IBM reported a 3 percent increase in income for its first quarter of 2000, beating analysts' estimates. But it also reported a decline in revenue. Its stock price dropped in response to the report. What explanation would you give for the drop in stock price on an earnings increase? What is your prediction of the change in IBM's asset turnover over the quarter?

IBM reported a 3 percent increase in income for its first quarter of 2000, beating analysts' estimates. But it also reported a decline in revenue. Its stock price dropped in response to the report. What explanation would you give for the drop in stock price on an earnings increase? What is your prediction of the change in IBM's asset turnover over the quarter?

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter6: Accounting Quality

Section: Chapter Questions

Problem 10QE: Checkpoint Systems is a leading provider of source tagging, handheld labeling systems, retail...

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Checkpoint Systems is a leading provider of source tagging, handheld labeling systems, retail merchandising systems, and bar-code labeling systems. In a press release, Checkpoint stated the following: GAAP reported net loss for the fourth quarter of 2004 was 29.3 million, or 0.78 per diluted share, compared to net earnings of 4.5 million, or 0.13 per diluted share, for the fourth quarter 2003. Excluding impairment and restructuring charges, net of tax, the Companys net income for the fourth quarter 2004 was 0.30 per diluted share, compared to 0.27 per diluted share in the fourth quarter 2003. Calculate the amount of the impairment and restructuring charges Checkpoint reported in 2004 and 2003. Discuss why the firm reported earnings both including and excluding impairment and restructuring charges.
In November 2007, for example, General Motors (GM) announced that it would take a write-off of about $39 billion, meaning that it was reducing net income for the third quarter of the year by that amount. Discuss why General Motors’ stockholders probably didn’t suffer as a result of the reported loss. What do you think was the basis for our conclusion?
Data on Shick Inc. for last year are shown below, along with the days sales outstanding of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks' average. If this were done, by how much would receivables decline? Use a 365 day year. Do not round yourData on Shick Inc. for last year are shown below, along with the days sales outstanding of the firms against which it benchmarks. The firm's new CFO believes that the company could reduce its receivables enough to reduce its DSO to the benchmarks' average. If this were done, by how much would receivables decline? Use a 365-day year. Do not round your intermediate calculations. Sales $103, 000 Accounts receivable $16,000 Days Sales Outstanding (DSO) 56.699 Benchmarks' Days Sales Outstanding (DSO) 19.000 a. $9,805 b. $11,471 c. $10, 638 d. $4,529
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1. Analysts who follow Howe Industries recently noted that, relative to the previous year, the company's net cash provided from operations increased, yet cash as reported on the balance sheet decreased. Which of the following factors could explain this situation? a. The company issued new common stock. b. The company made large investments in fixed assets. c. The company sold a division and received cash in return. d. The company cut its dividend. e. The company issued new long-term debt. 2. Which of the following statements is CORRECT? a. Other things held constant, the higher a firm's total debt to total capital ratio, the higher its TIE ratio will be. b. Debt management ratios show the extent to which a firm's managers are attempting to reduce risk through the use of financial leverage. The higher the total debt to total capital ratio, the lower the risk. c. Debt management…
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In the late 1990's, Sunbeam Corporation faced financial woes and attempted various strategies to boost its reported earnings. In 1997, three strategies appeared to be working; revenues had risen by 18%. However, by April 1998 Sunbeam’s stock was downgraded by investment analysts after noticing unusually high accounts receivables, massive increases in electric blankets in the third quarter 1997, which usually sell best in the fourth quarter, as well as unusually high sales of barbecue grills for the fourth quarter. Soon after, Sunbeam announced a first quarter loss of $44.6 million, and Sunbeam’s stock prices fell 25%. Sunbeam then faced a lawsuit by shareholders and an investigation by the Securities and Exchange Commission (SEC). You are the controller for a company that is considering becoming publicly-traded in the next few years, and the board of directors wants to be sure the company is properly following GAAP in regards to revenue recognition. They have heard that there is a new…
Over the past year, Free Inc. had an increase in its current ratio and a decline in its total asset turnover ratio. However, its sales, cash, DSO and fixed asset turnover ratio remains constant. What the following statement is correct? Group of answer choices a)Total asset decreases, current asset decreases, and inventory increases b)Total asset increases, current asset increases, and inventory increases c)Total asset increases, current asset decreases, and inventory decreases d)Total asset decreases, current asset increases, inventory increases
Jiang Ltd has recently produced its financial statements for the current year. The directors of the company are concerned that the return on capital employed (ROCE) has decreased from 14% last year to 12% for the current year.The following reasons were suggested as to why this reduction in ROCE has occurred. an increase in the gross profit margin a reduction in sales revenue an increase in overhead expenses an increase in amount of inventories held the repayment of a loan at the end of the year an increase in time taken for trade receivables to be paid Taking each of these 6 suggested reasons in turn, state, with reasons, whether each of them could lead to a reduction in ROCE ROCE = (EBIT/Sales Revenue) x (Sales revenue/Long term capital)
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