...June 30, 1999 common belief: was that the investigation involved the company’s deferral of revenue and other undisclosed reserve accounts . >1986 (going public) financial performance: no extraordinary. Revenue: 43% per year (In every quarter never >15%) & operating income: 49% per year. Net income: increased from the same quarter in the prior year. 1999, June: cash and short-term investments: $17 billion; assets $37 billion; book value of equity $28 billion. Overall: stable growth 1986 - mid 1999. For software developers: 2 KEY AREAS in which the standards at the time allowed flexibility: software development costs and revenue recognition Microsoft: conservative method of reporting. Software Development Costs GAAP: software development costs: must conform to Statement of Financial Accounting Standards (SFAS) No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed. The Financial Accounting Standards Board (FASB) issued the Statement in 1985 as a response to industry concerns that treating software development costs in a similar fashion to research and development costs (i.e., expensed as incurred) led to a severe mis-matching of costs and related revenue. The Statement BERLAKU UNTUK: developed software & purchased software. Isi Statement: costs incurred internally in creating a computer software product, shall be charged to expense when incurred as research and development until technological feasibility (kemungkinan) has...
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...Question 1–18 19–32 33–44 45–78 79–84 85–120 Sample Examination Structure Topic Ethical and Professional Standards Quantitative Analysis Economic Analysis Financial Statement Analysis and Corporate Finance Portfolio Management Asset Valuation Total Percent 15 12 10 28 5 30 100 Minutes 27 21 18 51 9 54 180 QUESTIONS 1 THROUGH 18 RELATE TO ETHICAL AND PROFESSIONAL STANDARDS AND ARE ALLOCATED 27 MINUTES. 1. According to the CFA Institute Standards of Practice Handbook, insider trading is least likely to be prevented by establishing: Select exactly 1 answer(s) from the following: A . fire walls. B watch lists, C. selective disclosure. 2. William Wong, CFA, is an equity analyst with Hayswick Securities. Based on his fundamental analysis, Wong concludes that the stock of a company he follows, Nolvec Inc., is substantially undervalued and will experience a large price increase. He delays revising his recommendation on the stock from “hold” to “buy” to allow his brother to buy shares at a lower price. According to the Standards of Practice Handbook, Wong is least likely to have violated the CFA Institute Standards of Professional Conduct that relate to: Select exactly 1 answer(s) from the following: A. duty to clients. B. reasonable b asis. C. duty to his employer. 3. During an onsite company visit, Marsha Ward, CFA, accidentally overheard the Chief Executive Officer (CEO) of Stargazer, Inc., discussing the company’s pending tender offer to purchase Dynamica Enterprises, a...
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...Salloum April 30, 2012 Caledonia: Financial Analysis Taking on a new project or having an expansion done on an already existing facility takes time. There are several factors that need to come into play, centering mainly on capital-budgeting. As an analysts this is their main job; they need to be able to formulate the cash-flows statement for the project while figuring in such factors as risk, and depreciation, differential cash flows to determine if taking on the project is worth the monetary value as well as the risk. An analyst must also be able to measure the risk that is associated with the project and determine what effects it will have on the corporation. Also, an analyst must be able to not only consider the risk associated with systematic but also with contribution-to-firm when it comes to real life situations. Simulation provides an analyst with the opportunity to run a project through a variety of changes to key factors resulting in or as close to real life results. The project then can be put through a sensitivity analysis to see how sensitive the project will be to any changes that may take place. Capital Budgeting Capital budgeting can be a large fit to tackle. There are two separate options that a financial analyst can consider to focus on; cash flows and accounting profits. Both options have their pros and cons. For instance when it comes to accounting profits, this process shows when cash is earned rather than when it is actually on hand. In this case there...
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...Note: Sentences beginning with a * are using material or quotes from the text or Investopedia.com 1. Companies present four related financial statements and their accompanying footnotes: * The Balance Sheet: * Is a financial statement that summarizes a company's financial condition at a specific point in time, * Follows the formula Assets = Liabilities + Shareholder’s Equity, which makes sense because the company must pay for the resources it owns (assets) by either borrowing money (liabilities) or through the combo of money received from the sale of stock and money retained in the company from net income (shareholder’s equity). * The Income Statement: * Is a financial statement that measures a company's financial performance over a specific period of time, * Is divided into 2 sections: The operating section shows information about the company’s revenues and expenses that occurred due to their regular business operations (Apple selling an Ipad). The non-operating section shows the revenues and expenses as well as the gains and losses that were not tied to the company’s regular business operations (Apple selling a factory), * Is summarized by calculating net income or net loss, which indicates the profitability of the company. If the company has more (fewer) revenues than expenses for the period, it will have a net income (loss). * The Statement of Cash Flows: * Is necessary since companies tend to use the accrual accounting method (recognizing events...
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...Polytechnic University of the Philippines College of Economics, Finance and Politics Department of Banking and Finance Sta. Mesa, Manila PAPELRIFIC “Your Paper is Terrific” BUSINESS PROPOSAL A. THE COMPANY 1. Name of the Company PAPELRIFIC - “Your Paper is Terrific” The name of the company emerged from the creative minds of the group members. Indeed, the company name, Papelrific, satisfies its product since we produce special papers, bookmarks and stationery made from an ecofriendly source which is the banana. We could proudly say that “your paper is terrific”. Logo of the Business The logo represents the opportunity of this paper business to enter and embrace the new chapter of its life. The letter “P” at the center symbolizes that we could be the center of this business and many could be inspired to us. The colors represent the colorful experience of the group by doing the project. It also represents the colorful love that he group wants to give to Mother Earth. 2. MISSION STATEMENT * We are committed to develop and provide an Earth friendly and state of the art paper stationery. * We are committed to have a good relationship with our customers and continually innovate to provide high quality of products. * We are committed to provide alternative papers for students and individuals who are concerned with the environment. 3. BACKGROUND AND HISTORY OF THE COMPANY A typical office worker uses about 50 sheets of paper a day, which...
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...the following statements made in York's marketing brochure is a violation of Standard VII(B) Reference to CFA Institute, the CFA Designation, and the CFA Program? A. Roger Langley, Chartered Financial Analyst, has been a portfolio manager with York for ten years and passed all three levels of the CFA examinations on his first attempts. B. Langley is one of three CFAs on staff with York. We expect that two more of our staff members will earn the right to use the designation in the future. C. Paul Yeng has retired from the firm after 25 years of service. Yeng was awarded the CFA charter in 1988. Much of the firm's past successes can be attributed to Yeng's efforts as an analyst and portfolio manager. 2. Hedge Funds Unlimited, a global hedge fund, has publicly acknowledged in writing that it has adopted the CFA Institute Code and Standards as its policies. Which of the following is least likely a violation of the firm's policies? A. An analyst at the firm working overseas uses material nonpublic information as allowed by local law to make investment decisions for discretionary client accounts. B. A junior analyst at the firm uses a subscription to his local newspaper and the opinions of his friends and colleagues to make investment recommendations for discretionary client accounts. C. A CFA candidate at the firm, who is registered for the Level 3 exam, includes reference to participation in the CFA program and her status as a Level 3 candidate in her biographical background. 3. Ralph...
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... 1. Why would investors and analysts have trouble processing pension information? Investors and Analysts only gradually incorporate pension information into prices and forecasts as they observe the effects of pension plan changes on subsequent quarterly earnings. Analysts seem to ignore the constant disclosures regarding pensions each quarter and investors do not accurately assess the long run cash flow and earnings implications of off balance sheet pension disclosures. A combination of information complexity and presentation (sometimes relevant information is not found on the primary financials directly) can affect both the assimilation and weighting of pension information by analysts. 2. What makes pension expense more susceptible to earnings management? Pension expense is more susceptible to earnings management because of the complex nature of the expense and the estimates that are made as to the value of the expense to date. Furthermore, pension information is disclosed in the footnotes rather than directly in the financial statements making it more “manipulative” a number for management. 3. Name at least three items used in determining pension expense that are "estimates" by management. PBO - is based on estimated payments into a present value based on estimated retiree population, estimated salary increases, and discount rate Compensation Rate assumptions Pension Cost - using estimates of interest cost and expected return on plan assets...
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...value. Three basic ideas underlie the application of discounted cash flow (DCF) analysis. First, the value of a company is ultimately derived from the cash that can be extracted from that company, and more cash is preferred to less. Second, cash received in the future is not as valuable as cash received today. Third, risky cash flows are valued less than cash flows known with relative certainty. The process of valuing publicly traded equity using DCF involves three steps. First, condensed financial statements, also called pro-forma statements, are forecasted several years into the future. Second, the forecasted statements are used to calculate free cash flows for the entire firm, which are then discounted by the cost of capital for the firm. Third, the intrinsic value of one share of the common stock is calculated as total firm value minus the market value of the debt, divide by the number of outstanding shares. The resulting intrinsic value of the shares can be compared with the current market price to inform buy and sell decisions. The objective of fundamental analysis in active portfolio...
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...Proposal to Board of Directors A Little Cup of Joe Introduction to the Proposal’s Purpose and Content A Little Cup of Joe Corporation is a medium-sized manufacturing company with 250 employees. It directly markets one product: a unique coffee cup with a patented ball bearing sliding mechanism. Nathan Jr. and a group of 10 other executives run the company. A Little Cup of Joe Corporation has received a large sum of money from a venture capitalist. The venture capitalist and Nathan Jr. are predicting 100 percent growth in five years. To achieve that growth, productivity will need to increase at a similar rate. Therefore, this proposal provides a suggested business model update. Further, the functional areas updates are indicated to assist the business model to predict, plan, and implement future growth and profits. In this proposal, the problem of the outdated business model and functional areas is addressed with new ideas and new employees to implement them. The 100 percent growth projection in five years can become a reality with the managers’ ideas about these questions: Executive Summaries The Accounting and Finance Area is one of the main parts of A Little Cup of Joe. Having A Little Cup of Joe accounting in top shape all year round will help the business function smoothly and provide grounds for sound and promising business decisions. By accomplishing this A Little Cup of Joe will hiring experience and ethical accounting...
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...1. Five (5) phases of SDLC that the business organization must go through in order to develop the new system. Provide an illustration to show the Waterfall model of System Development Life Cycle (SDLC). SYSTEM PLANNING SYSTEM ANALYSIS SYSTEM DESIGN SYSTEM CONSTRUCTION AND IMPLEMENTATION SYSTEM MAINTENANCE Diagram: System development life cycle Waterfall Model System Development Life Cycle is used to organize activities needed to build a system to assist management by providing reports on project status and keeping track of resource needed. It assumes that all activities are performed in a strict sequence. One phase must be completed before the next activity can be carried out and that no phase is to be repeated. However, the linear systems development life cycle is subjected to a number of critics which are the real information systems project rarely follow such a simple sequential cycle. Phases may be overlapped and activities may have to be repeated. Alterations are needed as inadequacies in the analysis phase mat become evident only during the design, construction or implementation phase. A great amount of time may have elapsed between the preliminary investigation and the final implementation. Also, the new technology existence may not be possible to incorporate new technology without redoing the analysis and design work already completed. System planning Information system strategic planning is a set of long-term goals that describe the information architecture...
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...Title: Date: BYP13-1 Financial Reporting Problem PepsiCo, Inc. (a) Our financial statements include the consolidated accounts of PepsiCo, Inc. and the affiliates that we control. In addition, we include our share of the results of certain other affiliates based on our economic ownership interest. We do not control these other affiliates, as our ownership in these other affiliates is generally less than 50%. Equity income or loss from our anchor bottlers is recorded as bottling equity income in our income statement. Bottling equity income also includes any changes in our ownership interests of our anchor bottlers. Bottling equity income includes $147 million of pre-tax gains on our sales of PBG and PAS stock in 2008 and $174 million of pre-tax gains on our sales of PBG stock in 2007. There were no sales of PBG or PAS stock in 2009. Income or loss from other noncontrolled affiliates is recorded as a component of selling, general and administrative expenses. Intercompany balances and transactions are eliminated. Our fiscal year ends on the last Saturday of each December, resulting in an additional week of results every five or six years. Raw materials, direct labor and plant overhead, as well as purchasing and receiving costs, costs directly related to production planning, inspection costs and raw material handling facilities are included in cost of sales. The costs of moving, storing and delivering finished product are included in selling, general and administrative expenses. The preparation...
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... In the ongoing search for bargains in the stock market, analysts and investors rely on models to estimate the intrinsic value of a firm’s equity. By comparing the valuation suggested by their model to the actual value in the marketplace, they form opinions as to whether a given stock is under or over valued. Valuation models are also used by investment bankers as an aid to pricing initial public offerings, and to inform parties involved in assorted private transactions such as selling a business or division, dividing property among owners, and settling estates. In this note, we introduce a relatively simple but powerful model of equity (stock) valuation.[1] 1. The basic idea behind valuation Valuation models in finance are typically based on discounted future cash flows or discounted future dividends. Keep in mind that, holding underlying assumptions constant, all valuation models should yield the same result. A model for valuing equity based on accounting data may be preferable in some cases, in that: o Benchmarks for performance are almost always given in earnings per share (EPS) – not cash flows or dividends. o Since real world dividend payout policies tend to be stable for long periods, valuation models based on dividends are less useful for modeling changes in value. o Earnings generally receive far more attention from the business press, investors and analysts. In fact, analysts typically forecast earnings (rather than cash flows or dividends)...
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...assets and that has either a high volume of activity in fixed assets, or has major capital expenditure projects in process. In operations where keeping track of fixed assets does not involve sufficient work to occupy an accountant full-time, this responsibility may be combined with other accounting duties. The level of responsibility of the person in charge of fixed assets, and the functions performed will also depend on the size and nature of the operation, and the way in which the organisation is set up to handle accounting and reporting for property, plant, and equipment. Accounting for fixed assets may be more of a clerical function, involving entering data and maintaining records. Or the position could involve more of a financial analyst role, where the person would participate in economic evaluations of proposed projects. An audit role may also form part of the overall planning, controlling and reporting function for capital expenditures. What Does A Fixed Asset or Property Accountant Do? In an accounting and administrative capacity, the person in charge of fixed assets will maintain the fixed assets register. This may be a spreadsheet application, a separate module within the accounting system, or a more elaborate system. Some of the duties of a fixed asset clerk or accountant include: · Coding invoices for fixed asset purchases...
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...The following 18 questions relate to Ethical and Professional Standards.(27 minutes) 1. An analyst for a foreign branch of HB Investments, which is based in Lagos, has just issued a recommendation on an IPO. Unknown to the analyst, who is a CFA charterholder, members of her team manipulated the valuation model to increase the newly public company's stock price. She and all of the analysts on the team purchased shares of the oversubscribed IPO for their personal accounts and then purchased the remainder of the firm's allocation of shares for appropriate client accounts, a practice which is permitted by local securities laws. The analyst: A. did not violate the Standard I(A) Knowledge of the Law. B. violated Standard 1(A) Knowledge of the Law by purchasing the shares of the IPO but not by allowing the report to be published. C. violated Standard I(A) Knowledge of the Law both by allowing the report to be published and by purchasing the shares of the IPO. 2. Green Investments utilizes the CFA Institute Standards of Professional Conduct as their standards for ethical practice. For purposes of compliance, which of the following is least likely a violation of Green Investments' policies? A. One of Green Investments' marketing brochures states that several of the firm's portfolio managers passed all three levels of the CFA exam on their first attempts. B. At a meeting with potential clients, chief investment officer Bill Ray, CFA, states that he is among an "elite group of the most qualified...
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...was involved in a multi-vehicle traffic accident near Chicago. The company announced that the loss of the quarterly earnings which target by $260 million is because of the truck accident happened that contributed a significant unfavourable variance where the company estimated that revenue of the truck that involved in accident was in the range of $10 million to $20 million. There are several issues that addressed in this case which included accounting policy based on the revenue recognition; how Biovail Corporation should account the sales based on two different “Freight On Board” (FOB) point which are FOB Shipping point and FOB Destination point, and ethic of earning management where Biovail is suspected might significantly overestimate the value of the product that involved in the truck accident due to Biovail fail to meet its third quarter 2003 earnings guidance. ISSUES First issue that our group discover from this case is how Biovail should account for the sales either FOB Shipping point or FOB Destination. According to the case, the truck accident happened on the last day of the end of the third...
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