Financial Information Analysis The Role Of Accounting Information In Modern Society 3rd Edition Philip O Regan - Solutions

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M1-3 Identifying Users of Financial Information 1. Who are the primary internal users of financial information, and what decisions do they make? 2. Who are the primary external users of financial information, and what decisions do they make?
M1-2 Matching Business Forms to Definitions Match each term with its related definition by entering the appropriate letter on the blank provided. Term Definition ____ 1. Sole proprietorship A. Business owned by more than one individual who are liable for the debts of the business. ____ 2.
M1-1 Matching Business Types to Definitions Match each term with its related definition by entering the appropriate letter on the blank provided. Term Definition ____ 1. Manufacturing business A. Provides service to customers. ____ 2. Merchandising business B. Produces goods from raw inputs. ____
10. (Supplement 1-A) Public accountants provide which of the following services for clients?a. Internal auditing, cost accounting, and budgeting.b. Assurance, forensic, and consulting.c. Internal auditing, taxation, and consulting.d. Assurance, cost accounting, and bookkeeping.
9. Which of the following is false?a. Assets are the resources the business owns.b. Assets = Liabilities – Owner ’ s Equity.c. Ethical decisions are an important component of sound financial reporting.d. The primary responsibility for the information in financial statements lies with management.
8. Which of the following regarding GAAP is true?a. GAAP is an abbreviation for goodie, another accounting problem.b. Changes in GAAP do not affect the amount of income reported by a company.c. GAAP is the abbreviation for generally accepted accounting principles.d. Changes to GAAP must be approved
7. Which of the following is a liability?a. Prepaid expenseb. Accounts receivablec. Wages payabled. Sales revenue
6. A company reported assets of $130,000, liabilities of $20,000, expenses of $220,000, and net income of $40,000. Revenues and owner’s equity would be reported as: Revenues Owner’s Equitya. $110,000 $180,000b. $180,000 $110,000c. $260,000 $110,000d. $260,000 $150,000
5. Which of the following is not one of the items required to be shown in the heading of a financial statement?a. The financial statement preparer’s name.b. The title of the financial statement.c. The financial reporting date or period.d. The name of the business entity.
4. Which of the following is false regarding the balance sheet?a. The accounts shown on a balance sheet represent the basic accounting equation for a particular business.b. The owner’s equity balance shown on the balance sheet must agree to the ending owner’s equity balance shown on the
3. The income statement reportsa. Net earnings or losses for a period of time.b. Revenues, expenses, and liabilities.c. Only revenue for which cash was received at the point of sale.d. Financial position of a business at a specific point in time.
2. Which of the following is not one of the four basic financial statements?a. Balance sheetb. Audit reportc. Income statementd. Statement of cash flows
1. Which of the following is not a primary objective of external users who read a company’s financial statements?a. Understanding the company’s current financial state.b. Assessing the company’s contribution to social and environmental policies.c. Predicting the company’s future financial
14. What are ethical dilemmas in accounting, and who benefits and who is harmed by unethical behaviors?
13. Briefly describe the organizations responsible for developing accounting measurement rules (generally accepted accounting principles) in the United States.
12. What is the purpose of the notes to the financial statements?
11. What information should be included in the heading of each of the four primary financial statements?
10. Describe the purpose of thea. balance sheet,b. income statement,c. statement of owner’s equity, andd. statement of cash flows.
9. Write the equation for the statement of cash flows, and explain the three major types of activities reported on the statement.
8. Write the equation for the statement of owner’s equity.
7. Briefly define net income and net loss.
6. Write the equation for the income statement and define each of its elements.
5. Write the fundamental accounting equation and define each of its elements.
4. The accounting process generates financial reports for both internal and external users. Describe some of the specific groups of internal and external users.
3. Briefly distinguisha. financial accounting from managerial accounting andb. private accounting from public accounting.
2. Define accounting.
1. List the organizational forms for business and the primary strengths and weaknesses of each.
IP, a large public company, is one of the world’s leading generators of electric power. The board of directors has stated that the company’s corporate aim is to be the leading generator of electric power in the world, building a business which is profitable and provides long-term shareholder
MDT Ltd is a private limited company. It was formed in 1983 by three former electricians because they liked working together and they thoght that they could make a living by making good-quality, inexpensive, electrical appliances. Each of the founders invested £10,000 as the share capital of their
AL plc is a company which supplies industrial cleaning services. After it was founded, 15 years ago, AL Ltd (as it then was) achieved rapid growth and high levels of turnover. The board of directors at the time believed that its traditional scientific management style, based on Taylorian
Analysis of the ‘added value’ achieved by an organisation will reveal how much has been contributed by each of its primary and support activities. The object of the analysis is to identify those activities undertaken by the organisation which contribute the most to the total value added. This
A company which manufactures and distributes industrial oils employs a team of salespeople who work directly from home and travel around different regions in the country. Each member of the sales team has his or her own geographical area to cover and they visit clients on a regular basis. The sales
Michael Porter, in his book Competitive Advantage: Creating and Sustaining Superior Performance, suggested that a firm must assess the industry’s market attractiveness by considering: the extent of the rivalry between existing competitors; the bargaining power of suppliers; the bargaining
A clothing company based in the United Kingdom believes that its domestic market is limited and is proposing to expand by the manufacture and sale of its products abroad. At this stage it has not identified where it will locate its manufacturing facility. The company believes that there are major
A publicly-funded department within a local administrative authority provides a health advisory service to its local community. This is not a hospital. Its function is purely advisory in respect of preventive medicine and focuses on good health promotion and prevention of accidents and illness. In
Router plc, a mining company, has said in its mission statement that it will ‘endeavour to make the maximum possible profit for its shareholders while recognising its wider responsibilities to society’. Router plc has an opportunity to mine for gold in a remote and sparsely populated area. The
“No amount of legislation or regulation will overcome the fact that most fi nancial statements are essentially propaganda documents bearing little relation to the underlying commercial reality of business.” Discuss.
What useful information would an analyst or potential investor glean from the segment reporting note in an annual report?
Explain why intangible assets are now so signifi cant for most large companies. Why is it that human capital is not recognized on most statements of fi nancial position?
Identify the additional information disclosed by a cash-fl ow statement. Explain why, if prepared using the direct method, the cash-fl ow statement might be of use to potential investors in deciding whether or not to invest in the shares of a reporting entity.
Explain the thinking behind the introduction of the statement of changes in equity.
List the principal constituent parts of the statement of comprehensive income and explain why it was thought necessary to use the term “comprehensive”.
Explain why the disclosures now required in relation to intangibles have become so signifi cant.
List the principal constituent parts of the statement of fi nancial position.
List the primary fi nancial statements that appear in annual reports. Comment on whether and/or how they complement one another.
In terms of group structure, describe the types of relationships that it is possible for one company to have with another.
“There is nothing new in trying to predict corporate bankruptcy. Formal procedures using accounting ratios to distinguish between failing and surviving businesses have existed for almost 70 years. Like the alchemists of old who sought to turn base metals into gold, generations of researchers have
“EVA seeks to jog managers’ memories by deducting from a fi rm’s net operating profi t a charge for the amount of capital it employs. If the result is positive, then the fi rm created value over the period in question; if the EVA is negative it was a “value destroyer”. Providing a company
Why are these approaches to business valuation sometimes dismissed as “more art than science”?
Explain the use of the P/E ratio and ebitda in the price multiples approaches.
Explain what is meant by “enterprise value” and how one determines the multiple to be used.
Why is the market valuation method considered superior to the book value approach?
What is “book value” and what are the principal limitations in using it as a defi nitive measure of value?
What are the four basic steps involved in the process of valuing a company regardless of the commercial circumstances?
Why is the link to cash fl ows such a fundamental element in the approach to company valuation?
Explain why the need to value a business might arise.
Identify some items that would appear under each of the four headings of a SWOT analysis in the case of a large international retailer.
Explain the PESTEL framework and how it helps a company to understand its environments better.
What is the difference between the “formal” and “emergent” approaches to strategic planning?What issues might the emergent approach capture or emphasize that the formal approach might not?
Is the view that there is little merit in formal strategic planning process credible?
What are the principal features of the “formal” approach to strategic planning?
Distinguish between the organic, differentiation and acquisition strategic approaches to growth.
What are the fi ve key elements of Porter’s Five Forces Model? Why has this had such a major impact on approaches to industry analysis?
What is the difference between the competitive positioning approach and the resource-based-view approach?
“Competitive Advantage” has become a key concept in modern understandings of strategy. What does the term mean and why has it assumed such a central signifi cance?
Explain what is meant by the term “strategy” and why it is of such importance to commercial entities.
Explain why the ambitious convergence project that both IASB and FASB have embarked on has proven so contentious.
Having developed a very prescriptive set of regulations FASB is, understandably, reluctant to surrender the initiative to IASB, a body that it sees as too anxious to compromise on quality in order to reach consensus. Explain whether the US and its representatives can sustain this attitude towards
Distinguish between harmonization and standardization, and explain how recent developments in the EU and US may impact on the prospects for convergence.
Compare and contrast the accounting systems in Germany and France. Pay particular attention to identifying common features that distinguish them from the Anglo-American model.
What is the role of the Plan Comptable General (PCG) in French accounting practice?
Identify the principal characteristics of the corporate governance culture in Germany and explain how it differs from that operating in the UK.
“German accounting can be best described as conservative.” Explain.
Explain how accounting practice has developed in Germany to date and identify some of the principal characteristics of the German accounting system.
List some of the common characteristics, if any, of continental European accounting practice.
Identify the main catalysts for change in international accounting practice and assess how these might impact differently on developed and developing countries.
Referring back to Chapter 5, identify some of the ways in which additional disclosure requirements, for instance, those relating to the strategic report, may play a role in addressing some of the issues this chapter raises.
The integrated report is based on the alignment of the six capitals invested in a business and the value proposition of that business. List these six capitals and explain how this paradigm might produce a very different report from one that merely follows fi nancial investment.
Explain what is meant by “sustainability” and why this is a central concern in CSR reporting.
Account for the fact that environmental accounting has emerged as the one area within CSR capable of establishing a central role for itself in the reporting process.
Discuss the role that both stakeholder theory and broader governance and risk management issues could play in ensuring that CSR might be assimilated more fully into the fi nancial reporting model.
In your opinion how does CSR relate to the whole question of the company as “corporate citizen”?
Explain the signifi cance of the “triple bottom line” approach.
What are the principal defi ciencies in the traditional accounting model identifi ed by those supporting CSR as a reporting paradigm?
Explain the role played by the corporate report in identifying CSR as an area that was likely to have a considerable impact upon corporate reporting.
Identify and explain the various factors that have given rise to what is now commonly called CSR. Is this a fad or is it likely to infl uence corporate reporting into the long term?
To what extent should employers be held responsible for ensuring that employees believe they can come forward with their concerns on potential whistleblowing issues? To what extent can external auditors play a role?
Is it appropriate, do you think, to reward whistleblowers fi nancially?
“Creative accounting has several positive features. It should not just be viewed as something to eradicate.” Discuss.
What is the role of “whistleblowers” in uncovering creative accounting practices? Should there be greater legal protection for those willing to act in this way?
Discuss the extent to which, in an environment in which ethics are seen as negotiable, increased regulation can assist in eradicating creative accounting practice.
Consider the extent to which it is realistic to expect ethical considerations to inform work practices.
“Creative accounting is usually intended to support, or even increase, share price. Since this is in the interests of shareholders there is rarely any pressure from this group to eradicate such practices.”Explain the implications of this, if true, and discuss whether there is pressure from
Identify some of the more common examples of creative accounting used in the past and explain how recent accounting standards have attempted to deal with them.
SEC commissioner Arthur Levitt argues that what is needed is “a basic cultural change.” Explain what he means by this and why creative accounting practices may need to be addressed at such a fundamental level.
Defi ne “creative accounting” and explain why it presents such a potent challenge to accounting regulators and users of accounting information.
What is meant by the “convergence” project and why has it encountered such resistance?
Why might political lobbying be such an important factor in determining tax policy in relation to the taxation of company profi ts?
Explain the distinction between monetary and non-monetary items in the context of foreign exchange transactions and outline the signifi cance of this distinction in the context of the application of the provisions of IAS 21.
IAS 21, The Effects of Changes in Foreign Exchange Rates, requires that a company identify its functional and presentation currencies. Outline what these are and the circumstances in which each applies.

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Financial Information Analysis The Role Of Accounting Information In Modern Society 3rd Edition Philip O Regan - Solutions

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