Question: Discuss the differences, similarities, and ties

> What is taxable income for an individual? How does it differ from taxable income for a corporation?

> The company president is reviewing the performance and budget of the marketing department with the vice president of marketing. Should that be a one-on-one meeting or should the CFO be present? Why? If you feel the CFO should be there, what should be his

> Diversified companies are made up of divisions, each of which is a separate business. Large companies have divisions spread over the entire country. In such companies most treasury functions are centralized, whereas most accounting functions are carried

> If the Johnson Company of Problem 2 is subject to a marginal tax rate of 34%, what is the cash flow associated with the sale of the used truck?

> The Johnson Company bought a truck costing $24,000 two and a half years ago. The truck's estimated life was four years at the time of purchase. It was accounted for using straight line depreciation with zero salvage value. The truck was sold yesterday fo

> Canaday Ltd. has the following receivables balances ($M) Gross Accounts Receivable………………………………………. $175 Bad Debt Reserve………………………………………………………. (3) Net Accounts Receivable…………………………………………...$172 Two years ago a customer was approved for an unusually lar

> You've been hired by the nation of Utopia to computerize its approach to calculating taxes. Utopia's progressive tax system contains only two brackets, which are applicable to all households. These are as follows:

> Rachel and Harry are planning to get married. Both have successful careers and expect to earn the following this year. whether getting married will cost or save them money and how much. Assume that getting married during a year subjects the entire yea

> The Snyder Company had the following income and expense items: Sales…………$180,870,000 Cost…………...$110,450,000 Expenses…...$65

> Inky Inc. reported the following financial information in 2015. Operating income (EBIT)………………$650,000 Interest………………………………………...$430,000 Dividends from Printers Inc. not included in operating income (Inky owns 3% of Printers) …$20,000 Dividends paid t

> Compare and contrast the terms “stockholder” and “stakeholder.”

> Microchip Inc had the following profits and losses in the years indicated 2013………........$5,000,000 2014……………...$350,000 2015…….

> Ed Fletcher is planning to start a business that requires an investment of $500,000. He has that much money, but can also borrow virtually the whole amount from a rich relative. (This is very unusual.) Ed feels that after the business is started, it w

> Calculate the corporate tax on earnings before tax (EBT) of the following amounts a. $37,000 b. $57,000 c. $88,500 d. $110,000 e. $5,375,000 f. $14,000,000 g. $17,350,000 h. $23,500,000

> Dick Dowen is considering three investment opportunities: 1. A 4.5% City of Chicago bond that is tax exempt at both the state and federal level. 2. A 4.75% State of Illinois bond that is tax exempt at the federal level but taxable at the state level. 3.

> Harry Swartz wants to invest in a bond and has narrowed his choices down to two issues. The first is offered by Microsoft Corp. and pays an interest rate of 8%. The second option is offered by the city of Springfield, Massachusetts, and offers a return o

> Joan and Harry Leahy both had income in 2015. Harry made $72,500 in wages. Joan has an incorporated small business that paid her a salary of $50,000. In addition, the business had profits of $15,000, which were paid to the Leahys as dividends. They recei

> The Benjamin family had wage earnings of $185,000 in 2015. They received interest of $4,500 on corporate bonds and $1,500 on bonds issued by the state. Their dividend income was $500, and they had a $1,000 long term capital gain on the sale of securiti

> The Lindscomb family had the following income in 2015: Salaries: Mark …………… $63,500 Ashley …………. 57,900 Interest on investments: IBM bonds ……………………. $ 4,750 New York

> Joan Petros reported taxable income in 20X2 of $150,000 which included the following transactions: 1. In June, 20X2, Joan sold 100 shares of stock for $40 per share. She had purchased them three months earlier for $35 per share. 2. In October, 20X2, Jo

> Use the following tax brackets for taxable income: Bracket ………………………… Tax Rate $0 - $10,000 ………………………… 15% $10,000 - $50,000 ………………… 25%

> Is the agency problem an ethical issue or an economic issue?

> The Coolidge family has taxable income of $165,000. They live in a state in which income over $100,000 is taxed at 11%. What is their total effective (marginal) tax rate?

> The Digital Systems Company was organized two years ago to take advantage of an internet opportunity. Investors paid $12 a share for 2 million shares with a $4 par value. In the next two years the company had earnings of $2 million and $3 million respe

> Preston Road Inc. was organized was organized last year when its founders contributed $9 million and issued 3 million shares of $1.25 par value stock. The company earned $750,000 in its first year and paid dividends of $325,000. Construct the equity se

> Mints Entertainment, Inc. had Net Income of $170,000 and paid dividends of $0.25 per share on its 100,000 shares of outstanding stock this year. At the end of the year its balance sheet showed retained earnings of $250,000. What was Mints’ retained earn

> During the last year Alpha Co had Net Income of $150, paid $20 in dividends, and sold new stock for $40. Beginning equity for the year was $700. Calculate ending equity.

> Declan Ross wants to sell his business. The firm has no debt and earns an 8% return (ROE) on equity of $150,000. The business can borrow at an after tax rate of 5%. A consultant has advised that the business will be worth more if its financial statements

> Gatwick Ltd. has after tax profits (net income) of $500,000 and no debt. The owners have a $6 million investment in the business. If they borrow $2 million at 10% and use it to retire stock, how will the return on their investment (equity) change if ea

> Jacob Cornwall has a business in which he’s invested $250,000 of his own money, which is the firm’s only capital. (There are no other equity investors and no debt.) In a recent year the firm had net income of $20,000 for a return on equity of 8% ($20,00

> The Glavits Company opened for business on Monday, June 1, with inventory of $5,000 and cash in the bank of $7,000. These were its only assets. All start-up financing was provided from the owner's personal funds, and there were no other liabilities. T

> In January, 20X3, Elliott Industries recorded the following transactions: 1. Paid bills from 20X2 totaling $120,000 and collected $150,000 for sales that were made in 20X2. 2. Purchased inventory on credit totaling $500,000, 30% of which remain unpaid at

> What conflict(s) of interest can you imagine arising between members of the community in which a company operates and some other stakeholders? (Hint: Think about pollution.)

> Sanderson Metals Inc. accrues four liability items: payroll, employee vacation that has been earned but not used, property taxes, and inventory that arrives at its factory dock before an invoice is received from the vendor. Payroll: Sanderson pays its

> Belvedere Inc. has an annual payroll of $52 million. The firm pays employees every two weeks on Friday afternoon. Last month, the books were closed on the Tuesday after payday. How much is the payroll accrual at the end of the month?

> Becher Industries has three suppliers for its raw materials for manufacturing. The firm purchases $180 million per year from Johnson Corp. and normally takes 30 days to pay these bills. Belcher also purchases $150 million per year from Jensen, Inc. and

> On January 1, 20X2, Miller Corp. purchased a milling machine for $400,000. It will be depreciated on a straight line basis over 20 years. On January 1, 20X3, Miller purchased a heavy duty lathe for $250,000 which will be depreciated on a straight line

> Consider the Current Asset accounts (Cash, Accounts Receivable and Inventory) individually and as a group. What impact will the following transactions have on each account and current assets in total (Increase, Decrease, No Change)? (Hint: Each transac

> McFadden Corp. reports the following balances on their December 31, 20X2 Balance Sheet:

> Fred Gowen opened Gowen Retail Sales as a sole proprietorship and recorded the following transactions during his first month in business: 1. Purchased $50,000 of fixed assets, putting 10% down and borrowing the remainder. 2. Sold 1,000 units of product

> Heald and Swenson Inc purchased a drill press for $850,000 one year and nine months ago. The asset has a six year life and has been depreciated according to the following accelerated schedule. The press was just sold for $475,000. The firmâ€

> Jill Meier is the sole owner of Meier Corp., which provides her only source of income. Jill has always paid herself entirely by drawing dividends from her corporation. A friend suggested that as long as she is earning about what she would have to pay so

> Harvey Redmond is planning a new business that he expects will grow into a large company within a few years. Harvey’s lawyer has advised him that large companies are usually C-type corporations because of stock market considerations, so he’s considering

> A company has been growing rapidly for the last three years. It was profitable before the growth spurt started. Although this year's revenues are almost three times those of three years ago, the firm is now losing money. What's the first thing you woul

> Sussman Industries purchased a drilling machine for $50,000 and paid cash. Sussman expects to use the machine for 10 years after which it will have no value. It will be depreciated straight-line over the ten years. Assume a marginal tax rate of 40% What

> Is limited liability a meaningful concept? Why or why not? And if so, for whom?

> What are the significant financial advantages and disadvantages of the sole proprietorship/ partnership form in comparison with the corporate form?

> How does the activity of investors in financial markets affect the decisions of executives within the firm?

> Discuss the relationship between finance and economics.

> What is the primary factor that determines the price of securities? Can you think of another factor that might significantly affect how investors value the first factor?

> Separate the following list of assets into real assets and financial assets. What are the distinguishing characteristics of each type of asset? Delivery Truck Factory Building Corporate Bond Inventory Corporate Stock Land Note Receivable Compute

> What is the reasoning behind using the current ratio as a measure of liquidity?

> Financial ratios don't do you much good by themselves. Explain.

> The present format for the statement of cash flows is organized according to operating activities, investing activities, and financing activities. That format has only been in use since the late 1980s. The previous format first listed all sources and t

> Outline the thinking behind ratio analysis in brief, general terms (a few lines; don't go into each ratio individually).

> What are free cash flows? Who is likely to be most interested in them? Why?

> Why don't we calculate the total difference in the equity accounts between the beginning and end of the year and consider that difference as a source or use of cash? Why do we similarly exclude the cash account?

> If a company's cash account increases from the beginning to the end of the year, there's more cash on hand so that must be a source of cash. Yet the cash account is an asset and the first cash flow rule says that an asset increase is a use of cash. Exp

> Financial analysts are generally optimists who believe what they're told. Right or wrong? Explain.

> Where do analysts get financial information about companies? What are their concerns about the information?

> Can A competent financial analyst always correctly assess a firm’s financial health from publicly available information? Explain.

> Can managers affect market value ratios?

> It can be argued that the TIE ratio doesn't make much sense. Why? How would you change the measure to be more meaningful? (Hint: Think in terms of cash flows.)

> Why do people view having too much debt as risky? If you were interested in determining whether a company had too much debt, what measure would you use? Why? How much debt do you think would generally be considered too much?

> You invested $20,000 in the stock of HiFly Inc two years ago. Since then the stock has done very well more than doubling in value. You tried analyze HiFly’s financial statements twice in the last two years, but were confused by several of the detailed

> Discuss the different definitions of debt in ratio analysis.

> A company's terms are net 30 and the ACP is 35 days. Is that cause for alarm? Why or why not?

> Why do we need the quick ratio when we have the current ratio?

> List the main user groups of financial information. What are the reasons for their interest?

> Define the term tax base and discuss common bases. What government units’ tax on each? What are these taxes commonly called?

> What is leverage and how does it work? What is the main concern about using it?

> How are capital and working capital different?

> Do the definitions of current assets and current liabilities suggest a quick way of looking at the firm's ability to meet its financial obligations (pay its bills) over the near term? (Hint: Think in terms of ratios.)

> What are the common misstatements of balance sheet figures and why do they present a problem?

> What is meant by liquidity in financial statements?

> The industry average inventory turnover ratio is 7 and your company's is 15. This could be good or bad news. Explain each possibility. How would you find out whether or not it is bad news?

> Why is EBIT an important line item in the income statement? What does EBIT show us?

> Discuss the purpose of an accounting system and financial statements in terms of the way the system represents a business.

> What is the total effective tax rate?

> Why does a financial professional working outside accounting need a knowledge of accounting principles and methods?

> Explain the reasoning behind tax loss carry backs and carry forwards.

> Why are dividends paid from one corporation to another partially tax exempt?

> What are the tax implications of financing with debt versus equity? If financing with debt is better, why doesn't everyone finance almost entirely with debt?

> Is the corporate tax schedule progressive? Why or why not?

> Why is the tax treatment of capital gains an important financial issue?

> What tax rate is important for investment decisions? Why?

> The term "liquidity" is used in several ways. What does it mean in the context of an asset or liability such as those on the balance sheet? What does it mean when applied to an operating company? What does the similar term "liquidate" mean when applie

> Zurn Pex, Inc. and Zurn Industries, Inc. (Zurn) manufactures and markets a home plumbing system that uses Pex tubing, an alternative to traditional copper water pipes. Pex tubing systems are marketed as easier to install, cheaper, and longer lasting than

> Sandra Primrose, who was 73 years old, was shopping in a Wal-Mart store owned and operated by Wal-Mart Stores, Inc. She picked up a watermelon from a large display stand and as she took several steps around the display to reach her shopping cart, she tri

> Richtone Design Group LLC (Richtone) is a New York limited liability company (LLC) that owns the copyright to the Pilates Teacher Training Manual and licenses fitness instructors to teach pilates exercise programs. Live Siri Art, Inc. is a California co

> In 1909, the state legislature of Illinois enacted a statute called teaexinstructhe Woman’s 10-Hour Law. The law prohibited women who were employed in factories and other manufacturing facilities from working more than 10 hours per day. The law did not

> Jon Summervold purchased a remote-controlled toy watercraft from the Wal-Mart store located in Aberdeen, South Dakota. The plaintiff sued Wal-Mart, Inc. for alleged defective design and failure to warn that arose out of the trauma he suffered when the to

> Raymond P. Wirth signed a pledge agreement that stated that in consideration of his interest in education, and “intending to be legally bound,” he irrevocably pledged and promised to pay Drexel University the sum of $150,000. The pledge agreement provide

> Mighty Morphin’ Power Rangers was a phenomenal success as a television series. The Power Rangers battled to save the universe from all sorts of diabolical plots and bad guys. They were also featured in a profitable line of toys and garments bearing the P

> Loren Vranich, a doctor practicing under the corporate name Family Health Care, P.C., entered into a written employment contract to hire Dennis Winkel. The contract provided for an annual salary, insurance benefits, and other employment benefits. Another

> The Lewiston Lodge of Elks sponsored a golf tournament at the Fairlawn Country Club in Poland, Maine. For promotional purposes, Marcel Motors, an automobile dealership, agreed to give any golfer who shot a hole-in-one a new Dodge automobile. Fliers adver

> Acting on an anonymous tip that a residence was being used to sell drugs, Tucson, Arizona, police officers knocked on the front door of the residence. Rodney Gant opened the door, and the police asked to speak to the owner. Gant identified himself and st

> Detective William Pedraja of the Miami-Dade Police Department received a Crime Stoppers unverified tip that one of the tipper’s neighbors, Joelis Jardines, was growing marijuana in his house. Detective Pedraja and Detective Bartelt and his drug detection

> Elvis Presley, a rock ’n’ roll singer, became a musical icon during a career that spanned more than 20 years, until he died at the age of 42. Many companies and individuals own copyrights to Presley’s songs, lyrics, photographs, movies, and appearances o

> Intel Corporation is a large company that distributes its entire line of products and services under the registered trademark and service mark INTEL. The company also owns numerous marks that incorporate its INTEL marks as a permanent component, such as