Question;Assignment 2;Assignment 2 is made up of seven questions. Read;the requirements for each question thoroughly, and plan your responses;carefully. Ensure that you answer each of the required components as concisely;and completely as possible. If supporting calculations are required, present;them in good form.;Case 1 10 marks;Case 1. Two businesses, Web Services and PC Providers, have;sought business loans from you. To decide whether to make the loans, you have;requested their balance sheets.;Evaluating business operations, using;financial statements;Required;1. Using only these balance sheets, to;which entity would you be more comfortable lending money? Explain fully, citing;specific items and amounts from the respective balance sheets.;2. Is there other financial information;you would consider before making your decision? Be specific.;C10-37 15 marks;C10-37 Use cash;flow data to evaluate potential investments;Your company has some excess cash and;would like to invest it in the stock of another company. You investigate;several different stocks and are trying to decide which stock would be the best;investment for your company. One factor you investigate is each company?s cash;flow. The summaries of the cash flow statements for your three top stock;choices follow;Although you will look at many other;criteria in your stock purchase recommendation, what can you tell about each of;the three companies listed? Based solely on cash flow, which stock appears to;be better?;C11-44 15 marks;C11-44 Investment recommendation;Take the role of an investment;analyst at Prudential Bache. It is your job to recommend investments for your;clients. The only information you have are some ratio values for two companies;in the pharmaceuticals industry.;Write a report to Prudential Bache?s investment;committee. Recommend on of the company?s stock over the other. State the;reasons for your recommendation.;C12-72 15 marks;C12-72. Prepare cash;budgets under two alternatives;Each autumn, as a hobby, Suzanne De;Angelo weaves cotton placemats to sell at a local crafts shop. The mats sell;for $20 per set of four. The shop charges a 10% commission and remits the net;proceeds to De Angelo at the end of December. De Angelo has woven and sold 25;sets each of the last two years. She has enough cotton in inventory to make;another 25 sets. She paid $7 per set for the cotton. De Angelo uses a;four-harness loom that she purchased for cash exactly two years ago. It is;depreciated at the rate of $10 per month. The accounts payable relate to the;cotton inventory and are payable by September 30.;De Angelo is considering buying an;eight-harness loom so that she can weave more intricate patterns in linen. The;new loom costs $1,000, it would be depreciated at $20 per month. Her bank has;agreed to lend her $1,000 at 18% interest, with $200 principal plus accrued;interest payable each December 31. De Angelo believes she can weave 15 linen;placemat sets in time for the Christmas rush if she does not weave any cotton;mats. She predicts that each linen set will sell for $50. Linen costs $18 per;set. De Angelo?s supplier will sell her linen on credit, payable December 31.;De Angelo plans to keep her old loom;whether or not she buys the new loom. The balance sheet for her weaving;business at August 31 is as follows;Requirements;1. Prepare a combined cash budget for;the four months ending December 31, for two alternatives: weaving the placemats;in cotton using the existing loom and weaving the placemats in linen using the;new loom. For each alternative, prepare a budgeted income statement for the;four months ending December 31, and a budgeted balance sheet at December 31.;2. On the basis of financial;considerations only, what should De Angelo do? Give your reason.;3. What nonfinancial factors might De;Angelo consider in her decision?;C13-77 15 marks;C13-77. Calculate;efficiency variances;Assume that you manage your local;Marble Slab Creamery ice cream parlour. In addition to selling ice cream cones;you make large batches of a few flavours of milk shakes to sell throughout the;day. Your parlour is chosen to test the company?s ?Made-for-You? system. The;system allows patrons to customize their milk shakes by choosing different;flavours.;Customers like the new system and;your staff appears to be adapting, but you wonder whether this new;made-to-order system is as efficient as the old system where you made just a;few large batches. Efficiency is a special concern because your performance is;evaluated in part on the restaurant?s efficient use of materials and labour.;Assume that your superiors consider that efficiency variances greater than 5%;are unacceptable.;You decide to look at your sales for;a typical day. You find that the parlour used 390 kilograms of ice cream and 72;hours of direct labour to produce and sell 2,000 shakes. Assume that the;standard quantity allowed for a shake is 0.2 kg of ice cream and 0.03 hours;(1.8 minutes) of direct labour. Further, assume that standard costs are $1.50;per kilogram for ice cream and $8.00 an hour for labour.;Requirements;1. Compute the efficiency variances for;direct labour and direct materials.;2. Provide likely explanations for the;variances. Do you have reason to be concerned about your performance;evaluation? Explain.;3. Write a memo to Marble Slab;Creamery?s national office explaining your concern and suggesting a remedy.;C14-64 15 marks;C14-64. Apply time;value of money to a personal decision;Samer Almasri, a second-year business;student at the University of Ottawa, will graduate in two years with an;accounting major and a Spanish minor. Almasri is trying to decide where to work;this summer. He has two choices: work full-time for a bottling plant or work part-time;in the accounting department of a meat-packing plant. He probably will work at;the same place next summer as well. He is able to work 12 weeks during the;summer.;The bottling plant would pay Almasri;$600 per week this year and 7% more next summer. At the meat-packing plant, he;would work 20 hours per week at $10.00 per hour. By working only part-time, he;would take two accounting courses this summer. Tuition is $225 per hour for;each of the four-hour courses. Almasri believes that the experience he gains;this summer will qualify him for a full-time accounting position with the;meat-packing plant next summer. That position will pay $750 per week.;Almasri sees two additional benefits;of working part-time this summer. First, he could reduce his studying workload;during the fall and spring semesters by one course each term. Second, he would;have the time to work as a grader in the university?s accounting department;during the 15-week fall term. Grading pays $50 per week.;Requirements;1. Suppose that Almasri ignores the;time value of money in decisions that cover this time period because it is so;short. Suppose also that his sole goal is to make as much money as possible;between now and the end of next summer. What should he do? What;non-quantitative factors might Samer consider? What would you do if you were;faced with these alternatives?;2. Now, suppose that Almasri considers;the time value of money for all cash flows that he expects to receive one year;more in the future. Which alternative does this consideration favour? Why?;C15-45 15 marks;C15-45 Collect and;analyze division data;Colgate-Palmolive operates two;product segments. Using the company?s website, locate segment information for;2008 in the company?s 2008 annual report. (Hint: Look under investor;relations.) Then, look in the financial statement footnotes.;Requirements;1. What are the two segments (ignore;geographical subsets of the one product segment)? Gather data about each;segment?s net sales, operating income, and identifiable assets.;2. Calculate ROI for each segment.;3. Which segment has the highest ROI?;Explain why.;4. If you were on the top management;team and could allocate extra funds to only one division, which division would;you choose? Why?
Paper#37692 | Written in 18-Jul-2015Price : $37