
users a lack of consistency.
These characteristics are very important to a business... decisions
cannot be made based on incorrect information, and everyone
involved in a business venture of any kind, whether they be
management, owners, or investors and creditors, as well as
consumers, etc. must be able to rely on the financial information
provided in order to make any type of decision. Without this
information, it is difficult to imagine any business succeeding, even
for a short time.
Examples of problems that could occur without reliable, relevant,
consistent, or comparable information includes not being able to get
loans or investments; management could make decisions that cause
irreparable damage to entire operations, consumers could easily lose
faith and cut their ties... the possibilities are endless for companies
that lack these qualities in their financial reporting.
DQ2
For Discussion Question 2: Post your response to the following:
How does information from financial reports influence business
decisions?

Why is it important for business managers to understand the
information found on financial reports?
How does information from financial reports influence business
decisions?
Once the information from the financial reports have been posted
then a team will review the company's financial history to see what
decision were profitable or not. The decisions that were made
previous to the financial reports being posted will show which way
the company needs to go to continue to remain #1.
Why is it important for business managers to understand the
information found on financial reports?
IT is extremely important for he business managers to understand the
information found on the financial reports. The business managers
are going to be the people that are going to make decisions for the
company. They need to know how to interpret the financial reports
and come up with different strategies that will continue to make the
company money.
Another response
The information from financial reports influences business decisions
because it shows where the company stands. The managers use the
information from the financial report compared to the current year
from the previous year, whether the company growths or losses. It is
very important for business managers to understand the information
found on financial reports because the information from the financial
reports enables business managers to see how to improve and keep

the business afloat. It also gives business managers an insight what
came in and went out and the total operating cost of the company as
well as cutting cost in a certain areas. The information from the
financial reports helps the manager manages the business
accurately.
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FIN 571 Week 1 Connect Problems (Math and Accounting
Review)
FIN 571 Week 1 Connect Problems (Math & Accounting Review) 1.
Functions Excel will make your life as a finance student much easier.
Internal Cash Control
By
Kamilah Crooms
Accounting 220
Jess Stern
Internal Cash Control
The accounting department receives from sales invoices once a
month. Most of the information is missing on the invoices.

The accounting department relies on each department within the
company and all the information has to be submitted completely and
in a timely matter. In this scenario most of the information that has
been turned in has information that is missing on the invoices. I
would say that the internal controls that are not being followed are
Documentation procedures. Company documentation is very
important and must be turned in complete. These documents show
proof of delivery or proof of services to the customer. Any incomplete
documents can be very costly and can cause a delay in the company
being paid for any services rendered. For example, one of the
requirements in a transportation department is to make sure that the
drivers verify the load and sign for the load prior to leaving the yard,
these documents says that the load left in good condition. Well, it so
happened that we allowed a driver to leave without signing the
paperwork. This caused a delay in accounting because we had to get
signatures from the driver and the customer which took a month
later to complete.
Rob, Sue, and Bob use the same cash register at the donut shop.
Rob, Sue, and Bob all use one register has often turned into not the
best decision ideally for the company. It can increase the risk for the
drawer being short and it will be hard for the company to find out
which employee or employees had shorted the register. The internal
controls that are not being followed are Establishment of
responsibility. Happens when the company assigns one person to be
in control of a specific job or have authority to make decisions (pg
161 Internal Control and Cash). When the company signs one person

to be responsible over the register it will allow the company to hold
that one person responsible for any shortages.
Sam does the ordering of materials at the beginning of every
month and pays the bill.
In this case Sam is ordering materials and paying all the bills. This
process is actually known as related activities (pg 162 Internal
Control and Cash). This occurs when one person is doing two different
responsibilities just like Sam. The internal Control that is not being
applied is Segregation of Duties. It is better for the two to be a
separate responsibility because it will minimize the billing errors.
Bank reconciliations are done by the person who is responsible for
all cash responsibilities.
The problem with this scenario is that the same person is responsible
for all cash responsibilities, why is this person doing the only one that
does this job? Having one person take on such a major responsibility
increases the chances of embezzlement and thief. The internal control
that is not being applied is rotating employees’ duties and requiring
employees to take vacations. One person should not be completely in
control of one job, the company should encourage vacations or
switching positions to prevent incorrect handling of the company’s
valuable information.
New checks came in and are left on the shelf with other supplies.

This is a tough scenario because there are all sorts of internal
controls that are not being used in this case. I would say in my
opinion that the first internal control that comes to my mind that is
not being applied is bonding of employees who handle cash.
Every employee that works near or with expensive equipment should
be held reliable or responsible for the company’s assets. Bonding of
employees who handle cash protects the company by insuring that
the employee is or isn’t a risky applicant (background checks) or
reassuring that the employee that they will be prosecuted to the
fullest extinct if they are found guilty of thief. For example, I had
worked at Mc Donald’s and
there were my shift managers and one employee that were caught
with stealing money from the company. This situation had happen
very differently. The armor truck dropped off a deposit that belonged
to another company (armors mistake) but they signed it. Those
employees thought that nothing was going to be traced back to them
but the little did they know, all evidence traced back to them. They
each received jail time, and felony records.
Everyone has access to the computer system and the last audit was
seven years ago by the former accountant
This scenario has two things that are going on at the same time. I
will first start off with the computer system and how everyone has
access to the computer. The internal control that is not being applied
is Physical, Mechanical, and Electronic Controls. This allows the
company to control assets through physical or electronic based
systems or programs. It is extremely important for a company to

invest in computer or informational protection for the company and
for their employees. Today’s technology age most companies are
investing in a computerized program. This will help protect from
internal errors and external protection. For example, all companies
invest in a virus protection this will ensure that the company’s
information is protected and not in the wrong hands.
Invest idle cash
Invest idle cash occurs when any excess funds or cash needs to be
invested. The money should be highly invest and risk free. For
example, a major company should make investments with their
assets into profitably investments and risk free.
Plan the timing of major expenditures
This is when a company sets aside money for major cash needs. We
live in a world that things happen daily. A good company would set
aside emergency funds. For example, during a terrible thunderstorm,
the winds practically ripped off the roofing shingles off a commercial
business. The company will be able to use the money for emergency.
Delay payment of liabilities
Delay payment of liabilities is when a company pays bills not too soon
and not late. This allows the company to have money available for
bills that that really need to be paid allowing excess funds to be free
for other uses.
Keep inventory levels low

This occurs when the company keeps the inventory low so that it will
bring in more profits. For example, if the managers at a fast-food
over plan and fix too many hamburgers and the customers don’t buy
it, then the food will go bad and the company will lose profit.
Increase the speed of collection on receivables
This occurs when money is owed to the company, the company
cannot claim these until the funds have been received. Some
companies offer incentives to encourage customers to pay early or on
time. For example, my job encourages their customers by letting
them know that there will be a price increase on or after a certain
date and this really works because the customers want to pay at a
lower price.
References:
http:yourdictionary.com /accounting_statements.org Retrieved
2/13/2010
Thomas, Y. 2005-08-27 “Accounting 101 pg. 52 Statements
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FIN 571 Week 1 Connect Problems (Week 1 Problem Set)
FIN 571 Week 1 Connect Problems (Week 1 Problem Set) 1.The
ultimate control of a corporation lies in the hands of the corporate:
president Axia College Material
Appendix B
Cash Management Matrix
Directions: Using the matrix, list how each of the principles of
internal control works, and give an example for each. Next, list how
each of the principles of cash management works, and give an
example for each.
Principles of Internal
Control
How it Works Example
Establishment of
responsibility
Happens when the
company assigns
one person to be in
control of a specific
job or have
authority to make
decisions.
My job, Our Sales
department is the
only one that can
waive a restocking
fee. It allows the
Sales team to be in
control of the
customers returns

Segregation of duties This is when the
company has more
than one person to
control a task or job
A church- You have
people who count
the offering and
then you have
someone who
writes down and
logs in what was
received
Documentation
procedures
Evidence or proof of
all company
transactions
My job we deliver
ship shingles to our
customers, and we
make the driver sign
prior to leaving and
we make the
customer sign a
“Proof Of Delivery”
form
Physical, mechanical,
and electronic
controls
Allows the company
to control assets
through physical or
electronic based
systems or
programs.
Our job has a
system called Cisco
and this tracks the
employees breaks
and lunches. Also,
monitors how long
the CSR have been
ready or working.
Physical control
would be the
security guard, they
require
identification prior
to entry.

Independent internal
verification
Any information that
can be reviewed ,
compare, and
reconciliation by a
employee
My job has a way of
tracking our
inventory and when
someone says that
they were shorted
on their order we
can go back and
track the inventory
and compare the
numbers in the
system and a
physical count to
determine if the
numbers were
incorrect
Other controls Bonding of
employees,
company protects
against abuse of
assets.
Our company fired a
girl just recently
because she had
used the company
card business card
for personal us that
was not work
related.
Principles of Cash
Management
How it Works Example
Invest idle cash Occurs when any
excess funds or cash
needs to be
invested,
My father’s
company makes
wise investments
and it turns around
in his favor

Plan the timing of
major expenditures
A company wants to
make sure that
there is money set
aside for major cash
needs
During the recession
profits dropped
lower than expected
so some companies
pulled from these
funds
Delay payment of
liabilities
When a company
pays the bills at an
appropriate time
not late and not too
soon.
Ok, when times are
tough at home and
bills are due I
organize the bills by
which bills needs to
be paid the soonest,
because if I pay the
bills too early I will
cut off my excess
funds that could be
used for something
else
Keep inventory levels
low
Happens when a
company keeps the
inventory low so
that it will continue
to bring profit
See’s Chocolate
factory has to make
sure that they are
not over producing
or making too much
or else the sit and
the company will
lose money
Increase the speed of
collection on
receivables
Money that is owe
to the company by
other people or
customers is money
that can not be
When a customer
places a order for a
product and has not
paid yet, the
company can not

counted towards
the companies funds
count the money as
their’s until it is
received.
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FIN 571 Week 1 DQ 1
What is ethics? If you follow all applicable rules and regulations, are
you an ethical person? Income statement is a financial statement
that shows how much money is coming from product sales and
services prior to any expenses being taken out. Both internal and
external users such as managers and investors are able to access this.
For example, if a investor wanted to see if the company made money
or lost money they would use this financial statement report.
Balance sheet shows what condition the company is currently in.
whereas the other financial statements only came monthly or
annually. For example, what if the management planning team
wanted to see the company's current assets, ownership equity and
liabilities? All they have to do is run the balance sheet report.
CVP income statement or Cost Volume statement reports or monitors
the effects of the changes in cost and volume when it comes to the
company profits. For example, I work at a manufacturing plant for
roofing shingles. The CVP analyst studies the cost which includes but
not limited too, manufacturing, material, labor cost. This financial
statement report would help the management team budget the cost
of manufacturing goods.

Statement of cash flow tracks the movement of cash coming in or out
of the business. This financial statement will show if the company
made cash or not, or if the net income increased or decreased. For
example, the owner or the management department will use this to
determine if the company has earned enough money to be able to for
any expenses.
Retained earnings statements is a percentage that is kept by the
company to be reinvested or to be used to pay debts. For example, if
a company was looking to expand their business by purchasing top of
the line equipment they can use this statement to see how much
money the company has put away.
References:
http://www.investopedia.com/terms/r/retainedearnings.asphttp://fi
nancial- Retrieved 2/18/2010
statements.suite101.com/article.cfm/financial_statements_the_p_l.
Retrieved 2/18/2010
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FIN 571 Week 1 DQ 2
Assume that interest rates have increased substantially. Discussion
Question 1: Post your response to the following:
How would you describe the difference between financial and
managerial accounting? What are the distinguishing features of
managerial accounting?

There are many differences between financial and managerial
accounting. The financial accounting statements are available to
external users such as employees, stockholders, creditors, investors,
etc. This is available to them so that they can monitor the company's
performances quarterly or annually. Managerial accounting provides
financial information for managers and other internal people or
department. Managerial accounting is confidential so it is only
observed by internal users such as management, owner, and will
provided to external users such as the public. Management uses this
for budgeting purposes or to monitor profit loss/gain within the
company. Managerial accounting can be available to them as often as
needed. Managerial accounting statements is a great way for
management to make decisions based on what has been reported.
Another response
The differences between managerial accounting and financial
accounting are distinct. Managerial accounting reports are for those
in managerial and decision making positions. The managers use the
financial report to answer questions, which would advance the
company and its employees. The manager would want to know if
certain investments should be made and should the company advance
an employee's salary. The manager needs the report to decide if a
factory is built or if a certain stock is brought. The financial
accountant has the job of showing the external users such as creditors
and stockholders a picture of the company's stability.
The manager's purpose is to manage by making stable plans, delegate
duties, motivate the workers, and control the atmosphere.
Distinguishing features of managerial accounting are the fact no cpa
will audit the report, and there is no specific frequency of the report.
The reports are done in a need to know basis and for a specific
reason, which is for business purposes. The reports are detailed and
pertain to specific business decisions. The financial accountant need
only be concerned with the company's finances.

DQ2
Discussion Question 2: Post your response to the following:
Select a management function (planning, directing and
motivating, or controlling) and explain how that function relates to
business as a whole. Next, select a different function listed by a
classmate. Discuss with your classmate how the functions you each
selected complement each other.
The management functions that I choose was controlling.
Controlling job is to make sure that the each
department/person is keeping the company's activities or plans on
track and in order to achieve that they must work closely with
Management planning function. Controlling continually compares the
company's performance to make sure that the planned standards
are being met. In my opinion this is known as the "dirty work".
Controlling operations have to know what to look for and how to keep
track of all the company's activities. They have to take actions and
quickly correct any errors and make sure that the company goals are
being achieved in a timely matter or the time that it was planned. If
there are errors it is job of the controlling operations to take quick
action. The controlling operations not only correct errors after it
happens but they also are in charge of foreseeing any potential errors
and act quickly to get that resolved.
Another response
I chose Controlling as part of the management function. The
controlling function relates to business as a whole because it helps
monitoring the firm’s performance to make sure the planned goals
are being met. Managers need to pay attention to costs versus
performance of the organization. let say, if the company has a goal of
increasing sales by 10% over the next two months, the manager may
check the progress toward the goal at the end of month one. If they
are not reaching the goal the manager must decide what changes are
needed to get back on track.

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FIN 571 Week 1 Individual Assignment Business Structures
Watch the "Your Business Structure" and "Corporate Business
Structures" videos on the Electronics Reserve Readings page.
Identify the different business structures. Cost, Volume, and Profit
Formulas
By
Kamilah Crooms
Due February 28, 2010
Explain the components of cost-volume-profit analysis.
The components of cost volume-profit analysis consist of Level or
volume of activity, Unit Selling Price, Variable Cost per unit, total
fixed costs, and Sales mix.

What does each of the components mean?
Level or volume of activity is the activity that causes change or
behavior when it comes to the cost. Unit selling Price is the cost for
the product basically how much each unit is selling for. The Variable
Cost per unit is something that can change depending on the activity.
The total fixed cost does stay the same as activities change but differ
per unit. The Sales mix is basically what the name says. It’s a mixture
of sale items when more than one product sold the sales will remain
the consistent.
Based on the formulas you have reviewed, what happens to
contribution margin per unit when unit selling prices increase?
Contribution margin is the amount of revenue left over after
subtracting the variable cost. So basically Unit sales price
subtracting or minus variable cost.
Illustrate your explanation with an example from a fictitious
company of how an increase in unit selling prices might affect
contribution margin.
Kelly’s Sweetheart Flowers
The owner of Kelly’s Sweetheart Flowers is selling their bouquet of
flowers for $10 per unit. The Variable Cost per unit is $4.00. The
contribution margin will be ($10-$4) = $6. If the sells price

increases to say $15, then the contribution margin will be ($15-$6) =
$9 per unit.
When fixed costs decrease, what does this do for sales? Illustrate
your explanation with an example from a fictitious company.
Kelly’s Sweetheart Flowers
When the fixed cost decreases, the contribution margin ratio the net
income and sales will increase.
For example,
The flowers are $10 per unit. The variable cost per unit is $4.00.
The contribution margin will be ($10-$4) = $6. The fixed cost is $3.
We subtract Contribution margin – Fixed Cost= Net income. The
net income is $3.00.
Define contribution ratios
The contribution margin ratio is the contribution margin per unit
margin divided by the unit selling price.
What happens to contribution ratios as one of the components
changes?
Shown in the example above, if one or more of the components
changes is will cause the net income to increase or decrease.

Reference
statements.suite101.com/article.cfm/cost_volume_profits*the_p_l.
Retrieved 2/28/2010
//http:yourdictionary.com /CVP.org Retrieved 2/26/2010
Thomas, Y. 2005-08-27 “Accounting 101 pg. 52 Statements
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FIN 571 Week 2 Connect Problems
FIN 571 Week 2 Connect Problems 1.Sankey, Inc., has current assets
of $4,230, net fixed assets of $25,700, current liabilities of $3,500,
and long-term debt of $14,400. 7 How should mixed costs be
classified in CVP analysis? What approach is used to effect the
appropriate classification?
According to our class materials all mixed cost must be classified into
their fixed and variable and variable elements. The method that can
be used to determine is called the high/low method. To determine
the variable cost the analysis takes the total cost and divide it with
the low activity level. To get the fixed cost then the company would
have to subtract the total variable with either the high or low activity
level.
9. Cost volume profit CVP analysis is based entirely on unit costs. Do

you agree? Explain.
In my opinion when it comes to making financial decisions for the
company, often times more than one method is used. Cost volume
profit is also based on Volume or level activities, unit selling prices,
variable cost per unit, total fixed and sales mix.
14. You can find the break point in dollars by drawing a horizontal
line to the vertical axis. I you want to find the break even point in
units it will be a vertical line from the break even point to the
horizontal axis.
---------------------------------------------------------
FIN 571 Week 2 DQ 1
In order to receive proper credit, please reply to this message when
posting your answers to WK2 DQ1.
Axia College Material
Appendix C
Budgets Matrix
Directions: Using the matrix, define each of the budgets listed and
briefly describe its uses.
Budget Definition Describe its uses

Sales budget Estimate of the
expected sales for
the period. All of the
other budgets
depend on the sales
budget. This is
where all the other
budgets will start
from
The sales budget
shows dollars and
units. This will allow
management to see
how many units will
be produced for the
period
Production budget A production of
units needed to be
produced in order to
meet the projected
sales
Shows management
how many units will
be produced during
each budget period
and what amount is
needed to fulfill
inventory demands
Direct materials
budget
Is the estimated
quantity or cost of
the raw materials
that is needed in
order to produce the
units required to
fulfill inventory
Shows management
how much raw
materials that is
already on hand and
or that needs to be
ordered to meet
inventory demands.
Direct labor budget A estimate of cost
and quantity of
direct labor needed
in order to meet
production
Shows how many
hours, how many
laborers needed to
produce the units for
that budget period.
Management will
decide what will be
the right amount of

laborers needed and
if the company will
be able to meet the
budget
Manufacturing
overhead budget
An estimated
expected amount of
manufacturing cost
for the budget
period
This list all overhead
cost involving cash
disbursement in a
quarter
Selling and
administrative
expense budget
Anticipated selling
and administrative
expenses in the
budget period
Shows area of
budget expenses
that are not listed
other than
manufacturing.
Expenses such as
marketing,
promotion cost etc
for the budget
period
Budgeted income
statement
Estimate of
expected
profitability of
operations in a
budget period
Is a very important
tool because it
shows the company
estimated profit for
the budget period.
Cash budget A projection of
expected cash flows
in and out of the
business.
Cash budget helps
management keep a
tally or total of all
cash balances.
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FIN 571 Week 2 DQ 2
Suppose rf is 5% and rM is 10%. According to the SML and the
CAPM, an asset with a beta of −2.0 Discussion Question 1: Post
your response to the following:
You know how important it is to create budgets for your
household. How does budgeting help management make good
business decisions?
Budgeting is a very important skill that can be applied to everyday
life and also when it comes to making good business decisions. I
really like the way our class resources says about Budgeting.
Budgeting is used as a planning tool used by management to make
good decision for the company. If a company is successful than
more than likely that means that the management team is very good
at managing the company finances. Budgeting helps management
plan ahead, defines what is most important, shows warning signs,
reach a company target without over or under budgeting and etc.
Another response
In a business, a budget helps a business make good decisions
because they are used by the company to plan for future events and
coordinate the events and duties in the company. They also gives
objectives used to evaluate the performance of the company on each
level which can help to make future decisions that will not hurt the
company based on the projected objectives. It can also be used to
alert the company of possible problems or negative trends in the
company that need to be addressed so that there is a clear picture
of the overall health of the company before decisions are made. The

budget helps the company to be able to make an informed decision
when making one. It is there in order to make sure that making a
decision like taking on another company will not hurt the company
and is something that the compnay can sustain based on the budget.
DQ2
Discussion Question 2: Post your response to the following:
What are some of the different types of budgets?
Describe in detail one type of budget covered in the text.
Describe what the budget is used for and what information
it provides a business.
Then, as you respond to your classmates, discuss how the
budget you described relates to the budgets they described.
Discuss how a business benefits from each of the budgets.
There are many different types of budgetting. For example, there
sales budget which allows management to see how many units that
need to be produced, production budget which will allows everyone
to see how many units are going to be produced in or needed to be
produced in order to meet the inventory for that budget period. One
budget that I can describe in detail is called the direct labor budget
and this budget shows how many people, hours is needed in order
to meet the required budget for that period. This will give
management an idea of how much money is needed such as paying
the cost of labor. The company benefits by each of these budgets
because it will help manage just how much money it will cost the
company during this period. Management can also see if there are

different ways to cost the company out of pocket cost down during
this period.
Another response
I chose to write aboutthe Production Budget. The Production
Budget shows the cost of each unit needed to produce an item or
manufacture a product. The formula used by the Production Budget
:
Budget sales units + Desired ending finished goods units -
Beginning finished goods units = Required production units.
An example would be, every Easter the bakeries in the Bronx loads
up on Hot Cross Buns. My mother and grandmother would buy
these tasty sweet breads,and eat them for breakfast. I personally
would like to eat them every week but, they are only sold during the
Easter season. Maybe, it has something to do with the glazed cross
on the top.
Every Easter Holiday, there appears these Hot Cross Buns and the
bakeries production department allows for the purchases for items
needed to make the buns. After Easter has gone, Hot Cross Buns
are not included in the budget.
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FIN 571 Week 2 Individual Assignment Business Structure
Advice

Write a 350 to 700 word response to the following e-mail:
Dear Consultant,
What is a Flexible budget?
A Flexible budget is a budget that change or is flexible during
different levels or activity. Unlike the static budget which is a budget
based on one activity level, the flexible budget is based off of more
than one activity level.
The steps to development a flexible budget is :
a) Identify the activity index, and the range of activity
b) Find out what the variable cost, and determine the variable cost
per unit
c) Find out what the fixed cost and determine the budgeted
amount for each unit
d) Organize the budget for selected additionalactivity within the
appropriate range
The information found on a flexible budget cannot begin with
the master budget. The flexible budget uses the same guidelines the
original budget. The budget consists of Sales, Cost of Goods Sold,
Selling Expenses, General and Administrative Expenses, Income
Taxes, and finally the Net Income.
The information on the budget is a great tool to be used for
evaluation performances. The flexible budget can be used for monthly
comparison purposes. Also during the process that management is
identifying the activity index and the range of activity it will allow
them to see the cost of direct labor hours for that budget period.
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FIN 571 Week 2 Individual Assignment Ethics and Finance
The Sarbanes-Oxley Act of 2002 (SOX) was passed as the result of the
Enron scandal and other instances of accounting fraud. Capstone
Discussion Question: Post your response to the following:
Think back over what you have studied and learned in this
course. Do you have a new perception of or appreciation for the field
of accounting and how it contributes to business? Explain.
To be perfectly honest with you I truly had no clue what accounting
did for a company and how important it was. I always thought that
accounting only dealt with payroll. In fact accounting does much
more that just payroll and monitor company supplies (coffee, paper,
pens & pencils). The accounting sets budgets for the entire company,
monitors outflow and inflow of profits, plans budgets for each
department, and much more. When I first begun this class I was
really nervous, I truly thought that I was going to have a hard time
understanding the accounting but I happy to say that I was wrong. I
understood every part of this course.
On a personal note I would like to thank you Jess. If it wasn't for your
pep talk I probably would had gave up. You are truly a
great instructor. I wish you all the best! God Bless
Another response
Accounting has taken a whole new meaning to me in my vocabulary.
Prior to this course, I just took accounting as a calculator and

crunching numbers. I now have a new respect for accounting and all
the aspects that are involved. I never once took into consideration
profit, sales, revenue, and balance sheets also being included with
accounting. There is so much more involved with accounting, and
had I not taken this course I would have never known. Accounting is
a very important part of running a business. I feel that it is imperative
to all people thinking of opening a business should take some type of
accounting class to become more aware of how to run the
accounting part of a business.
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FIN 571 Week 2 Individual Assignment Ratio Analysis
Problems
Ratio Analysis
(Individual Assignment)
You may use excel or word.doc format for this assignment.
Please post your homework as a word.doc or excel file in the class
discussion section below by the due date.
Business Plan
By

The name of my business is called DestinyWear. DestinyWear
is a urban fashion clothing company for woman, men and youth.
DestinyWear specializes in making clothing for every occasion. My
name is Kamilah Crooms and I am the owner and CEO of
DestinyWear.My goal is to ensure that my company will be
succesfull in all areas and in each department. In order for me to
make sure that the company was going to begin in the right
direction I had to priortize what was most important in establishing
my business plan. The main priority is that I had to first choose the
appropriate business structure, a high demanding product, and most
of all an outstanding accounting team.
Business Structure
Upon establishing DestinyWear I had to decide which business
struture that I felt was best for me to pursue. I decided that as a
Entreprenuer the best choice for me abd the direction of the
company would be for me to be sole proprietorship. Sole
proprietorship allowed me to be the sole owner of DestinyWear.
The first and most important reason that I wanted sole

proprietorship is because it is much easier to start a business as sole
proprietorships. Sole proprietorship takes all the profit that and
doesn't have to split it between any other owners or corporations. I
also want the power to make and change decisions along the way
without having to first consult anyone else.
DestinyWear Products
DestinyWear products will range from jeans, shirts, accessories and
shoes. The company will first start off with its most profitable
product and that will be the DestinyWear designer jeans line. The
jeans line has over twenty different jeans designs
from straight leg, baggy, cargo, overalls, shorts and much more.
The jeans line will provide services within the United States and
Canada and will eventually service International customers. The
DestinyWear jeans line will have its own building. In this building
the bottom floor will consist of the factory and the top floor will
have the different departments such as management, marketing and
most importantly the accounting department.
DestinyWear Accounting Department
The accounting plays a major role in establishing my company
DestinyWear. The accounting department does more than

managing and reporting the company’s financial documents it is the
greatest tool in establishing my business. The key to a powerful
accounting department here at DestinyWear is applying the
principles of internal control. These principles consist of
establishment of responsibilities, segregation of responsibilities,
documentation procedures, Physical, mechanical, and electronic
controls, Independent internal verification and other controls such
as Bonding of employees. In order to ensure that this business plan
works DestinyWear has to hire nothing but the best qualified
employees.
DestinyWear Accounting Staff
DestinyWear accounting team of fine employees will all be
hired through the company. There are several requirements that
have to be met in order for myself as the owner and Human
Resource department to even consider the applicant for accounting.
We looked for characteristics, education and work history
experience. The first and far most important qualifying
requirements are education. The applicant has to have a Bachelor
BA/BS in accounting degree a plus if he or she has a master’s.
The second requirement is experience. The applicant must have the
minimum of five years of experience working in accounting. He or
She must have knowledge and employment experience of working
with financial statements, cash management and internal control.
Employees must be experienced in Invest idle cash, planning the
timing of major expenditures, delay payment of liabilities keeping
inventory levels low, and increasing the speed of collection on
receivables. In the category of experience we had to hire applicants
according to the position that had to be filled in accounting. For
example, if a position in accounting such as management or
supervisory needed to be filled, then we would look for years of
experience in management or supervisory positions. I personally
prefer that every employee have some type of management
experience.

Last but not least, the employees characteristics. It is a must that
every accounting staff member has and applies professionalism,
great ethic and moral skills, accuracy, and most importantly
punctuality, and reaching company deadlines. These characteristics
are very important to have at DestinyWear.
DestinyWear Accounting Management Team
The DestinyWear accounting management team will be
reporting to me and to the other head staff each week to report
updates and any new changes. The management team is responsible
to have all the different types of budgeting reports that includes
Sales, Labor, etc. Management must follow the responsibility
reporting system for each department. The managers will use the
company’s financial information to predict outcomes of the
business. I require a report from each responsibility center, cost
center, profit center and investment center to be reported each
month. Management is responsible to ensure that the company does
not over or under budget and if any changes it must be reported
immediately.
Conclusion
DestinyWear will be a very successful team not only because of
the products that we produce but because of having a great
accounting team. With the help of accounting team I DestinyWear
products will be in every wardrobe in America.

REFERENCES
 //http:yourdictionary.com /CVP.org Retrieved 3/20/2010
 Thomas, Y. 2005-08-27 “Accounting 101 pg. 52 Statements.
March 19, 2010
 Drucker, P. Managing in the next society 2002. retrieved march
19,2010
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FIN 571 Week 2 Learning Team Reflection
Read the Ethics case, "A Sad Tale: The Demise of Arthur Anderson"
located in the WileyPLUS Week Fundamentals of Corporate Finance
Chapter readings.
Costco Wholesale Corporation
If we look at the financial statements of the company we can find that
the company is financially strong. Its strength are:
1. It has enough amount of current asset to repay its current
liability. The current ratio of the company 8.18 indicates that
the company has $8.18 liquid asset to repay its $1 of current
liability.
2. The operating cost of the company is increasing because the
company is able to reduce its expenses.
3. Cash from operating activity has increased for the company.

Apart from this strength the company also has some weakness in its
financial statement:
(i) Increasing inventory indicates that the company inventory
conversion period is increasing.
(ii) The cash from investing activity shows that the company cash
outflow is more in the short term investment i.e. in non
operating activity.
(iii) The overall has for the year 2008 has declined for the
company.
Net Income:
If we look at the trend in net income of the company we can find that
the company net income looks fluctuating but it has improved it net
income in 2008 as compared to 2007.
Debt ratio as a percentage of total assets:

If we look at the debt ratio as percent of total asset we can find that
the debt ratio is declining in 2008 as compared to 2007 i.e. the
company is increasing equity to finance debt.
Debt as a percentage of total equity:
As we can see that the debt as percent of total equity is declining in
2008 as compared to 2007 i.e. the company is increasing equity in its
capital structure.
As we can see that there is nothing negative in 2008 for the company
and this is the reason it has positive trend as compared to 2007.
Hence there is no need to correct anything for the company.

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FIN 571 Week 3 Connect Problems If the Garnett Corp. has a 15
percent ROE and a 25 percent payout ratio, what is its sustainable
growth rate? Lucent Technologies
Axia College of University of Phoenix

Lucent Technologies is a company based on networking for service
providers, government, and enterprises worldwide (Lucent
Technologies, n.d., Para 1). The products and services they work with
are separated into three categories; service and maintenance,
wireless mobility networking, and wire line networking. Lucent
Technologies is backed by Bell Labs, which does research and
development in networking technologies.
During the years of 2001 to 2003 this company has experienced a
decrease in demand because of other companies’ loss or capital used
toward spending. This is mainly due to a downturn in the economy.
As an investor this information is necessary to know because it
explains the decrease or increase in sections of the balance sheet. In
order to compare the growth or decline of the company’s profit, an
investor must change a balance sheet into a common-size balance
sheet. First when looking at the balance sheet an investor will see
that the amount of paid in capital has increased from the year of
2003 to 2004, the assets have increased, but the liabilities have
decreased. When running a debt/asset ratio it is noticed that this
ratio drops from 1.2 in 2003 to 1.0 in 2004. This shows the company’s
risk is low when concerning financial leverage, usually when the debt
ratio is less than one percent it is financed mainly by company equity,
so this company is close to being debt free from creditors.
After changing the balance sheet to a common-size balance sheet
there are several factors an investor will look at. The current assets
have dropped to .48 from .49 in 2004. This does not show harm to
the company because only the accounts receivable dropped while the
rest of the current assets increased. This means the company is not in
as much danger of default on money owed to it. It does have a rise in
marketable securities. The one concern in the assets is the increase of
prepaid cost of pensions and goodwill. Goodwill can be used for tax
breaks but prepaid pensions cannot benefit the company.

When looking at the liabilities section an investor will see a drop in
pension and liabilities and an increase in long term debt, both of
these could be affected because of the drop in the economy. Long
term liabilities are often increased to help a company control interest
rate increases so as an investor cutting back on pension liabilities cuts
back cost to the company and watching interest rate increase show
the company is concerned with its earning and investors. This would
be encouraging or an investor. The stockholders deficit shows a drop
in accumulated deficits from -1.43 to -1.22 and total deficits of -.26 to
-.08. This shows the company is working to control any money loss
and turning it to the company’s advantage. Overall it shows the
company is still earning a profit although small. With an increase of
assets and a drop in liabilities the company is showing it is working in
a low risk capital.
After reviewing this information, a creditor or investor must be able
to compare this company to the industry totals. By comparing how
this company compares to other companies similar to it, a person can
see if it is competitive and worth taking a risk. Running ratios will also
show if the company is capable of paying off any debts it has or if it
can acquire the needed cash in case of emergencies. Overall as an
investor, I would say this company would be worth investing in.
Reference
Axia College. (2007). Understanding Financial Statements. Retrieved
May 10, 2010 from Axia College, Week 2 Assignment, ACC/230.

---------------------------------------------------------
FIN 571 Week 3 DQ 1
Why are interest rates on short-term loans not necessarily
comparable to each other?
Differentiating Depreciation Methods
There is one main difference between straight line depreciation and
accelerated depreciation. Straight line is decided by taking the cost of
the assets, figuring out the salvage cost when the use of the asset is
finished and how many years of use the asset has. A person then
takes the cost minus salvage and divides the remainder by the
number of years of use. This amount is the depreciation expense
subtracted each year from the cost. The accelerated depreciation
does not have the same amount of deprecation subtracted each year.
It does have the cost minus salvage value to figure out the amount to
use but is then divided out differently. A person takes the sum of the
years of a product’s useful life, such as three years is 3 + 2 + 1 = 6,
then a person would divide the depreciation amount by 3/6 the first
year, 2/6 the second and finally 1/6 for the final year. So the amount
of depreciation expense is larger to smaller with accelerated and
equal amounts for straight line.
The advantages of straight line method are it is easier and faster to
figure. The advantage of accelerated method is it is more accurate
when figuring depreciation expense. The accelerated method has an

advantage and disadvantage concerning taxes. A company can use
the accelerated method to take advantage of bigger tax breaks at
the beginning of an assets life, but since this amount drops during the
lifespan if the company needs added tax breaks it will not receive
them from these assets in the future. With the straight line method
the amount of tax breaks are even through the life of the product.
Most companies choose this form of depreciation for reporting
purpose on taxes but will use the accelerated method to figure
taxable income.
As mentioned before the advantage of straight line depreciation is it
is easier to figure and uses the same total each year for deduction of
depreciation expense but the disadvantage is that if use for taxable
income and reporting a company does not get a bigger tax break at
the beginning of the assets life when they have just put out the cost
for the item and may need a bigger tax break.
---------------------------------------------------------
FIN 571 Week 3 DQ 2
Optical Supply Company offers credit terms of 2/10, net 60.
Preparing an Income Statement

Coyote, Inc. Company
Multi-Step Income Statement
200x 201x 202x
Net Sales 1,833,000$
Cost of Goods Sold 1,072,000
Gross Profit 761,000 - -
Selling and Administrative Expenses 454,000
Advertising
Depreciation and Amortization 14,000
Repairs and Maintenance
Operating Profit 293,000 - -
Other Income (Expense)
Interest Income 13,000
Interest Expense (16,000)
Earnings Before Interest and Taxes 290,000 - -
Income Taxes 116,000
Net Earnings 174,000$ -$ -$
The companies’ net income is profitable when the sales exceed the
cost of goods sold. In this, the gross profit is $761k. This is beneficial
to the company. Though we took the cost of goods away from the net
sales there are still other areas which need to take a piece of the pie.
For this company, once the SG&A and depreciation are taken out, the
company still contains a profit of $290k. But the buck does not stop
there. Once the interest income and interest expense are adjusted the
balance before earnings and taxes is $290k. After taxes are taken
out, the company is left with a net profit of $174k.
In this case I think the company has achieved success with a net profit
of $174k. If the company were unable to be profitable, the company
would eventually go out of business. We would be able to tell if the
company was not profitable by looking at each section individually.
The cost of goods sold is what stands out for me. If we pay more to

make the product then we are actually selling it for, there is no profit
to be made. So, I think it should all start there.
---------------------------------------------------------
FIN 571 Week 3 Individual Assignment Interpreting Financial
Results
Resource: Financial Statements for the company assigned by your
instructor in Week 2.
Week 3 DQ 1
Due Tuesday, Day 2
Post your answer to Problem 3.5 on p. 109 (Ch. 3). How might the
information contained within the stockholder equity statement be
used for management and investor decision-making? Provide
specific examples of situations in which the stockholder equity
information might be used.
The statement of stockholders’ equity provides the changes in the
equity accounts during the accounting period more in depth than
the balance sheet. The information found on the statement of
stockholders’ equity includes retained earnings, common and
preferred stock, and additional paid in capital. Management uses
the statement of stockholders’ equity to ensure they are reaching
their goal of maximizing shareholder's equity. The use of market
ratios help with the analysis of the statement of stockholders’

equity, such as earnings per share, price-to-earnings, dividend
payout, and dividend yield. These ratios will help both management
and investors in analyzing the company. For example, if I were
looking to invest in a company’s stocks I would utilize all of the
financial ratios, as well as the market ratios. The earnings per share
ratio is calculated before the price to earnings ratio, P/E, because
the earnings per share ratio is used in the second. If a company
pays dividends, the dividend payout ratio will come in handy. It tells
us “The percentage of earnings paid to shareholders in
dividends” (Investopedia, 2010, p. 1).
References
Investopedia. (2010). Dividend Payout Ratio. Retrieved August 3,
2010, from
Investopedia:http://www.investopedia.com/terms/d/dividendpayo
utratio.asp
Response 2
Explain what can be found on a statement of stockholders’ equity.
The major elements of stockholders' equity include capital stock,
paid-in capital, retained earnings, treasury stock, unrealized loss on
long-term investments, and foreign currency translation gains and
losses.
How might the information contained within the stockholder equity
statement be used for management and investor decision-making?
Provide specific examples of situations in which the stockholder
equity information might be used.

Management may look at the stockholder’s equity statement
retained earnings section to determine if company should borrow
money for capital investments or finance it through various forms
of equity. It may also be used by the stockholder to evaluate the
compensation paid to the company officers. Investors may also look
at the statement for cumulative net unrealized gains and losses
before purchasing stock in the company. Investors are also
interested in the paid in capital because they can compare it to the
additional paid in capital and the difference between the two
values will equal the premium paid by investors over and above the
par value of the shares.
DQ 2
Week 3 DQ 2
Due Thursday, Day 4
Provide an example from the text or the Internet that demonstrates
a situation in which a company’s net profits appeared good in the
statements, but the gross or operating profits presented a different
picture. Discuss how this might have occurred. Respond to the
following question, addressed in Problem 3.6 on p. 109 (Ch. 3):
“Why is the bottom-line figure, net income, not necessarily a good
indicator of a firm’s financial success?” Look for indicators like
liquidity or solvency to answer this discussion question.
An example that demonstrates the situation is Enron. Enron’s
financial statements did not show all the expenses and costs.

Instead of showing them on the income statement they made
entries so the cost and expenses would post in the balance sheet.
The same was done with the revenues. This way it would be less
expenses and the net profit appeared good. Many debts and losses
were not reported in the financial statements. From the third
quarter of 2000 through the third quarter of 2001, the directors
fraudulently used reserve accounts within Enron Wholesale to mask
the extent and volatility of its windfall trading profits, particularly
its profits from theCalifornia energy markets; avoid reporting large
losses in other areas of its business; and preserve the earnings for
use in later quarters. By early 2001, Enron Wholesale's undisclosed
reserve accounts contained over $1 billion in earnings. The head of
the company improperly used hundreds of millions of dollars of
these reserves to ensure that analysts' expectations were met. In
addition, Skilling and others improperly used the reserves to
conceal hundreds of millions of dollars in losses within Enron's EES
business unit from the investing public.This would show the
creditors that Enron was making profits and its position was solid.
The net income is not necessarily a good indicator of a firm’s
financial success because the income statement only shows the
profit or loss at a period of time and does not show the whole
picture of the company. The Balance Sheet, Statement of cash flow,
Statement of shareholders’ equity and the Income Statement all
together give the real picture of the business. Each one of them
shows different aspects of the business. These statements show
where the income is actually coming from; is it from sales or from
loans the company is borrowing? If the company is selling a
building or any other asset but that does not mean that it is selling
more products and making profit. Looking at the Income
Statements the company might be making profit but at the same
time it is extremely leveraged.

Response 2
A company’s net income is not the whole picture, just part of it.
There are lots of things that contribute to the net income that may
not be significative to the company’s success. If the value of a dollar
has a sudden change that can affect the bottom line if the company
happens to hold the medium of exchange that can benefit by the
change that might occur. The company can falsely inflate the
bottom line. A company’s net income is coupled with liabilities, cash
flow, and selects financial ratios. Looking at it this way is a much
better way of seeing what the company’s success is like. A company
can change up many things to make it look like their income is
better. These things that can be changed are single sales events,
cash infusion, or false financial statements. Some things like debt
that a company has, the company’s cash on hand, their capital
assets conditions, or even their sales trends. To figure the success of
the company, you must look at the whole picture. One thing cannot
tell you all the facts of the company’s affairs. You cannot tell the
net income of the company just from the bottom line. Look at all
the financial records.
Response 3
Provide an example from the text or the Internet that demonstrates
a situation in which a company’s net profits appeared good in the
statements, but the gross or operating profits presented a different
picture. Discuss how this might have occurred. Respond to the
following question, addressed in Problem 3.6 on p. 109 (Ch. 3):
“Why is the bottom-line figure, net income, not necessarily a good
indicator of a firm’s financial success?” Look for indicators like
liquidity or solvency to answer this discussion question.

Net income is not necessarily a good indicator of a firm’s financial
success because they have ways to manipulate it by increasing their
revenues or hiding some of their expenses. For investors trying to
decide where to invest their money, they need to look more into
assessing how the company came up with the numbers they
presented.
An example of this situation is when Laribee Wire Manufacturing
Co. exaggerated in recording their inventory value which allowed
them in acquiring loans from six banks totaling to about $130
million using it as collateral. At the same time, they reported $3
million in net income for the period, but in actuality they lost $6.5
million.
This company showed a higher net income by reporting fake
inventory in which its value was overstated and transferred over to
their income statement. When the banks assessed their financial
statements, it was enough to sway them into lending the loans they
needed.
Reference:
Investopedia. (2010). Spotting Creative Accounting On The Balance
Sheet. Retrieved
fromhttp://www.investopedia.com/search/searchresults.aspx?q=S
potting+Creative+Accounting+On+The+Balance+Sheet&submit=Sea
rch
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Watch the "Concept Review Video: Working Capital Management"
video located in theWileyPLUS Assignment: Week 3 Videos Activity.
STOCK DIVIDEND
Stock Split
University of Phoenix
Stock Dividend
In the present time, the stock dividend has become important
concept. When dividend is given in form of stock, it is called stock
dividend. In this form of dividend, the cash does not use. It is
important, when the corporation declares stock dividend, the market
value of the share decreases because the number of stock increases.
The many companies prefer stock dividend due to the tax benefit. If
the individual gets stock dividend, he does not pay any tax on stock
dividend. Thus the stock dividend reduces tax burden. On the other
hand, the ownership of investors also spurs up in the company
because the number of holding share increases. There is also
disadvantage of stock dividend. The market value of the share
decreases, so the market value of holding also decreases (Kennon,
2009).
The ABC Company is leading company in its industry. The number
of outstanding share of the company is one million. On the other
hand, the number of investors is five millions. The value of market

capitalization is $100 million. The management declares 20% stock
dividend. Thus the 200000 shares will be distributed as a stock
dividend. The number of outstanding share will be increased by
200000 and the new total number of outstanding stock will be 1.2
million. On the other hand, the new value per share in the market
will be $83.33 (100 million/1.2 million). This example is taken from
below mentioned link:
Stock Split
The stock split is also an important concept. When the management
wants to increases number of shares, the management follows this
method. In this method, the face value of the share is split and
number of share gets increased. Due to increment in number of
outstanding share, the market value of per share also gets affected
but the total market capitalization of the company does not affect.
Both stock split and stock dividend increase number of outstanding
shares but both are different due to the accounting treatment. In the
stock split, the investors do not get any real benefit. It is also known
as non-cash distribution of dividend. The motto behind stock split is
to increase trading of the shares in the market (Baker, 2009)
For example, the face value of per share is $100 and the total
outstanding shares are 100 million. If the management of the
company announces stock split in ratio of 1:2, the total outstanding
shares will be increased by 100 million, thus the new total number
of the share will be 200 million. On the other hand, the face value of
the share will reduce by 50%. So the new face value of the share will
be $50. Due to effect of stock split, the holding share of the investor
will also increase in the prorate basis. If the investor has 10 shares,
now he will have 20 shares. It is important thing that the total issued
capital will not be changed. The illustration of stock split has been
got from following link:
Reverse Stock Split
The reverse stock split is just opposite of stock split. In this process,
the management reduces the number of outstanding shares. The
company increase face value of the share. In this method

corporation decides a ratio such as 2:1. Thus the company
accumulates two shares in one share. In this method, the total
market value of company does not change. Due to reverse stock
split, the earning per share and face value of per share rises. Thus
the reverse stock split provides just opposite result from stock split.
It is important question, why company selects this method. When
the management seems that the face value of the share is less as
compared to competitors then the company goes for this method to
make its share value to equal to competitor’s share’s face value. It is
also a sound strategy to increase treading of shares. If the face
value of share is too cheap in comparison to competitors, the
investors will be discouraged for investment. For increasing the
confidence of investors, the management uses this method
(Mladjenovic, 2009).
For example, an investor holds 100 shares of XYZ Company and
the face value per share is $50. If the management go for reverse
stock split option and declares one share for 10 shares then the
holding of the individual will reduce 9 shares for every 10 shares.
Thus the new holding of the investor will be 10 (100/10) shares but
the face value per share will be $500. It is also important that the
total market capitalization will remain as same as before reverse
split. The example of the reverse split is take form below mentioned
link: http://www.sec.gov/answers/reversesplit.htm.
References
Baker, H. K. (2009). Dividends and Dividend Policy. John Wiley
and Sons.
Kennon, J. (2009). All About Dividends. Retrieved May 31, 2010,
from
http://beginnersinvest.about.com/od/dividendsdrips1/a/aa040904_2.
htm
Mladjenovic, P. (2009). Stock Investing for Dummies. Dummies.
---------------------------------------------------------

FIN 571 Week 3 Team Assignment Financial Statement
Interpretation
Select three publicly traded companies. Choose one each from the
following sectors: manufacturing, service, and retail. Week 1 DQ 1
Due Tuesday, Day 2
Go to the U.S. Securities and Exchange Commission’s Web site
at http://www.sec.gov and the Financial Accounting Standards
Board’s Web site athttp://www.fasb.org. Identify the mission and
main activities of each organization. Then, analyze the similarities
and differences between the roles of each entity. Which entity has
more influence over financial statement reporting? Explain your
answer.
According to the SEC website their mission is to protect investors,
maintain fair, orderly, and efficient markets, and facilitate capital
formation. The SEC also requires public companies to disclose
meaningful financial and other information to the public. This
provides a common pool of knowledge for all investors to use to
judge for themselves whether to buy, sell, or hold a particular
security. The SEC is concerned primarily with promoting the
disclosure of important market-related information, maintaining fair
dealing, and protecting against fraud.
According to the FASB website the mission of the FASB is to establish
and improve standards of financial accounting and reporting that
foster financial reporting by nongovernmental entities that provides

decision-useful information to investors and other users of financial
reports. Since 1973, the Financial Accounting Standards Board (FASB)
has been the designated organization in the private sector for
establishing standards of financial accounting that govern the
preparation of financial reports by nongovernmental entities
The major difference in the SEC and the FASB is that the SEC deals
with reporting of financial statements for all industries while the
FASB deals mainly with the private nongovernmental entities. Both
are concerned with the fairness of financial reports and work in the
interest of the public. I believe that the SEC has more influence over
financial statement reporting because they can bring civil action
against companies and individuals for violations of securities laws.
Although according to the FASB website, “the Commission’s policy
has been to rely on the private sector for this function to the extent
that the private sector demonstrates ability to fulfill the responsibility
in the public interest.
Response 2
Go to the U.S. Securities and Exchange Commission’s Web site
at http://www.sec.gov and the Financial Accounting Standards
Board’s Web site athttp://www.fasb.org. Identify the mission and
main activities of each organization. Then, analyze the similarities
and differences between the roles of each entity. Which entity has
more influence over financial statement reporting? Explain your
answer.
U.S. Securities and Exchange Commission (SEC)
According to the SEC’s website “The mission of the U.S. Securities
and Exchange Commission is to protect investors, maintain fair,

orderly, and efficient markets, and facilitate capital formation”(U.S.
Securities and Exchange Commission, 2010, Para. 1).
The main activities of the SEC are to interpret federal securities
laws; issue new rules and amend existing rules; oversee the
inspection of securities firms, brokers, investment advisers, and
ratings agencies; oversee private regulatory organizations in the
securities, accounting, and auditing fields; and coordinate U.S.
securities regulation with federal, state, and foreign authorities. (U.S.
Securities and Exchange Commission, 2010)
Financial Accounting Standards Board (FASB)
According to the FASB’s website “The mission of the FASB is to
establish and improve standards of financial accounting and
reporting that foster financial reporting by nongovernmental entities
that provides decision-useful information to investors and other users
of financial reports. That mission is accomplished through a
comprehensive and independent process that encourages broad
participation, objectively considers all stakeholder views, and is
subject to oversight by the Financial Accounting Foundation’s Board
of Trustees” (Financial Accounting Standards Board, n.d., Para. 3).
The main activities of the FASB are to identify financial reporting
issues based on requests/recommendations from stakeholders or
through other means. The FASB Chairman decides whether to add a
project to the technical agenda, after consultation with FASB
Members and others as appropriate, and subject to oversight by the
Foundation's Board of Trustees. The Board deliberates at one or more
public meetings the various reporting issues identified and analyzed
by the staff. The Board issues an Exposure Draft to solicit broad
stakeholder input. (In some projects, the Board may issue a
Discussion Paper to obtain input in the early stages of a project) The
Board holds a public roundtable meeting on the Exposure Draft, if
necessary. The staff analyzes comment letters, public roundtable

discussion, and any other information obtained through due process
activities. The Board redeliberates the proposed provisions, carefully
considering the stakeholder input received, at one or more public
meetings. The Board issues an Accounting Standards Update
describing amendments to the Accounting Standards Codification
(Financial Accounting Standards Board, n.d.).
Both the SEC and the FASB have the same goals of fairness,
accuracy, and understandability of financial accounting and
reporting. Both agenecys accomplish these goals in the best interest
of the overall public.
The differences between the SEC and the FASB is that the FASB
regulates financial reporting in the private sector of businesses (but
are subject to the rules and regulations of the SEC) and the SEC deals
with regulating the financial reporting of publicly held corporations.
I believe that the SEC has the greatest influence over financial
statements reporting because they have the final approval on all
changes of the rules and regulations. The Sec can also bring civil or
administrative enforcement actions against individuals and
companies in violation of the securities laws.
References
Financial Accounting Standards Board. (n.d.). Facts about FASB.
Retrieved July 15, 2010, from Financial Accounting Standards
Board:http://www.fasb.org/facts/index.shtml#mission
U.S. Securities and Exchange Commission. (2010, May 3). The
Investors Advocate: How the SEC Protects Investors, Maintains
Market Integrity, and Facilitates Capital Formation. Retrieved July 15,
2010, from U.S. Securities and Exchange
Commission: http://www.sec.gov/about/whatwedo.shtml

Week 1 DQ 2
Due Thursday, Day 4
Search the Internet or the Online Library for information about the
Sarbanes-Oxley Act. A useful guide to some of these provisions is
located at http://www.soxlaw.com. Summarize at least two
provisions of the law, and discuss your interpretation of these
provisions with your classmates. Do you think this law will make
financial statements more reliable? Also, discuss how Sarbanes-Oxley
establishes boundaries to ensure ethical practices. What does the law
allow or prohibit, and why?
The Sarbanes-Oxley act has many provisions to give companies
guidelines for responsible, and ethical financial reporting. One of
those provisions is listed in Section 302 of the act. The provision is
that periodic statutory financial reports be certified that signing
officers have reviewed the reports, the report does not contain any
untrue, or misleading information. The financial statements fairly
present the financial condition. The signing officers are responsible
for internal controls. A list of all deficiencies in internal controls, and
a list of fraud involving employees, and anything that could
negatively affect the internal controls.
Another provision pertains to the "management assessment of
internal controls". This provision ensures that information is

published in annual reports regarding the adequacy of internal
controls, structure and procedures.
The Sarbanes-Oxley act is designed to help companies promote
ethical accounting procedures. The act gives guidelines as to how
financial statements are reported. The act requires verification that
officers within the company have checked the information in the
reports for accuracy and true. The act also requires that the
companies have internal controls in place to ensure ethical reporting
practices. The main thing that the Sarbanes-Oxley promotes is
transparency in reporting.
Response 2
Section 802 of the Sarbanes-Oxley Law defines the penalties that may
be assessed against individuals who failed to comply with the Act. An
individual could be subject to 20 years in jail for altering, destroying,
mutilating, concealing, falsifying records, documents or tangible
objects. Guilt is define by the intent to impede a legal
investigation. This part of the law gets to the heart of how Arthur
Anderson reacted by destroying documents important to
Worldcom. The law further defines that any accountant who
knowingly violates their ethics by wilfully violates the requirements of
maintenance of all audit or review papers. These papers are subject
to review up to five years.
The second Section that I reviewed was the Section 302. This actually
is my favorite part of the law because it directly holds the officers and
directors accountable for the accuracy of reporting in their financial
statements. It defines that the management must review and
understand the financial statements and sign that they are true and
accurate. It also holds the management accountable for the internal

controls, requiring any deficiencies to be reported. In the past
directors of companies relied heavily on the internal officers,
management, to report the company performance without
questioning the accuracy or taking their role on oversight committees
seriously. They could hide behind a veil of trust of the key
leaders. This Section clearly puts the responsibility for the Board to
remain independent of the executives and function more effectively
on the respective oversight committees they serve. The example I
would share is what happened in WorldCom. The company leaders
shared what they wanted to with the Board, who trusted implicitly
the top leaders. Had they questioned their legal representation or
auditors, they potentially could have uncovered the fraud that was
committed by the creation of shell companies, with WorldCom
employees as stockholders.
I would love to think this law would protect the investing
community. Financial reporting has improved to some
extent. Unfortunately the scams still continue. Example would be
Barney Madoff or what happened in the financial mortgage
industry. These unethical practices were conducted after Sarbanes
Oxley was implemented. Madoff was able to provide false financial
information to investors. Financial industry was allowed to get to
aggressive in underwriting and product suite. Fines and penalties are
deterrents. Ethics still must be inherent in an individual and
company. Laws and requirements are a guide. There will never be
enough auditors, inspectors or oversight boards to catch all of the
fraud in the corporate community.
The law prohibits falsifying information, failing to notify of material
changes, and destruction of records.
---------------------------------------------------------

FIN 571 Week 4 Connect Problems Q-1 Even though most corporate
bonds in the United States make coupon payments semiannually,
bonds issued elsewhere often have annual coupon payments.
Suppose a German company issues a bond with a par value of
€1,000, 20 years to maturity, and a coupon rate of 7 percent paid
annually. If the yield to maturity is 8.1 percent, what is the current
price of the bond? (Do not round intermediate calculations and round
your answer to 2 decimal places, e.g., 32.16.) Q-1 (Set 2) Watters
Umbrella Corp. issued 30-year bonds 2 years ago at a coupon rate of
7.4 percent. The bonds make semiannual payments. If these bonds
currently sell for 83 percent of par value, what is the YTM? (Do not
round intermediate calculations and enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.) 2.Microhard has issued a
bond with the following characteristics: Par: $1,000 Time to maturity:
15 years Coupon rate: 11 percent Semiannual payments Calculate the
price of this bond if the YTM is (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g.,
32.16.): Q-2 (Set 2) Union Local School District has bonds outsta
---------------------------------------------------------
FIN 571 Week 4 DQ 1

A firm uses a single discount rate to compute the NPV of all its
potential capital budgeting projects, even though the projects have a
wide range of nondiversifiable risk. The firm then undertakes all
those projects that appear to have positive NPVs. Briefly explain why
such a firm would tend to become riskier over time.
---------------------------------------------------------
FIN 571 Week 4 DQ 2
Phyllis believes that the firm should use straight-line depreciation for
a capital project because it results in higher net income during the
early years of the project’s life. Joanna believes that the firm should
use the modified accelerated cost recovery system depreciation
because it reduces the tax liability during the early years of the
project’s life. Assuming you have a choice between depreciation
methods, whose advice should you follow? Why?
---------------------------------------------------------
FIN 571 Week 4 Individual Assignment Analyzing Pro Forma
Statements
Decide upon an initiative you want to implement that would increase
sales over the next five years, (for example, market another product,
corporate expansion, and so on).

Using the sample financial statements, create pro forma
---------------------------------------------------------
Watch the "Concept Review Video: Stock Valuation" video located in
the WileyPLUS Assignment: Week 4 Videos Activity.
Discuss how markets and investors value a stock.
Write a 350-700 word summary of your discussion.
Click the Assignment Files tab to submit your assignment.
---------------------------------------------------------
FIN 571 Week 4 Team Assignment Operating Leverage and
Forecasting
Operating Leverage and Forecasting Problems Team Assignment
Please complete the following problems. When calculating earnings
per share and PE ratios, please show your work. This problem is
similar to the examples shown in the lecture.
1. You manufacture hunting pack systems in China for 80 dollars
each, including shipping. The manufacturing costs only include
variable costs. Variable costs are not calculated as a

percentage of sales in this case. Sales are a function of the
number of packs sold and the price per pack. Likewise, variable
costs are a function of the number of packs sold and the cost to
produce each pack. You sell these packs to retailers for 200
dollars each. In the current year you will sell 100,000
packs. Your fixed costs including such items as insurance,
marketing, travel, shows, office supplies, warehouse rentals etc.
totals 5 million dollars this year and are not part of the 80
dollars per pack manufacturing cost. The federal income tax
rate for your company is 40 percent.
Your company is publicly traded on the NASDAQ with 1,000,000
shares outstanding.
1. Please create a current income statement using t
2. ---------------------------------------------------------
1.The difference between the present value of an investment’s future
cash flows and its initial cost is the: payback period. internal rate of
return. profitability index. discounted payback period. net present
value. 2.Which statement concerning the net present value (NPV) of
an investment or a financing project is correct? An investment project
that has positive cash flows for every time period after the initial
investment should be accepted. Any type of project should be
accepted if the NPV is positive and rejected if it is negative. A
financing project should be accepted if, and only if, the NPV is exactly
equal to zero. Any type of project with greater total cash inflows than
total cash outflows, should always be accepted. An investment

project should be accepted only if the NPV is equal to the initial cash
flow. 3.The primary reason that company projects with positive net
present values are considered acceptable is that: they create value
for the owners of the firm. the investment's cost exceeds the present
value of the cash inflows. the project's rate of return exceeds the rate
of inflation. the required cash inflows exceed the actual cash inflows.
they return the initial cash outlay within three years or less.
4.Accepting a positive net present value (NPV) project: indicates the
project will pay back within the required period of time. is expected
to increase the stockholders’ value by the amount of the NPV. ignores
the inherent risks within the project. guarantees all cash flow
assumptions will be realized. means the present value of the
expected cash flows is equal to the project’s cost. 5.The net present
value method of capital budgeting analysis does all of the following
---------------------------------------------------------
FIN 571 Week 5 DQ 1
Because the weighted average is always a correct measure of a
required return, why do firms not create securities to finance each
project and offer them in the capital market in order to accurately
determine the required return for the project?
---------------------------------------------------------
FIN 571 Week 5 DQ 2

The development of the new issue junk bond market had important
implications for capital structure choice. The existence of a viable
junk bond market means that firms can comfortably maintain higher
degrees of leverage than they could prior to the development of this
market. Do you agree or disagree? Justify your answer.
---------------------------------------------------------
FIN 571 Week 5 Individual Assignment DCF and WACC
Problems
Discounted Cash Flows and WACC Homework Problems
Please post the answers (and show your work) in the assignments
section by midnight the last day of the week assigned.
1. Calculate the future value of 1,535 invested today for 8 years at
6 percent.
(5 points)
2. What is the total present value of the following cash stream,
discounted at 8 percent? (5 points)

Year Amount
1 400
2 750
3 945
---------------------------------------------------------
Watch the "Concept Review Video: Cost of Capital" video located in
the WileyPLUS Assignment: Week 5 Videos Activity.
Discuss some of the corporate finance challenges faced by this
company.
Write a 350-700 word summary of your discussion.
---------------------------------------------------------
FIN 571 Week 5 Team Assignment Capital Budgeting
Assignment, Part 1 (New Heritage Doll)
Acting as the executive team for a small company, your team will
apply the principles of capital budgeting to invest in growth and cash
flow improvement opportunities in three phases over 10 simulated
years. Each opportunity has a unique financial profile and you must

analyze the effects on working capital. Examples of opportunities
include taking on new customers, capitalizing on supplier discounts,
and reducing inventory. The team must understand how the income
statement, balance sheet, and statement of cash flows are
interconnected and be able to analyze forecasted financial
information to consider possible effects of each opportunity on the
firm's financial position. The company operates on thin margins with
a constrained cash position and limited available credit. You must
optimize use of internal and external credit as you balance the desire
for growth with the need for maintaining liquidity. Create a 1,050-
word analysis of the team members' decisions during each phase (1-
3) and how they influenced each member's final results. • Analyze the
influence of member's decisions on sales outcomes or metrics of SNC.
• Analyze the influence of member's decisions on EBIT outcomes or
metrics of SNC. • Assess the influence of member's decisions on Net
Income outcomes or metrics of SNC. • Analyze the influence of
member's decisions on Free Cash Flow outcomes or metrics of SNC. •
Assess the influence of member's decisions on Total Firm Value
outcomes or metrics of SNC. Cite a minimum of two scholarly
references. Format your assignment consistent with APA guidelines.
---------------------------------------------------------
FIN 571 Week 5 Working Capital Simulation Managing
Growth, Part 1 (New Heritage Doll)
Acting as the executive team for a small company, your team will
apply the principles of capital budgeting to invest in growth and cash
flow improvement opportunities in three phases over 10 simulated

years. Each opportunity has a unique financial profile and you must
analyze the effects on working capital. Examples of opportunities
include taking on new customers, capitalizing on supplier discounts,
and reducing inventory. The team must understand how the income
statement, balance sheet, and statement of cash flows are
interconnected and be able to analyze forecasted financial
information to consider possible effects of each opportunity on the
firm's financial position. The company operates on thin margins with
a constrained cash position and limited available credit. You must
optimize use of internal and external credit as you balance the desire
for growth with the need for maintaining liquidity. Sign-in to the
Harvard Business Simulation and review each of the following: •
Welcome Statement • How to Play • Terminology Primer • More
Details (this includes information to help you understand how to play
the simulation) Complete the Harvard Business Simulation
individually and track and save your results. Create a 1,050-word
analysis of the team members' decisions during each phase (1-3) and
how they influenced each member's final results. • Analyze the
influence of member's decisions on sales outcomes or metrics of SNC.
• Analyze the influence of member's decisions on EBIT outcomes or
metrics of SNC. • Assess the influence of member's decisions on Net
Income outcomes or metrics of SNC. • Analyze the influence of
member's decisions on Free Cash Flow outcomes or metrics of SNC. •
Assess the influence of member's decisions on Total Firm Value
outcomes or metrics of SNC. Cite a minimum of two scholarly
references. Format your assignment consistent with APA guidelines.
---------------------------------------------------------
FIN 571 Week 6 Individual Assignment Working Capital
Simulation Managing Growth Assignment

Resources:
Harvard Business Publishing: Working Capital Simulation:
Managing Growth Assignment
Ch. 1 - 21 ofFundamentals of Corporate Finance
WileyPLUS Assignments
All additional resources from each week
---------------------------------------------------------
Watch the "Corporate Finance Video: Stable Money Makers" located
in the WileyPLUS Assignment: Week 6 Videos Activity.
Identify a capital improvement that could help Betty with her Alpaca
business.
Write a summary of no more than 700 words explaining how the
capital improvement you identified could help the business.
---------------------------------------------------------
FIN 571 Week 6 Team Assignment Capital Budgeting
Assignment, Part 2 (New Heritage Doll)

The executive team of New Heritage Doll has completed the decision
making for capital budgeting for the firm. Now the team must decide
which decisions and approach were the best for the company. The
executive team must create a presentation to be given to the board
members of New Heritage Doll Compare the decisions and results of
all members of the team. Create a 20-slide Microsoft® PowerPoint®
presentation that includes detailed speaker notes that act as the
script of the presentation in which you include the following: •
Summarize the decisions made by each member. • Explain why those
decisions were made. • Analyze the effects the team's decisions had
on New Heritage Doll working capital. • Select one plan from the
team's results to propose as the best option for SNC • Defend this
option to the board including all supporting documentation. Cite a
minimum of three scholarly sources. Click the Assignment Files tab to
submit your assignment.
---------------------------------------------------------
FIN 571 Week 6 Working Capital Simulation Managing
Growth, Part 2 (New Heritage Doll)
The executive team of New Heritage Doll has completed the decision
making for capital budgeting for the firm. Now the team must decide
which decisions and approach were the best for the company. The
executive team must create a presentation to be given to the board
members of SNC. Compare the decisions and results of all members

of the team. Create a 20-slide Microsoft® PowerPoint® presentation
that includes detailed speaker notes that act as the script of the
presentation in which you include the following: • Summarize the
decisions made by each member. • Explain why those decisions were
made. • Analyze the effects the team's decisions had on New
Heritage Doll 's working capital. • Select one plan from the team's
results to propose as the best option for New Heritage Doll • Defend
this option to the board including all supporting documentation. Cite
a minimum of three scholarly sources. Click the Assignment Files tab
to submit your assignment.

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