Accounting is often referred to as the language of business. Explain in your own words what this expression means. Also, considering this definition of accounting, discuss how the knowledge of accounting will enhance your own career. Please give examples. Participate in follow-up discussion by adding additional information in support of or in disagreement with fellow students’ reasonings. Remember to use a professional tone.

DQ2

In biblical times, livestock was the indicator of wealth and, in essence, was the currency that was traded. Therefore, Proverbs 27 warns that it is important to know the condition of your flock and to give careful attention to your herds because riches do not endure forever. Relate this concept to the importance of the financial statements in today’s business environment. Briefly describe each financial statement and examine how each helps a business to “know the condition of its flock.” Participate in follow-up discussion by comparing your interpretation of this verse to that of a classmate.

RESOURCES

Review “Beginners’ Guide to Financial Statement,” by the U.S. Securities and Exchange Commission (SEC, 2007), located on the SEC website. https://www.sec.gov/reportspubs/investor-publications/investorpubsbegfinstmtguidehtm.html

View “McGraw Hill SmartBook Orientation,” by Jacobson (2022), located on the YouTube website, for an introduction to using SmartBooks in this course. https://www.youtube.com/watch?v=XH0dsUJFtOc

Sample Solution

Dilli Bista, MBA is the financial manager for Computron Inc. a large public corporation specializing in software manufacturing. The company designs and develops software programs that allow users to create their own documents, apps, animations, and other media content. Despite a huge investment made last three years in fixed assets, the company’s sales revenue and profit margins have decreased over the years because of the Covid-19 pandemic and complaints of some parents about the effect of video games on their kids’ social life and academic performance. Dilli is analyzing the company’s financial statements and annual reports to determine the financial performance of the company for the year and see how the performance can be improved.

Dilli noticed that last year the company had $4 million in operating income (EBIT). The company had a depreciation expense of $1 million and an interest expense of $1 million. The company’s tax rate is 25%. The company has $14 million in operating current assets and $4 million in operating current liabilities and has $15 million in net plant and equipment. The company has after-tax cost of capital of 10%.

1. List four types of financial statements that the company’s annual report typically include. State three items that can be found in each of the financial statement of Computron Inc.
2. Determine Computron’s net income for the year. Show your calculations.
3. What was Computron’s net cash flow?
4. What was Computron’s net operating profit after taxes (NOPAT)?
5. Calculate net operating working capital and total net operating capital for the year.
6. Calculate Computron’s free cash flow for the year if net operating capital in the previous year was $24 million.
7. Explain to the chairman of the board five uses of free cash flow that can help maximize the value of the firm.
8. Explain Economic Value Added (EVA) and compute Computron’s EVA if total net operating capital is $25 million? The company’s after-tax cost of capital is 10.0%.
9. Compute and explain market value added (MVA) for Computron using the following information: i. total number of shares outstanding is 2 millionii. current stock price is $35 per share iii. total common equity is $68.2 million</code></pre></li>Calculate the company’s return on invested capital (ROIC). Do you think Computron’s growth added value?

Sample Solution

“Globalization is a very interesting topic and can get very heated,” you explain. “There are some countries and companies who are fiercely loyal to their homes and would not consider going global. Others see it as a benefit to the company and their customers. Some people here in the states believe that American-made is best because we are contributing to our home country. But, is it? Is it always best to stay domestic? How does this impact pricing? Are you truly helping?”

As your team ponders these questions, you start to think about your position on the topic. Complete the following:

Should your company go global? Why or why not?
How does globalization impact the marketplace as a whole?
Has your opinion changed from the beginning of the course to now?

Sample Solution