Questions and Answers of Accounting Financial Analysis

The PCAOB ended the self-regulation of the external auditing profession.True/false
Auditors should not demand full access to the entire general ledger so that they can be more focused on the audit.True/false
The National Crisis Inquiry Report (2011) concluded that the financial crisis was unavoidable.True/false
According to the Financial Crisis Inquiry Report, the lack of transparency in the balance sheets of major financial institutions was one of the causes of the financial crisis of 2008.True/false
The Glass-Stegall Act revised and increased the power of the SEC.True/false
Wall Street analysts often recommended to investors shares of companies that have an investment banking relationship with their firm; yet privately, analysts deride the same companies.True/false
One of the most contentious parts of the SOX legislation was Section ______________ , which addressed internal controls.
It was problematic for WorldCom that its internal ______________ department reported to the CFO, Scott Sullivan, who was the major originator of the company’s accounting fraud.
In 1999, the Glass-Steagall Act was repealed and the Financial Services Modernization Act was passed to deregulate the _____________ sector in the United States.
The health of our financial and capital markets and the very foundation of our financial system rely on the production and accessibility of ______________ financial information.
In the year ________________, the Dodd-Frank Act established the Financial Stability Oversight Council (FSOC) as well as the Consumer Financial Protection Bureau (CFPB) in response to the financial
Accounting fraud, which is also called ____________ , or financial reporting fraud, is a particular type of fraud that involves the manipulation of financial statements.
Since 1977, the ____________ had been responsible for monitoring audit independence and quality, but it did not have the power to punish wrongdoers in the face of accounting frauds.
One of the reforms of the Dodd-Frank Act is the requirement that has become known as the ___________ Rule, which calls for a reduction of risky investments on the balance sheets of large financial
Auditors would often leave the auditing profession and join the company that they had audited, which created _____________ and made it difficult for the external auditors to work independently with
Which of the following gatekeepers or gatekeeping functions was not identified by WorldCom’s Bankruptcy Examiner as having failed WorldCom in some way?(a) The structure of its internal audit
In 2008, countless investors held mortgage backed securities that were backed by ______________ mortgage loans.
According to SEC enforcement releases, which of the following was a major reason company executives orchestrated accounting frauds at the turn of the millennium?(a) Receiving government-based
The majority of corporate fraud cases pursued by the FBI involve accounting schemes to deceive investors, auditors, and analysts about the true financial condition of an entity in the form of
Section 301 of the Sarbanes-Oxley Act 2002 had caused problems rather than providing solutions for the spread of corporate fraud globally. We can say this based on which of the following?(a) U.S.
Which of the following is not a goal of the Dodd-Frank Act?(a) To increase the number of audit firms.(b) To regulate financial products.(c) To increase transparency.(d) To protect consumers.
Which of the following is an important financial reporting consequence of Dodd-Frank?(a) Smaller public companies will be exempt from Section 404(b) of the SOX Act of 2002.(b) Auditors of nonpublic
Judy, an internal auditor at Fermented Fruits, has found evidence of accounting fraud at the company. She is worried about the repercussions of reporting her firm to the SEC. You remind her that
Which of the following might undermine the independence of a member of the board of directors at Fermented Fruits?(a) One of the outside directors works for another dried fruit company, Raining
Loans to executives were prohibited by the Sarbanes-Oxley Act of 2002 because:(a) The board of directors granted huge loans to company officers, and then conveniently authorized “forgiveness” of
The Financial Crisis Inquiry Report (2011) concluded that the financial crisis in the United States has been caused by:(a) The collapse of the mortgage-lending standards and the occurrence of
Because you are reading this after the end of Ethan Allen’s fiscal year 2017, how do your forecasts from the previous problems compare to the actual FY 2017 results? Does it appear that more
Copy the Big Rock Candy Mountain Mining financial statements from Problem 1 in Chapter 2 into a new workbook.a. Set up a ratio worksheet similar to the one in Exhibit 3-6, page 99, and calculate all
Using the data in the student spreadsheet file Ethan Allen Financials.xlsx (to find the student spreadsheets for Financial Analysis with Microsoft Excel, ninth edition, go to
Using the UNH Quarterly Sales data (UnitedHealth Group):a. Create a line chart of sales. Do you see a trend?b. Do you see any seasonality? If so, what is the frequency and what quarter typically has
Suppose that TRM Consulting Services has discussed its need for capital with its investment bankers. The bankers have estimated that TRM can raise new funds in the capital markets under the following
Choose two stocks from different industries that you think would have a low correlation. Get the closing prices for each month over the past five years for both stocks. To get the prices from Yahoo!
Use the same data as in Problem 1.a. Recalculate the percentage of sales income statement, but this time use the Trend function to forecast other income and interest expense.b. Recalculate the
Choose your own company and repeat Problem 3. The data can be obtained from Yahoo! Finance (https://finance.yahoo.com). Enter a ticker symbol and get a stock price quote. Click the “Historical
Using the Forecast.ETS.Seasonality function, calculate the frequency of seasonality, if any, for AMZN, TGT, UNH, BMY, and JNJ.a. Do you get same result for each company? Why, or why not?
Using the Yahoo! Finance Web site (https://finance.yahoo.com) get the current price and five-year dividend history for 3M Company. To gather this data, enter the ticker symbol (MMM) in the search box
Using the Yahoo! Finance Web site (https://finance.yahoo.com) get the current price and five-year dividend history for Intel Corporation (Nasdaq:INTC). Use the same procedure as in the Internet
Go to https://www.microsoft.com/en-us/Investor/earnings/trended/quarterlyincome- statements.aspx and download Microsoft’s financial statements by clicking the Financial Statements link in the
3. Using the ETF Data.xlsx workbook from the chapter: b. C. Using Get & Transform, clean up the data as described in the chapter, and keep only the Fund Name, Symbol, Asset Class, Total Return 2016,
Financial researchers have found various violations of market efficiency that are referred to as “calendar effects.” Using the S&P 500 1950 to 2018 Daily.xlsx file from the official Web site
We claimed that bonds that pay interest monthly are rare, and that most bonds pay interest semiannually. Using the S&P 500 Company Outstanding Bonds.xlsx workbook from the official Web site
In footnote 2 some claims were made about the average level of fourth quarter sales for Target Corp. Using the Target Quarterly Sales.xlsx workbook from the official Web site
Camp and Fevurly Financial Planning have forecasted revenues for the first six months of 2021, as shown in the following table.The firm collects 70% of its sales immediately, 29% one month after the
You were recently hired to improve the financial condition of Idaho Springs Hardware, a small chain of three hardware stores in Colorado. On your first day the owner, Chuck Vitaska, told you that the
The following is information for three local auto dealers:a. Using the information given in the above table, construct income statements for each company and the industry average. Assume that each
Income statements for Siam Foods, Inc. from 2018 to 2020 appear below.a. Enter the data into your worksheet and calculate the degree of operating leverage for each year.b. Calculate the degree of
Given the following set of cash flows:a. If your required rate of return is 7% per year, what is the present value of the above cash flows? Future value?b. Now, suppose that you are offered another
The spreadsheet file “Chapter 5 Problem 3.xlsx” (to find the student spreadsheets for Financial Analysis with Microsoft Excel, ninth edition, go to (www.cengage.com/finance/mayes/analysis/9e)
Using the TGT Quarterly Sales (Target Corp.) data:a. Create a line chart of sales. Do you see a trend? Do you see any seasonality? If so, what is the frequency?b. Using the procedures detailed in the
Using the TGT Quarterly Sales (Target Corp.) data:a. Fit the sales data using the Holt-Winters Additive Seasonal model, and optimize the smoothing constants with the Solver.b. Use the Forecast Sheet
Using Yahoo! Finance (https://finance.yahoo.com), find the actual fiscal fourth quarter 2019 sales (period ending January 31, 2020) for Target Corp. Which of the models that were used in problems 2
Using the TGT Quarterly Sales (Target Corp.) data:a. Fit a regression model with a time trend and seasonal dummy variables to the sales data.b. Is the time trend coefficient statistically
In early July 2019, the U.S. Treasury issued three T-Bills, and they had issued a one-year T-Bill on June 20, 2019:a. Calculate the bank discount rate for each security using the formula given in the
Autonomous Vehicles, Inc. has some new products that it expects to lead to high growth in the near future. It has given analysts the following forecasts for the next three years:The firm’s debt has
Miss Ellaneous Bakery is considering the addition of a new line of pies to its product offerings. It is expected that each pie will sell for $17 and the variable costs per pie will be $11. Total
TRM Consulting Services currently has the following capital structure:New debt would mature on June 30, 2051, have a coupon rate of 7%, and would be sold for their par value of $1,000. The bonds pay
You have decided to purchase a house for $400,000 and are evaluating your options for the mortgage. Assume that your down payment will be 20% of the purchase price, payments will be made monthly, and
Your five-year-old daughter has just announced that she would like to attend college. The College Board has reported that the average cost of tuition, room, board, and other expenses at public
You have decided to invest in a small commercial office building that has one tenant. The tenant has a lease that calls for annual rent payments of $20,000 per year for the next three years. However,
Congratulations! You have just won the State Lottery. The lottery prize was advertised as an annuitized $350 million paid out in 30 equal annual payments beginning immediately. The annual payment is
Bob’s Rawhide Company has a dividend payout ratio of 45%. Next year it will earn $0.75 per share and have a return on equity of 12%. The shareholders’ required return is 8%.a. Calculate the
As a broker at Churnem & Burnem Securities, you recommend stocks to your clients. After gathering data on Furniture Factory, you have found that its dividend has been growing at a rate of 4% per
You are considering an investment in the bonds of the Front Range Electric Company. The bonds pay interest semiannually, will mature in 15 years, and have a coupon rate of 6% on a face value of
Chen Chocolate Company’s EPS in 2020 was $1.80, and in 2015 it was $1.25. The company’s payout ratio is 60%, and the stock is currently valued at $37.75. Flotation costs for new equity will be
You are considering two projects, A and B. Each project will cost $200,000, the WACC is 8.5%, and the projected cash flows are as follows:a. Calculate the payback period, discounted payback, NPV, PI,
The Ocean City water park is considering the purchase of a new log flume ride. The cost to purchase the equipment is $8,000,000, and it will cost an additional $475,000 to have it installed. The
Arroy Snackfoods is considering replacing a five-year-old machine that originally cost $75,000. It was being depreciated using straight-line to an expected salvage value of zero over its original
Chicago Turkey is considering a new turkey farm to service its western region stores. The stores currently require 650,000 turkeys per year, and they are purchased from various local turkey farms for
The Chief Financial Officer of Eaton Medical Devices has determined that the firm’s capital investment budget will be $5,000,000 for the upcoming year. Unfortunately, this amount is not sufficient
Lemon, a scooter rental company, is currently evaluating two mutually exclusive investments. After doing a scenario analysis and applying probabilities to each scenario, it has determined that the
You are considering an investment in the stock market and have identified two potential stocks (XYZ and ABC) to purchase. The historical returns for the past five years are shown in the table
The Salida Salt Company is considering making a bid to supply the highway department with rock salt to drop on roads in the county during the winter. The contract will guarantee a minimum of 45,000
Montrose Manufacturing is considering two potential investments. Each project will cost $115,000 and have an expected life of five years. The CFO has estimated the probability distributions for each
You are considering investing in the following securities and have developed the probability distributions for their returns over the next year.a. Calculate the expected return and standard deviation
Using the data in the Alphabet Financials.xlsx:Data from Alphabet Financials.xlsxAlphabet Inc. Class CIncome Statement (Industrial)All figures in millions of U.S.
Using the same workbook, copy both datasets into one worksheet so that they can be used together in a pivot table. Transpose them using Paste Special Transpose.Data from Alphabet
Using the S&P 500 Company Data.xlsx file from the official Web site (www.cengage.com/finance/mayes/analysis/9e):a. Create a table from the data and then add a calculated column that calculates
Suppose that on July 25, 2014 you purchased shares in Tesla Inc. (Nasdaq: TSLA). It is now five years later and you decide to evaluate your holdings to see if you have done well with this investment.
In your position as research assistant to a portfolio manager, you need to analyze the profitability of the companies in the portfolio. Using the data for Oracle Corporation (NASDAQ: ORCL) below:a.
Repeat Problem 2 using the data below for Kroger Co (NYSE: KR). However, this time you should create a copy of your worksheet to use as a template. Replace the data for Oracle with that of Kroger.a.
Using the data for Johnson & Johnson (NYSE: JNJ), presented below:a. Calculate the ratio of each years’ data to the previous year for each of the above items for JNJ. For example, for the year
Choose your own company and repeat the analysis from Problems 1 and 2. Get the data from Yahoo! Finance at https://finance.yahoo.com/. To retrieve the data for your company, enter the name or ticker
Using the data presented below: a. Recreate the income statement and balance sheet using formulas wherever possible. Each statement should be on a separate worksheet. Try to duplicate the formatting
Using the data from the previous problem:Data from previous 1.Using the data presented below: a. Create a common-size income statement for 2019 and 2020. This statement should be created on a
Download the file named “Chapter 2 Problem 3.xlsx” from the text support Web site.Data from Chapter 2 Problem 3.xlsxNew Smyrna Surf ShopIncome StatementsFor the Years 2019 and
A computer problem at Mike Owjai Finance has resulted in incomplete financial statements. Management of the company has asked you to see if you can fill in the missing data.a. Recreate the financial
Durango Mountain Bike Tours’ ending cash balance as of December 31, 2020 was $10,000. Its expected cash collections and payments for the next six months are given in the following table.a.
1. What financial strategy will you need to develop and follow to grow your net worth so that you can afford vacations like these?2. What are your strengths that will help you follow your financial
What will be your biggest obstacle to start investing?
What is the difference between principal and interest?
Why is planning for retirement at the start of a career so important?
Why are company benefit programs so important to employees?
Why are company 401K programs so important to employees?
Describe the Rat Race including how you get in it and how you get out of it.
Name three support services that the Darden Corporate Research and Design Department would provide for existing restaurants.What is the difference between the Research and Design Department and the
Why are notes to the consolidated financial statement important?
What is the Statement of Cash Flow information compared to?
What is the Balance Sheet information for the year compared to?
What is the current P&L information for the year compared to?
Why is a company’s vision, core values and culture important to mention in it’s annual report?

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