Ethics of business Case study

Any material item should be stated separately." ASC-360-10-45-5 states that "A gain or loss recognized on the sale of the long-lived asset (disposal group) that is not a component of an entity shall be included in income from continuing operations before income taxes in the income statement of a business entity." Because of this, the sale of this building will be recognized as operating income. The gain on the sale of the building would be included in the operating income section of the income statement. This gain will be listed as a line item under the operating income section of the income statement, and will be be added to net income and be taxed accordingly. 4. Class Action Settlement Due to a class action lawsuit settlement against a supplier, Totz received proceeds of $2.7 million. Under ASC 225-20-45-1, this item would have been treated as an extraordinary item; it is both unusual and infrequent and would have been listed as an extraordinary gain or loss on the income statement. However, under ASU 225-20-65-1, extraordinary items are no longer listed on the income statement, which means that this item would no longer be considered extraordinary. the costs associated with the materials provided by the supplier in this transaction are part of Totz' central operations and therefore, the gain associated with the class action lawsuit should be treated as operating income. ASC-605-10-S99-1 indicates that both gains and losses should be treated according to the guidance of Reg S-X, Rule 5-03(b)(6). 16 The proceeds of this lawsuit would be treated as other operating income, although being both unusual and infrequent, because of the change in recognition of extraordinary items. This income would then affect net income, increasing it by $2.7 million net of income tax expense. It is crucial to include this income on the income statement because it deals with expenses that are part of the company's central operations.

10. There are four ways a company can use the money it generates: a) buying other

companies or assets; b) reducing its debt; c) distribute it to shareholders, and d)

increasing its cash holdings. What other reasonable things can it do?

11. Assuming a company wishes to distribute money to its shareholders, is it better to

distribute dividends or to repurchase shares?

12. Is the price of futures the best estimate of the /$ exchange rate?

13. How could we obtain an indisputable discount rate? How should we calculate the beta

and the risk premium?

14. My company paid an extremely high price for the acquisition of another company; the

price was recommended by the valuation of an investment bank. We now have

financial problems. Is there any way to make that bank legally responsible for this

situation?

15. Which currency has to be used in an international acquisition in order to calculate the

flows?

16. Calculated betas provide different information if they are obtained by using daily,

weekly or monthly data. Which data is the most appropriate?

17. Does is make any sense to calculate betas against local indexes when a company has a

great part of its operations outside this local market? I have two examples: BBVA and

Santander.

18. Is it possible to make money in the stock market when the quotations are going

down? What is credit sale?

19. Which capital structure should we consider when calculating the WACC for a subsidiary

valuation: the one that is reasonable according to the risk of the subsidiary's business,

the average of the company or the one the subsidiary "tolerates/permits"?

20. Are there any ways to analyze and value seasonal businesses?

21. A financial consultant obtains different valuations of my company when it discounts the

Free Cash Flow (FCF) as opposed to when it uses the Equity Cash Flow. Is this correct