Reference no: EM13864734
After graduating near the top of his class, Ben Naegle was hired by the local office of a Big 4 CPA firm in his hometown. Two years later, impressed with his technical skills and experience, Park Electronics, a large regional consumer electronics chain, hired Ben as assistance controller. This was last week. Now Ben’s initial excitement has turned to distress.
The cause of Ben’s distress is the set of financial statements he’s stared at for the last four hours. For some time prior to his recruitment, he had been aware of the long trend of moderate profitability of his new employer. The reports on his desk confirm the slight, but steady, improvements in net income in recent years. The trend he was just now becoming aware of, though, was the decline in cash flows from operations.
Ben had sketched out the following comparison ($ in millions):
Profits? Yes. Increasing profits? Yes. The cause of his distress? The ominous trend in cash flow which is consistently lower than net income.
Upon closer review, Ben noticed three events in the last two years that, unfortunately, seemed related:
a. Park’s credit policy had been loosened; credit terms were relaxed and payment periods were lengthened.
b. Accounts receivable balances had increased dramatically.
c. Several of the company’s compensation arrangements, including that of the controller and the company president, were based on reported net income.
Required:
1. What is so ominous about the combination of events Ben sees?
2. What course of action, if any, should Ben take?
Required for the periods estimated level of production
: Harris Fabrics computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 33,000 direct labor-hours would be required for the period’s estimated level of production.
|
Result in the least overall inefficiency
: Which of the following trade restrictions would likely result in the least overall inefficiency? a) A $20 tariff that resulted in 5000 unites of imports b)A quota of 3000 units that has a licensing fee set at the difference between the world price a..
|
Were mattels responses to the toy recalls appropriate
: Were Mattel's responses to the toy recalls appropriate? Why or why not? What are the supply chain risk issues for Mattel when using suppliers in a distantly located and developing economy such as China?
|
Determine the timing of revenue recognition
: On July 1, 2014, Legoria Co. shipped software to a customer. The arrangement with a customer also requires the company to provide technical support over the next 12 month and to ship an expected software upgrade on January 1, 2015. Assume Legoria is ..
|
What is so ominous about the combination of events ben sees
: After graduating near the top of his class, Ben Naegle was hired by the local office of a Big 4 CPA firm in his hometown. Two years later, impressed with his technical skills and experience, Park Electronics, a large regional consumer electronics cha..
|
What is hanna presenting problem
: What is Hanna's presenting problem? How has this kept her from focusing on her treatment? Describe Hanna's barriers to treatment and how those could be prevented or minimized. Explain the short, mid, and long-term goals that you proposed and tell how..
|
A major development firm in the southeast
: Your company is a major development firm in the southeast. The company specializes in designing and construction retirement communities throughout the United States. One of the biggest expenses for the company is the cost of project management team t..
|
Failure mode and effects analysis and fault tree analysis
: Describe the difference between Failure Mode and Effects Analysis (FMEA) and Fault Tree Analysis (FTA). Which one is more desirable? Justify your opinion. Quote one healthcare reference from your own search.
|
International financial accounting concepts align with this
: How has FASB clearly designated a fair value approach with regards to business combinations? Does this tendency extend into other areas of accounting? How do the international financial accounting concepts align with this shift?
|