The president of a plastics company was quoted in a business journal as stating, “We haven’t had a dollar of interest-paying debt in over 10 years. Not many companies can say that.” As a stockholder in this company, how would you feel about its policy of not taking on debt?
Q: A. On November 14, 2013 a delivery truck of the Boone Company jumped the curb in a quiet residential…
A: According to IFRS 37, Provisions, Contingent Liabilities and Contingent Assets, A provision is the…
Q: Sal Shirey is an owner of a small business. His company has recently borrowed a large amount of…
A: 1.Yes, there is an ethical issue in the implementation of this rule as it will wrongly enable Person…
Q: Margie Johnson is a staff accountant at ToolEx Company, a manufacturer of tools and equipment. The…
A: Inventory shrinkage: It represents the loss of inventory. In other words, it refers to the…
Q: Discuss whether Sean can take $150,000 loss for a business bad debt or for a worthless security.
A: Deduction of Qualified Business Income: An individual is allowed to deduct up to 20 % of qualified…
Q: long hours counselling clients on how to get out of debt. All the while, no one knew that he was…
A: Debt means the money which is borrowed by a person from the other person. Debt is used by corporates…
Q: ter a wedding, ten people were hospitalized possibly as a result of food poisoning from products…
A: Contingent liabilities are liabilities that are probable to occur on a future date. They are not…
Q: An insurance company estimates that drivers have 1% chance of getting into an accident that will…
A: Moral hazard means that when a customer is insured , they will be more likely to be careless because…
Q: Read the following scenario and answer the question in 5–10 sentences. In 1999, Franklin Johnson, a…
A: The shareholders invest money into the business and the top management is responsible for running…
Q: Tim Brooks is a fund manager at Liberty Financial Advisers' clients and arranges a presentation for…
A: The first behavioral bias would be the self – attribution bias. In this type of behavioral bias,…
Q: Carson Company is a large manufacturing firm in Accra that was created 20 years ago by the Carson…
A: Hi student Since there are multiple sub parts, we will answer only first three sub parts.
Q: Mojo invested $20,000 in the Bundle Shirts Company ten years ago. He is concerned about the future…
A: When a business or a corporation is not able to pay its outstanding debts then it is said to go…
Q: The former bookkeeper of White Electric Supply is serving time in prison for embezzlingnearly…
A: Embezzlement: Embezzlement is the stealing of money or assets of the company assigned to him/her…
Q: Bernie Ebbers, the CEO of WorldCom, a major telecommunications company, was having personal…
A: Company W agreed to lend $400 miliion of personal loan to its CEO at the rate of 2.5%. This was the…
Q: Vini was owed RM200 by a debtor, Kelvin. However, Kelvin was declared bankrupt. Vini later received…
A: Current assets are those assets which are held by the business for shorter period of time, say less…
Q: Karen Johnson, CFO for Raucous Roasters (RR), a specialty coffee manufacturer, is rethinking her…
A:
Q: merideth has invested 25,000 in SW Developement. The firm filed for bankrupty and has 60,000 in…
A: Merideth has invested 25,000 in SW Development so Merideth becomes a shareholder of the company as…
Q: What ethical issue would you face as you consider what to report in your company's annual report…
A: Ethics: Ethics in business is a much debated yet less followed topic. Every business has to…
Q: Your roommate is puzzled. During the last year, the company in which she is a stockholder reported a…
A: The books of accounts of the company are prepared using the accrual basis of accounting. While…
Q: Stephenson Real Estate Company was founded 25 years ago by the current CEO, Robert Stephenson. The…
A: This question is related to leverage. Leverage means the use of debt so that we can amplify returns…
Q: Caleb's duplex sold at a foreclosure auction for $140,000. At the time of foreclosure, he had not…
A: A loan is an amount given by the lender to the borrower at an agreed interest rate for a defined…
Q: Smith, Jones, and Brown were creditors of White, who operated a grain elevator known as White’s…
A: Partnership: This is the form of business entity which is formed by an agreement, owned and managed…
Q: Carson Company is a large manufacturing firm in California that was created 20 years ago by the…
A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: The following scenario describes the X Company with 25M revenue and approximately 300 employees. X…
A: (a) Operational issue It relates to the issues faced in the day to day operations of a company.…
Q: client who is in his 70's. in 2020, he incurred significant capital losses in the amount of $65,000…
A: The capital losses are very common methods of making loss but only $3000 can be adjusted against…
Q: Because of severe hurricane losses, Donaldson Decorators, one of your oldest and largest clients,…
A: Accounts Receivable One of the major component in the current assets in the balance sheet is…
Q: Ann was informed that John Lee was unable he would pay 40 cents for each dollar owed balance was…
A: The bad debt expense is the expense occurred due to non payment by debtors or lower payment made by…
Q: You were recently hired to work in the controller's office of the Balboa Lumber Company. Your boss,…
A: Accounting Standard- Accounting standards are designed to ensure that accounting practices are…
Q: The tobacco companies have paid billions because of smoking-related illnesses. In particular, Philip…
A: The Ethical Issues faced in reporting the fact are as follows:“The main issue is that whether to…
Q: Can BAC enforce the note
A: Solution:- Angela Brock borrowed $544,000 from Amerifund Mortgage Services and signed a note to buy…
Q: TUV Hardware Stores is a major retailer of lumber and building products. They are privately owned…
A: Audit procedure: Audit procedures are used by auditors to determine the quality of financial…
Q: n her preliminary cash budget, Johnson has assumed that all sales are collected and thus that RR has…
A: Bad Debts: It is Uncollectible accounts expense which is amount owed to a creditor that is…
Q: try-level engineer at Boeing Aerospace in California. He took a financial risk and bought a bond…
A: Rate of return is profit earned annually on investment as percentage of the investment and it is…
Q: 15. In 2016, Tom loaned his friend Janelle $5,000 to invest in various stocks. Janelle signed a note…
A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…
Q: aren Johnson, CFO for Raucous Roasters (RR), a specialty coffee manufacturer, is rethinking her…
A:
Q: Katrina, a risk manager for State Farm Insurance, filed a petition in bankruptcy under Chapter 7,…
A: It is most common form of bankruptcy. In this form of bankruptcy court helps creditors to get their…
Q: GoodMates Pty Ltd loaned one of its staff, Munir, the amount of $5,000 (interest free) for one…
A: Fringe benefits are described as those payments which are made by the employer to the employee in…
Q: Carson Company is a large manufacturing firm in California that was created 20 years ago by the…
A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…
Q: The tobacco companies have paid billions because of smoking-relatedillnesses. In particular, Philip…
A: Ethical is an adjective word which deals with morals or the principles of morality .It is related…
Q: Margie Johnson is a staff accountant at ToolEx Company, a manufacturer of tools and equipment. The…
A: The Boss is in favor of not to report inventory shrinkage, it is ethically wrong if Margie Johnson…
Q: Lynch joined an investment club when he got his first job at the accounting firm after he passed his…
A: Limited Lability Company: The Limited Lability Company (LLC) is a United States business structure…
Q: formed. The bank required Katherine, Bethany, and Charlie to personally guarantee the bank loan. The…
A: It is given that any loss, profit or debt is allocated at 1/3 rd for each person. The loan borrowed…
Q: Suppose that Ike is loss averse. In the morning, Ike’s stockbroker calls to tell him that he has…
A: Loss aversion is when the investors feel the pain of loss of an amount more than they enjoy the gain…
Q: 15. In 2016, Tom loaned his friend Janelle $5,000 to invest in various stocks. Janelle signed a note…
A: An individual, business, or company lent money to others to receive the benefit of interest payments…
The president of a plastics company was quoted in a business journal as stating, “We haven’t had a dollar of interest-paying debt in over 10 years. Not many companies can say that.” As a stockholder in this company, how would you feel about its policy of not taking on debt?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- In June 2020, the board of directors for McElroy Enterprises Inc. authorized the sale of $10,000,000 of corporate bonds. Jennifer Grayson, treasurer for McElroy Enterprises Inc., is concerned about the date when the bonds are issued. The company really needs the cash, but she is worried that if the bonds are issued before the company's year-end (December 31, 2020) the additional liability will have an adverse effect on a number of important ratios. In July, she explains to company president William McElroy that if they delay issuing the bonds until after December 31 the bonds will not affect the ratios until December 31, 2021. They will have to report the issuance as a subsequent event which requires only footnote disclosure. Grayson expects that with expected improved financial performance in 2021, ratios should be better. Instructions What are the ethical issues involved? Should McElroy agree to the delay?Karen Johnson, CFO for Raucous Roasters (RR), a specialty coffee manufacturer, is rethinking her company’s working capital policy in light of a recent scare she faced when RR’s corporate banker, citing a nationwide credit crunch, balked at renewing RR’s line of credit. Had the line of credit not been renewed, RR would not have been able to make payroll, potentially forcing the company out of business. Although the line of credit was ultimately renewed, the scare has forced Johnson to examine carefully each component of RR’s working capital to make sure it is needed, with the goal of determining whether the line of credit can be eliminated entirely. In addition to (possibly) freeing RR from the need for a line of credit, Johnson is well aware that reducing working capital will improve free cash flow. Historically, RR has done little to examine working capital, mainly because of poor communication among business functions. In the past, the production manager resisted Johnson’s efforts to question his holdings of raw materials, the marketing manager resisted questions about finished goods, the sales staff resisted questions about credit policy (which affects accounts receivable), and the treasurer did not want to talk about the cash and securities balances. However, with the recent credit scare, this resistance has become unacceptable and Johnson has undertaken a company-wide examination of cash, marketable securities, inventory, and accounts receivable levels. Johnson also knows that decisions about working capital cannot be made in a vacuum. For example, if inventories could be lowered without adversely affecting operations, then less capital would be required, and free cash flow would increase. However, lower raw materials inventories might lead to production slowdowns and higher costs, and lower finished goods inventories might lead to stockouts and loss of sales. So, before inventories are changed, it will be necessary to study operating as well as financial effects. The situation is the same with regard to cash and receivables. Johnson has begun her investigation by collecting the ratios shown here. (The partial cash budget shown after the ratios is used later in this mini case.) Johnson plans to use the preceding ratios as the starting point for discussions with RR’s operating team. Based on the data, does RR seem to be following a relaxed, moderate, or restricted current asset usage policy?The Dotson Company, owner of Bleacher Mall, charges Rich Clothing Store a rental fee of $600 per month plus 5% of yearly profits over $500,000. Matt Rich, the owner of the store, directs his accountant, Ron Hamilton, to increase the estimate of bad debt expense and warranty costs in order to keep profits at $475,000. Instructions Answer the following questions. a. Should Hamilton follow his boss’s directive?. b. Who is harmed if the estimates are increased? c. Is Matt Rich’s directive ethical?
- The president of Freeman Industries Inc. made the following statement in the annual report to shareholders: “The founding family and majority shareholders of the company do not believe in using debt to finance future growth. The founding family learned from hard experience during the Great Depression that debt can cause loss of flexibility and eventual loss of corporate control. The company will not place itself at such risk again.As such, all future growth will be financed either by stock sales to the public or by internally generated resources.”Write a brief memo to the company’s president, Boss Freeman, outlining the errors in his logic.Bernie Ebbers, the CEO of WorldCom, a major telecommunications company, was having personal financial troubles. Ebbers pledged a large stake of his WorldCom stock as security for some personal loans. As the price of WorldCom stock sank, Ebbers’s bankers threatened to sell his stock in order to protect their loans. To avoid having his stock sold, Ebbersasked the board of directors of WorldCom to loan him nearly $400 million of corporate assets at 2.5% interest to pay off his bankers. The board agreed to lend him the money.Comment on the decision of the board of directors in this situation.David Lyons, CEO of Lyons Solar Technologies, is concerned about his firm’s level of debt financing. The company uses short-term debt to finance its temporary working capital needs, but it does not use any permanent (long-term) debt. Other solar technology companies have debt, and Mr. Lyons wonders why they use debt and what its effects are on stock prices. To gain some insights into the matter, he poses the following questions to you, his recently hired assistant: Who were Modigliani and Miller (MM), and what assumptions are embedded in the MM and Miller models?
- A Public Corporation states in an annual SEC disclosure that its product, the xWatch, is extremely profitable, and should generate 51 billion. The company omits, though, that it took pre-orders for the watch, and that most of the $1 billion was earned in the prior year. Most investors reading this Document would form the mistaken belief that the $1 billion was all earned in the current year, causing them to be misled in overvaluing the corporation's health and profitability. If an injured i investor sues under 10(b): The corporation is liable if the statement lacked material information The corporation is not liable because it has no duty to disclose information to the SEC after its IPO The corporation is not liable because the contested statement is factually accurate The corporation is liable only if the company is publicly tradedI had asked this question previously but the answer was incorrect from what my professor had put on the answer key and the explanation was confusing again, so I have to decided to repost the question with the answer options and the answer that is listed to be correct. the backwoods lumber co. has a debt equity ratio of .80. the firm's required return on assets is 12% and its cost of equity is 15.68% what is the pre tax cost of debt based on M&M II with no taxes? a. 6.76% b. 7.00% c. 7.25% d. 7.40% (marked correct on the answer key given) e. 7.50%Dr. Roger Jones is a successful dentist but is experiencing recurring financial difficulties. Forexample, Dr. Jones owns his office building, which he leased to the professional corporation thathoused his dental practice. (He owns all shares in the corporation.) After the corporation’s failure to pay payroll taxes for the past 6 months, however, the Internal Revenue Service is threatening to impound the business and sell its assets. Also, the corporation has had difficulty payingits suppliers, owing one of them over $200,000 plus interest. In the past, Dr. Jones had borrowedmoney on the equity in either his personal residence or his office building, but he has grownweary of these recurring problems and has hired a local consultant for advice.According to the consultant, the financial difficulties facing Dr. Jones have been caused bythe absence of proper planning and control. Budgetary control is sorely needed. The followingfinancial information is available for a typical month:…