...Shelby Johnson Week 5 Accounting IIDecember 13, 2013Common StockThe holders of common stock can reap two main benefits: capital appreciation and dividends. Capital appreciation occurs when a stock's value increases over the amount initially paid for it. The stockholder makes a profit by selling the stock at its current market value after capital appreciation. Dividends, which are taxable payments, are paid to a company's shareholders from retained or current earnings. Typically, dividends are paid to stockholders on a quarterly basis. Payments are usually made in the form of cash, but other property or stock can also be used. Payment of dividends, however, hinges on a company's capacity to grow -- or maintain -- current or retained earnings. This means ongoing payment of dividends cannot be guaranteed. Common stock has the additional benefit of enabling its holders to vote on company issues and when choosing the company's leadership. Usually, one share of common stock equals one vote. Preferred Stock Preferred stock doesn't offer the same profit potential as common stock, but it’s a more stable investment vehicle because it guarantees a regular dividend that isn't directly tied to the market as with the price of common stock. Preferred stock guarantees dividends, which common stock does not. The price of preferred stock is tied to interest rate levels; it tends to decrease if interest rates go up and increase if interest rates fall. Preferred stockholders get priority...
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...Assignment 3 Common Stock Screen Market Capitalization – Small ($300 million to $2 billion) Generally speaking, companies with smaller market caps are relatively new. This is a good thing, since they have a lot of room for expansion and growth. Although there is a risk that they will fail, if other fundamental factors are good, then there is a good chance the company will flourish. Companies with bigger market caps have already grown and will probably not have as much potential as smaller ones. Price – Under $20 There are two reasons I chose a low price as opposed to a high one. When investing a given amount of money, a lower price per stock will yield a greater percentage ownership in the corporation. On the other hand, you cannot afford as many stocks with a high price per stock. This is assuming the corporations have equal total shares. The second reason is that companies with a lower stock valuation have much more room to grow as ones with higher stock prices. Price to earnings ratio – Over 30 The P/E ratio is very important in determining whether a stock is worth investing in or not. A high P/E ratio means that investors and analysts expect the company to grow in the future. Future growth means more profits and more investors, which drives the stock price up. Most big companies have high P/E ratios, such as Google, which is priced much more than the value of its assets. Debt/Equity – low (<0.1) A high debt/equity ratio means that the company has been financing...
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...ownership position in a publicly-traded corporation (stock), a creditor relationship with governmental body or a corporation (bond), or rights to ownership as represented by an option. A security is a fungible, negotiable financial instrument that represents some type of financial value. The company or entity that issues the security is known as the issuer” (Definition of ‘Security’). Typically securities are divided into equities that represent ownership interest that the shareholders in an organization hold and debt securities representing borrowed funds that must be paid back. In this essay I will be discussing the significance of understanding the differences between fixed income securities and common stock securities. In the United States, the sales of securities are regulated by organizations like the Financial Industry Regulatory Authority and the Securities and Exchange Commission or for short the SEC. Publicly traded companies have two classes of securities they issue, which are common stock securities and preferred stock securities. A security is what is considered a paper asset with the potential to be traded in small denominations (mostly) in the secondary market. Securities that pay a fixed amount of income are considered to be fixed-income securities i.e. bonds or preferred stocks. Bonds are debt securities that are dispensed by the government and corporations having a face value, or par. Unlike bonds preferred stocks are a representation of equal ownership within...
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...Date: 03/15/2015 From: Samah Alshaikh Re: Porter Industries common stock impairment Facts: Our client, Lennon Incorporated, in January 10, 2014, purchased 100 shares of Porter Industries common stock on for $25 per share. The corporation classified the investment as an available for sale security. The price of the Porter Industries shares has declined to $18 per share In March. Then, the price stayed stable between $17.70 and $18.20 per share from April to November. On December 31, 2014, the price of Porter Industries common stock was $18.10 per share. Lennon management believes that the price decreasing is temporary, and Lennon management does not intend to sell the stock in the next year. Lennon reported its investment in Porter Industries...
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...MULTIPLE CHOICE (5 Points Each) 1. Gaw Company owns 15% of the common stock of Trace Corporation and used the fair-value method to account for this investment. Trace reported net income of $110,000 for 2013 and paid dividends of $60,000 on October 1, 2013. How much income should Gaw recognize on this investment in 2013? A. $16,500. B. $9,000. C. $25,500. D. $7,500. E. $50,000. 2. Yaro Company owns 30% of the common stock of Dew Co. and uses the equity method to account for the investment. During 2013, Dew reported income of $250,000 and paid dividends of $80,000. There is no amortization associated with the investment. During 2013, how much income should Yaro recognize related to this investment? A. $24,000. B. $75,000. C. $99,000. D. $51,000. E. $80,000. 3. On January 1, 2013, Pacer Company paid $1,920,000 for 60,000 shares of Lennon Co.'s voting common stock which represents a 45% investment. No allocation to goodwill or other specific account was made. Significant influence over Lennon was achieved by this acquisition. Lennon distributed a dividend of $2.50 per share during 2013 and reported net income of $670,000. What was the balance in the Investment in Lennon Co. account found in the financial records of Pacer as of December 31, 2013? A. $2,040,500. B. $2,212,500. C. $2,260,500. D. $2,171,500. E. $2,071,500. 4. A company should always use the equity method to account for an investment if: A. It has the ability to exercise...
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...On January 1, 2013, Bangle Company purchased 30% of the voting common stock of Sleat Corp. for $1,000,000. Any excess of cost over book value was assigned to goodwill. During 2013, Sleat paid dividends of $24,000 and reported a net loss of $140,000. What is the balance in the investment account on December 31, 2013? | | $950,800. | | On January 4, 2012, Harley, Inc. acquired 40% of the outstanding common stock of Bike Co. for $2,400,000. This investment gave Harley the ability to exercise significant influence over Bike. Bike's assets on that date were recorded at $10,500,000 with liabilities of $4,500,000. There were no other differences between book and fair values. During 2012, Bike reported net income of $500,000. For 2013, Bike reported net income of $800,000. Dividends of $300,000 were paid in each of these two years. What was the reported balance of Harley's Investment in Bike Co. at December 31, 2013? | $2,680,000. | On January 1, 2013, Deuce Inc. acquired 15% of Wiz Co.'s outstanding common stock for $62,400 and categorized the investment as an available-for-sale security. Wiz earned net income of $96,000 in 2013 and paid dividends of $36,000. On January 1, 2014, Deuce bought an additional 10% of Wiz for $54,000. This second purchase gave Deuce the ability to significantly influence the decision making of Wiz. During 2014, Wiz earned $120,000 and paid $48,000 in dividends. As of December 31, 2014, Wiz reported a net book value of $468,000. For both purchases...
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...Identify the components of a stock’s realized return. “The realized return is the total realized return that happens during a specific period (Jonathan Berk, 2010, p. 388).” The components consist of the stock price that it was bought, the price it was sold, and also the dividend. To calculate the stock’s realized return begin by dividing the dividend by amount that it was bought and adding it to the difference between the amount that it was sold by the amount that it was bought and finally dividing that by the amount that it was bought (Jonathan Berk, 2010, pp. 338-341). This will be the last component to a realized return. Contrast systematic and unsystematic risk. “Unsystematic risk is fluctuations of a stock’s return that are due to company or industry specific news” (Jonathan Berk, 2010, p. 353). This is associated with random causes that can be eliminated through diversification. It’s attributed to firm-specific events such as strikes, lawsuit, regulatory actions, or a loss of a key account. Unsystematic risk is due to factors specific to an industry like labor unions, product category, research and development, pricing, or marketing On the other hand, systematic risk occurs when fluctuations of the stocks returns are changed because of market wide news (Jonathan Berk, 2010, p. 353). These market factors may include situations such as war, inflation, international incidents, or political events. It may be eliminated through diversification and the combination of...
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...9-807-027 REV: AUGUST 1, 2008 ROBERT F. HIGGINS VIRGINIA A. FULLER NatuRi Corporation In February 2006, Aravind Cherukuri and Kartik Natarajan were reviewing their options for raising capital for NatuRi Corporation, the company they had founded together in 2005. With operations split between Chennai, India, and Boston, Massachusetts, NatuRi had developed a biological compound that showed promising effects in cholesterol management. The compound, discovered by Aravind’s mother, biological scientist Rukmini Cheruvanki, was derived from the byproducts of rice bran oil (RBO) production. Early animal trials had demonstrated that the compound was effective in lowering “bad” cholesterol while simultaneously increasing levels of “good” cholesterol. If manufactured for human ingestion, the compound would provide a natural alternative to synthesized cholesterol-lowering drugs on the market. Although NatuRi was still in the start-up stage, it had captured the attention of at least four potential investors willing to offer a seed investment. Having just received a term sheet from Waltham Partners, a well-known East Coast venture capital firm, Aravind and Kartik were now forced to weigh their options and determine which of the four potential investors currently interested in their venture would be most appropriate for NatuRi’s future growth. Their funding decision for this stage would also impact options for later rounds of funding. The duo had to decide on NatuRi’s ...
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...Harvard Business School 9-899-097 Rev. November 19, 1998 Walnut Venture Associates (D): RBS Deal Terms It was Friday, June 5, 1998, and Bob O’Connor was headed home for the weekend. He knew it would be a busy one, for he had many decisions to make. He had been trying to raise capital for his Company – the RBS Group, a software firm – for almost a year. He felt like he was finally nearing the end of this process, but now more issues had arisen. First, his prospective investors wanted to increase the amount of their investment. While he would be happy to have the extra money, he felt that the valuation on RBS was already lower than he had hoped, and he was reluctant to take more money at this price. Second, he had received a draft term sheet the day before. He’d only had a few minutes to scan it, but it seemed a long way from the simple deal they’d discussed weeks before. O’Connor knew he would be spending a lot of time with this document over the coming weekend. Background Wagner and other “angels” from the Walnut group had successfully gotten over several of the issues that had arisen during their due diligence process. (See Walnut Ventures Associates (A), (B) and (C) Nos.899-062, 063 and 064) Wagner described those issues and the due diligence process: The customer feedback was all quite good. O’Connor was a great salesman. The issue was: Is he a one man band? And we decided – yes, he was a one man band, but more by necessity than by choice. After watching him in...
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...Discussion Questions Environmental Collaboration RPTS 609 Edward Abbey – “Society is like a stew. If you don't stir it up every once in a while then a layer of scum floats to the top” Advocacy Questions: 1) In regards to your advocacy paper, what were your advocacy group’s mission/key initiatives? What made them successful in fulfilling their mission? 2) Have you ever been a part of an advocacy/non-profit group? If so why did you join? Overcoming Locally Based Collaboration Constraints (Margerum) 1) What was the purpose of this study? 2) What are some positive attributes associated with Localism? 3) What are the five collaboration constraints associated with localism? Are these constraints limited to localism? Do they outweigh the benefits of Localism or grass-root programs? 4) How does the Nested Collaboration Model of the Rogue Basin address these constraints? Making It Work: Keys to Successful Collaboration in Natural Resource Management (Schuett, Selin, & Carr) 1) What are the six categories that emerged in successful collaboration? How do these categories rely on the stakeholders involved in collaboration? 2) Are there any limitations to the methods used in the study? Is there anything you would change? 3) In both articles by Margerum and Schuett, success is based on qualitative interpretation. Is this a good way to measure success? Are there other ways that we ought to measure success? Is This the Course You Want to Be...
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...Global Commons: An evaluation of global fish stock health and management. The global commons share many primary resources that deserve to be managed and maintained effectively. The global fish stocks are included in these. Overexploitation of this delicate resource can lead to not only a depletion and extinction of this precious fish resource, but also a depletion of jobs, economic opportunities and revenue. Many countries rely heavily on aqua fisheries and aqua tourism industries as a great source of social and economic growth. Factors such as bycatch casualties, pollution, illegal fishing, unsustainable fishing and unsustainable management have a large part in the rapid depletion of global fish stocks. International policies are in place to effectively sustain and replenish fish stocks in particular The United Nations Convention of the Law of the Sea and The 1995 United Nations Fish Stocks Agreement. The purpose of this paper is to critically access the government and academic literature in respect to the fish stocks of the world. This paper also aims to critically investigate the international policies and treaties associated with the Ministry Of Fisheries; that govern the regulations of sustainable fishing and fish stock management. Accordingly, this paper will be divided into four quantitive sections: the first section will provide reference and conduct a detailed review of the literature on overexploitation and depletion of fish stocks in the global commons in response...
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...concepts introduced in earlier chapters. Marc and Craig begin by taking the simplest example of raising a few thousand dollars and move on to greater feats like raising over a billion dollars to help victims of natural disasters. The authors begin by describing a school in Toronto that has dozens of obstacles that it faces on a daily basis. Among those issues are racial tension, frequent violence and gang problems. The authors described this school as a type of school that was thought of as “needing help rather than giving it.” The authors describe how the student body was inspired by a speaker from Free the Children and ended up raising over $30,000 to help several causes in Africa. The authors then begin talking about the “tragedy of the commons” and truly begin hitting on their point of UNITY. Through several concise examples readers learn how working together for the greater good is much more effective than simply working alone. Continuing with the theme of unity, the authors talk about an issue that hits very close to home for me; family values. I have written extensively in prior assignments about my close relationship with my family and I’m very glad to see that Marc and Craig hold similar views on this issue. The whole philosophy of Me to We begins at a very young age and a tight-knit family is a key element that harbors a vibrant...
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...primarily on two factors; 1) whether MCI can expand market share as forecasted amid the increasing competition with AT&T and 2) whether they can sustain good profitability as forecasted amid a concern that AT&T might decrease their pricing. 2. Discuss MCI’s past financial strategy, paying attention to the types of securities issued. After the initial public offering in 1972 and the additional common stock offering in 1975, from 1978 the company accelerated the financing activities due to the larger capex required, namely, 1) Convertible preferred stock in 1978, 1979 and 1980 at the cost of 10.5~12.3% 2) Subordinated debentures in 1980, 1981 and 1982 at the cost of 15.0~16.8% 3) Convertible subordinated debenture in 1981, 1982 and 1983 at the cost of 7.8~10.3% Convertible preferred stock: The company issued preferred stock of $25.8 million in 1975 and $ 63.1 million in 1979. This is because 1) the company believed that issuing common stock would deteriorate the stock price, 2) corporate purchasers of preferred stock and the company could enjoy the tax advantage of the preferred stock especially during the time the company’s profitability was sheltered by the carryforward of past losses and 3) with call option, the company could stop...
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...E17-1 (Investment Classifications) For the following investments, identify whether they are: * 1.Trading * 2.Available-for-Sale * 3.Held-to-Maturity Each case is independent of the other. * (a)A bond that will mature in 4 years was bought 1 month ago when the price dropped. As soon as the value increases, which is expected next month, it will be sold. * (b)10% of the outstanding stock of Farm-Co was purchased. The company is planning on eventually getting a total of 30% of its outstanding stock. * (c)10-year bonds were purchased this year. The bonds mature at the first of next year. * (d)Bonds that will mature in 5 years are purchased. The company would like to hold them until they mature, but money has been tight recently and they may need to be sold. * (e)A bond that matures in 10 years was purchased. The company is investing money set aside for an expansion project planned 10 years from now. * (f)Preferred stock was purchased for its constant dividend. The company is planning to hold the preferred stock for a long time. E17-2 (Entries for Held-to-Maturity Securities) On January 1, 2012, Jennings Company purchased at par 10% bonds having a maturity value of $300,000. They are dated January 1, 2012, and mature January 1, 2017, with interest receivable December 31 of each year. The bonds are classified in the held-to-maturity category. Instructions * (a)Prepare the journal entry at the date of the bond purchase. * (b)Prepare the...
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...worked with YWCA administrators to research and develop a successful three-year funding proposal that greatly expands supportive services and facilities for women in the program. Prior to the expansion, staff offices and program locations were spread out over seven floors, with staff available mostly on weekdays during office hours. Now services are consolidated on one floor with a friendly, convenient “drop-in” center approach for residents. Supportive service staff are available around-the-clock to help residents achieve their goals, and to improve building safety and security. PSC continues to work with the Resident Council to refine the new program design, and coordinates meetings of the peer recovery program in partnership with the Commons at Grant and YMCA supportive housing...
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