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- Interpretation of GAAP and Ethical Issues Robin Smith is considering buying shares in Mah Company. The company has reported an increase in net income this year. On careful reading of the notes to the financial statements, Robin learns that the company had a LIFO liquidation this year. Robin understands what caused the liquidation but has asked you for advice about how to interpret it. Required: 1. Prepare a short memo to Robin to answer the question. 2. Could a LIFO liquidation profit create ethical issues?Case Study You have applied for a public relations (PR) position with a RM 10.2 million savings and loan association, a conservative financial institution that has been in existence for over 50 years. The organization has never employed a PR person before. Now that its assets have risen above 10 million, however, the president of the institution feels it is time to hire someone to ‘do the PR’. During an interview, the president admits he is not sure what PR is, but he is fairly sure he wants the person he hires to plan promotions and stage events that will attract new customers, write stories that will get free space and time in the local media and start an employee publication. The president also states that he is open to suggestions about the position and asks you to explain how you would establish a professional, effective PR program if you were hired.Question: Financial decisions often place heavier emphasis on one type of financial statement over the others. Consider each of the following hypothetical situations independently. An investor is considering purchasing common stock of the 24/7 Fitness The investor plans to hold the investment for at least 3 years. Xerox is considering extending credit to a new customer. The terms of the credit would require the customer to pay within 60 days of receipt of goods. The president of American Airlines is trying to determine whether the company is generating enough cash to increase the amount of dividends paid to investors in this and future years, and still have enough cash to buy new flight equipment as it is needed. PNC Bank is considering extending a loan to a small company. The company would be required to make interest payments at the end of each year for 5 years, and to repay the loan at the end of the fifth year. Instructions In each of the situations above, state whether the…
- Problem 1: After the presentation of your report on the examination of the financial statements to the board of directors of Lana Rhodes Publishing, one of the new directors expresses surprise that the income statement assumes that an equal proportion of the revenue is earned with the publication of every issue of the company's magazine. She feels that the “crucial event” in the process of recognizing revenue in the magazine business is the cash sale of the subscription. She says that she does not understand why most of the revenue cannot be recognized in the period of the sale. Instructions: Discuss the propriety of timing the recognition of revenue in Lana Rhodes Publishing's accounts with respect to the following. 1.1 The cash sale of the magazine subscription. 1.2 The publication of the magazine every month. 1.3 Both events, by recognizing a portion of the revenue with the cash sale of the magazine subscription and a portion of the revenue with the publication of the magazine…Which of the following is NOT considered an Agency Problem? Multiple Choice The Chairman of the Board decides to throw his wife a lavish birthday party in Tahiti using company funds. A salesperson stops working after the commission payout has hit her annual limit. A manager makes a bad decision, but he has nothing to gain personally from it. The CEO of a company uses the company's jet for personal (non-business-related) travel. A purchasing manager passes up on a positive NPV project because he feels that his job will be in jeopardy if the project fails.119-Mr. Abdullah is an auditor in XYZ LLC. His job is to see the correctness of financial statements and to give suggestions. He came to know that his company is entering into a new product line, so he started discussing about it on various places and about its projection in the future. In this situation there is a chance of a. Advocacy threat b. Familiarity threat c. Self review threat d. None of the options
- You have just been employed as the new Chief Executive Officer of a medium-sized company that is listed on the Ghana Stock Exchange. At the maiden Board Meeting, the chairman advised you and your management team to avoid what he termed as “Agency problem”. Explain the term “Agency Problem”, and identify four (4) ways by which shareholders can deal with it.CRWhich investor would not qualify as "Accredited"? Group of answer choices A.The CFO of the company issuing the security B. An MBA graduate and CPA who now was a net worth of $500,000 through shrewd investments in the last 3 months C. A recent retiree who saved a little over $1M in their 401k during their career D. A university endowmentYou have just been hired as a financial manager for BEE Inc. Management has provided you with the information below and has asked you to provide a brief explanation for each of the following questions. Your answer must be a minimum of one sentence and no longer than two or three sentences. One word answers or an answer of "good" or "bad" only will receive zero marks. 2021 2020 2019 Current ratio .99 1.32 1.69 Total debt ratio 0.540 0.495 0.489 Profit Margin 0.10 0.11 0.14 Inventory Turnover 2.60 3.14 4.18 a. Based on the results of the past three years, how is the company doing in regards to their ability to pay their short-term debts? Please refer to the specific ratio you would point out to management that backs up your answer. b. The benchmark industry average for the debt ratio is ,490. What does this mean for BEE Inc.? c. The benchmark industry average for the profit margin is .15. What advice would you give…
- You have just been employed as the New chief executive officer of a medium sized company that is listed on the Ghana stock exchange. At the maiden board meeting,the chairman advised you and your management team to avoid what he termed as "Agency Problem" Explain the term "agency proAm blem " and identify (4) way by which shareholders can deal with it. (B)Suppose you are expecting to receive a million british pounds in six months,and you agree to a forward trade to exchange your pounds for dollars.IF the spot exchange rate and the 180-day forward rate in terms of dollars per pound are$1.5861=£1 and$1.5832=£1,respectively,how many dollars will you get in six months?Is the pound selling at a discount or a premium relative to the dollar? (C)suppose the british pound U-S dollar exchange rate is currently So=£.50.Further suppose that the inflation rate in Britain is predicted to be 10percent over the year ,coming year and(for the moment)the inflation rate in the United States is predicted…Q.1 Answer the following: a) Jim Tang, CFA, is a sell-side investment analyst. While at a software industry conference, Tang hears rumors that Blue Run Software may have falsified its financial results. When he returns to her office, Jim conducts a thorough analysis of Blue Run. Based on her research, including discussions with some of Blue Run's customers, Tang is convinced that Blue Run's reported 50% increase in net income during recent quarters is completely fictitious. So far, however, Tang is the only analyst suspicious about Blue Run's reported earnings. According to the CFA Institute Code of Ethics and Standards of Professional Conduct, the least appropriate action for Tang is to... (only one possible answer) Report her suspicions to Blue Run Do nothing until other analysts support her analysis. Recommend that her clients sell their Blue Run shares immediately. None of the above. b) Nick Bolton, CFA, acts as an outside portfolio manager for a Swiss wealth fund. Ralph…Assume that you are the controller of a business that provides legal services to clients. Suppose that the company has had a tough year, so the revenues have been lagging behind, based on previous years’ standards. What would you do if your boss (the chief executive officer [CEO] of the company) asked to reclassify a transaction to report loan proceeds of $150,000 as if the cash came from service fee revenue from clients instead. Would following the CEO’s advice impact the company’s accounting equation? How would reclassifying this one transaction change the outcome of the balance sheet, the income statement, and the statement of retained earnings? Would making this reclassification change the perception that users of the financial statements would have of the company’s current year success and future year potential? Write a memo, detailing your willingness (or not) to embrace this suggestion, giving reasons behind your decision. Remember to exercise diplomacy, even if you must dissent…