User Account

All Pages

How hidden reserve is drawn down to boost earnings

Assignment Help Finance Basics
Reference no: EM13320311

A former Chairman of the SEC refers to hidden reserves on the balance sheet as "cookie-jar" reserves. These reserves are built up in periods when earnings are strong and drawn down to bolster earnings in periods when earnings are weak.

Required:

Reserves for (1) bad debts and (2) inventory, along with the (3) large accruals associated with restructuring charges, are transactions that sometimes yield hidden reserves.

a. For each of these transactions, explain when and how a hidden reserve is created.

b. For each of these transactions, explain when and how a hidden reserve is drawn down to boost earnings.

Reference no: EM13320311

Questions Cloud

What is the ratio of their speeds : Planet A and Planet B are in circular orbits around a distant star. Planet A is 4.5 times farther from the star than Planet B. What is the ratio of their speeds
Compute the average rainfall intensity and the total volume : A total of 500 mm of rain fell on a 75 ha watershed in a 10 hour period. Compute the average rainfall intensity and the total volume of rain that fell on the watershed.
Compute for the process of double stranded dna : Calculate for the process ?G°, ?H°, ?S°, and DCp at 36.8oC (the ‘°' refers to the reference temperature of 36.8°C). Attach all work and a well labeled van't Hoff plot and explain any assumptions you make
Determine pipe size required at ultimate development stage : The country town with service area of 150 ha is sewered, and the main outfall sewer is laid on a grade (slope) of 0.003 m/m to a treatment plant. Effluent from the treatment plant is at present discharged via an open channel to the river.
How hidden reserve is drawn down to boost earnings : For each of these transactions, explain when and how a hidden reserve is created. For each of these transactions, explain when and how a hidden reserve is drawn down to boost earnings.
Find the average distance of comet halley from the sun : Comet Halley has an orbital period of about 75 years. Determine the average distance of Comet Halley from the sun in AU
Residual payout policy and managed payout policy : Explain the meaning of the terms "residual payout policy" and "managed payout policy". Does the empirical evidence suggest that U.S. and European companies follow a residual or a managed payout policy?
Developing an implementation plan : Develop an implementation plan (1,500-2,000 words). The elements that should be included in your plan are listed below:
Calculate the wiemers 2014 income statement : Wiemers's 2014 income statement included net sales of $100,000, cost of goods sold of $60,000, and net income of $15,000.

Reviews

Write a Review

Finance Basics Questions & Answers

  Analyzing unprofitable firm

You've been hired by an unprofitable firm to determine whether it should shut down its unprofitable operation. Provide a report to management of the firm as to whether or not it should continue to operate at a loss? Be sure to show your work to sup..

  What is the projects npv if the interest rate is 6 percent

What is the project's NPV if the interest rate is 6%?

  Should the company accept the project

Compute the IRR for this project. How many IRRs are there? Using the IRR decision rule, should the company accept the project? What's going on here?

  Candy and i were going

Candy and I were going through the last year's financial statements (year ended 31 December 2012) and I discovered that the income tax expense account was significantly lower than the income tax the company actually paid to the Australian Taxation Of..

  Computation of future value of a lump sum amount

Computation of future value of a lump sum amount and what recommendation would you make to Jeanie

  Devise and implement a cost allocation scheme

Suppose that $2 million of Financial Services are related to billing and managerial reporting and $1 million are related to payroll and personnel management activities.

  What is the current share price

Apocalyptica Corp. pays a constant $8.30 dividend on its stock. The company will maintain this dividend for the next 14 years and will then cease paying dividends forever. If the required return on this stock is 12 percent, what is the current sha..

  Reducing debt and value of company

The Griffey Lang Food Corporation faces a difficult problem. In management's effort to grow the business, they accrued a debt of $150 million while the value of the company is only $125 million.

  What is the expected year-end dividend

Francis Inc.'s stock has a required rate of return of 10.25%, and it sells for $57.50 per share. The dividend is expected to grow at a constant rate of 6.00% per year. What is the expected year-end dividend, D1? a. $3.25 b. $2.44 c. $2.96 d. $2.20..

  Long-term contract that spans multiple periods of time

If revenue is realized isn't always easily determined. In the normal cash for product or service exchange is easy as recognition is almost always immediate. How about when the ticket is purchased for the concert or travel for some future period? W..

  What is the npv for this project

If the shop's tax rate is 35 percent and its discount rate is 8 percent, what is the NPV for this project?

  True or false questions

Dividends reinvested are not subject to federal income tax. The value of a stock depends in part on future dividends and on the investors' required return

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd