Question: Describes the key financial ratios Standard & Poor’

> In what ways was the situation at Hertz, as described in the minicase, similar to that of HealthSouth, and in what ways was it different?

> How would you use the COSO internal control framework to assess the internal control environment at Hertz?

> With reference to the Hertz minicase, what psychological phenomenon or phenomena were involved in the fraud triangle?

> In 2010, the Morgan Stanley analysts covering eBay had stopped using PEG to value eBay, relying on P/E, P/S, and discounted values of free cash flows. In 2013, they dropped P/E and P/S, and only used discounted free cash flows. In 2015, they based their

> How would you assess the review conducted by Hertz’s compensation committee in 2013?

> Discuss whether there are any behavioral issues in the minicase that have not arisen in connection with any of the preceding questions.

> In January 2004, a multifactor regression analysis of Apple’s stock return, based on five years of past monthly returns, indicated that only the excess return on the market was statistically significant. Factor loadings related to size,

> Drawing on the discussion in Chapters 5 and 7, as well as this chapter, analyze Apple’s policy in respect to debt, repurchasing shares, and splitting its stock.

> What are the main issues that the behavioral approach emphasizes in respect to Apple’s dividend policy?

> What are the main issues that the traditional approach emphasizes in respect to Apple’s dividend policy?

> Analyze the ratio that Cogent Communication uses to measure leverage, and compare it to common textbook ratios measuring leverage.

> Discuss the extent to which Cogent’s financing and investment decisions conform to the BPV framework presented in the chapter.

> Discuss the extent to which PSINet’s financing and investment decisions conform to the BPV framework presented in the chapter.

> Based on the information presented in the minicase, how would you characterize PSINet CEO William Schrader’s susceptibility to psychological phenomena?

> For the period 2010 through 2014, the Morgan Stanley team’s 2010 report on eBay forecasted that free cash flow would on average grow by 5.7 percent. Free cash flow actually grew by an average growth rate of 16.7 percent during this period. Discuss the na

> On April 19, 2016, an article that appeared on the web site seekingalpha.com discussed the implications of selling Tesla stock short.33 The article warns short sellers to be cautious in believing that even though Tesla’s fundamentals ar

> Consider the possibility that the volatility of Tesla’s stock has placed some investors in a situation where they are averse to a sure loss. On October 22, 2015, an article on the site seekingalpha.com suggested that this was the case.32 At that time, Te

> From the MHHE web site for Chapter 6, download the free cash flow analysis file associated with this minicase. Compare the various cash flow analyses, for both the same point in time in 2013, to identify how the analysts’ views differed from Damodaran’s

> Consider the manner in which the readers of Aswath Damodaran’s blog responded to his $67 valuation for Tesla, as discussed in the minicase. Analyze the psychological basis for their responses.

> Based on the information presented in the minicase, and the discussion in both Chapter 2 and this chapter, to what extent does Elon Musk fit the general characteristics of an entrepreneur and a CEO, especially in respect to his attitude about risk and re

> Discuss the chronology of Twitter through the lens of the Baker-Wurgler sentiment framework.

> Given the details in the minicase, to what extent did Groupon, Facebook, and Twitter engage in either catering behavior or market timing?

> Compare the IPOs of Groupon, Facebook, and Twitter in respect to hot issue market, initial under pricing, and long term underperformance.

> Consider the notion of “transaction utility.” How does this concept apply to Group on’s business strategy?

> Discuss the psychological aspects associated with how Groupon’s board and executives analyzed whether or not they should accept Google’s offer.

> Excel has a function, BINOM.DIST, for the binomial probability distribution. This function computes the probability of drawing x successes in n independent trials when the probability of drawing a success is p. Do you see a role for the binomial distribu

> Imagine a decision task in which you are to choose between two alternatives that involve blindly drawing a single chip from one of two urns, labeled A and B respectively. Both urns contain colored balls. The proportion of the different colors is describe

> The following data were taken from the financial records of Glum Corporation for 2017: Sales ………………………………………………………$3,600,000 Bond interest expense ……………………………………120,000 Income taxes………………………………………………………600,000 Net income ………………………………………………………800,000 How

> Dunnsmore Company reported cost of goods sold of $318,450 on its 2017 income statement. Other information for Dunnsmore is as follows: Prepare a schedule showing the amount of cash Dunnsmore paid to suppliers in 2017. 1/1/2017 12/31/2017 Inventorie

> The following information is from the 2017 annual report of Weber Corporation, a company that supplies manufactured parts to the household appliance industry. Average total assets ………………………………………………………$24,500,000 Average interest-bearing debt …………………………

> Diana Gomez Corporation, a manufacturer of cowboy boots, provided the following information from its accounting records for the year ended December 31, 2017. Inventory at December 31, 2017 (based on a physical count …â€&br

> Consider the following transactions pertaining to Retail Traders Company. Amounts in parentheses indicate a decrease in the account. Required: 1. Based on this information, prepare an income statement and statement of cash flows. 2. Provide an intuit

> Utica Company’s net accounts receivable was $250,000 at December 31, 2016, and $300,000 at December 31, 2017. Net cash sales for 2017 were $100,000. The accounts receivable turnover for 2017 was 5.0, which was computed from net credit sales for the year

> The following balance sheet, which has some weaknesses in terminology and classification, has been prepared by an inexperienced accountant and submitted to you for review: Prepare a classified balance sheet in proper form. Make any necessary correction

> Ricky Corporation had the following alphabetical account balance listing at December 31, 2017 (in thousands of dollars). Prepare a balance sheet for Ricky Corporation at December 31, 2017. Debit Credit Accounts payable Accounts receivable $9,224 $

> Holmes Company reported the following balance sheets at December 31, 2017 and 2018: Its income statement for 2018 was as follows: Additional information: During 2018, Holmes had the following transactions: a. Declared and paid a common dividend of $5

> An income statement for the first year of operations for Patti Company appears below: Sales ……………………………………$ 390,000 Dividend revenue …………………39,000 Interest revenue …………………24,050 Cost of goods sold………………… (208,000) Salary expense ………………… (26,000) Deprecia

> On January 1, 2017, River Company’s inventory was $400,000. During 2017, the company purchased $1,900,000 of additional inventory, and on December 31, 2017, its inventory was $500,000. What is the inventory turnover for 2017?

> Selected data of Islander Company follow: Required: 1. What is the accounts receivable turnover for 2017? 2. What is the inventory turnover for 2017? As of December 31, Balance Sheet Data 2017 2016 Accounts receivable $500,000 (25,000) $470,000 Al

> The following information was taken from the 2017 financial statements of Planet Corporation: Accounts receivable, January 1, 2017…………………$ 21,600 Accounts receivable, December 31, 2017 …………………30,400 Sales on accounts and cash sales …………………438,000 Determi

> Watsontown Yacht Sales has been selling large power cruisers for 25 years. On January 1, 2017, the company had $5,950,000 in inventory (based on a FIFO valuation). While the number of yachts in Watsontown Yacht Sales’ inventory remained fairly constant t

> Swiss Valley Veterinary Products distributes animal health care products to commercial livestock producers throughout the United States and Europe. Its terms of sale require cash payment within 30 days, and most customers take full advantage of this paym

> As shown in equation (6.10), the price equation for a firm with positive growth opportunities is equity capital, and NPVGO is the net present value of future growth opportunities. Recent values of P0, X0, and re for several companies are: Required: 1

> Bank. It will use the money to expand its warehouse and to upgrade its assembly line. Randall supplied the following cash flow forecasts as part of the loan application. The forecasts assume that the loan is granted at the beginning of 2017 and that $2

> Margaret Magee has served both as an outside director to Maxcor Manufacturing since 2010 and as a member of the company’s compensation committee since 2014. Margaret has been reviewing Maxcor’s 2017 preliminary earning

> Neville Company decides at the beginning of 2017 to adopt the FIFO method of inventory valuation. It had used the LIFO method for financial reporting since its inception on January 1, 2015, and had maintained records that are sufficient to retrospectivel

> In August 2003, Krispy Kreme’s common stock was trading at $44 per share. Several analysts and investors believed at the time that its shares were worth considerably less. They appear to have been right because by November 2007, the stock was trading bel

> Colonel Electric Company is one of the largest and most diversified industrial corporations in the world. From the time of its incorporation in 1892, the company has engaged in developing, manufacturing, and marketing a wide variety of products for the g

> In mid-2000, Enron Corporation and Blockbuster (a division of Viacom) set up a pilot project, streaming videos to a few dozen apartments in Portland, Oregon, from servers set up in the basement of the building. With that tiny beginning, Enron opened up a

> On July 10, 2012, Advanced Micro Devices (AMD) announced that it expected its revenues for the second quarter to be about $1.4 billion. At the time of the announcement, financial analysts expected AMD’s second quarter revenue to be about $1.6 billion. 1.

> Ashley Stores, Inc., sells gift cards for use at its stores. The following data pertains to 2019, 2020, and 2021, the company’s first three years of operation: As of December 31, 2019, Ashley estimates that 1.0% of its gift cards will

> The following table shows four ratios derived from the financial statements of three real companies, labeled A, B, and C in the table. (They are not listed in the table in any particular order.) The real companies are: a. Brunswick Corporation, a leader

> Electronic Arts develops, markets, publishes, and distributes interactive software games. The “lease commitments” section of the Commitments and Contingencies note from the company’s annual report for the year ended March 31, 2015, includes the following

> Lennox International Inc. makes air conditioning, heating, and fireplace systems for residential and commercial uses, as well as commercial refrigeration equipment. Tecumseh Products Company manufactures air conditioning and refrigeration compressors, co

> Danaher Corporation manufactures a variety of products, including electronic measurement instruments and network communications products, water quality measurement systems, and medical and dental instruments. Selected financial statement data and related

> Packaging Corporation of America produces containerboard and white papers. KapStone Paper and Packaging Corporation manufactures unbleached kraft paper products and corrugated products. Financial statement data for these two companies follow: Required:

> Microsoft develops, manufactures, licenses, sells, and supports a wide range of software products for personal computers (PCs) and servers; business and consumer productivity applications; software development tools; and content such as MSN (the Microsof

> The following table provides ROA and ROCE for Best Buy, a retailer of consumer electronics. Required: 1. How did Best Buy’s performance change over the period shown? 2. What is the most likely reason the change in ROCE was so much gre

> AK Steel Holding Corporation is a fully integrated producer of steel. It produces cold-rolled and hot-rolled steel products as well as specialty stainless and electrical steels that are sold to the domestic automotive, appliance, industrial machinery and

> The following table reports the operating cycle, cash conversion cycle, and current ratio for three apparel retailers all having year-ends at January 31, 2015. Aeropostale, which was originally owned by Macy’s, is a specialty retailer o

> Margaret O’Flaherty, a portfolio manager for MCF Investments, is considering investing in Alpine Chemical 7% bonds, which mature in 10 years. She asks you to analyze the company to determine the riskiness of the bonds. Required: 1. U

> Cassidy Oil Change is a chain of fast oil change centers. Oil changes sell for $30 each. Alternatively, customers can join the Cassidy Club for $105 and receive five oil changes over three years. Experience has shown that 10% of oil changes paid for thro

> Griffin and Lasky, Inc. (G&L), supplies industrial automation equipment and machine tools to the automotive industry. G&L uses the percentage of completion method for recognizing revenue on its long-term contracts. Customer orders have long lead

> Audit engagement partners were comparing notes about changes in clients’ financial statement ratios or amounts from the prior year’s figures. Here is what the partners had discovered. Client 1. Inventory turnover increased substantially from the prior ye

> Daley, Inc., is consistently profitable. Its normal financial statement relationships are as follows: Current ratio ………………………………………………………3 to 1 Inventory turnover ………………………………………………………4 times Long-term debt/total assets ratio ……………………………………0.5 to 1 Req

> At the end of 2009, Blockbuster Inc. operated more than 5,000 stores and franchisees operated another 1,300. Nine months later the company filed for bankruptcy protection. By the end of 2010, Blockbuster had closed nearly 1,000 company-operated and 300 f

> Tiffany & Company is a luxury jeweler and specialty retailer that sells timepieces, sterling silverware, china, crystal, fragrances, and accessories through its retail stores worldwide. Signet Jewelers Ltd. operates a number of well-known retail stor

> Nucor Corporation produces steel and steel products at its eight mills and is a major recycler of scrap metal. The following data relate to Nucor for four years. Required: 1. Calculate Nucor’s ROA for 2012, 2013, and 2014. Decompose

> Sunny Day Stores operates convenience stores throughout much of the United States. The industry is highly competitive, with low profit margins. The company’s competition includes national, regional, and local supermarkets; oil companies

> The following table presents ROA calculations for three companies in the retail grocery industry using earnings before interest (EBI) and balance sheet data for each company. The Kroger Company operates more than 2,600 supermarkets and multi-department s

> The following cash flow information pertains to the 2017 operations of Fishmaster, Inc., a maker of fishing equipment. Cash collections from customers ……………………………………$79,533 Cash payments to suppliers…………………………………… 64,097 Cash payments for selling and adm

> The following cash flow information pertains to the 2017 operations of Matterhorn, Inc., a maker of ski equipment: Cash collections from customers ……………………………………$ 16,670 Cash payments to suppliers……………………………………19,428 Cash payments for various operating e

> The balance sheet and income statement for Bertha’s Bridal Boutique are presented along with some additional information about the accounts. You are to answer the questions that follow concerning cash flows for the period. a. All

> The following data have been extracted from the financial statements of Prentiss, Inc., a calendar-year merchandising corporation: a. Total sales for 2018 were $1,200,000 and for 2017 were $1,100,000. Cash sales were 20% of total sales each year. b. Co

> Karr, Inc., reported net income of $300,000 for 2017. Changes occurred in several balance sheet accounts as follows: Equipmentv…………………$25,000 increase Inventories …………………$20,000 decrease Accumulated depreciation ….40,000 increase Accounts receivable …

> The common-size balance sheets from five companies follow: Alcoa, a major producer of aluminum products; Delta Air Lines, a major airline; Duke Energy, a leading energy company focused on electric power and gas distribution; JCPenney, a national retailer

> A December 31, 2017, postclosing trial balance for Short Erin Company follows. Additional information about Short Erin’s account balances: Required: 1. Cash includes $12,000 in U.S. treasury bills purchased on December 21, 2017, that

> Kay Wing, Inc., prepared the following balance sheet at December 31, 2016. The following occurred during 2017. 1. $15,000 in cash and a $35,000 note payable were exchanged for land valued at $50,000. 2. Bonds payable (maturing in 2021) in the amount of

> Sell Corp. has a primary business model of buying and selling merchandise inventory. The balances in Sell Corporation’s balance sheet accounts at December 31, 2017 are as follows: During 2018, Sell Corp. has the following transactions

> Lend Corp. has a primary business model of borrowing funds at low interest rates and lending them out at higher interest rates. The balances in Lend Corporation’s balance sheet accounts at December 31, 2017 are as follows: During 2018

> As described in the chapter, the abnormal earnings approach for estimating common share value is where V0 is the total value of all outstanding shares, BV0 is the current book value of stockholders’ equity, BVt−1 i

> Vanguard Corporation is a distributor of food products. The corporation has approximately 1,000 stockholders, and its stock, which is traded “over-the-counter,” is sold throughout 2017 at about $7 a share with little f

> The statement of cash flows for the year ended December 31, 2017, and other data for Bradley Corporation are shown below: Additional data: a. Bradley’s Dividends receivable account decreased by $2,000 during the year. b. The Machinery

> On October 1, 2018, Bullseye Company sold 250,000 gallons of diesel fuel to Schmidt Co. at $3 per gallon. On November 8, 2018, 150,000 gallons were delivered; on December 27, 2018. another 50,000 gallons were delivered; and on January 15, 2019, the remai

> The following information is taken from the operating section of the statement of cash flows (direct method) of Battery Builders, Inc.: Collections from customers ……………………………………$ 28,000 Payments to suppliers for purchases ………………… ………………… (13,000) Paymen

> Zahava Corporation sells equipment to Ari Company for $700,000. Ari does not need the equipment until December 31, 2021, but agrees to pay $600,000 immediately on December 31, 2019, in order to assist Zahava with its finances. The remaining $100,000 is d

> Zahava Corporation sells equipment to Ari Company for $700,000 on December 31, 2019. The two companies agree that Ari will pay $100,000 upon delivery (December 31, 2019), with the remaining $600,000 due on December 31, 2021. Zahava is confident that Ari

> Ladd Corporation sells construction equipment to a customer for $200,000. The equipment comes with a standard 10-year warranty covering all maintenance and repairs during that time. Initially, Ladd estimates that it will incur $10,000 in costs over the l

> On January 1, 2019, Quenneville Corporation sold equipment to Wirtz, Inc., for $500,000. The equipment had cost $300,000 to manufacture. The contract with Wirtz requires Quenneville to provide complete maintenance and repair services on the equipment for

> Panarin Company entered into two contracts on the same date with Hjalmarsson Corporation. Panarin has provided the following analysis of price and cost for the contracts: Hjalmarsson, the customer, may cancel both contracts if either of them is not ful

> Teuvo Company entered into two contracts on the same date with Rundblad Corporation. Teuvo has provided the following analysis of price and cost for the contracts: You inquired about why Teuvo would have agreed to make a sale at a loss. The company&aci

> MSK Construction Company contracted to construct a factory building for $525,000. Construction started during 2019 and was completed in 2020. Information relating to the contract follows: 1. Record the preceding transactions in MSK’s

> It’s late Tuesday evening, and you’ve just received a phone call from Dennis Whiting, your boss at GE Capital. Dennis wants to know your reaction to the Argenti loan request before tomorrow’s loan com

> Cornwell Construction Company has been operating in Pennsylvania for a number of years. During 2019, the firm contracted with the Borough of Lewisburg to build a domed sports complex. Cornwell estimated that it would take three years to complete the faci

> In 2019, its first year of operations, Regal Department Store sells $250,000 of gift certificates redeemable for store merchandise that expire one year after their issuance. With a high degree of certainty, Regal believes 10% of the gift certificates wil

> Maffett Ticket Brokers is a reseller of tickets to sporting events and concerts. During 2019, Maffett sold gift cards totaling $250,000. Based on past experience, Maffett expects that 1% of the gift card purchases will not be redeemed by the time they ex

> Gallemore Corporation entered into a contract to sell a machine to Christiansen Corporation for $2 million. Christiansen pays for the equipment, but asks Gallemore to delay shipment under a “bill-and-hold” arrangement. Gallemore agrees. Under each of the

> Under a single contract, Sapra Corporation sold two machines to Gao Company in 2019. One of the machines typically sells for $300,000 and the other for $150,000. Because Gao purchased the machines together, Sapra agreed to a price of $425,000 for both ma

> Berger Company had sales in 2019 of $200,000. The goods sold cost Berger $125,000. The goods were sold with the right of return. By the end of 2019, goods having a total selling price of $10,000 had been returned. As of December 31, 2019, Berger expected

> Online Auction Company (OAC) provides a platform for its users to buy and sell goods. Sellers post goods for sale and other users bid on them. They high bidder wins the auction and purchases the goods. After each auction, the seller pays OAC a 10% fee an