Discussion 1,2,3 - Do Numbers Lie, The Other Side of Financial Statement

Corp Fin

DB 1

Topic: Do Numbers Lie? The Other Side of Financial Statement Analysis

If you were to enter the banking industry, you might find yourself approving or not approving loans. The following is a good example of a common event you could encounter.

Company X is looking for $100,000 to purchase new equipment. The finance manager for Company X recently presented financial reports. Upon further analysis of the statements, you, the banker, noted some window dressing (a technique used to manipulate financial statements and reports) of the financial statement. In this case, it seems Company X has delayed payments to vendors to make their cash position look higher.

· Do you see this practice as a matter of ethical and/or legal concern?

· Do you think most companies  "window dress" their data?

· Please explain your decision to approve or deny Company X's loan.

Your initial discussion post must include one outside resource, which may include the Internet or Library, and must be cited according to current APA formatting.

 

DB 2

Topic: Standard Industrial Classification: How A re You Doing Compared to Others?

Standard Industry Classification codes (SIC) are used for financial statement "benchmarks" analysis. Your company's financial results would need to be compared to others. SICs provide the format to compare a particular company's financial data to its respective SIC averages.

Explain how using SIC codes or competitors' financial statements as benchmarks can give you insight into how management is running a company.

How can ratio analysis help you determine what improvements need to be made?

Discuss the strengths and weaknesses of using SIC as a benchmark for your financial analysis.

Your initial discussion post must include one outside resource, which may include the Internet or Library, and must be cited according to current APA formatting.

 

DB 3

Topic: Monitoring the Cost of Money: Interest Rates

Interest rates and the cost of money influence most personal and corporate capital budgeting factors.

You are the CFO of a company. There is new robotic equipment you want to buy. Your net present value (NPV) study shows that the new equipment will add new free cash flows to the company above the discount rate used in your NPV study. However, you have noticed that the market i ndicates that the cost of capital is expected to drop in the future.

· Would you, as the CFO, finance your projects as soon as possible if the cost of capital was expected to drop? Please explain.

· What are the opportunity costs you must consider in this decision?

· More importantly, where do you find the information to analyze expected changes in interest rates?

· What other information does a drop in interest rates signal regarding the economy?

Your initial discussion post must include one outside resource, which may include the Internet or Library, and must be cited according to current APA formatting.