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Question 1 Vaughan Speed Clean — budgeting The Vaughan Speed Clean company is a young company that operates three car
Posted On: Nov. 23, 2017
Author: Shipra


Question 1 Vaughan Speed Clean — budgeting The Vaughan Speed Clean company is a young company that operates three car wash locations in the Greater Toronto Area. The owner relies on the abilities of three managers to run the car wash locations. At the end of each month, the owner evaluates the performance of each car wash location. His evaluations determine the size of the location manager’s bonus. If the location achieves an annual ROA1 of 10%, the location manager gets $1,000. The bonus is also augmented by $1 for every $10 the location exceeds its profit target. However, the bonus contract gives the owner the right to make subjective adjustments for the effects of factors he deems outside the control of the location managers. In the past few months, he has made such adjustments for the adverse effects on revenue of having city workers repaving the street just in front of one car wash location. By far the largest uncontrollable factor that is regularly considered is the weather. In particular, sales volume decreases sharply when it rains or snows. The budget, which is updated at the beginning of the month, is prepared on an assumption of hours of good weather. Inevitably, those assumptions are not accurate. The month of November 2013 was an atypical month. It snowed and rained many more hours than were assumed in the budget, and actual profits for the three locations were below the budgeted profit level. The results for the Jane-HW7 location are shown in Exhibit 1. Exhibit 2 shows some operating assumptions and statistics for the month. The Jane-HW7 location has an average of $600,000 of total assets and is open every day, 10 hours per day, when it is not raining. When it is raining, the car wash is closed. The car wash employees are paid the legally required minimum wage plus a fixed amount for each car wash completed, so labour costs are highly variable with revenues. Exhibit 1: Profit compared to budget for Jane-HW7 — November 2013 Budget1 Actual Variance Revenue $184,000 $120,555 $63,445 U Variable expenses, including wages (50% of revenues) 92,000 60,277 31,723 F Fixed expenses 53,820 55,000 1,180 U Total expenses 145,820 115,277 30,543 F Profit $ 38,180 $ 5,278 $32,902 U 1Based on 800 hours of good weather Exhibit 2: Operating statistics for Jane-HW7 — November 2013 Budgeted Actual Average number of vehicles washed in a good weather hour 23 27 Average revenue per vehicle $10 $9.50 Total hours in month (averaged) 920 920 Hours of bad weather 120 450 Hours of good weather 800 470 Required a. How large will the bonus be for the Jane-HW7 manager in November 2013? b. Was the Jane-HW7 location properly managed in the November 2013 quarter? Your answer should consist of variance calculations (based on information provided in Exhibit 2) and an assessment of which variances are controllable. ________________________________________ 1 Return on assets (ROA) is the measure of profit earned before interest expense in relation to the assets employed by an entity. It is calculated by expressing net income as a percentage of average total assets. The term is similar to return on investment. Question 2 RevGenR Seats Incorporated — variance analysis RevGenR Seats Incorporated manufactures golf cart seats and mobility vehicle seats. Here are the 2013 budget and actual sales and market data for the company’s two seat products: Golf cart Mobility vehicle Actual data Company sales — units 5,940 16,060 Selling price per unit $200 $300 Total industry sales of both products: 160,000 units Budget data Expected company sales — units 4,788 18,012 Expected selling price per unit $220 $300 Unit manufacturing cost at expected sales per unit $120* $200* Unit selling and administrative expense at expected sales per unit $70* $80* Contribution margin per unit $134 $164 Total expected industry sales of both products: 123,000 units *Fixed and variable Required a. Calculate the following revenue variances for 2013: i. Sales mix ii. Sales quantity b. State two reasons why, as president of RevGenR Seats Incorporated, you will or will not be satisfied with the performance of the marketing and sales personnel, by referring to the calculations from part (a). c. Calculate the market share and market size variances for 2013. Question 3 Hardware Scientific Technology Inc. — transfer pricing Hardware Scientific Technology Inc. operates and fully supports a decentralized corporate structure. The Assembly subsidiary manufactures automotive computer engine modules and purchases a component, part #89661-02K23, from the Parts subsidiary of the same corporate conglomerate. Both subsidiaries operate as completely separate investment centres. The subsidiary managers have full authority over decisions involving transactions with internal or external customers and suppliers. Currently, the Parts subsidiary is operating at full capacity and the Assembly subsidiary is operating below its capacity of 5 million units. Part #89661-02K23 can be sold externally for $75. The costs of producing the automotive computer engine modules, excluding the cost of part #89661-02K23, are as follows: • Direct materials $120 • Direct labour 30 • Variable overhead 125 • Fixed overhead 100 • Total $375 The manager of the Assembly subsidiary has received an offer from a national distributor willing to buy 5 million automotive computer engine modules at a price of $425 per unit. Required a. Indicate the minimum transfer price per unit that the manager of the Parts subsidiary would agree to. Justify your answer. b. Indicate the maximum transfer price per unit that the manager of the Assembly subsidiary would be willing to pay for part #89661-02K23. Justify your answer. c. Assume the full cost (variable and fixed costs) of part #89661-02K23 is $50. Explain whether Hardware Scientific Technology Inc. as a whole would benefit if part #89661-02K23 is transferred from the Parts subsidiary to the Assembly subsidiary at full cost. Justify your answer. d. Explain whether your answer to part (c) would be different if the Parts subsidiary is not operating at full capacity and can supply all of the Assembly subsidiary requirements without affecting external sales. Explain the issue of goal congruence as it relates to this situation. How is each division manager evaluated, and what effect does this have on each division manager’s preferred transfer price? Question 4 High-Tech Company — economic value added The following information pertains to High-Tech Company for the year ended December 31, 2013: Net operating income before taxes $ 422,000 EVA adjusted total capital, December 31, 2013 3,500,000 Research costs in 2013 expensed under GAAP 75,600 Development costs expensed in 2013 under GAAP 55,000 Development costs capitalized in 2013 under GAAP 83,000 Impairment loss of goodwill included in the calculation of GAAP income 23,400 Additional information: • The capital structure is 38% debt and 62% equity. • The market yield on equivalent debt is 6.5%. • The marginal tax rate is 35%. • The cost of equity is 12%. • Research and development costs were incurred on January 1, 2013. • Capitalized development costs are amortized over a period of 5 years in GAAP income; R&D costs are amortized over the same period in net operating profit after taxes (NOPAT). Required a. Determine the economic value added (EVA) for the year ended December 31, 2013, and explain the results. b. Should the financial performance at High-Tech be measured using EVA or ROI? Address the following points in your answer: i. The purpose of financial performance measures ii. Advantages and disadvantages of each measure iii. The difference between accounting and economic income c. As an outside consultant, you are asked for some advice on effective performance measures. Chapter 11 of the Merchant text describes six financial results control remedies that can reduce a manager’s tendency to focus on short-term results. Select two of these remedies and draft a one or two paragraph memo to the management accountant at High-Tech with a comprehensive explanation that includes: o How the remedy increases the manager’s long term focus o Issues with the remedy and its implementation o An action plan that outlines two or three steps the company should take to implement the remedy Note: Foundation review 3 provides a review of memo writing and the acceptable format. Question 5 Ocean and Salvage Recovery Inc. — short-term decision Ocean and Salvage Recovery Inc. was established in 2008. The company specializes in salvage, towage, wreck removal, and offshore installation support operations (anchor handling/supply) for the shipping industry as well as for the oil and gas industries worldwide. The company provides advanced proposals for its services prior to committing to the services. For 2014, the company is considering a proposal for a wreck removal. Here is an estimate of the revenues and costs for this removal. Ocean and Salvage Recovery Inc. Maritime Wreck Removal Proposal Revenue and Expenses Forecast for 2014 (in thousands) Revenue $ 170,000 Expenses Direct wreck removal salaries1 48,000 Removal coordinators’ contracts 30,000 Survey costs2 12,000 External quality control contracts 8,000 Administration and equipment insurance3 2,000 Group accident and life insurance4 7,000 Depreciation 8,000 Removal support employees1 28,000 Equipment maintenance5 7,000 Direct site meals 20,000 Hotel and accommodation costs 20,000 Administrative and head office expense6 3,000 Total expenses 193,000 Net operating loss $ 23,000 Notes: 1. Ocean and Salvage Recovery Inc. will incur a cost of 5% of the salaries in severance costs when employees are terminated. This cost will have to be paid if the removal proposal is not accepted. 2. Survey costs have already been incurred. 3. Administration and equipment insurance is an apportioned amount of the total annual costs paid by the company. 4. Insurance is payable only if the removal is confirmed. 5. Equipment maintenance costs are specific to this job. 6. These expenses are for related removal accommodations, arranging meals, and providing communication services during the removal. Required a. Based on the costs provided determine whether the wreck removal proposal should be accepted. b. Calculate the minimum revenue required to justify accepting the wreck removal project. c. Corporations and their managers are expected to act ethically. This is part of corporate social responsibility. However there are two contrasting views of what this responsibility involves. i. Contrast the stockholder and stakeholder views. ii. Under what conditions would each view recommend that a company meet environmental targets beyond the letter of the law? iii. Using the stakeholder view of corporate social responsibility, list two stakeholders in this wreck removal project. For each stakeholder, determine what qualitative factor the company should consider when deciding whether to take on the project. Question 6 Kyru Inc. — EOQ and re-order point Kyru Inc. is a retailer that sells game consoles, electronic games, and accessories. It purchases the electronic games from Sotell for $30 each. Kyru expects to sell 18,750 electronic games this year. Competition for electronic games is strong, and it is critical that Kyru has sufficient stock to meet demand. Kyru gathered the following information regarding last year’s costs and activities. Activity Description of activity Total costs Cost allocation base Ordering Placing orders for purchases $176,000 Number of orders Shelf stocking Stocking and restocking merchandise $105,000 Hours stocking Other Facility sustaining $16,500 (Not allocated) Total $297,500 In addition to purchasing electronic games from Sotell, Kyru purchases game consoles from Bitbyte and accessories from Petersen. There were 8,000 orders placed last year — 2,000 with Sotell, 1,500 with Bitbyte, and 4,500 with Petersen. Stocking and restocking hours have been directly traced to product lines. Of the 14,000 hours spent in this activity, 60% was for accessories, 25% for electronic games, and 15% for game consoles. Kyru stocked 17,500 electronic game units last year. The other relevant carrying costs for items such as insurance and breakage for electronic games is $0.60 per unit. Kyru uses a required rate of return of 8%. The lead time is three days. Kyru can place rush orders, but this adds $3.00 to the cost of each unit. This is the only quantifiable stockout cost. Assume 30 days per month and 360 days per year. Required a. Calculate the relevant ordering costs per purchase order and the relevant carrying costs per game. b. Calculate the economic order quantity (EOQ) for the electronic games and determine the number of orders that will be placed in the coming year. (Ordering costs and carrying costs should be based on last year’s figures.) c. Using the EOQ and total relevant costs, calculate the total ordering and carrying costs for the period. d. Assuming demand is uniform throughout the period, what should the re-order point be? Question 7 The following information pertains to Gerco Inc. for the year ended December 31, 2014: Net operating income before taxes $1,300,000 EVA-adjusted total capital, December 31, 2014 5,400,000 Research costs in 2014 expensed under GAAP 165,000 Development costs in 2014 expensed under GAAP 88,000 Development costs in 2014 capitalized under GAAP 34,000 Impairment loss of goodwill included in the calculation of GAAP income 46,000 Total depreciation of all equipment 75,000 Additional information: • Equity accounts for 69% of the firm’s capital structure. • The marginal tax rate is 35%. • The market yield on equivalent debt is 6%. • The cost of equity is 8%. • Total debt is 31% of capital (debt + equity). • All research and development (R&D) costs were incurred January 1, 2014. • Capitalized development costs are amortized over a period of 8 years in GAAP income; R&D costs are amortized over the same period for economic value added calculations. Required a. Determine the economic value added (EVA) for the year ended December 31, 2014. b. Explain the significance of your answer to part (a). Identify and briefly explain the major differences, if any, between EVA income and GAAP income. Question 8 Wood Inc. manufactures wood poles. It has two divisions, Harvesting and Sawing, which are both evaluated as profit centres. The Harvesting Division is responsible for all the harvesting operations and transfers logs to the Sawing Division, which transforms the logs into poles for external customers. Sawing can produce 10,000 poles per year. Sawing is currently producing at full capacity, after management decided a year ago to manufacture a higher-demand wood pole, Pole-S, that can be sold readily. The manager of the Sawing Division suggests that the maximum price the division can pay for logs transferred from Harvesting is $61.50 per log. The following information supports this suggestion: Price that external customers are willing to pay for one unit of Pole-S $122.00 Costs to produce Pole-S: Direct labour 35.00 Variable overhead 4.50 Fixed overhead 8.50 Direct materials (other than logs) 2.50 Total cost per unit 50.50 Target profit margin 10.00 Total cost and margin $ 60.50 Maximum transfer price for one log $ 61.50 The manager of the Harvesting Division disagrees with the proposed transfer price of $61.50. The division is operating at full capacity and can sell all the logs it produces to external customers for $75. Moreover, the director says: “For each log, my direct labour cost is $40.50, variable overhead is $9.50, and fixed overhead is $15. I cannot spend $65 to cut trees and sell them for $61.50.” Required a. Determine whether it would be beneficial for the company as a whole if logs were transferred to the Sawing Division at the suggested price of $61.50 per log. Show all your calculations. b. Explain the impact of transferring the logs to the Sawing Division at $61.50 on the performance of each division and specifically on each manager. c. Determine the minimum and the maximum transfer price that could be used to account for the transfer of logs from the Harvesting Division to the Sawing Division. Recommend an appropriate transfer price. Justify your recommendation. Question 9 New World Brewery is a successful microbrewery located in Ontario. New World brews different types of beer: lager, ale, stout, as well as some seasonal fruit beers using local produce. Bottled beer is sold in bars and liquor stores, whereas draft beer is sold strictly in bars. In 2013, the Ontario microbrewery market grew by 12%, but New World had some difficulty maintaining its market share. The CEO asked you to prepare an analysis of last year’s results based on the following budgeted and actual data. Actual sales prices and costs were exactly as budgeted, but actual profits were almost $500,000 less than what was originally budgeted. Actual data for Ontario market Unit sales (hectolitres) 2012 2013 Bottled beer 289,000 332,350 Draft beer 51,000 48,450 Total 340,000 380,800 Actual data for New World Brewery Unit sales (hectolitres) 2012 2013 Bottled beer 43,450 46,529 Draft beer 6,120 7,752 Total 49,570 54,281 Budgeted 2013 sales for Ontario market Bottled Draft Unit sales (hectolitres) 317,900 56,100 Budgeted 2013 data for New World Brewery Bottled Draft Unit sales (hectolitres) 54,043 7,854 Sales price (per hectolitre) $192 $136 Variable cost (per hectolitre) $135 $122 Required a. Calculate the 2013 market share variance and the 2013 market size variance for New World Brewery. b. Calculate the sales quantity variance and show that it is equal to the sum of the market share variance and the market size variance. c. Using the data provided in the question explain why actual profit for New World Brewery was less than budgeted profit.



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After living here for over ten years myself, I have come to learn that New York City is as expensive as you want it to be. I mean, I’d love if it were cheaper, but there are so many resources here ...
Posted On: Nov. 22, 2017
Author: Shipra


After living here for over ten years myself, I have come to learn that New York City is as expensive as you want it to be. I mean, I’d love if it were cheaper, but there are so many resources here that allow you to reduce expenses cut out entire expense categories you might have to spend on elsewhere. This sample budget is meant to reflect a comfortable yet frugal New York City lifestyle (i.e. my kind of living)… Rent: $900/month. This is a totally reasonable price to pay for rent in New York City, even in parts of Manhattan. No, you won’t be living alone, but you can certainly get your own room in a fairly spacious apartment for under $1000/month. Some areas to check out are Washington Heights, Inwood, and Harlem (my neighborhood) in Manhattan – Astoria and Long Island City in Queens – Weehawken and West New York in New Jersey. Rental Insurance: $5/month. $10 split between you and the roomie – provided you don’t have anything too fancy in your new digs that requires extra insuring. Utilities: $50/month. Heat and hot water are generally included in the price of your rent so that leaves gas and electric. Again, having a roommate or two can be tremendously helpful in cutting down this cost. Even with some A/C use in the summer, an average of $50 a month per person is a reasonable expectation. Internet: $30/month. Again, splitting the cost with a roomie and only worrying about internet rather than a full premium cable package keeps this expense low without much sacrifice, thank goodness for Netflix. Cellphone: $75/month. The national average cell phone bill is $73/month, though there are definitely major savings to be had in this category. Transportation: $116.50/month. Unlimited Monthly Metro Card. Groceries: $300/month. I’m basing this off of my monthly grocery bill. I shop at Trader Joe’s and buy a lot of organic fruits and veggies. You could probably eat for significantly less. Laundry: $15/month. Most New Yorkers don’t have access to a washer/dryer. I’ve gotten really good about heading to the laundromat only once every 3-4 weeks to bring down my costs (and stop wasting time sitting at the laundromat). The trick is to own lots of socks and underwear- you can re-wear just about everything else. Health Insurance: $328/month. The average cost of health insurance for a middle tier health plan on the exchange. Personal Care/ Cleaning Products: $50/month. My occasional Amazon orders of contact solution, razors, deodorant, make up, toilet paper, cleaning supplies, etc. generally average out to around $50/month. (I also go through the Ebates shopping portal to score some extra cash back). Miscellaneous/Discretionary: $200/month. Classes, business expenses, new clothing, postage, gifts, dental cleaning, prescriptions, etc. Entertainment/Play: $100/month. Happy hour, dinners out, theatre, social meet ups, Netflix, etc. Short Term Savings Goals: $100/month. Emergency fund contributions and short/medium-term savings goals. Long Term Savings/ Debt Pay Off: $250/month. Retirement contributions, long term savings goals, and debt pay off. Total: $2,519.50 per month That’s $30,234 per year, after taxes – which means that to live a reasonably comfortable life in New York City, a single person would need to make a salary of roughly $40,000 per year. Now, this is indeed a comfortable (though far from indulgent) budget. You can absolutely employ strategies to reduce the cell phone bill, the entertainment budget, and utility consumption, among other things. If you’re having a rough month, you can adopt a “make or break” budget , reducing discretionary spending and savings contributions to fund necessities. There are all kinds of ways to rearrange and reallocate for your specific needs, but for the sake of answering the question of how much you need to live in New York City comfortably, as a single adult, while still preparing for a financial future, these numbers are a solid starting point. - See more at: http://thebrokeandbeautifullife.com/much-need-live-new-york-city/#sthash.sbBZbEfH.dpuf



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Financial Modeling and Forecasting PHASE 1 DB Task Type: Discussion Board 2 Deliverable Length: 400–500 words
Posted On: Nov. 21, 2017
Author: Shipra


Financial Modeling and Forecasting PHASE 1 DB Task Type: Discussion Board 2 Deliverable Length: 400–500 words Reminder: Initial Discussion Board posts due by Wednesday, responses due by Sunday Students will be expected to post their first initial discussion board posting by Wednesday of each week. Discussion posts will be graded and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time. Students are expected to post their responses to peers by Sunday. NOTE: All submission posting times are based on midnight Central Time. Primary Task Response: Within the Discussion Board area, write 400–600 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas. Select a company that you are familiar with, and research how regression analysis might apply in forecasting its revenue. Be sure to include the following in your answer: • Explain the difference between a time series forecast and a regression analysis forecast. • What factors or variables might affect the regression analysis outcomes? • When is regression analysis preferred over time series analysis PHASE 1 IP Task Type: Individual Project Deliverable Length: 300–400 words + 1 Excel spreadsheet Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time. For the following set of data, construct a line graph, and interpret the trend. Sales 2008 2009 2010 Jan 80,250 87,500 91,375 Feb 76,450 79,235 81,180 March 84,278 89,567 94,576 April 74,598 77,891 83,455 May 69,489 71,344 79,511 June 67,777 69,001 74,666 July 58,914 64,577 70,788 August 66,788 73,522 79,234 Sept 67,999 75,354 78,299 Oct 89,444 92,389 98,123 Nov 94,777 99,222 109,511 Dec 101,888 106,666 114,444 Answer the following questions: • When is the peak season period? • What period of time represents the lowest earnings period? • What is the trend between 2008 and 2010? • What kind of company would this represent? Why? o Give specific reasons by explaining the data PHASE 2 DB Task Type: Discussion Board Deliverable Length: 400–500 words Reminder: Initial Discussion Board posts due by Wednesday, responses due by Sunday Students will be expected to post their first initial discussion board posting by Wednesday of each week. Discussion posts will be graded and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time. Students are expected to post their responses to peers by Sunday. NOTE: All submission posting times are based on midnight Central Time. Primary Task Response: Within the Discussion Board area, write 400–600 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas. It has been suggested that the best results in forecasting come from not just one method alone, such as a time series analysis or the Delphi method. Describe each of the forecasting methods below, and discuss how to combine them: • Autoregression moving average (ARMA) • Customer surveys • Regression analysis • The Delphi method Provide a rationale for combining (i.e., using simultaneously) these 4 forecasting methods PHASE 2 IP Task Type: Individual Project Deliverable Length: 500–600 words + spreadsheet with 3-year moving average calculations Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time. Compute the 3-year moving average for annual attendance at a county fair from the following attendance numbers, and explain what the numbers tell you, how it is calculated, and what its significance is to the county fair authority. The county fair operates to promote the county’s arts and crafts and business communities. The attendance data is used to plan for venues, parking, and seasonal hiring for the fair. Year Attendance 2005 5,761 2006 6,148 2007 6,783 2008 7,445 2009 7,405 2010 11,405 PHASE 3 DB Task Type: Discussion Board Deliverable Length: 400–500 words Reminder: Initial Discussion Board posts due by Wednesday, responses due by Sunday Students will be expected to post their first initial discussion board posting by Wednesday of each week. Discussion posts will be graded and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time. Students are expected to post their responses to peers by Sunday. NOTE: All submission posting times are based on midnight Central Time. Primary Task Response: Within the Discussion Board area, write 400–600 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas. Forecasting cycles is an inexact science and as such, needs to be grounded in sound economic theory. Explain the use of economic indicators in forecasting business cycles. Please cover the following in your answer: • The leading economic indicators • The concurrent economic indicators • The lagging economic indicators PHASE 3 IP Task Type: Individual Project Deliverable Length: 500–600 words Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time. Explain how to use a multiple linear regression model to estimate future sales. Explain how the various independent variables might affect sales. The formula is Y’ = B0 + bx1 +bX2 + bXn where B0 is the y-axis intercept, b is the slope of the line, Y’ is the dependent variable, and X is the independent variable. Assume that you are estimating the sale of gourmet pies, and include the following in your analysis: • Price of the pie • Price of the competitor's pie • Inflation rate • Disposable income • Unemployment rate PHASE 4 IP Task Type: Individual Project Deliverable Length: 12 slides + title and reference slides; 150–200 words of speaker notes per slide Weekly tasks or assignments (Individual or Group Projects) will be due by Monday and late submissions will be assigned a late penalty in accordance with the late penalty policy found in the syllabus. NOTE: All submission posting times are based on midnight Central Time. Submit a rough draft of the Key Assignment detailed in Week 5 for evaluation and feedback. Select a Fortune 500 company from the manufacturing sector. Examine the 2 previous years' financial data, and create a forecast of revenues and expenses for the coming year using the percentage of sales method. To do this, you will need to go to the Security and Exchange Commission (SEC) Web site. Using the stock ticker symbol for that company, access the most recent 10-K summary report. You must also go to the company’s Web site and open its financial statements. Look at the following areas from that financial data: • Detailed budgets o Production budget o Materials budget o Labor budget o Overhead budget o Cost of goods sold budget o Marketing budget o Estimated retained earnings budget o Change in fixed assets budget o Capital expenditures budget o Cash budget • Financial statements o Income o Balance sheet Perform a regression analysis and a sensitivity analysis on the data. Select an appropriate financial model Part II Deliverable Length: 1,200-1,500 words Explain how autoregression conditional heteroskedasticity (ARCH) and general autoregression conditional heteroskedasticity (GARCH) can be used to smooth out the common problems of autocorrelation found in financial data (ARCH) and variable time lags also found in financial data (GARCH



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Using any computer file you did not create originally is expressly prohibited and will result in zero credit. Solutions must be typed, printed out, and all pages stapled together.
Posted On: Nov. 20, 2017
Author: Shipra


Using any computer file you did not create originally is expressly prohibited and will result in zero credit. Solutions must be typed, printed out, and all pages stapled together. Failure to follow instructions will lead to a reduced grade. Problem 1: Bond Price Volatility [14 points] Consider the following four bonds: i. 3 years to maturity, 0% coupon ii. 8 years to maturity, 0% coupon iii. 3 years to maturity, 7% coupon iv. 8 years to maturity, 7% coupon A. Assuming the term structure is flat at 5%, compute the price of each bond i. to iv. [2 points] B. What is the current yield for each bond from Part A? [2 points] C. Compute the new price and the percentage price change for each bond if the term structure instantaneously shifts from 5% to 5.5%. [2 points] D. Compute the new price and the percentage price change for each bond if the term structure instantaneously shifts from 5% to 4.5%. [2 points] E. How does the bond coupon rate relate to the magnitude of the percentage price change in C. and D.? [2 points] F. How does the term-to-maturity relate to the magnitude of the percentage price change in C. and D.? [2 points] G. Are the magnitudes of the percentage price changes in C. and D. different for each bond? If so, what contributed to that difference? [2 points] Problem 2: Interest Rate Risk [10 points] Consider a 7-year zero coupon bond. A. Using the bond pricing equation, P(y), illustrate the derivation (using calculus) of this bond’s modified duration. Note: the correct answer is an equation, not a number. [2 points] B. Assuming the yield-to-maturity is 3%, compute the bond’s modified duration. [2 points] C. Use your answer to part B to estimate the price of the bond and the percentage price change if interest rates instantaneously rise to 4%. [2 points] D. Use your answer to part B to estimate the price of the bond and the percentage price change if interest rates instantaneously decline to 2%. [2 points] E. How do the estimates from C. and D. compare to the true prices using the bond pricing equation P(y) if yields change to 4% and 2%? Is the estimate more accurate for part C. or D., and why? [2 points] Problem 3: Bond Values Through Time [9 points] Consider a 20-year zero coupon bond. A. Plot the value of the bond P(y) for yields ranging from 0% to 30%. [2 points] B. Add to the graph the price of the same bond after 10 years have passed (i.e. it will be a 10- year zero coupon bond). [2 points] C. Add to the graph the price of the same bond after 15 years (it will be a 5-year bond). [2 points] D. Explain what happens through time (at any given yield) to: a. The bond’s price [1 points] b. The bond’s interest rate risk [1 points] c. The bond’s convexity. [1 points] Clarification: “Explain” means “using your graph, explain to me how I can understand your answer by looking at the graph.” Problem 4: Reinvestment Risk [8 points] Merton is a bond portfolio manager at ABC Capital Partners. His fund recently purchased $200 million principal value of 2-year 15% coupon bonds at par value. Assume that the term structure of interest rates is flat. Under each of the following 3 scenarios, calculate the actual rate of return earned on this bond investment, assuming ABC Capital Partners holds the bonds until maturity. A. Assume the term structure instantaneously shifts from 15% to 20%. Compute the new price of the bonds. Assume ABC Capital Partners holds the bonds until maturity. Compute the holding period return for the bonds assuming the term structure remains at 20% over the holding period. [3 points] B. Repeat part A assuming an instantaneous shift from 15% to 10%. [3 points] C. Explain the roles of interest rate risk and reinvestment rate risk in this example. [2 points] Problem 5: Bootstrapping The Yield Curve [10 points] Based on the U.S. Treasury bond information below, answer the following series of questions. Bond Coupon Rate Maturity (years)Price 1 4% 0.5 99.750 2 3% 1.0 99.000 3 6% 1.5 103.250 4 5% 2.0 103.000 A. [8 points (2 per spot rate)] From the given information, compute the 6-month, 1-year, 1.5- year, and 2-year spot rates. Do not round excessively: use at least 5 decimal places (for example 12.345%). B. [1 points] Is the term structure inverted, normal, or flat? C. [1 points] Use the liquidity preference theory to explain the shape of the term structure (your answer to B).



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(This project is valued at 5% of the final grade.) Financial Statement Analysis provides information that indicates how a company is
Posted On: Nov. 17, 2017
Author: Shipra


(This project is valued at 5% of the final grade.) Financial Statement Analysis provides information that indicates how a company is performing. By comparing financial statements of different years, a manager can make informed decisions about investments, expenditures, and activities that impact revenues. Directions: Read the chapter in the text titled “Financial Statement Analysis.”Using the comparative financial statements for Baby Cakes International Inc. (see “BabyCakes_Financial_Project_Data.xls” linked in the lesson activities) ,complete the following tasks. Note: The market price of BabyCakes Int’l, Inc. common stock was $20 on December 31, 2008. Part A: Complete the 19 ratios listed below. Determine the following measures for 2008: 1. Working Capital 2. Current ratio 3. Quick ratio 4. Accounts receivable turnover 5. Number of days’ sales in receivables 6. Inventory turnover 7. Number of days’ sales in inventory 8. Ratio of fixed assets to long-term liabilities 9. Ratio of liabilities to stockholders’ equity 10. Number of times interest charges earned 11. Number of times preferred dividends earned 12. Ratio of net sales to assets 13. Rate earned on total assets 14. Rate earned on stockholders’ equity 15. Rate earned on common stockholder’s equity 16. Earnings per share on common stock 17. Price-earnings ratio 18. Dividends per share of common stock 19. Dividend yield Part B: Explain what the results of each ratio indicate about the company. Part C: Complete a horizontalanalysis for the Income Statement, and explain your findings. Part D: Complete a vertical analysis for the Income Statement, and explain your findings.



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Total Words ( 3834 ): Assignment: Dt: 27.08.2009
Posted On: Nov. 13, 2017
Author: Shipra


Total Words ( 3834 ): Assignment: Dt: 27.08.2009 Sno. Issue Addressed 1. Voluntary Disclosure of Non Financial Information 2. Distinction Between Debt and Equity From Accounting Standard Setters and Regulators Point of View 3. Should All Types of Shares Issued By Companies Be Treated as Equity 4. Accounting Treatment/Classification of Cumulative Perpetual Preferred Preference Shares 5. References Q. In your study of accounting, apply the different accounting theories that you have learnt in this subject to explain why companies voluntarily disclose non financial information in their annual report. Discuss the relevant issues with examples. Ans: Suitable explanation to this question is given in 2 parts; where in it is explained why voluntary disclosures are made by companies. In Part A it has been explained as to how good Corporate Governance that includes Disclosures in its fold; results in significant benefits - both financial and non financial to the companies. It being so ; in view of the aforesaid and in an overall environment of Integrity, transparency, fair practices, ethics and accountability ; Companies go in for voluntary disclosures of non financial information in their annual report. In Part B; it has been explained through examples and specific items; Implications viz Frauds suffered by companies; if non disclosure is there or disclosures are made but that are incomplete, inaccurate and not timely. It been so; it makes voluntary disclosures by companies all the more relevant and important to identify ethical companies from the rest. PART A Corporate Governance refers to the processes and structure by which the business and affairs of the company are directed and managed. The primary objective of sound corporate governance is to contribute to improved corporate performance and accountability in creating long term shareholder value. Good corporate governance is fundamentally about trust and confidence. These are vital underpinnings of commercial transactions, and indeed, of the market economy. Companies in Singapore rank highly in corporate governance. The IMD World Competitiveness Report ranked corporate boards in Singapore to be the best in Asia in supervising the management of companies. Singapore was also ranked first out of ten Asian countries in a joint study on corporate governance standards by CLSA, the Asian Corporate Governance Association and the Political and Economic Risk Consultancy, June 2005 The high standards achieved by Singapore are the results of three mutually reinforcing components in system - legal, supervisory and enforcement regime; disclosure standards and market discipline; and finally, the commitment of corporate leaders to maintaining integrity. Singapore has so far adopted all International Accounting Standards. Strengthening of corporate governance, accounting and disclosure standards, adapting international best practices to suit Singapore's context, is an on-going effort. Studies have shown that companies with good corporate governance command a premium in their valuation. At the national level, the benefit of good corporate governance and ethical behavior is quite clear. Singapore's strong reputation as a trustworthy jurisdiction is a key competitive advantage in attracting trade and investment, and in positioning Singapore as a premier financial centre and business hub. When companies based here are associated with the values of integrity and credibility, they receive the recognition from global investors who are willing to pay a premium for their strong branding as trusted entities. Many companies, local and foreign, use Singapore as the home base to raise capital, to site command and control functions, and to engage in high value R&D and marketing functions. Singapore authorities have placed an increasing emphasis on corporate governance, generally benchmarking local standards to international best practices. Following the amendments to the Companies Act on 8 July 2002 Council on Corporate Disclosure and Governance ("CCDG") was launched on 16 August 2002. The Council On Corporate Disclosure and Governance (“CCDG”) is responsible for strengthening the framework on disclosure practices and reporting standards taking into account trends in corporate regulatory issues and international best practices, reviewing and enhancing the existing framework on Corporate Governance and promote good Corporate Governance in Singapore, taking into account international best practices, and prescribing accounting standards in Singapore. The CCDG constantly encourages companies in Singapore to improve their corporate governance culture and practices, so that over time, more and more companies are able to comply with the spirit and substance of the Code. The CCDG also reviews the disclosure practices of all companies on a continuous basis. The Code of Corporate Governance 2005 issued by the Ministry of Finance supersedes and replaces the Code that was issued in March 2001. Listed companies are required to disclose their corporate governance practices and explain deviations from the Code of Corporate Governance 2005 in their annual reports for AGMs held from 1 January 2007 onwards. PART B Improper Disclosures: In the below mentioned text; it will make it clear; as to in the absence of Proper Disclosures – Voluntary – there is strong possibility of Fraud in the Financial Statements. Accounting Principles require that financial statements include all the information necessary to prevent a reasonably discerning user of the financial statements from being misled. The notes should include narrative disclosures, supporting schedules, and any other information required to avoid misleading potential investors, creditors, or any other users of the financial statements. Management has an obligation to disclose all significant information appropriately in the financial statements and in management’s discussion and analysis. In addition, the disclosed information must not be misleading. Improper disclosures relating to financial statement fraud may involve the following: • Liability Omissions • Subsequent Events • Related Party Transactions • Accounting Changes Liability Omissions Typical omissions include the failure to disclose loan covenants or contingent liabilities. Loan covenants are agreements, in addition to or as part of a financing arrangement, which a borrower has promised to keep as long as the financing is in place. The agreements can contain various types of covenants including certain financial ratio limits and restrictions on other major financing arrangements. Contingent liabilities are potential obligations that will materialize only if certain events occur in the future. A corporate guarantee of personal loans taken out by an officer or of a private company controlled by an officer is an example of a contingent liability. Under most accounting standards, the company’s potential liability, if material, must be disclosed. Subsequent Events Events occurring or becoming known after the close of the period may have a significant effect on the financial statements and should be disclosed. Fraudsters typically avoid disclosing court judgements and regulatory decisions that undermine the reported values of assets, that indicate unrecorded liabilities, or that adversely reflect upon management integrity. Public record searches can often reveal this information. Related Party Transactions Related party transactions occur when a company does business with another entity whose management or operating policies can be controlled or significantly influenced by the company or by some other party in common. There is nothing inherently wrong with related party transactions, as long as they are fully disclosed. If the transactions are not conducted on an arm’s length basis, the company may suffer economic harm, injuring stockholders. The financial interest that a company official might have may not be readily apparent. For example, common directors of two companies which do business with each other, any corporate general partner and the partnerships with which he/she /it does business may be related parties. Family relationships can also be considered related parties, such as all lineal descendents and ancestors, without regard to financial interests. Related party transactions are sometimes referred to as “self – dealing “. While these transactions are sometimes conducted at arm’s length, they often are not. Example: In September 2002, the U.S. Securities and Exchange Commission (SEC) charged former top executives of Tyco International Ltd., including former CEO L.Dennis Kozlowski, with violating U.S. Securities laws by failing to disclose to shareholders hundreds of millions of dollars of low interest and interest-free loans they took from the company, and in some cases, never repaid. The SEC complaint, which also charged former Tyco CFO Mark H.Swartz and chief legal officer Mark A. Belnick, alleges that the former executives sold shares of Tyco stock valued at millions of dollars while their self- dealings remain undisclosed. The Complaint alleges numerous improper transactions, such as Kozlowski’s use of US$242 million of loans for impermissible and unauthorized purposes including finding an extravagant lifestyle. With their undisclosed loans, Kozlowski allegedly amassed millions of dollars in fine art, yatchs, and estate jewellery, as well as a US$ 31 million Park Avenue apartment and a palatial estate in Nantucket. Kozlowski and Swartz allegedly engaged in undisclosed non arm’s length real estate transactions with Tyco or its subsidiaries and received undisclosed compensation and perquisites including forgiveness of multi million dollar loans, rent – free use of large New York apartments, and use of corporate aircraft for personal purposes at little or no cost. In July 2004, Belinck was acquitted of all the charges brought against him. In a separate trial , Kozlowski and Swartz were each found guilty of 22 charges, including grand larceny, falsifying business records, conspiracy, and securities fraud, and face upto 30 years in prison. At time of this writing, both men were awaiting sentencing. Accounting Changes There are generally three types of accounting changes that must be disclosed to avoid misleading the user of financial statements: accounting principles, estimates, and reporting entities. Although the required treatment for these accounting changes varies among the types and across jurisdictions, they are all susceptible to manipulation by the determined fraudster. For example, fraudsters may fail to properly retroactively restate financial statements for a change in accounting principle if the change causes the company’s financial statements to appear weaker. Likewise, they may fail to disclose significant changes in estimates such as the useful lives and estimated salvage values of depreciable assets, or the estimates underlying the determination of warranty or other liabilities. They may even secretly change the reporting entity, by adding entities owned privately by management or excluding certain company – owned units, in order to improve reported results. The notes give additional information about the information in the financial statements. Disclosures In addition to the measurement accounting principles that guide the values placed on the elements included in the balance sheet, there are accounting principles specifying the informative disclosures that are necessary because, without the information they provide, the financial statements would be misleading. Refer International Accounting Standard 37:Provisions, Contingent Liabilities and Contingent Assets: Objective: The objective of this standard is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities and contingent assets and that sufficient information is disclosed in the notes to enable users to understand their nature, timing and amount. ( The above is the statutory rationale for Disclosures in the Financial Statements) It shall be clear that voluntary disclosures are made to have trust, confidence of the 3 key constituencies for any corporate viz 1. Customers 2. Shareholders 3. Employees. The following five disclosure techniques are used in varying degrees in contemporary financial statements: 1. Parenthetical explanations 2. Notes to the financial statements 3. Cross References 4. Valuation Allowances(sometimes referred to as “contra” amounts ) 5. Supporting Schedules Parenthetical explanations. Information is sometimes disclosed by means of parenthetical explanations appended to the appropriate balance sheet caption. For example Common stock ($ 10 par value, 200,000 shares authorized, 150,000 issued) $ 1,500, 000 Notes to Financial Statements If the information cannot be disclosed in a relatively short and concise parenthetical explanation, a note disclosure is used. For example Inventories (see note 1) $2,550,000. The notes to the financial statements would contain the following: Note 1: Inventories are stated at the lower of cost or market. Cost is determined using the first-in-first-out (FIFO) method. Cross – references. Cross- referencing is used when there is a direct relationship between two accounts on the balance sheet. For example: Among the current assets, the following might be shown if $1,500,000 of accounts receivable were pledged as collateral for a $1,200,000 bank loan. Accounts receivable pledged as collateral on bank loan payable $ 1,500,000 Included in the current liabilities would be the following: Bank loan payable – collateralized by accounts receivable $ 1,200,000 Valuation Allowances. Valuation allowances are used to reduce or increase the carrying amounts of certain assets and liabilities. Accumulated depreciation reduces the carrying value of property, plant, and equipment, and a bond premium ( discount ) increases ( decreases ) the face value of a bond payable as shown in the following illustrations: Supporting Schedules. A supporting schedule might be used to provide additional detail about an item in the financial statements. Q.Why do accounting standard setters and regulators regard the distinction between debt and equity as important? Your response should indicate the practical implications of the distinction. Ans: Accounting standard setters and regulators regard the distinction as important as: • Presentation of Financial Statements viz Balance sheet, Income Statement and Cash Flow Statement; that gives a true and fair position of the state of affairs of a company ; it is of concern for the standard setters that there is absolute clarity in regard to components of Debt and Equity for period to period financial analysis, industry analysis and further that there is harmonization with the International Accounting Standards- International Financial Reporting Standards ; so that analyst across the globe can undertake financial analysis without avoidable time spent in doing adjustments. • Again for processing of financial information submitted to the regulators; it is of importance that there is “clear definition and understanding” of the regulators reporting format so that the aggregate figures of Debt and Equity are separately updated in the relevant data fields and there is minimal queries/resubmissions in view of technical errors in improper understanding of the distinction between debt and equity. • Its their duty and responsibility to ensure that there is compliance with all relevant and requisite “Financial Health Key Indicators”. • They have to ensure that “Preventive Controls - Flags – Alerts” put in place to check if the Company is “geared” within permissible limits keeping the overall capital structure in perspective. • Monetary Authority of Singapore (MAS) compiles a lot of financial and economic intelligence for macro and micro economic management; as such it is of particular concern and interest to the Debt Equity mix employed by the Companies. • For doing financial statement analysis and reviews; the distinction between debt and equity is of primary focus; as based on the Capital Structure mix with clear distinction between debt and equity shall assist the statutory authorities and regulators to make necessary policy adjustments and procedural changes like Credit Policy, Taxation, and Treasury Management. • Too Much Debt: Borrowing too much money to continue operations or to finance new activities can be a major red flag that indicates future problems for a company especially if interest rates start rising. Debt can overburden a company and make it hard for a company to meet its obligations, eventually landing the company in bankruptcy. Examples of Financial Ratios having Debt and Equity Inputs Debt Equity Ratio = Debt/Equity Analysis: Higher the ratio, riskier is the Capital Structure, because of • Higher Interest burden and • Greater chance of insolvency in the long run. More a company borrows, harder it will be for it to pay interest in the years of falling profits. Leverage Ratios Financial Leverage Refers to the extent to which the firm has fixed financing costs arising from the use of debt capital. A firm with high financial leverage will have relatively high fixed financing cost compared to a firm with low financial leverage. It is sometimes also called Interest-charges leverage, which exists whenever the firm has debt that requires the payment of interest. Financial Leverage and Risk As the company becomes more financially leveraged, it becomes riskier, which leads to: Increased fluctuations in return on equity Q.Should all types of shares issued by companies be treated as equity? Explain your answers fully. Ans. All shares issued by companies cannot and should not be treated as Equity alone. A Company should have an optimum capital structure with right mix of debt and equity to takes benefits of tax incentives available for loan capital. Below a brief explanation of the Kinds of Capital available other than Equity and benefits/advantages there in are mentioned. Equity Is an ownership “share” in the revenue stream of a corporation’s income once all prior obligations and debts have been satisfied. There are various classes of equity for the individual investor to consider. The primary 3 groups into which equity may be subdivided are • Common stock, • Preferred stock and • Warrants. Common Stock • Represents an ownership in a corporation. • Common stockholders participate in the earnings stream of the corporation through dividends paid and capital gains made on a per share basis. • Owners of common stock are responsible for the election of Board of Directors, appointment of Senior Officers, the selection of an auditor for the corporate financial statements, dividend policy and other matters of corporate governance,. • Investors participate to a greater extent in the fortunes of the firm. Capital gains, through the increase in market price of the firm’s stock, accrue to a greater extent to the holder of common stock than to the holder of preferred stock. • Common stockholders also have a couple of significant rights should the business invested in be wound down ; limited liability to the creditors of the firm and a residual claim on any assets or income derived once all prior claims ( motgages, bondholders, creditors, etc.) have been satisfied. Preferred Stock • Are stock in a company which have a defined dividend, and a prior claim on income to the common stock holder. • Should the company wind up operations, preferred shareholders are paid any obligations owed to them. Should a dividend be suspended by the Board of Directors, for what ever reason, the preferred share usually has a cumulative clause in it allowing that any unpaid dividends must be fully paid before any dividends may be declared and paid to holders of common stock. This means that the preferred share is a relatively more secure investment. The corporate issuing preferred shares may add differing features to the share in order to make it more attractive. These features are similar to those used in the fixed income market and include convertibility into common shares, call provisions, etc. Many have equated preferred shares with a form of fixed income security due to its defined dividend stream. • However, with he added security offered by the guaranteed dividend stream, the holder of preferred shares gives up the right to vote on issues related to corporate governance. Therefore, the preferred holder has little input into corporate policy. Types of Preferred Stock: Cumulative preferred stock - If the dividend is not paid, it will accumulate for future payment. Convertible preferred stock - This type of preferred stock carries the option to convert into a common stock at a prescribed price. Perpetual preferred stock - This type of preferred stock has no fixed date on which invested capital will be returned to the shareholder, although there will always be redemption privileges held by the corporation. Most preferred stock is issued without a set redemption date. Participating Preferred Stock- This type of preferred stock allows the possibility of additional dividend above the stated amount under certain conditions. Why Preferred? A company may choose to issue preferred for a couple of reasons: Flexibility of Payments: Preferred dividends may be suspended in case of corporate problems. Easier to market: The majority of preferred stock is bought and held by institutions. Institutions tend to invest in preferred stock because IRS rules allow U.S. corporations that pay corporate income taxes to exclude 70% of the dividend income they receive from their taxable income. This is known as the dividend received reduction, and it is the primary reason why investors in preferred are primarily institutions. Preferred Stock Pros • Higher Fixed Income payments than bonds or common stock • Lower investment per share compared to bonds • Priority over common stocks for dividend payments and liquidation proceeds • Greater price stability than common stocks • Greater liquidity than corporate bonds of similar quality Warrants: A warrant is a right, exercisable for a stated period of time that allows the holder to purchase a stated amount of shares for a designated price. Companies sometimes give warrants to investors as an “equity kicker” or “equity sweetener” to make investment more attractive to those investors. Treasury Stock: Stock that is repurchased by the Company from the stockholders. How would you treat the cumulative perpetual preferred preference shares of Casino. Justify your view based on any accounting standards or pronouncements that you may have access to. Cumulative preferred stock - If the dividend is not paid, it will accumulate for future payment. Perpetual preferred stock - This type of preferred stock has no fixed date on which invested capital will be returned to the shareholder, although there will always be redemption privileges held by the corporation. Most preferred stock is issued without a set redemption date. Perpetual Cumulative Preferred stock will be included as Tier 2 Capital. This is aligned with the Basel 1 and Basel 2 norms for supplementary capital- as Preferred Stocks are Hybrid Instruments having characteristics of both debt and shareholders equity. How would you treat the cumulative perpetual preferred preference shares of Casino. Justify your view based on any accounting standards or pronouncements that you may have access to. Ans. Definitions: Cumulative preferred stock - If the dividend is not paid, it will accumulate for future payment. Perpetual preferred stock - This type of preferred stock has no fixed date on which invested capital will be returned to the shareholder, although there will always be redemption privileges held by the corporation. Most preferred stock is issued without a set redemption date. Accounting Treatment Perpetual Cumulative Preferred stock will be included as Tier 2 Capital. This is aligned with the Basel 1 and Basel 2 norms for supplementary capital - as Preferred Stocks are Hybrid Instruments having characteristics of both debt and shareholders equity. It is further stated that on 30th June; it is more than likely that the Company will classify the security as equity. From the particulars given; there is no mention that the preferred stock are convertible in nature. Had that been the case; then it would have been consistent with what has been stated in the Information provided in the case study. In the existing facts either there is a redemption that is exercised; a right that is vested in perpetual preferred stock; and then the security is classified as Equity or there will be need for a board resolution to be passed and then approved in the shareholders meeting; to have the existing cumulative perpetual preferred shares converted to Equity prior to 30th June. References: 1.Association of Certified Fraud Examiners, USA 2.Institute of Management Accountants, USA 3.Association of Chartered Certified Accountants, UK 4.ICWAI- India. 5.All India Management Association, India 6.www.IASB.org Website 7.www.SEC.gov Website 8.www.AICPA.org Website 9.www.FASB.org Website 10.Monetary Authority of Singapore. 11.Doing Business in Singapore-ICSI-India.



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MODULE 8 Financial Statement Analysis This module will focus on the analysis of financial statements in order to measure
Posted On: Nov. 13, 2017
Author: Shipra


MODULE 8 Financial Statement Analysis This module will focus on the analysis of financial statements in order to measure financial health and forecast future business financial viability. The study includes the careful selection of data to examine trends, the use of key financial ratios and other financial tools necessary to analyze business financial conditions. Objectives: After completing this module, you should be able to understand and use financial ratios to analyze financial statements in order to measure the financial condition of a business entity. You should understand consistent guidelines and methodologies for identifying activities that are sources for business analyses and utilized for organizational and business decision. Specific objectives include being able to: • Analyze financial statements using trending and comparative methods. • Assess financial statements and convey their importance to stockholders and stakeholders. • Use financial ratios to measure assets, debts, stockholder's equity, return of assets and return on equity. • Interpret financial ratios to analyze and implement cost effective material and inventory management. • Explain the need for qualitative as well as quantitative analysis of financial statements. • Formulate financial executive summaries for presentations to senior management and stockholders. Readings: • Brewer, Garrison, Noreen (2005). Introduction to Managerial Accounting 4/e, McGraw-Hill. Chapter 14. Assignments: Please submit ONE MS Word document that contains all of your answers. Please use Excel and copy and paste your answers to the document you will submit for evaluation. Please show your answers step-by-step. Your assignment shall be well organized and formatted. Your paper shall illustrate your clear understanding of both cash inflow and cash outflow because both are important to successful organizational and company operations. Exercises: [10 points each] Chapter 14 1. Exercise 14-7 Selected Financial Ratios for Common Stockholders, p. 609. Please answer parts one and two only. 2. Exercise 14-8 Selected Financial Ratios, p. 609. 3. Problem 14-11A Interpretation of Financial Ratios, p. 610-611. Please answer only part 'a' of this question. Course Evaluation: As your final assignment, you need to complete the online course evaluation. Your responses will remain confidential. The course instructor will receive a report summarizing the responses of all course participants; no names will be associated with specific comments or ratings. Discussion Questions: [10 points each] 1. Discuss the difference between operating profits and the bottom line (profits after revenues and expenses). 2. What do you think it means when Chief Financial Officers (CFOs) talk about financial leverage? Summary: Module 8 explained the objectives and techniques of financial statement evaluation as an important management element, which can also be utilized by the managerial accounting managers for decision-making. It summarized all the ratios presented thus far in the course, using comprehensive financial analyses emphasizing their relative importance to the overall operation of the organization and the firm. Comparison of financial data, understanding ratios such a working capital, current ratio, acid test, inventory turnover, debt to equity, return on equity were presented in order to isolate the well being of a firm. It also addressed information and guidance relevant to the career of managerial accountant.



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Financial management MODULE 5 Decentralization and Relevant Costs for Decision-Making
Posted On: Nov. 13, 2017
Author: Shipra


Financial management MODULE 5 Decentralization and Relevant Costs for Decision-Making This module continues the discussion of performance measures through the use of return on investment (ROI), and retained and residual income to assure organizational goals and motivate managers. The module will further focus on relevant and irrelevant cost data and operational decisions for best alternatives to meet organizational and business goals and objectives. Objectives: After completing this module, you should be able to understand and apply learning objectives related to the role of cost, profit analysis and investment centers in a decentralized organization structure, notably: • Compare and contrast relevant and irrelevant costs in the decision-making process. • Formulate and analyze capital investment alternatives. • Perform analyses for the viability of product lines. • Determine the best and most cost efficient use of resources. • Compute break-even-point and return on investment (ROI) for organizational investments. • Assess retained and residual income as a performance measure for organization operation. Readings: • Brewer, Garrison, Noreen (2007). Introduction to Managerial Accounting 4/e, McGraw-Hill. Chapters 10 and 11. Assignments: Please submit ONE MS Word document that contains all of your answers. Please use Excel and copy and paste your answers to the document you will submit for evaluation. Please show your answers step-by-step. Your assignment shall be well organized and formatted. Your assignment shall illustrate your clear understanding of how a managerial accounting manager measures, reports, and evaluates performance for various types of responsibility centers. It should also illustrate that you know how to calculate return on investment (ROI), residual income, and economic values. Upon successful completion of this module, I am confident that you will understand the importance of linking performance incentives to performance measures, while providing instruction and tools for short-run decision. Exercises: [10 points each] Chapter 10 1. Exercise 10-8 "Images.com", p. 442. 2. Problem 10-13A "Kramer Industries" Return on Investment (ROI); Residual Income; Decentralization, p. 444. Chapter 11 1. Exercise 11-6 Identification of Relevant Costs, pp. 479-480. Please answer only part one. 2. Problem 11-12A "Wright Airlines" Dropping or Retaining a flight, p. 482-483. Issues to Consider: [10 points] Read the Ethics Challenge on page 488, and write a two-paragraph narrative addressing the first part of the question. Discussion Questions: [10 points each] 1. If you wanted to encourage efficient operation within any organization, what would be the best method of performance measure for management and why? 2. The key to the efficient utilization of a scarce resource is the contribution margin per unit of the constraint resource. What does this statement mean? Provide examples in your discussion. Summary: Module 5 continued the discussion of how a managerial accounting manager measures, reports, and evaluates performance for various types of responsibility centers. The balanced scorecard was discussed with its links to the management cycle isolated. The calculation of performance measures such as return on investment (ROI), residual income, and economic value added were also covered. Various approaches to performance reporting by different types of decentralized organizations, including flexible and fixed budgeting were introduced. The module emphasized the importance of linking performance incentives to performance measures, while providing instruction and tools for short-run decision. A discussion of how the management cycle is used to identify relevant and irrelevant cost and their respective utilization in the decision-making process was also included. Decision analysis in a manufacturing organization facing outsourcing decisions, special order decisions, segment profitability decisions, product mix decisions in an environment of constrained or limited resources, and sell or process-further decisions were also addressed in this module. The module concluded with an application of various types of decisions for service or non-manufacturing organizations as well.



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Great financial inequality exists between the schools and conferences that compete
Posted On: Nov. 8, 2017
Author: Shipra


Financial inequality Great financial inequality exists between the schools and conferences that compete within the divisions of the NCAA. What is the cause of the inequality? What is the result of the inequality? What solutions would create more financial parity among the NCAA member institutions? How can the NCAA foster these solutions? Inequality in the intercollegiate athletics has been prevalent for quite some time. The root cause of the same is free-market forces that influence the intercollegiate athletics, more specifically the National Collegiate Athletic Association (NCAA). Since NCCA has several member institutions, the inequalities spread to all conferences, universities, and several other athletic programs, to specific sports and ultimately to student- athletes. Several top-notch schools are flooded with cash while others are in the red. Except for handful colleges with excellent academic reputations, others treat athletic teams as the outcome of financial health. This includes college public relation teams, admission counselors, and other related departments. This is based on a simple logic. Triumph in athletics brings about reputation that entices more student applications, and therefore increases the level of selectivity in admissions. It also stimulates the alumnae to contribute more towards the school’s endowment. The choice among the players is limited and thus they accept the reality with disdain. Since the NCCA claim there is not enough money going around, players accept it as their fate and this in turn leads to financial inequality. The same is also true for women sportspersons as well as a vast majority of college athletic programs are left with not much funds and are invariably in the red. The solution lies in treating players at par on the basis of their performance and set standard for achievements. Based on this criteria payment should be made. This would leave out grievances. Reference Cozzillio M.J. Robert L. Hayman (2005) Sports and inequality Carolina Academic Press Role of athletic departments Is the role of collegiate athletic departments more aligned with the business or educational goals of the universities and colleges? What role has the NCAA had in the development of athletic departments as related to the goals of the departments? What evidence from the course text supports your perspective? Intercollegiate athletics helps in supporting the mission of different universities. This is done b offering several activities that enhance the personal and cultural development of the student, in addition to providing them skills and team building techniques that would be useful to them lifelong. This would be helpful to them in their future endeavors. Another benefit of athletics is that it provides community awareness and encourages involvement in activities that would make them a better citizen. This also helps universities and colleges in gaining statewide and nationwide publicity. The lateral effect of the same is that it benefits in enrolment of students which is a big contributor to the revenues of the universities. Furthermore, intercollegiate athletics gives rise to several other opportunities and acts as a bridge between alumni and the university. This in turn acts as a way of increasing the potential for future gift giving in terms of financial package to the universities. The affiliation of the colleges and universities with NCCA division provides a unique balance between athletics and academics. It helps the student in obtaining a rich and quality education which helps in their professional growth and development right from the first year to the last. The aim of the colleges and universities is to prepare them for a suitable career in life by helping them in participating in athletics at a competitive and highly respected level. References Weaver A.G. (2007) Upward Reclassification of Intercollegiate Athletic Departments to Division I: A Case Study Approach ProQuest



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Critically evaluate the importance of capital structure and the cost of capital in the efficient financial management of large companies.
Posted On: Nov. 8, 2017
Author: Shipra


Part A. Critically evaluate the importance of capital structure and the cost of capital in the efficient financial management of large companies. Capital Structure can be simply put as the combination and the types of sources of finances available in an organization. In order to carry out operations , an organization has to make arrangements for its finance. Thse can be arranged in the form of • Long term debt • Short term debt • Common equity and • Preferred equity The long term debt is in the form of borrowing from banks or other financial institutions. In this case the rate of interest need to be taken into consideration as a higher rate of interest would add considerable burden on the financial health of the company. Short term debt on the other hand implies borrowing to meet the expenses on the short term basis. These borrowings are meant to meet expenses of short term nature, such as payment to vendors, short term commitments etc. Equity as the name suggests, means ownership. It can be either common ( i.e., ownership by general public etc , having no special rights ) and preferred ( with special rights and implications / obligations ) Either way , equity is one form of arranging finance for the company. Cost wise, the company has to consider which one is the most economical method. As mentioned, Debts ( both short and long term ) involve payment of interest and this needs commitment from the company. This can not be ignored .Equity is ownership and the dividend or profit is distributed to the owners as and when it is declared. So , one can say that equity is a cheap form of borrowing but then one looses control on the operations of the company as being a equity holder, the person who has a stake also has a saying in the working of the company. Another form of finance is leasing which is generally adopted by companies who wish to purchase items of large value but can not afford to make payment for the same. In this case, the equipment to be used by the company is not bought by them from the suppliers, but given on lease or contract. This way , the company can make use of the item / equipment and the supplier gets payment on a regular monthly basis. It is obvious that the ownership of the equipment remains with the supplier itself. Heavy machinery , trucks, buildings etc are some of the items which are taken on lease by the companies. Generally in every organization, the sources of finances are of two types – owned and borrowed. They are also known as the equity capital and debt capital respectively. Judging the right mix of equity and debt is one of the most complex decisions making of all the processes that the management faces. While the debt is cheap, it is a perpetual liability on the business and eats a large amount of interest from the business’s profits. On the other hand, equity capital is safe but is very costly to maintain and often deprives the company of the tax benefit that it can derive. Cost of capital is also known as the Weighted Average Cost of Capital (WACC) or the required rate of return is the summation of cost of all types of capital available in the firm’s capital structure. The capital structure and the cost of capital are closely associated with each other as the proportion of cost and debt has the direct implications on the overall cost of capital (WACC). WACC is nothing but a simple calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All capital sources such as - common stock, preferred stock, bonds and any other long-term debt - are included in a WACC calculation. The WACC formula is Where: Re= cost of equity Rd = cost of debt E = market value of the firm's equity D = market value of the firm's debt V = E + D E/V = percentage of financing that is equity D/V = percentage of financing that is debt Tc = corporate tax rate (http://www.investopedia.com/terms/w/wacc.asp) Numerical example Suppose the following situation in a company: The market value of debt = €300 million The market value of equity = €400 million The cost of debt = 8% The corporate tax rate = 35% The cost of equity is 18% The WACC of this company is: 300 : 700 * 8% * (1-35%) + 400 : 700 * 18% ------------------------------------------------ 12,5% (WACC - Weighted Average Cost of Capital) (http://www.12manage.com/methods_wacc.html The initial theories in respect of the capital structure was propounded by Modigliani & Miller in 1958 which questioned whether the company is having the capital structure which is optimal enough and making money for the investors those who provide it. Although the assumptions of the theory are quite absurd like there is no tax, there is only a single rate for borrowing and lending and market has perfect competition. This kind of situation was never and will never be in the market. Also it is impossible to imagine a world without tax. This is tax only that makes the debt advantageous and provides the necessary leverage to the firm and helps firms maximize their values. It is the tax that motivates the businesses to go for capital gearing and take up more debts for financing their projects. The greater the leverage or gearing, the greater are the tax benefits to business arising out of debt financing. The capital structure is one of the very important factors in deciding about the overall profitability of the firm and it variates from industry and industry and region to region across the globe. While the US and Japanese companies have high amounts of debts in their Balance Sheets, many German and Canadian firms have less debt book value. This has also to deal with the tax laws in the prevailing country. The other significant observation is that the capital structure varies from industry to industry. The capital intensive industries like telecom, automation, power etc have more gearing than the service sectors like IT. In some of the cases, it has also been observed that the tax reforms or the change in them has not impacted the capital structure of the company, like in US. Among the major capital structure theories, first of them is trade – off model which suggests that the capital structure of the company is dependent upon the trade off between tax benefits and risk associated with the high leverage. A model with an inverse relationship between financial distress and optimal leverage in early 1980s (M. Bradley, G. Jarrel, E. Kim, 1984). The model so developed studied 800 firms over a period of 20 years and observed that the findings were consistent with the trade – off model. Another theory is known as Pecking Order Theory which suggests that the real life firms have all sorts of capital structure combinations. It ranges from 100% Equity to 100% between and many in between them. The companies adjust and change this combination according to their needs, financial conditions and prevailing economic situation. Cost of capital is something about which most of the companies are worried about. They want to keep it as low as possible. In the M&M theory do not work in the actual world and the main reason for that they do not take in to consideration the agency cost which is actually a hidden cost in debt financing. It is often mis understood that getting the debt is easier than equity but that is not true. The sources or the providers of the debt are always worried about the safety of their money and often critically evaluate the firm’s ability to service the debt and interest payment. They are also concerned that the firm should not take any excessive risk which could jeopardize the safety of their money invested. In order to save them, they often insist on inserting the covenants in the agreements which restricts the firm to take too much of risky decisions like disposing off the assets, restrictions on the use of the money, putting the first charge on the fixed assets and like. These restrictions are known as agency costs. There are several other factors that need to be taken into the consideration before arriving at the single figure of cost of capital. It is comprised of cost of equity capital, cost of debt, cost of preference capital and the cost of retained earnings. Once the cost of each element of the capital structure is calculated, the same is multiplied by its respective weights in the capital structure and then added to get the WACC. This holds a special position in the financial position and the decision making process of the firm as this is used as the discounting method in evaluating the projects or making any long term decision. The cost of capital is also important from the point of view that it is compared with the Return on Equity and Return on Investment. If ROE & ROI are more than the cost of capital, it is considered that the firm is doing well and reflects the efficiency of the management. Then again the firms have to walk on the tight rope of maintaining the capital structure which can also bring their overall cost of capital to the minimum possible level. In fact, dealing with the capital structure and cost of capital issues is a continuous process and it keeps on changing from situation to situation as per the prevailing economic and financial needs. The ratio of debt to equity is extremely difficult to quantify. It depends on several factors such as the type of industry sector in which a company operates, the life cycle stage of the industry. A low debt and higher equity based companies have better chances of borrowing from the market and people will be wiling to invest in them. Part B Discuss the motives behind corporate restructuring and evaluate the methods by which mergers and takeovers may take place. As the name suggest, Corporate Restructuring is the changing the design and structure of the company as they it used to exist. It means change in the financial structure, management or the controlling of an organization. It is much broader term than we expect and covers many aspects of business reorganization like mergers, takeovers, hostile takeovers, internal or external reconstruction of the financial of the organization and rearrangements. It might be expansion or the shrinking the scale or operations of the organization. Why do companies resort to Corporate Restructuring? There might be ample reasons due to which the company might resort to corporate restructuring. One of the reasons could be reshaping its structure. Like humans companies also take care of their health and want to look slim, trim, active and healthy. When any organization grows to a size that it’s bulky and becomes lethargic due to its own weight, it becomes necessary to adopt lean strategies like spinning off some of its divisions into the subsidiaries, which function as the investment center. The company also sees it as the opportunity to focus on the core business and increase its market share. It also gives the parent company an advantage to take the benefit of tax exemptions. The whole business world is still struggling with the global recession and is still far from over. In the era of turbulent times, the companies also feel the burden of the costs that they are carrying and this prompts them to take steps to restructure their financial management. When the revenues are dropping, margins are squeezing and recession starts taking the toll of the firm’s business, then the organizations often resort to cost cutting and rearrangement of their financials and costing model. They might also resort to cost cutting, scaling down the operations, change the senior management, close the unprofitable businesses or units and even layoffs. Somebody in the business world has compared it as a sea and the presence of sharks can not be ruled out in a sea. One of the very common reasons of corporate restructuring is mergers and acquisitions. While the mergers happens to create a synergy with the willingness of the two businesses to create a new bigger business. On the other hand, acquisitions could be in the form of hostile takeovers or levered buyouts. What ever be the reason, sometime the companies also allows them to be taken over in order to book a profit and exit. Sometimes the acquirer also sees a gain in the acquired company due to the assets it owns and then selling them off at a profit and uses those resources to run the acquired company which could not have been possible without a takeover. Methods of executing Mergers and Acquisitions (Takeovers) Mergers Mergers are the business combinations in which the business come together to form a new company. The merged companies loose their identity in this process. This can be done in the two broad categories: (i) On the basis of nature • Horizontal This happens when two or more companies in the same industry merge together. The main motives behind this kind of mergers are cutting the costs, economies of scale and cutting down the competition. A horizontal merger is when two companies competing in the same market merge or join together. When two extremely small companies combine, or horizontally merge, the results of the merger are less visible. Such kinds of horizontal mergers are quite common. For example if a small pharmaceutical company were to horizontally merge with another local pharmaceutical , the effect of this merger on the pharmaceutical market would be negligible. However, in a large horizontal merger, the ensuing ripple effects can be felt all over the market segment and sometimes throughout the whole economy. http://www.learnmergers.com/index.shtml • Vertical This kind of merger often happens between tow or more different levels of companies in order to gain the major market share. This is basically done in order to have control over the raw material or the use of the end product and gain with the synergy. The business combination of AOL and Time Warner is one such example. A vertical merger is one in which a firm or company combines with a supplier or distributor. This type of merger can be viewed as anticompetitive because it can often deprive supply business from its competition. For example if a contractor has been receiving raw material from two different firms, and then decides to purchase the two supplying firms, the vertical merger could cause the contractor’s competitors to go out of business. Antitrust concerns are a crucial point of investigation if competition is hurt. • Conglomerate, and This kind of merger also happens in the same industry but the two or more firms are not having any kind of relationship. This is just to have more of a space and focus on diversification. • Reverse Merger This is a unique kind of a merger in which the parent company merges with its own subsidiary to create value and space for it in the market. This creates the economies of scale and better control on the market share. (ii) On the financial basis • Accretive Mergers This kind of mergers happens purely with a focus of maximizing the wealth of the company. The company with high P/E Ratio acquires with lower P/E ratio and helps increase its Earning per Share (EPS) which would help in soaring its market price. Accretive mergers occur when a company with a high price to earnings ratio ( P/E ratio ) purchases a company with a low price to earnings ratio. This makes the purchasing company’s earnings per share increase dramatically For example if IBM purchases a smaller firm software firm , then its P/E would increase • Dilutive Mergers This is just opposite to that of just discussed above. In this case the EPS of the acquiring company is reduced. Warren Buffet often does this with its companies. Acquisitions (Takeovers) Acquisition means acquiring the controlling interest in one company by the other company. This does not involve the extinction of the firms as in mergers. It can be done in the following ways: (i) On the basis of the response of the acquired firm • Negotiated Acquisition This is done by the mutual agreement and understanding of the target company and the acquiring company, where the target company’s management is willing to allow the takeover for an agreed price. • Hostile Takeover This is something for which the target company is not prepared. This is generally done by acquiring the number of share good enough to take control in the target company by the acquiring company. • Bail Out When a financially strong company takes control over a financially weak company for a certain price, it is known as bail out. Sometimes this is done to increase the base or entering in the new market or for some strategic purposes. It is often seen as step taken by the government or public sector companies to help any sick company. (ii) Motives behind acquisition • Strategic When the acquiring company takes over the other company as a part of its overall strategy, it is known as strategic takeover. The strategy could be in respect of beating the competition, or enhancing the capacity or market dominance. This is generally done by offering the ratio of share by the acquiring company to the shareholders of the acquired company. The strategy of the company is determined by top level management. If the top level management feels that the expansion can be done by Merger, then necessary steps will be taken in that direction. Similarly , if the expansion plans are to be achieved by Take over, then those policies will be implemented. • Financial When the promoter of the company itself is the acquirer, it is known as financial takeover. This is generally done to cut the cost, and operate the company in much efficient manner with the best possible available resources. (iii) Method of acquisition • Buying of shares In this case the control of the target company is purchased by buying the shares of the target company in exchange of the acquirer company. The assets and the liabilities of the acquired company remain intact. The shares can be purchased as equity or preferred stock. The ownership issues need to be resolved. • Buying of Assets In this case the buyer takes over the assets and liabilities of the target company and collects money by selling the assets. It then also pays off the liabilities and external borrowers of the target company. This often makes the target company like an empty box when all shares are acquired. Prior to acquiring a company ( by what ever method, it is important to carry out its valuation ) There are several ways of valuation of the company such as Discounted cash flow method of valuation Asset based valuation Replacement cost method Income based valuation Net realizable value method Let us take example of one of the most popular method viz DCF ( discounted cash flow ) METHOD OF CALCULATING DISCOUNTED CASH FLOW The DCF for an investment is calculated by estimating: the cash that you will have to pay out, and the cash which you expect to receive back. The timeframes that you expect to receive the payments must also be estimated. Each cash transaction must then be recalculated, by subtracting the opportunity cost of capital between now and the moment when you will pay or receive the cash. EXAMPLE For example, if inflation is 6%, the value of your money would halve every ±12 years. If you expect that a particular asset will provide you an income of $30.000 in 12 years from now, that income stream would be worth $15.000 today if inflation was 6% for the period. We have now discounted the cash flow of $30.000: it is only worth $15.000 for you at this moment. (http://www.12manage.com/methods_dcf.html) References: • Lumby, S., Jones, C., (2004), Corporate Finance - theory and practice 7th edition, Thomson • ACCA Paper 3.7 (2001) Strategic Financial Management, The Financial Training Company • Rajan, R., Zingales, L., (1996), “What do we know about capital structure? Some Evidence from International Data”, Journal of Finance 50, 1421-1460 • Bradley, M., Jarrel, G., Kim, E. (1984), “On the Existence of an Optimal Capital Structure: Theory and Evidence”, Journal of Finance 39(3), 857 -878. • ‘Cost of Capital’, viewed on 24 June 2009 < http://www.teachmefinance.com/costofcapital.html> • ‘What is cost of capital’ viewed 25 June 2009 < http://www.12manage.com/methods_cost_of_capital.html> • (http://www.investopedia.com/terms/w/wacc.asp) • (http://www.12manage.com/methods_wacc.html • http://www.12manage.com/methods_dcf.html • http://www.learnmergers.com/index.shtml



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Piagetian stages of cognitive development Jean Piaget and Theory of cognitive development
Posted On: Nov. 8, 2017
Author: Shipra


Piagetian stages of cognitive development Jean Piaget and Theory of cognitive development Piaget was a French speaking Swiss theorist who posited that children learn through actively constructing knowledge through hands-on experience.[1] He suggested that the adult's role in helping the child learn was to provide appropriate materials for the child to interact and construct. He would use Socratic questioning to get the children to reflect on what they were doing. He would try to get them to see contradictions in their explanations. He also developed stages of development. His approach can be seen in how the curriculum is sequenced in schools, and in the pedagogy of preschool centers across the United States. Vygotsky's cultural-historical theory Vygotsky was a theorist from the Soviet era, who posited that children learn through hands-on experience, as Piaget suggested. However, unlike Piaget, he claimed that timely and sensitive intervention by adults when a child is on the edge of learning a new task (called the "zone of proximal development") could help children learn new tasks. This technique is called "scaffolding," because it builds upon knowledge children already have with new knowledge that adults can help the child learn.[2] Vygotsky was strongly focused on the role of culture in determining the child's pattern of development, arguing that development moves from the social level to the individual level.[2] Ecological Systems Theory Main article: Ecological Systems Theory Also called "Development in Context" or "Human Ecology" theory, Ecological Systems Theory, originally formulated by Urie Bronfenbrenner specifies four types of nested environmental systems, with bi-directional influences within and between the systems. The four systems are Microsystem, Mesosystem, Exosystem, and Macrosystem. Each system contains roles, norms and rules that can powerfully shape development. Since its publication in 1979, Bronfenbrenner's major statement of this theory, The Ecology of Human Development [3] has had widespread influence on the way psychologists and others approach the study of human beings and their environments. As a result of this conceptualization of development, these environments — from the family to economic and political structures — have come to be viewed as part of the life course from childhood through adulthood.[4] Attachment theory Attachment theory, originally developed by John Bowlby, focuses on close, intimate, emotionally meaningful relationships. Attachment is described as a biological system that evolved to ensure the survival of the infant. A child who is threatened or stressed will move toward caregivers who create a sense of physical, emotional and psychological safety for the individual. Later Mary Ainsworth developed the Strange Situation Protocol and the concept of the secure base. See also the critique by developmental psychology pioneer Jerome Kagan. Nature/nurture A significant question in developmental psychology is the relationship between innateness and environmental influence in regard to any particular aspect of development. This is often referred to as "nature versus nurture" or nativism versus empiricism. A nativist account of development would argue that the processes in question are innate, that is, they are specified by the organism's genes. An empiricist perspective would argue that those processes are acquired in interaction with the environment. Today developmental psychologists rarely take such extreme positions with regard to most aspects of development; rather they investigate, among many other things, the relationship between innate and environmental influences. One of the ways in which this relationship has been explored in recent years is through the emerging field of evolutionary developmental psychology. One area where this innateness debate has been prominently portrayed is in research on language acquisition. A major question in this area is whether or not certain properties of human language are specified genetically or can be acquired through learning. The empiricist position on the issue of language acquisition suggests that the language input provides the necessary information required for learning the structure of language and that infants acquire language through a process of statistical learning. From this perspective, language can be acquired via general learning methods that also apply to other aspects of development, such as perceptual learning. The nativist position argues that the input from language is too impoverished for infants and children to acquire the structure of language. Linguist Noam Chomsky asserts that, evidenced by the lack of sufficient information in the language input, there is a universal grammar that applies to all human languages and is pre-specified. This has led to the idea that there is a special cognitive module suited for learning language, often called the language acquisition device. Chomsky's critique of the behaviorist model of language acquisition is regarded by many as a key turning point in the decline in the prominence of the theory of behaviorism generally.[5] But Skinner's conception of "Verbal Behavior" has not died, perhaps in part because it has generated successful practical applications.[5] Mechanisms of development Developmental psychology is concerned not only with describing the characteristics of psychological change over time, but also seeks to explain the principles and internal workings underlying these changes. Psychologists have attempted to better understand these factors by using models. Developmental models are sometimes computational, but they do not need to be. A model must simply account for the means by which a process takes place. This is sometimes done in reference to changes in the brain that may correspond to changes in behavior over the course of the development. Computational accounts of development often use either symbolic, connectionist (neural network), or dynamical systems models to explain the mechanisms of development. Research areas Cognitive development Main article: Cognitive development Cognitive development is primarily concerned with the ways in which infants and children acquire, develop, and use internal mental capabilities such as problem solving, memory, and language. Major topics in cognitive development are the study of language acquisition and the development of perceptual and motor skills. Piaget was one of the influential early psychologists to study the development of cognitive abilities. His theory suggests that development proceeds through a set of stages from infancy to adulthood and that there is an end point or goal. Other accounts, such as that of Lev Vygotsky, have suggested that development does not progress through stages, but rather that the developmental process that begins at birth and continues until death is too complex for such structure and finality. Rather, from this viewpoint, developmental processes proceed more continuously, thus development should be analyzed, instead of treated as a product to be obtained. Modern cognitive development has largely moved away from Piagetian stage theories, and is influenced by accounts of domain-specific information processing, which posit that development is guided by innate evolutionarily specified and content-specific information processing mechanisms. Social and emotional development Developmental psychologists who are interested in social development examine how individuals develop social and emotional competencies. For example, they study how children form friendships, how they understand and deal with emotions, and how identity develops. Research in this area may involve study of the relationship between cognition or cognitive development and social behavior. Research methods Developmental psychology employs many of the research methods used in other areas of psychology. However, infants and children cannot always be tested in the same ways as adults, so different methods are often used to study their development. Methods and techniques Techniques for studying infants Children Adolescents When studying older children, especially adolescents, adult measurements of behavior can often be used, but they may need to be simplified to allow children to perform certain tasks. Adults Research design Developmental psychologists have a number of methods to study changes in individuals over time. In a longitudinal study, a researcher observes many individuals born at or around the same time (a cohort) and carries out new observations as members of the cohort age. This method can be used to draw conclusions about which types of development are universal (or normative) and occur in most members of a cohort. Researchers may also observe ways in which development varies between individuals and hypothesize about the causes of variation observed in their data. Longitudinal studies often require large amounts of time and funding, making them unfeasible in some situations. Also, because members of a cohort all experience historical events unique to their generation, apparently normative developmental trends may in fact be universal only to their cohort. In a cross-sectional study, a researcher observes differences between individuals of different ages at the same time. This generally requires less resources than the longitudinal method, and because the individuals come from different cohorts, shared historical events are not so much of a confounding factor. By the same token, however, cross-sectional research may not be the most effective way to study differences between participants, as these differences may result not from their different ages but from their exposure to different historical events. An accelerated longitudinal design or cross-sequential study or cohort-sequential design combines both methodologies. Here, a researcher observes members of different birth cohorts at the same time, and then tracks all participants over time, charting changes in the groups. By comparing differences and similarities in development, one can more easily determine what changes can be attributed to individual or historical environment, and which are truly universal. Clearly such a study can be even more resource-consuming than a longitudinal study. Additionally, these are all correlational, not experimental, designs, and so one cannot readily infer causation from the data they yield. Nonetheless, correlational research methods are common in the study of development, in part due to ethical concerns. In a study of the effects of poverty on development, for instance, one cannot easily randomly assign certain families to a poverty condition and others to an affluent one, and so observation alone has to suffice. Stages of development The prenatal development of human beings is viewed in three separate stages, which are not the same as the trimesters of a woman's pregnancy: 1. Germinal (conception through week 2) 2. Embryonic (weeks 3 through 8) 3. Fetal (week 9 through birth) The germinal stage begins when a sperm penetrates an egg in the act of conception (normally the result of sexual intercourse between a man and a woman). At this point a zygote is formed. Through the process of mitosis, the cells divide and double. The embryonic stage occurs once the zygote has firmly implanted itself in the uterine wall. It is in this stage that the vital organs are formed, and while the external body is still extremely dissimilar from an adult human, some features such as eyes and arms, and eventually ears and feet, become recognizable. The fetal period is the pre-natal period when the brain has its greatest development, becoming more and more complex over the last few months. During pregnancy there is a risk to the developing child from drugs and other teratogens, spousal abuse and other stress on the mother, nutrition and the age of the mother. Genetic testing prior to pregnancy is also increasingly available. Three methods of determining fetal defects and health include the ultrasound, amniocentesis, and chorionic villus sampling. Although difficult, some methods of treating fetal disorders have been developed, both surgical and drug based. Infancy From birth until the onset of speech, the child is referred to as an infant. Developmental psychologists vary widely in their assessment of infant psychology, and the influence the outside world has upon it, but certain aspects are relatively clear. While no agreement has yet been reached regarding the level of stimulation an infant requires, a normal level of stimulation is very important, and a lack of stimulation and affection can result in learning difficulties and a host of other developmental and social disorders[citation needed] Some feel that classical music, particularly Mozart is good for an infant's mind.[citation needed] While some tentative research has shown it to be helpful to older children, no conclusive evidence is available involving infants. The majority of a newborn infant's time is spent in sleep. At first this sleep is evenly spread throughout the day and night, but after a couple of months, infants generally become diurnal. Infants can be seen to have 6 states, grouped into pairs: • quiet sleep and active sleep (dreaming, when REM occurs) • quiet waking, and active waking • fussing and crying Infants respond to stimuli differently in these different states. Habituation is frequently used in testing psychological phenomenon. Both infants and adults attend less as a result of consistent exposure to a particular stimulus. The amount of time spent attending to an alternate stimulus (after habituation to the initial stimulus) is indicative of the strength of the remembered percept of the previous stimulus, or dishabituation. Habituation is used to discover the resolution of perceptual systems, for example, by habituating a subject to one stimulus, and then observing responses to similar ones, one can detect the smallest degree of difference that is detectable by the subject. Infants have a wide variety of reflexes, some of which are permanent (blinking, gagging), and others transient in nature. Some have obvious purposes, some are clearly vestigial, and some do not have obvious purposes. Primitive reflexes reappear in adults under certain conditions, such as neurological conditions like dementia or traumatic lesions. A partial list of infantile reflexes includes: • Moro reflex or startle reflex: 1. Startle 2. spreading out the arms (adduction) 3. unspreading the arms (abduction) 4. Crying (usually) • Tonic neck reflex or fencer's reflex • Rooting reflex, sucking reflex, suckling reflex: can be initiated by scratching the infant's cheek; the reaction is pursing of the lips for sucking. • Stepping reflex, step-up reflex: can be initiated if you support the infant upright from its armpits below a given surface so the baby lifts its foot and steps up on the surface (like climbing a stair). • Grasp reflex: can be initiated by scratching the infant's palm. • Parachute reflex: the infant is suspended by the trunk and suddenly lowered as if falling for an instant. The child spontaneously throws out the arms as a protective mechanism. The parachute reflex appears before the onset of walking. • Plantar reflex or Babinski reflex: a finger is stroked firmly down the outer edge of the baby's sole; the toes spread and extend out. Infants have significantly worse vision than older children. Infant sight, blurry in early stages, improves over time. Infants less than 2 months old are thought to be color blind[citation needed]. Hearing is well-developed prior to birth, however, and a preference for the mother's heartbeat is well established. Infants are fairly good at detecting the direction from which a sound comes, and by 18 months their hearing ability is approximately equal to that of adults. Smell and taste are present, with infants having been shown to prefer the smell and taste of a banana, while rejecting the taste of shrimp.[citation needed] There is good evidence for infants preferring the smell of their mother to that of others. Infants have a fully developed sense of touch at birth, and the myth believed by some doctors even today that infants feel no pain is inaccurate.[citation needed] Doctors are slowly becoming aware of the need for pain prevention for newborns. Piaget asserted that there were several sensorimotor stages within his broader Theory of cognitive development. • The first sub-stage occurs from birth to six weeks and is associated primarily with the development of reflexes. Three primary reflexes are described by Piaget: sucking of objects in the mouth, following moving or interesting objects with the eyes, and closing of the hand when an object makes contact with the palm (palmar grasp). Over these first six weeks of life, these reflexes begin to become voluntary actions; for example, the palmar reflex becomes intentional grasping. (Gruber and Vaneche, 1977[6]). • The second sub-stage occurs from six weeks to four months and is associated primarily with the development of habits. Primary circular reactions or repeating of an action involving only ones own body begin. An example of this type of reaction would involve something like an infant repeating the motion of passing their hand before their face. Also at this phase, passive reactions, caused by classical or operant conditioning, can begin (Gruber et al., 1977). • The third sub-stage occurs from four to nine months and is associated primarily with the development of coordination between vision and prehension. Three new abilities occur at this stage: intentional grasping for a desired object, secondary circular reactions, and differentiations between ends and means. At this stage, infants will intentionally grasp the air in the direction of a desired object, often to the amusement of friends and family. Secondary circular reactions, or the repetition of an action involving an external object occur begin; for example, moving a switch to turn on a light repeatedly. The differentiation between means also occurs. This is perhaps one of the most important stages of a child's growth as it signifies the dawn of logic (Gruber et al., 1977). Towards the late part of this sub-stage infants begin to have a sense of object permanence, passing the A-not-B error test. • The fourth sub-stage occurs from nine to twelve months and is associated primarily with the development of logic and the coordination between means and ends. This is an extremely important stage of development, holding what Piaget calls the "first proper intelligence." Also, this stage marks the beginning of goal orientation, the deliberate planning of steps to meet an objective (Gruber et al. 1977). • The fifth sub-stage occurs from twelve to eighteen months and is associated primarily with the discovery of new means to meet goals. Piaget describes the child at this juncture as the "young scientist," conducting pseudo-experiments to discover new methods of meeting challenges (Gruber et al. 1977). • The sixth sub-stage is associated primarily with the beginnings of insight, or true creativity. This marks the passage into the preoperational stage. Special methods are used to study infant behavior. When studying infants, the habituation methodology is an example of a method often used to assess their performance. This method allows researchers to obtain information about what types of stimuli an infant is able to discriminate. In this paradigm, infants are habituated to a particular stimulus and are then tested using different stimuli to evaluate discrimination. The critical measure in habituation is the infants' level of interest. Typically, infants prefer stimuli that are novel relative to those they have encountered previously. Several methods are used to measure infants' preference. These include the high-amplitude sucking procedure, in which infants suck on a pacifier more or less depending on their level of interest, the conditioned foot-kick procedure, in which infants move their legs to indicate preference, and the head-turn preference procedure, in which the infant's level of interest is measured by the amount of time spent looking in a particular direction. A key feature of all these methods is that, in each situation, the infant controls the stimuli being presented. This gives researchers a means of measuring discrimination. If an infant is able to discriminate between the habituated stimulus and a novel stimulus, they will show a preference for the novel stimulus. If, however, the infant cannot discriminate between the two stimuli, they will not show a preference for one over the other. Object permanence is an important stage of cognitive development for infants. Numerous tests regarding it have been done, usually involving a toy, and a crude barrier which is placed in front of the toy, and then removed, repeatedly. In sensorimotor stages 1 and 2, the infant is completely unable to comprehend object permanence. Jean Piaget conducted experiments with infants which led him to conclude that this awareness was typically achieved at eight to nine months of age. Infants before this age are too young to understand object permanence, which explains why infants at this age do not cry when their mothers are gone. "Out of sight, out of mind." A lack of Object Permanence can lead to A-not-B errors, where children reach for a thing at a place where it should not be. (see also: Infant metaphysics) Toddler Intelligence is demonstrated through the use of symbols, language use matures, and memory and imagination are developed. Thinking is done in a nonlogical, nonreversible manner. Egocentric thinking predominates. Socially, toddlers are little people attempting to become independent at this stage, which they are commonly called the " terrible twos". They walk, talk, use the toilet, and get food for themselves. Self-control begins to develop. If taking the initiative to explore, experiment, risk mistakes in trying new things, and test their limits is encouraged by the caretaker(s) the child will become autonomous, self-reliant, and confident. If the caretaker is overprotective or disapproving of independent actions, the toddler may begin to doubt their abilities and feel ashamed for the desire for independence. The child's autonomic development will be inhibited, and be less prepared to successfully deal with the world in the future. Early childhood When children attend preschool, they broaden their social horizons and become more engaged with those around them. Impulses are channeled into fantasies, which leaves the task of the caretaker to balance eagerness for pursuing adventure, creativity and self expression with the development of responsibility. If caretakers are properly encouraging and consistently disciplinary, children are more likely to develop positive self-esteem while becoming more responsible, and will follow through on assigned activities.[citation needed] If not allowed to decide which activities to perform, children may begin to feel guilt upon contemplating taking initiative.[citation needed] This negative association with independence will lead them to let others make decisions in place of them. Childhood In middle childhood, intelligence is demonstrated through logical and systematic manipulation of symbols related to concrete objects. Operational thinking develops, which means actions are reversible, and egocentric thought diminishes. Children go through the transition from the world at home to that of school and peers. Children learn to make things, use tools, and acquire the skills to be a worker and a potential provider. Children can now receive feedback from outsiders about their accomplishments. If children can discover pleasure in intellectual stimulation, being productive, seeking success, they will develop a sense of competence. If they are not successful or cannot discover pleasure in the process, they may develop a sense of inferiority and feelings of inadequacy that may haunt them throughout life. This is when children think of them selves as industrious or as inferior Adolescence Adolescence is the period of life between the onset of puberty and the full commitment to an adult social role, such as worker, parent, and/or citizen. It is the period known for the formation of personal and social identity (see Erik Erikson) and the discovery of moral purpose (see William Damon). Intelligence is demonstrated through the logical use of symbols related to abstract concepts and formal reasoning. A return to egocentric thought often occurs early in the period. Only 35% develop the capacity to reason formally during adolescence or adulthood. (Huitt, W. and Hummel, J. January 1998)[7] The adolescent asks "Who am I? Who do I want to be?" Like toddlers, adolescents must explore, test limits, become autonomous, and commit to an identity, or sense of self. Different roles, behaviors and ideologies must be tried out to select an identity. Role confusion and inability to choose vocation can result from a failure to achieve a sense of identity. Early adulthood The person must learn how to form intimate relationships, both in friendship and love. The development of this skill relies on the resolution of other stages. It may be hard to establish intimacy if one has not developed trust or a sense of identity. If this skill is not learned the alternative is alienation, isolation, a fear of commitment, and the inability to depend on others. However, an Inuit proverb claims that 'privation and suffering are the basis of all great things', so ultimately this isolation may be to an individual's long-term best interest. A related framework for studying this part of the life span is that of Emerging adulthood, introduced in 2000 by Jeffrey Arnett. Scholars of emerging adulthood are interested not only in relationship development (focusing on the role of dating in helping individuals settle on a long-term spouse/partner), but also the development of sociopolitical views and occupational choice. Middle age Middle adulthood generally refers to the period between ages 40 to 65. During this period, the middle-aged experience a conflict between generativity and stagnation. They may either feel a sense of contributing to the next generation and their community or a sense of purposelessness. Physically, the middle-aged experience a decline in muscular strength, reaction time, sensory keenness, and cardiac output. Also, women experience menopause and a sharp drop in the hormone estrogen. Men do not have an equivalent to menopause, but they do experience a decline in sperm count and speed of ejaculation and erection. Most men and women remain capable of sexual satisfaction after middle age. Old age This stage generally refers to those over 75 years. During old age, people experience a conflict between integrity vs. despair. When reflecting on their life, they either feel a sense of accomplishment or failure. Physically, older people experience a decline in muscular strength, reaction time, stamina, hearing, distance perception, and the sense of smell. They also are more susceptible to severe diseases such as cancer and pneumonia due to a weakened immune system. Mental disintegration may also occur, leading to Dementia or Alzheimer's Disease. However, partially due to a lifetime's accumulation of antibodies, the elderly are less likely to suffer from common diseases such as the cold. Whether or not intellectual powers increase or decrease with age remains controversial. Longitudinal studies have suggested that intellect declines, while cross-sectional studies suggest that intellect is stable. It is generally believed that crystallized intelligence increases up to old age, while fluid intelligence decreases with age. Parenting In Western developed societies, mothers (and women generally) were emphasized to the exclusion of other caregivers, particularly as the traditional role of the father was more the breadwinner, and less the direct caregiver of an infant, he has been traditionally viewed as impacting an infant indirectly through interactions with the mother of the child. The emphasis of study has shifted to the primary caregiver (regardless of gender or biological relation), as well as all persons directly or indirectly influencing the child (the family system). The roles of the mother and father are more significant than first thought as we moved into the concept of primary caregiver. Affirming a role for fathers, studies have shown that children as young as 15 months benefit significantly from substantial engagement with their father.[8][9] In particular, a study in the U.S.A. and New Zealand found the presence of the natural father was the most significant factor in reducing rates of early sexual activity and rates of teenage pregnancy in girls.[10] Covariate factors used included early conduct problems, maternal age at first childbirth, race, maternal education, father's occupational status, family living standards, family life stress, early mother-child interaction, measures of psychosocial adjustment and educational achievement, school qualifications, mood disorder, anxiety disorder, suicide attempts, violent offending, and conduct disorder. Further research has found fathers have an impact on child academic performance, including involved nonresident fathers.[8] However, father absence is associated with a range of negative outcomes for children, including child and later criminal behavior.[11] Historical antecedents The modern form of developmental psychology has its roots in the rich psychological tradition represented by Aristotle, Tabari,[12] Rhazes,[13] Alhazen,[14] and Descartes. William Shakespeare had his melancholy character Jacques (in As You Like It) articulate the seven ages of man: these included three stages of childhood and four of adulthood. In the mid-eighteenth century Jean Jacques Rousseau described three stages of childhood: infans (infancy), puer (childhood) and adolescence in Emile: Or, On Education. Rousseau's ideas were taken up strongly by educators at the time. In the late nineteenth century, psychologists familiar with the evolutionary theory of Darwin began seeking an evolutionary description of psychological development; prominent here was G. Stanley Hall, who attempted to correlate ages of childhood with previous ages of mankind. A more scientific approach was initiated by James Mark Baldwin, who wrote essays on topics that included Imitation: A Chapter in the Natural History of Consciousness and Mental Development in the Child and the Race: Methods and Processes. In 1905, Sigmund Freud articulated five psychosexual stages. Later, Rudolf Steiner articulated stages of psychological development throughout human life.[15] By the early to mid-twentieth century, the work of Vygotsky and Piaget, mentioned above, had established a strong empirical tradition in the field.



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Revision Sheet Release No. Date Revision Description Rev. 0 29/06/10 Functional Requirements Document
Posted On: Nov. 7, 2017
Author: Shipra


IT FUNCTIONAL REQUIREMENTS DOCUMENT Metropolis Dispatch Centre Revision Sheet Release No. Date Revision Description Rev. 0 29/06/10 Functional Requirements Document FUNCTIONAL REQUIREMENTS DOCUMENT TABLE OF CONTENTS 1.0 GENERAL INFORMATION 1.1 Purpose 1.2 Scope 2.0 CURRENT SYSTEM SUMMARY 2.1 Background 2.2 System Objectives and Current Functionality 3.0 PROPOSED METHODS AND PROCEDURES 3.1 Summary of Improvements 3.1.1 Functional Improvements 4.0 DETAILED CHARACTERISTICS 4.1 Functional Area System Functions 4.2 Input and Output 5.0 ENVIRONMENT 5.1 Equipment Environment 5.2 Software Environment 5.3 Communications Requirements 5.3.1 Communications Overview 5.3.2 Communications Hardware 5.3.3 Communications Software 1.0 GENERAL INFORMATION 1.0 GENERAL INFORMATION 1.1 Purpose This functional requirements document describes the change management requirements for Metropolis Dispatch Center. 1.2 Scope This document will include the functional requirements for three emergency service organizations 1. Police 2. Fire and 3. Ambulance The 3 dispatch centers would be centralizing all the three services. The dispatch center operators would work centrally and handle all emergency services. This will provide for better responsiveness and service to the public. 2.0 CURRENT SYSTEM SUMMARY 2.0 CURRENT SYSTEM SUMMARY 2.1 Background Currently the system operates as follows. Each emergency service operates from a number of stations located throughout the city and has its own dispatch centre. Emergency calls received by the telephone company are dispatched to the requested emergency service dispatch center. On receiving the call, the dispatch center operator takes the details such as name, location and nature of incident. The operator then alerts the suitable operational unit. The operator may alert one or more services depending upon the nature of the incident. 2.2 System Objectives and Current Functionality The major requirement of the current system is to provide efficient and quick service to the public. As stated above, currently the system is not centralized. So the operator judges the kind of service required after analyzing the incident and then calls up the appropriate service. Thus it may happen that the services are delayed. Also, due to improper co-ordination among the three emergency service centers, significant costs and delays take place. The current system is decentralized. The operator decides about the type of service requested. The operator may call up one or more service centers depending upon the requirement. The current system is in-effective and poses time delay. 3.0 PROPOSED METHODS AND PROCEDURES 3.0 PROPOSED METHODS AND PROCEDURES The proposed system intends to centralize the operations. Dispatch center operators will now work for the city and not for the separate services. All 3 emergency service staff members in a single center. 3.1 Summary of Improvements 1. Good co-ordination between the three emergency services 2. Possibly less or null time delay 3. Better service 4. Cost saving 5. Efficient center 3.1.1 Functional Improvements 1. The functional improvements will be 2. A centralized center handling all the three services. 3. Employees will be centralized 4. Less paper work 5. Less calls to be handled 6. Proper service 4.0 DETAILED CHARACTERISTICS 4.0 DETAILED CHARACTERISTICS 4.2 Functional Area System Functions Use Case for Ambulance Emergency Service Operator Patient Emergency Service Staff 4.2 Input and Output Input to the system will be 1. Location of the incident 2. Seriousness of the incident 3. Equipments required 4. Details about the incident The system will generate output like 1. Detailed report about the incident 2. Time taken to resolve the incident 3. Status of the victims affected 5.0 ENVIRONMENT 5.0 ENVIRONMENT 5.1 Equipment Environment • Processors (including personal computers • Storage media • Output devices like printer • Input devices like keyboard and mouse , scanner 5.2 Software Environment Database Required: SQL server 2005 Language Used: .Net Operating system: Windows XP 5.3 Communications Requirements VOIP based service VoIP services enable voice, data and multimedia services to be provided over a broadband Internet connection. This consultation focuses on the provision of voice call services, which is the feature common to all types of VoIP services. There are four main types of VoIP voice call service: 1. Type 1: peer-to-peer services to make and receive voice calls over the Internet only, usually within the same application community; 2. Type 2: VoIP Out services to make voice calls over the Internet to the PSTN (Public Switched Telephone Network, the standard public phone network), but not to receive calls from the PSTN; 3. Type 3: VoIP In services to receive voice calls over the Internet from the PSTN, but not to make calls to the PSTN. 4. Type 4: VoIP In and Out services to receive voice calls over the Internet from the PSTN and to make voice calls over the Internet to the PSTN. 5.3.1 Communications Overview



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Report on Financial Statements: Classification, Analysis and
Posted On: Nov. 7, 2017
Author: Shipra


Total Words ( 3015 ): Report on Financial Statements: Classification, Analysis and Disclosures Table of Contents 1. Voluntary Disclosure of Non Financial Information………………………………….Page 3 2. Distinction Between Debt and Equity From Accounting Standard Setters and Regulators Point of View………………………………..Page 7 3. Should All Types of Shares Issued By Companies Be Treated as Equity……….Page 9 4. How would you treat the cumulative perpetual preferred preference shares of Casino? Justify your view based on any accounting standards or pronouncements that you may have access to. ……………………………………………...Page 13 5.References……………………………...Page 14 Why Companies voluntarily disclose non financial information in their annual report. Explanation: In Part A it has been explained as to how good Corporate Governance that includes Disclosures in its fold; results in significant benefits - both financial and non financial to the companies. It being so ; in view of the aforesaid and in an overall environment of Integrity, transparency, fair practices, ethics and accountability ; Companies go in for voluntary disclosures of non financial information in their annual report. In Part B; it has been explained through examples and specific items; Implications viz Frauds suffered by companies; if non disclosure is there or disclosures are made but that are incomplete, inaccurate and not timely. It been so; it makes voluntary disclosures by companies all the more relevant and important to identify ethical companies from the rest. PART A The below text shall give enough reasons and rationale/benefits from adequate disclosures made for Non Financial Information like Lawsuits,Enviromental Concerns, Restructuring, Discontinued Operations, Trade Sanctions, Target Markets etc ; aligned to Good Corporate Governance programme. Corporate Governance refers to the processes and structure by which the business and affairs of the company are directed and managed. The primary objective of sound corporate governance is to contribute to improved corporate performance and accountability in creating long term shareholder value. Good corporate governance is fundamentally about trust and confidence. These are vital underpinnings of commercial transactions, and indeed, of the market economy. Companies in Singapore rank highly in corporate governance. The high standards achieved by Singapore are the results of three mutually reinforcing components in system - legal, supervisory and enforcement regime; disclosure standards and market discipline; and finally, the commitment of corporate leaders to maintaining integrity. Studies have shown that companies with good corporate governance command a premium in their valuation. At the national level, the benefit of good corporate governance and ethical behavior is quite clear. Singapore's strong reputation as a trustworthy jurisdiction is a key competitive advantage in attracting trade and investment, and in positioning Singapore as a premier financial centre and business hub. When companies based here are associated with the values of integrity and credibility, they receive the recognition from global investors who are willing to pay a premium for their strong branding as trusted entities. Many companies, local and foreign, use Singapore as the home base to raise capital, to site command and control functions, and to engage in high value R&D and marketing functions. The Council On Corporate Disclosure and Governance (“CCDG”) is responsible for strengthening the framework on disclosure practices and reporting standards taking into account trends in corporate regulatory issues and international best practices, reviewing and enhancing the existing framework on Corporate Governance and promote good Corporate Governance in Singapore, taking into account international best practices, and prescribing accounting standards in Singapore. PART B Improper Disclosures: In the below mentioned text; it will make it clear; as to in the absence of Proper Disclosures – Voluntary – there is strong possibility of Fraud in the Financial Statements. Accounting Principles require that financial statements include all the information necessary to prevent a reasonably discerning user of the financial statements from being misled. The notes should include narrative disclosures, supporting schedules, and any other information required to avoid misleading potential investors, creditors, or any other users of the financial statements. Management has an obligation to disclose all significant information appropriately in the financial statements and in management’s discussion and analysis. In addition, the disclosed information must not be misleading. Improper disclosures relating to financial statement fraud may involve the following: • Liability Omissions • Subsequent Events • Related Party Transactions • Accounting Changes Liability Omissions Typical omissions include the failure to disclose loan covenants or contingent liabilities. Loan covenants are agreements, in addition to or as part of a financing arrangement, which a borrower has promised to keep as long as the financing is in place. Contingent liabilities are potential obligations that will materialize only if certain events occur in the future. A corporate guarantee of personal loans taken out by an officer or of a private company controlled by an officer is an example of a contingent liability. Under most accounting standards, the company’s potential liability, if material, must be disclosed. Subsequent Events Events occurring or becoming known after the close of the period may have a significant effect on the financial statements and should be disclosed. Fraudsters typically avoid disclosing court judgements and regulatory decisions that undermine the reported values of assets, that indicate unrecorded liabilities, or that adversely reflect upon management integrity. Public record searches can often reveal this information. Related Party Transactions Related party transactions occur when a company does business with another entity whose management or operating policies can be controlled or significantly influenced by the company or by some other party in common. There is nothing inherently wrong with related party transactions, as long as they are fully disclosed. If the transactions are not conducted on an arm’s length basis, the company may suffer economic harm, injuring stockholders. The financial interest that a company official might have may not be readily apparent. For example, common directors of two companies which do business with each other, any corporate general partner and the partnerships with which he/she /it does business may be related parties. Family relationships can also be considered related parties, such as all lineal descendents and ancestors, without regard to financial interests. Related party transactions are sometimes referred to as “self – dealing “. While these transactions are sometimes conducted at arm’s length, they often are not. Example: In September 2002, the U.S. Securities and Exchange Commission (SEC) charged former top executives of Tyco International Ltd., including former CEO L.Dennis Kozlowski, with violating U.S. Securities laws by failing to disclose to shareholders hundreds of millions of dollars of low interest and interest-free loans they took from the company, and in some cases, never repaid. Accounting Changes There are generally three types of accounting changes that must be disclosed to avoid misleading the user of financial statements: accounting principles, estimates, and reporting entities. Although the required treatment for these accounting changes varies among the types and across jurisdictions, they are all susceptible to manipulation by the determined fraudster. For example, fraudsters may fail to properly retroactively restate financial statements for a change in accounting principle if the change causes the company’s financial statements to appear weaker. Likewise, they may fail to disclose significant changes in estimates such as the useful lives and estimated salvage values of depreciable assets, or the estimates underlying the determination of warranty or other liabilities. They may even secretly change the reporting entity, by adding entities owned privately by management or excluding certain company – owned units, in order to improve reported results. The notes give additional information about the information in the financial statements. It shall be clear that voluntary disclosures are made to have trust, confidence of the 3 key constituencies for any corporate viz 1. Customers 2. Shareholders 3. Employees. The following five disclosure techniques are used in varying degrees in contemporary financial statements: 1. Parenthetical explanations 2. Notes to the financial statements 3. Cross References 4. Valuation Allowances(sometimes referred to as “contra” amounts ) 5. Supporting Schedules Why do accounting standard setters and regulators regard the distinction between debt and equity as important? Explanation. Accounting standard setters and regulators regard the distinction as important as: • Presentation of Financial Statements viz Balance sheet, Income Statement and Cash Flow Statement; that gives a true and fair position of the state of affairs of a company ; it is of concern for the standard setters that there is absolute clarity in regard to components of Debt and Equity for period to period financial analysis, industry analysis and further that there is harmonization with the International Accounting Standards- International Financial Reporting Standards ; so that analyst across the globe can undertake financial analysis without avoidable time spent in doing adjustments. • Again for processing of financial information submitted to the regulators; it is of importance that there is “clear definition and understanding” of the regulators reporting format so that the aggregate figures of Debt and Equity are separately updated in the relevant data fields and there is minimal queries/resubmissions in view of technical errors in improper understanding of the distinction between debt and equity. • Its their duty and responsibility to ensure that there is compliance with all relevant and requisite “Financial Health Key Indicators”. • They have to ensure that “Preventive Controls - Flags – Alerts” put in place to check if the Company is “geared” within permissible limits keeping the overall capital structure in perspective. • Monetary Authority of Singapore (MAS) compiles a lot of financial and economic intelligence for macro and micro economic management; as such it is of particular concern and interest to the Debt Equity mix employed by the Companies. • For doing financial statement analysis and reviews; the distinction between debt and equity is of primary focus; as based on the Capital Structure mix with clear distinction between debt and equity shall assist the statutory authorities and regulators to make necessary policy adjustments and procedural changes like Credit Policy, Taxation, and Treasury Management. • Too Much Debt: Borrowing too much money to continue operations or to finance new activities can be a major red flag that indicates future problems for a company especially if interest rates start rising. Debt can overburden a company and make it hard for a company to meet its obligations, eventually landing the company in bankruptcy. Examples of Financial Ratios having Debt and Equity Inputs Debt Equity Ratio = Debt/Equity Analysis: Higher the ratio, riskier is the Capital Structure, because of • Higher Interest burden and • Greater chance of insolvency in the long run. More a company borrows, harder it will be for it to pay interest in the years of falling profits. Financial Leverage Refers to the extent to which the firm has fixed financing costs arising from the use of debt capital. A firm with high financial leverage will have relatively high fixed financing cost compared to a firm with low financial leverage. It is sometimes also called Interest-charges leverage, which exists whenever the firm has debt that requires the payment of interest. Financial Leverage and Risk As the company becomes more financially leveraged, it becomes riskier, which leads to: Increased fluctuations in return on equity Should all types of shares issued by companies be treated as equity? Explanation. All shares issued by companies cannot and should not be treated as Equity alone. A Company should have an optimum capital structure with right mix of debt and equity to takes benefits of tax incentives available for loan capital. Below a brief explanation of the Kinds of Capital available other than Equity and benefits/advantages there in are mentioned. Equity Is an ownership “share” in the revenue stream of a corporation’s income once all prior obligations and debts have been satisfied. There are various classes of equity for the individual investor to consider. The primary 3 groups into which equity may be subdivided are • Common stock, • Preferred stock and • Warrants. Common Stock • Represents an ownership in a corporation. • Common stockholders participate in the earnings stream of the corporation through dividends paid and capital gains made on a per share basis. • Owners of common stock are responsible for the election of Board of Directors, appointment of Senior Officers, the selection of an auditor for the corporate financial statements, dividend policy and other matters of corporate governance,. • Investors participate to a greater extent in the fortunes of the firm. Capital gains, through the increase in market price of the firm’s stock, accrue to a greater extent to the holder of common stock than to the holder of preferred stock. • Common stockholders also have a couple of significant rights should the business invested in be wound down ; limited liability to the creditors of the firm and a residual claim on any assets or income derived once all prior claims ( motgages, bondholders, creditors, etc.) have been satisfied. Preferred Stock • Are stock in a company which have a defined dividend, and a prior claim on income to the common stock holder. • Should the company wind up operations, preferred shareholders are paid any obligations owed to them. Should a dividend be suspended by the Board of Directors, for what ever reason, the preferred share usually has a cumulative clause in it allowing that any unpaid dividends must be fully paid before any dividends may be declared and paid to holders of common stock. This means that the preferred share is a relatively more secure investment. The corporate issuing preferred shares may add differing features to the share in order to make it more attractive. These features are similar to those used in the fixed income market and include convertibility into common shares, call provisions, etc. Many have equated preferred shares with a form of fixed income security due to its defined dividend stream. • However, with he added security offered by the guaranteed dividend stream, the holder of preferred shares gives up the right to vote on issues related to corporate governance. Therefore, the preferred holder has little input into corporate policy. Types of Preferred Stock: Cumulative preferred stock - If the dividend is not paid, it will accumulate for future payment. Convertible preferred stock - This type of preferred stock carries the option to convert into a common stock at a prescribed price. Perpetual preferred stock - This type of preferred stock has no fixed date on which invested capital will be returned to the shareholder, although there will always be redemption privileges held by the corporation. Most preferred stock is issued without a set redemption date. Participating Preferred Stock- This type of preferred stock allows the possibility of additional dividend above the stated amount under certain conditions. Why Preferred? A company may choose to issue preferred for a couple of reasons: Flexibility of Payments: Preferred dividends may be suspended in case of corporate problems. Easier to market: The majority of preferred stock is bought and held by institutions. Institutions tend to invest in preferred stock because IRS rules allow U.S. corporations that pay corporate income taxes to exclude 70% of the dividend income they receive from their taxable income. This is known as the dividend received reduction, and it is the primary reason why investors in preferred are primarily institutions. Preferred Stock Pros • Higher Fixed Income payments than bonds or common stock • Lower investment per share compared to bonds • Priority over common stocks for dividend payments and liquidation proceeds • Greater price stability than common stocks • Greater liquidity than corporate bonds of similar quality Warrants: A warrant is a right, exercisable for a stated period of time that allows the holder to purchase a stated amount of shares for a designated price. Companies sometimes give warrants to investors as an “equity kicker” or “equity sweetener” to make investment more attractive to those investors. Treasury Stock: Stock that is repurchased by the Company from the stockholders. How would you treat the cumulative perpetual preferred preference shares of Casino. Justify your view based on any accounting standards or pronouncements that you may have access to. Cumulative preferred stock - If the dividend is not paid, it will accumulate for future payment. Perpetual preferred stock - This type of preferred stock has no fixed date on which invested capital will be returned to the shareholder, although there will always be redemption privileges held by the corporation. Most preferred stock is issued without a set redemption date. Perpetual Cumulative Preferred stock will be included as Tier 2 Capital. This is aligned with the Basel 1 and Basel 2 norms for supplementary capital- as Preferred Stocks are Hybrid Instruments having characteristics of both debt and shareholders equity. How would you treat the cumulative perpetual preferred preference shares of Casino. Ans. Definitions: Cumulative preferred stock - If the dividend is not paid, it will accumulate for future payment. Perpetual preferred stock - This type of preferred stock has no fixed date on which invested capital will be returned to the shareholder, although there will always be redemption privileges held by the corporation. Most preferred stock is issued without a set redemption date. Accounting Treatment Perpetual Cumulative Preferred stock will be included as Tier 2 Capital. This is aligned with the Basel 1 and Basel 2 norms for supplementary capital - as Preferred Stocks are Hybrid Instruments having characteristics of both debt and shareholders equity. It is further stated that on 30th June; it is more than likely that the Company will classify the security as equity. From the particulars given; there is no mention that the preferred stock are convertible in nature. Had that been the case; then it would have been consistent with what has been stated in the Information provided in the case study. In the existing facts either there is a redemption that is exercised; a right that is vested in perpetual preferred stock; and then the security is classified as Equity or there will be need for a board resolution to be passed and then approved in the shareholders meeting; to have the existing cumulative perpetual preferred shares converted to Equity prior to 30th June. References: 1.Association of Certified Fraud Examiners, USA 2.Institute of Management Accountants, USA 3.Association of Chartered Certified Accountants, UK 4.ICWAI- India. 5.All India Management Association, India 6.www.IASB.org Website 7.www.SEC.gov Website 8.www.AICPA.org Website 9. www.FASB.org Website 10.Monetary Authority of Singapore. 11.Doing Business in Singapore-ICSI-India.



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Financial inequality Schools and conferences are part of the NCAA and hence it is quite obvious that
Posted On: Nov. 4, 2017
Author: Shipra


Week 1 Financial inequality Schools and conferences are part of the NCAA and hence it is quite obvious that there will be a competition amongst the two entities. Several reasons are cited for the same but once you analyze the basics of the cause, it all boils down to money. A lot of student athletes of Division 1 A are offered scholarships. This is because this division contributes more money to the NCAA. So, as a matter of principle, they would get a lion’s share of the revenue generated. As fallout of the same, best athletes in the country vie with one another to join this division. They are likely to get more exposure, even though the level of competition is quite high. Some of them consider it a status symbol to join this division as it adds to their own brand value. It is a vicious circle as these teams get more chances to play for National Championships, which in turn helps them in making more money. As the popularity of the team grows, the number of fans also grows and so does the TV network contracts. Other divisions offer less number of scholarships and hence attract the second level of athletes. Fans are also not so much interested in watching their games. They also get minimal exposure to Television. Our text suggests several solutions to the problem such as filing antitrust suit against NCAA. Other solution could be to make a drastic change in the rules of the university (Rosner & Shropshire, 2011). However, if we examine the situation from the practical point of view, we can conclude that above solution is not worthy of success. The best option is to make a provision for a fixed stipend and give incentive for performance. This way, the basic needs of the players will be met and due to competition, the quality of games would also improve. Rosner, S., & Shropshire, K., (2011) The Business of Sports (2nd Ed) Jones & Bartlett Learning, LLC. Week 2 Role of athletic departments Are college athletic departments purely academically oriented? Or are they business oriented? These questions lead to several opinions and it is difficult to arrive at a consensus. It is true that a majority of the colleges pay attention to the educational needs of the athletes and provide them opportunity to excel in this field by way of offering scholarship and subsidizing their education expenses. However many colleges do not abide by these norms and tend to make use of those athletes, especially the one who are promising and make them play sports and earn huge amount of revenue. All that are interested in is to compete and win the top positions in various competitions so that they can earn more profit by ticket sales or signing big contracts with TV networks. NCAA has been trying to put a stop to this activity by cutting down on the number of scholarships to promising players. But then this action has a negative connotation. An athlete would chose to join a college if he gets scholarship and thus he is denied an opportunity to study as well as play games as well. It is important for the management of the colleges to distribute scholarships in a judicious manner so that all schools get an equal chance to recruit the best players. This would also help in all colleges gaining advantage of earning revenue in an equal manner. NCAA has done an excellent work by dividing and categorizing the college athletics into different divisions. This helps the people having less talent to come up to the mark (Rosner, 2011) Rosner, S. R. & Shropshire, K. L. (2011). The Business of Sports. Sudbury, MA: Jones & Bartlett Learning



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ACG 2022 – Principles of Financial Accounting – Homework Portfolio
Posted On: Nov. 3, 2017
Author: Shipra


A ACG 2022 – Principles of Financial Accounting – Homework Portfolio REQUIREMENT: Your Homework Portfolio should be done in Microsoft Excel and/or Microsoft Word. Upload the complete portfolio (no more than one spreadsheet and one word document) to dropbox on or before the due date (see syllabus). The Accounting Resource Center has Excel and Word on its computers and these programs are also available at all campuses in the Computer Commons and various labs. 1. On May 1, 2007, the amount of Mary Beth's capital in Beth’s Services Company was $101,000. During May, she withdrew $15,100 from the business. The amounts of the various assets, liabilities, revenues, and expenses are as follows: Accounts payable $ 8,900 Accounts receivable 25,950 Cash 11,390 Fees earned 70,800 Insurance expense 1,475 Land 74,400 Miscellaneous expense 1,510 Prepaid insurance 2,000 Rent expense 8,000 Salary expense 35,300 Supplies 950 Supplies expense 825 Utilities expense 3,800 Present, in good form, (a) an income statement for May, (b) a statement of owner's equity for May, and (c) a balance sheet as of May 31. 2. Record the following selected transactions for March in a two-column journal, identifying each entry by letter: (a) Received $10,000 from Shirley Knowles, owner. (b) Purchased equipment for $35,000, paying $10,000 in cash and giving a note payable for the remainder. (c) Paid $1,000 for rent for March. (d) Purchased $8,500 of supplies on account. (e) Recorded $2,500 of fees earned on account. (f) Received $11,000 in cash for fees earned. (g) Paid $200 to creditors on account. (h) Paid wages of $1,250. (i) Received $1,150 from customers on account. (j) Recorded owner's withdrawal of $1,850. 3. On the basis of the following data taken from the Adjusted Trial Balance columns of the work sheet for the year ended October 31 for Shore Co., journalize the four closing entries. Cash $ 21,500 Accounts Receivable 45,200 Supplies 5,000 Equipment 169,900 Accumulated Depreciation $ 69,000 Accounts Payable 42,500 Stan Shore, Capital 152,600 Stan Shore, Drawing 30,000 Fees Earned 404,500 Salary Expense 300,500 Rent Expense 60,000 Depreciation Expense 25,000 Supplies Expense 9,500 Miscellaneous Expense 2,000 $668,600 $668,600 4. Prepare a multiple-step income statement for Goodwin Co. from the following data for the year ended December 31, 2007. Sales, $925,000; cost of merchandise sold, $560,000; administrative expenses, $30,000; interest expense, $10,000; rent revenue, $20,000; sales returns and allowances, $55,000; selling expenses, $110,000. 5. Prepare an Income Statement using the following data for Spiritlight Ventures for the current fiscal year ended December 31: Net Sales $21,500,000 Cost of Merchandise Sold 10,900,000 Operating Expenses 6,300,000 Losses from Asset Impairment 2,000,000 Restructuring Charge 800,000 Income Tax Expense 500,000 Loss on Discontinued Operations 200,000 Net Loss on Extraordinary Item 100,000



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Importance of financial forecasting to an organization Financial forecasting can be defined as a process through which companies
Posted On: Oct. 31, 2017
Author: Shipra


Importance of financial forecasting to an organization Financial forecasting can be defined as a process through which companies consider and prepare there future plan. Financial forecasting involves estimating financial outcomes of various kinds of future business decisions. These decisions include the future of an existing as well as proposed products or product lines, the overall business and the industry in which the company business performs. Forecasting is a technique that can provide some valuable estimates for the decision making, such as: • It provides an estimate of profit the business will make in the future. • It provides an estimate of demand that is expected for a product or service of the business in the future. • It provides an estimate for cost to produce product or offer service in the business. • It provides an estimate of borrowing needs for the company. • It provides an estimate about the repayments of borrowed funds for the company. Theses are forecasted estimates which help the company and its businesses to understand the futuristic situations and take some valuable decision making. These decisions based on the forecasting, the company prepare itself for the future. Financial forecasting is an important tool for several reasons. It facilitates management to change its operations at a right time to garner the greatest benefit. It helps the company to prevent unwanted losses through proper decisions based on properly forecasted information. Forecasting is also important when it comes to developing new products or new product lines. It helps management decide whether the product or product line will be successful. Forecasting prevents the company from spending time and money developing, manufacturing, and marketing a product that will fail. The other most important benefit of the financial forecasting is that it highlights the expectation of the stockholder. Based on the above discussion we can say that financial forecasting is the process to estimate future business performance that includes earnings, sales and costs. Financial forecasting is also important for various aspects of the managerial decision makings. It is to value the securities of the companies and the companies as well. Financial forecasting also talks about comprehensive prospects of the whole firm instead of looking at the individual projects. How forecasts are developed? Forecasting can be developed through four major categories that include time series analysis, qualitative, simulation, and causal relationships. In the time analysis, historical data are used to predict future trends. Qualitative forecasting has a subjective approach and it uses opinions and estimates to predict. Different conditions and factors are used and modified in simulation forecasting where a particular event or situation to arrive to predict the future conditions. In causal forecasting, an assumption on future results is made through a particular indicator or variable. The Delphi Method is one of the most important techniques in qualitative method of forecasting. It gives equal weight for the input of each participant and uses participant anonymity for the forecasting process. In Delphi technique a questionnaire is issued through a survey to each participant. Delphi technique uses its participants from the different area of company operations. After the selection of participant, each participant responds through the survey and anonymously submits their responses. A compiled result is then sent back to the participants for further revision and review. This process is repeated to achieve a common consensus on forecast. Grass Roots method is another qualitative method for forecasting process. This method is based on the assumption that the person that is closet to the customer is a most appropriate person to predict the future trend as the person remains involved with the end use of the product. A bottoms up approach is used in the preparation of Grass Roots forecasting. Here the forecasted information from the people closest to the customer is compiled and submitted to the next highest level in the distribution system. This process continues until it is maid available as a decision making component in firm's business operations. It is similar to the Delphi method but in that the information is complied and communicated through the company channel. As far as casual method of forecasting is concerned the leading indicators method of forecasting is the best to discuss. This forecasting method is based on the assumption that a high level of accuracy can be achieved only when the behavior is used to predict the behavior of another variable. Here a particular static situation or event monitored and used for predicting the behavior of another behavior. Selection of forecasting technique depends on the various aspects of company operations but the leading and common method for forecasting is the Delphi, Grass Roots and Leading Indicators method. Financial statement forecasting process V/S Budgeting process Forecasting is defined as calculating, predicting, and as a assumption to something in the future whereas budgeting is defined as an estimate of expected income and expense. Based on this estimates the operation of the company is planed before hand. For forecasting we predict for the future but in budgeting we plan for the future based on the estimates and forecast of the business. If we take any manufacturing company for forecasting we need to forecast the market for sales, product; demand and time etc. For budgeting we estimate sales and expenses, profits and losses etc. If we talk about budget a budget is a document that is used to convert plans into money. In budgeting is referred to as a source which is used to spent to get the desired planned done also referred to as an expenditure and at the same time money that is required to be generated to cover the expenditure of getting the desired work done also referred as income. Budgeting is referred to as an estimate about the future need which is required to do the desired work without any obstacle. The budget tells you how much money you need to carry out your activities. • The budget forces you to be rigorous in thinking through the implications of your activity planning. There are times when the realities of the budgeting process force you to rethink your action plans. • Used properly, the budget tells you when you will need certain amounts of money to carry out your activities. • The budget enables you to monitor your income and expenditure and identify any problems. • The budget is a basis for financial accountability and transparency. When everyone can see how much should have been spent and received, they can ask informed questions about discrepancies. • You cannot raise money from donors unless you have a budget. Donors use the budget as a basis for deciding whether what you are asking for is reasonable and well-planned. Forecasting and budgeting process helps the management to decide for the further financial plans and decision making for the next year based on historical data. The steps for forcasting and budgeting are important because a proper forecasting and budgeting allows the management to think upon the required level of expenses and also provides a way to get the income to book profit. The budgeting and forecasting process helps to decide management for a profitable investment decisions. Forecasting and budgeting allows the management to determine about the realization of profit. If the company is going to start any business the forecasting and budgeting allows the management to find out when i.e. in which year actually the profit will be realized. References: Gallagher, Timothy J, and Andrew, Joseph D., 2003, "Financial Management Principles and Practice", by Pearson Education Inc, Upper Saddle River, New Jersey. Wolinski, R.J. November 28, 2005, Contract, V.P. Profitability Group, short discussion / interview (bio at http://www.furnitureprofits.com/group.html)



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Hector and Maria Montez Hector and Maria Montez are trying to figure out their current financial health.
Posted On: Oct. 31, 2017
Author: Shipra


Hector and Maria Montez Hector and Maria Montez are trying to figure out their current financial health. They have listed the following items from their most recent statements. They will pay off their car loan in 3 years. Their gross household income is $3800 per month. They receive $75 month in interest income from their investments. savings account: $1200 checking account: $800 credit card balance: $1000 Car loan balance: $12,000 Car market value: $8000 furniture; market value: $2000 Stocks and Bonds: $10,000 1) What is their current net worth? A) $13,000 B) $22,000 C) $9,000 D) $35,000 E) $(13,000) 2) What is their current ratio? A) .59 times B) 1.69 times C) 2 times D) .50 times E) Not enough information available 3) What is their debt ratio? A) 169 percent B) 1.69 times C) 59 percent D) 59 times E) 2 times 4) What is their month's living expenses covered ratio? A) 2 times? B) 2.44 times? C) 1.69 times? D) .5 times E) Not enough information to answer this question 5) You have learned that a budget A) can be pretty simple or pretty sophisticated. B) is a process of setting spending goals for the upcoming month or year. C) is a plan for controlling cash inflows and cash outflows. D) includes both actual and estimated expenses. E) All of the above are true about budgets. Arnold Diaz Arnold learned something very valuable as a teenager from his dad. He was told to invest $1,000 at 12% interest at age 20 and leave it alone until age 65. Arnold's dad knew that one strategy that wealthy people use is to exercise self-discipline to never touch this long-term plan. Arnold is very happy he applied his dad's advice. 6) Approximately how long will it take Arnold's savings to grow into $2,000? A) 60 months. B) 5 years. C) 8.5 years. D) 6 years. 7) If he sticks to this plan, Arnold savings will have grown to ________ by age 62. A) $116,000 B) $64,000 C) $128,000 D) $256,000 E) none of the above 8) From age 62 to age 68, Arnold's investment will increase by more than A) $16,000. B) $32,000. C) $64,000. D) $128,000. E) none of the above 9) If his savings had earned a more conservative 9%, Arnold's savings would be how much less ________ by age 68. A) $16,000 B) $32,000 C) $64,000 D) $168,000 E) $192,000 10) Suppose the investment rate of return is increased to 18%. When will Arnold have $1,000,000? A) at age 52 B) at age 56 C) at age 60 D) at age 65 E) at age 70 11) A) Describe the two factors that affect how much we need to save to achieve financial goals. b)What is the single most important technique in building wealth? 12) For someone who has $100,000 to save for 20 years, would a 4% Certificate of Deposit that compounds annually be a better deal than a 3.94% Certificate of Deposit that compounds quarterly? Why? 13) What are the results of choosing a loan with a longer term? A) Your APR will be higher than a shorter term loan. B) Your monthly payments will be larger with a longer term loan. C) Your finance charges will be larger with a longer term loan. D) all of the above are correct E) Both A and C are correct 14) The advantage to the borrower with a variable rate loan over a fixed rate loan includes A) lower initial rates and payments than a fixed loan. B) making it easier to afford since your income will probably increase along with the loan payments. C) The market rates of interest will only rise in the future. D) the creditor assumes more risk than with a fixed rate loan. E) both A and B above 15) What will the courts decide if you file Chapter 7 personal bankruptcy? A) Confiscate most of your assets. B) Liquidate most of your assets to pay off creditors. C) Eliminate most of your debts. D) Allow you a chance to start again financially. E) all of the above 16) In auto sales, a ________ is an amount of money, generally in the 2% to 3% range, that the manufacturer gives the dealer when they sell an automobile. A) holdback B) rebate C) kickback D) commission E) none of the above 17) Why is it that you should not tell the salesperson what you want your monthly payment to be before you negotiate the final price on the car? 18) You have an annual gross income of $36,000. You estimate $200 for monthly taxes and insurance on a new home. You have a $400 per month car payment that will be paid off in two more years. Using the 28/36 rule for maximum mortgage payment (PITI) estimation, what is your maximum PITI payment using your monthly gross income as a guide (28%)? A) $840 B) $1080 C) $680 D) $640 E) $880 19) Jeremy does not like the idea of paying points. A point is actually A) one percent of the selling price of the house. B) one percent of the amount financed with the mortgage. C) one percent of the selling price minus the realtor's fee. D) one percent of the taxable value of the house and property. E) none of the above 20) The advantage of a fixed-rate mortgage over an ARM includes A) no private mortgage insurance required. B) fixed payments that are easier to budget for. C) less worry about the loan reaching the rate and payment cap. D) none of the above E) both B and C 21) You are going through a divorce and the Judge has awarded you alimony and custody of the children. What else should your Lawyer ask for? A) That your spouse must purchase and pay for a life insurance policy where they are the named insured. B) That you are the Policy owner of the policy. C) That you are the Beneficiary of the policy. D) All of the above. E) All but B is correct. 22) Phillip Morris wants to know in which of these conditions is life insurance very important? A) married with children B) married single income couple with no children C) single with no dependents D) all of the above E) A and B are correct. 23) What are the risks associated with Term insurance policies? A) You may need to have insurance coverage past the term expiration date. B) The cash value does not earn a decent return. C) The renewal premium may be cost prohibitive. D) Both A and C are correct. 24) Under COBRA, if you work for a company with at least 20 employees, you will be given the opportunity to continue your health insurance coverage for ________ after you leave the company, depending on why you left. A) six months B) up to 2.0 years C) up to 2.5 years D) 1.5 to 3.0 years E) none of the above 25) A Health Savings Account is a wonderful option for many young people with many benefits. What are the benefits of an HSA? A) Because of the high deductible, the monthly premiums are more affordable that traditional health insurance. B) You can deduct your contributions into the HSA account from your income taxes up to a certain limit. C) The money in your HSA account can grow and compound tax free. D) All of the above are true about HSAs. 26) Explain the advantages and disadvantages of medical reimbursement accounts. 27) Why is long-term care insurance needed? A) It is not covered by major medical insurance. B) It is not covered under Medicare. C) Life expectancies have increased. D) all of the above E) none of the above 28) You are considered to be engaging in ________ when you purchase an asset whose value depends solely on supply and demand. A) investing B) speculation C) hedging D) optioning E) none of the above 29) Prior to beginning an investment program, we should have a grip on our financial affairs and conduct a financial reality check consisting of A) maintaining adequate emergency funds. B) paying off any credit card debt. C) putting a safety net in place with adequate insurance protection. D) budgeting to pay yourself first. E) all of the above are correct 30) Latisha invested $1,000 in XYZ stock. Two years later she sold the stock for $1,200. During the time she owned the stock, she received a total of $80 in dividends. What was her total return on investment? A) 8% B) 20% C) 28% D) not enough information available. 31) How do interest rates affect returns on other investments? 32) What are the benefits of a well diversified portfolio/ A) It protects you from systemic risk. B) It protects you from business risk. C) It protects you from default risk. D) All of the above are correct. E) All but A are correct. 33) Why is it important for an investor to know their tolerance for risk? A) To help them avoid certain types of investments. B) To help them design an effective diversification strategy. C) To minimize their stress and anxiety. D) All of the above are correct. 34) Describe the sources of risk in the risk-return trade off. 35) Rank the historical rates of return of the common investments discussed in this chapter from highest to lowest. 1. Common stocks 2. Long-term government bonds 3, Long-term corporate bonds 4. Treasury bills a) 4,3,2,1 b) 1,2,3,4 c) 3,4,2,1 d) 1,3,2,4 36) You have just recently started your investment activities for retirement. You were happy to learn from your broker that your investor's account balance would be insured for up to $500,000 through the ________ in the event their brokerage firm goes bankrupt. A) FDIC B) FSLIC C) NCUA D) SIPC E) FTC 37) The city of Houston passed a bond issue to build a bridge over the bay. The bond was to have the interest paid by the income generated by charging drivers a toll to cross the bridge. This is an example of a ________ bond. A) collateralized B) cash C) revenue D) general obligation E) none of the above 38) The newest and most exciting government bond, the ________ bond, pays 3% above the inflation rate and is ________ indexed; that is, it is designed to stay ahead of ________. A) Ginnie Mae; mortgage; recessions B) Treasury inflation-indexed; inflation; inflation C) Treasury inflation; inflation; inflation D) Treasury inflation-indexed; interest; stocks E) Treasury inflation; stock market; inflation 39) Which of the following starts off with the highest risk bond and ends with the lowest risk bond? A) Municipal, Corporate, Treasury, Junk B) Corporate, Junk, Treasury, Municipal C) Junk, Corporate, Municipal, Treasury D) Corporate, Junk, Treasury, Municipal 40) You are considering the purchase of one of two different bonds, a muni, which currently yields 6%., and a corporate, which currently yields 10%. If you are trying to maximize your return and you are in a 38% tax bracket, which of the following is true? A) Buy the muni bond. B) Buy the corporate bond. C) You are indifferent between the muni and the corporate bond. D) There is not enough information to determine which is better. E) None of the above are true statements. 41) It is a fact that there is a(n) ________ relationship between interest rates and bond values in the secondary market. When interest rates ________, bond values ________, and when interest rates ________, bond values ________. A) direct; rise; rise; drop; drop B) direct; rise; drop; drop; rise C) inverse; rise; drop; drop; rise D) inverse; rise; rise; drop; drop E) direct; drop; rise; rise; drop 42) What is the current value of a corporate bond that was issued with a 8% annual coupon, par value of $1,000, required rate of return is 7% and is due in 10 years? A) $1,000.00 B) $1,070.23 C) $1,080.00 D) $1,167.33 E) none of the above 43) What risks are you assuming with preferred stock that you would not have with common stock and bonds? Be specific. 44) What is the advantage of investing in mutual funds over buying individual stocks yourself? A) inexpensive way to instantly diversify B) professional management C) minimal transaction costs D) liquidity E) all of the above 45) When comparing which mutual fund to invest in, which of the following would be important to consider? A) Load B) Net Asset Value C) Expense ratio D) All of the above are correct E) Both A and C are correct. 46) Which of the following will effect your capital gains liability? A) Turnover ratio B) Changes in Net Asset Value C) expense ratio D) All of the above are correct. E) Both A and B are correct. 47) Explain how a dividend reinvestment plan is similar to compounding and the time value of money. 48) Explain why/why not you would prefer to put retirement funds in a Roth IRA vs. a traditional IRA. 49) Social Security is a mandatory insurance program that provides a base level of protection for all of the following occurrences except one. Choose that one. A) death B) disability C) health problems D) retirement E) job loss 50) Richard Harris wants to elect the single life annuity option for retirement. His mother lived to age 92 and his dad lived to be 89. This annuity will pay Richard a set monthly payment for as long as he lives. However, what possible disadvantages will he face? A) There will be no inflation protection. B) There will be no flexibility for withdrawals in case of emergencies. C) The balance of the money left over upon death will not be passed on to his heirs. D) All of the above are correct E) Both A and C are correct



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