To combat high inflation, the Federal Reserve (Fed) has been pursuing a tightening monetary policy. This includes actions such as increasing interest rates and reducing the money supply in the economy.
These measures aim to slow down economic growth and decrease the demand for goods and services, ultimately reducing inflationary pressures.
In response to high inflation, the Fed typically employs contractionary monetary policy. This involves raising interest rates, making borrowing more expensive and reducing consumer and business spending. By increasing the cost of borrowing, the Fed aims to curb excessive borrowing and spending, which can contribute to inflationary pressures.
Additionally, the Fed may use open market operations to reduce the money supply in the economy. This can be done by selling government securities, such as Treasury bonds, which reduces the amount of money available for lending and spending.
The tightening of monetary policy is aimed at slowing down economic activity and cooling off inflation. By reducing the availability of credit and controlling the money supply, the Fed seeks to bring inflation back to its target level. However, it's important to note that the specific measures undertaken by the Fed may vary depending on the prevailing economic conditions and the severity of inflationary pressures.
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Answer: 1. … are properties or things of value owneff and controlled by a 1. Increase Supplies and decrease Cash. 2. Increase Supplies Expense and increase Accounts Payable. business entity. Answer: 3. Increase Supplies Expense and increase Accounts Receivable. 1. Liabilities 4. Increase Supplies and increase Accounts Payable. 2. Owner's Equity 3. Assets 4. None of the above 2. Parish Tutoring Services has assets of $25,000 and liabilities of $10,000. What is the amount of owner's equity? Answer: 1. $35.000 2. $15.000 3. $12.500 4. $10.000 3. Which of the following accounts would increase owner's equity? Answer: 1. Cash 2. Accounts Payable 3. Accounts Recelvable 4. Income from Tutoring 4. Which of the following statements is true? Answer: 1. Every transaction is recorded as an increase and/or decrease in only one account. 2. One side of the equation does not need to equal the other side of the equation. 3. Double-entry accounting is demonstrated by the fact that each transaction must be recorded in at least two accounts. 4. When a business earns revenue, owner's equity decreases. 5. M. Parish purchased supplies on credit. What is the impact on the accounting equation?
1. The correct option is Increase Supplies and decrease Cash. The purchase of supplies with cash reduces the amount of cash and increases the supplies account.
2. The correct option is $15,000. Owner's equity is the difference between assets and liabilities. In this case, the calculation is:Owner's Equity = Assets - Liabilities Owner's Equity = $25,000 - $10,000 = $15,0003. The correct option is Income from Tutoring. Revenues increase owner's equity, while expenses decrease it.4. The correct option is Double-entry accounting is demonstrated by the fact that each transaction must be recorded in at least two accounts.
This is the fundamental principle of double-entry accounting. Every transaction affects at least two accounts, with one account debited and another credited.5. The impact on the accounting equation is:Increase Supplies and increase Accounts Payable.
This transaction increases supplies account and increases accounts payable, which is a liability account. The accounting equation is:Assets = Liabilities + Owner's EquityWith this transaction, both sides of the equation increase by the same amount, and the equation remains in balance.
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A mortgage is used to finance ......
A. Stock purchases
B. Commercial Real Estate
C. Purchasing a home
D. Both B and C are correct.
A mortgage is used to finance purchasing a home. Thus, the correct option is C.
The reason why people use mortgage to finance purchasing a home is that, in most cases, it is nearly impossible for an individual or a family to buy a home outright. Purchasing a home with a mortgage helps to make the cost of owning a home more affordable, especially for people with lower income.
Furthermore, mortgages allow homeowners to pay for their homes over time, spreading the cost over many years. A mortgage is typically a loan that an individual borrows from a financial institution like a bank, to purchase a home.
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Which of the following is the PRIMARY basis on Which audit objectives are established? Consideration of risks Audit risk Assessment of prior audits Business strategy
The primary basis for establishing audit objectives is the consideration of risks. This risk-based approach ensures that the audit focuses on areas with the highest potential impact on an organization's financial statements and compliance.
The primary basis on which audit objectives are established is the consideration of risks. Audit objectives are determined by evaluating the potential risks that could impact an organization's financial statements, operations, and compliance with laws and regulations.
Risks are identified through a thorough understanding of the business environment, internal control systems, and previous audit findings. By assessing risks, auditors can prioritize their efforts and resources to address areas with the highest risk of material misstatements or non-compliance.
This risk-based approach helps ensure that the audit is focused on areas that are most critical to the organization's financial health and integrity. It also allows auditors to tailor their procedures and testing to provide reasonable assurance that the financial statements are free from material misstatements and that the organization is in compliance with relevant laws and regulations.
Ultimately, considering risks as the primary basis for establishing audit objectives enhances the effectiveness and efficiency of the audit process.
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During the year, the Senbet Discount Tire Company had gross sales of $1.18 million. The company's cost of goods sold and selling expenses were $587,000 and $240,000, respectively. The company also had notes payable of $790,000. These notes carried an interest rate of 7 percent. Depreciation was $117,000. The tax rate was 22 percent.
a. What was the company's net income? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.)
b. What was the company's operating cash flow? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.)
a.
Net income
b.
Operating cash flow
To calculate the net income and operating cash flow for the Senbet Discount Tire Company, we'll use the following formulas:
Net Income = Gross Sales - Cost of Goods Sold - Selling Expenses - Interest Expense - Depreciation Expense - Taxes
Operating Cash Flow = Net Income + Depreciation Expense
Given information:
Gross Sales = $1.18 million
Cost of Goods Sold = $587,000
Selling Expenses = $240,000
Notes Payable = $790,000
Interest Rate on Notes Payable = 7%
Depreciation Expense = $117,000
Tax Rate = 22%
Let's calculate the values:
a. Net Income:
Net Income = $1,180,000 - $587,000 - $240,000 - (Notes Payable * Interest Rate) - $117,000 - (Net Income * Tax Rate)
Net Income = $1,180,000 - $587,000 - $240,000 - ($790,000 * 7%) - $117,000 - (Net Income * 22%)
To solve for Net Income, we'll rearrange the equation:
Net Income + Net Income * 22% = $1,180,000 - $587,000 - $240,000 - ($790,000 * 7%) - $117,000
Combining like terms:
1.22 * Net Income = $1,180,000 - $587,000 - $240,000 - ($790,000 * 7%) - $117,000
Simplifying further:
1.22 * Net Income = $1,180,000 - $587,000 - $240,000 - $55,300 - $117,000
1.22 * Net Income = $180,700
Dividing both sides by 1.22:
Net Income = $180,700 / 1.22
Net Income ≈ $148,032
Therefore, the company's net income is approximately $148,032.
b. Operating Cash Flow:
Operating Cash Flow = Net Income + Depreciation Expense
Operating Cash Flow = $148,032 + $117,000
Operating Cash Flow ≈ $265,032
Therefore, the company's operating cash flow is approximately $265,032.
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R Co has set a minimum cash account balance of $7,500. The cash spread is expected to be $13,500.
Determine the upper limit and the return point for the cash account of R Co using the Miller-Orr model and explain the relevance of these values for the cash management of the company.
The minimum cash balance of $20,000 is required at Miller-Orr Co, and transferring money to or from the bank costs $50 per transaction. Inspection of daily cash flows over the past year suggests that the standard deviation is $3,000 per day, and hence the variance (standard deviation squared) is $9 million. The interest rate is 0.03% per day.
Calculate:
(i) the spread between the upper and lower limits (A: $31,200)
(ii) the upper limit (A: $51,200)
(iii)the return point. (A: $30,400)
In this case, the upper limit would be $7,500 + $13,500 = $21,000. The return point is determined by subtracting half of the cash spread from the upper limit. In this case, the return point would be $21,000 - ($13,500 / 2) = $15,750.
In the context of cash management, these values play a crucial role in ensuring that the company maintains an optimal level of cash reserves. The minimum cash account balance acts as a safety net, ensuring that the company has enough cash on hand to meet its immediate financial obligations.
By setting a minimum balance of $7,500, R Co ensures that it always has a certain level of liquidity.
The upper limit and return point are important for managing cash fluctuations. The upper limit represents the threshold at which excess cash beyond the minimum balance can be invested or used for other purposes.
By setting an upper limit of $21,000, R Co can ensure that excess cash is not left idle and can be put to work to generate additional returns.
The return point, on the other hand, serves as a trigger for action. When the cash balance exceeds the return point, it indicates that the company has more cash than required for its immediate needs. At this point, R Co can decide to invest the excess cash or take other actions to optimize its cash position.
By setting the return point at $15,750, the company ensures that it takes proactive measures to manage its cash when it exceeds a certain threshold.
In conclusion, the Miller-Orr model helps R Co establish appropriate cash management practices. The minimum cash account balance ensures sufficient liquidity, while the upper limit and return point enable the company to optimize its cash position and take timely action based on its cash inflows and outflows.
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A baseball team has scheduled its opening game for April 1. It is assume that if it snows on April 1, the game is postponed and will be play on the next day that, it does not snow. The team purchased insurance against snow. The policy will pay GHS 1,000 for each day, up to 2 days that the game is postponed. It is determined that the number of consecutive days of snow beginning on April 1, is a Poisson random variable with mean 0.6. What is the standard deviation of the amount that the insurance company will have to pay.
The standard deviation of the amount that the insurance company will have to pay is approximately 0.7746 GHS.
Let X be the random variable of the number of days the game is postponed due to snow. It is stated that X can take values of up to 2 days (if the snow lasts longer than that, the game will be canceled altogether).
Thus, P(X = k) = e^(-λ) λ^k / k!, for k = 0, 1, 2.
With λ = 0.6, we have:
P(X = 0) = e^(-0.6) (0.6)^0 / 0! ≈ 0.5488
P(X = 1) = e^(-0.6) (0.6)^1 / 1! ≈ 0.3293
P(X = 2) = e^(-0.6) (0.6)^2 / 2! ≈ 0.0988
Therefore, the probability of a payout is P(X = 1) + P(X = 2) ≈ 0.4281.
When a payout happens, the amount is GHS 1,000. Therefore, the expected value of a payout is:1000(P(X = 1) + P(X = 2)) ≈ 428.1.
The variance of a Poisson distribution is equal to its mean. Hence, the variance of X is 0.6.
The standard deviation of X is the square root of the variance.
Therefore, the standard deviation of the amount that the insurance company will have to pay is approximately √0.6 ≈ 0.7746 GHS.
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A salesperson spends his 8-hour day as follows: 4.5 hours driving between client locations, 45 minutes eating lunch, 2 hours engaging in sales activities, and 45 minutes making personal phone calls. What is the value-added percentage of his sales process?
Multiple Choice
81.3%
34.4%
56.3%
25.0%
Value-Added Time refers to the time taken in adding value to the product. Therefore, the value-added percentage of the salesperson is 25.0%.
The value-added percentage can be calculated using the formula:
Value-Added Percentage = (Value-Added Time / Total Cycle Time) x 100
Where, Value-Added Time refers to the time taken in adding value to the product, and Total Cycle Time refers to the time taken to complete one cycle.
To calculate the value-added percentage of a salesperson, we need to identify the value-added time and total cycle time. In the given scenario, the salesperson spends 4.5 hours driving, 45 minutes eating lunch, 2 hours engaging in sales activities, and 45 minutes making personal phone calls.
Hence, the total cycle time is 8 hours = 480 minutes.
Value-added time is 2 hours = 120 minutes (spent in engaging in sales activities)
Hence,Value-Added Percentage = (120/480) x 100 = 25%.
Therefore, the value-added percentage of the salesperson is 25.0%.
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AIfredo makes 3 pizzas in 30 minutes or 2 lasagnes in 10 minutes. Massimo makes 4 izzas in 40 minutes or 10 lasagnes in 50 minutes. Which of the following tatements is correct? Massimo has the competitive advantage in making both pizza and lasagne. Alfredo has the competitive advantage in making pizza. Massimo will specialize in making lasagne. Neither Alfredo nor Massimo has the competitive advantage in making lasagne. Massimo will specialise in making pizza. Alfredo has the competitive advantage in making lasagn
Based on the information provided, Massimo has the competitive advantage in making lasagne, while Alfredo has the competitive advantage in making pizza.
To determine the competitive advantage, we compare the productivity of Alfredo and Massimo in making pizzas and lasagnes.
Alfredo can make 3 pizzas in 30 minutes, which means he can make 1 pizza in 10 minutes (30 minutes divided by 3). Massimo, on the other hand, can make 4 pizzas in 40 minutes, resulting in 1 pizza every 10 minutes (40 minutes divided by 4). Therefore, both Alfredo and Massimo have the same productivity in making pizzas, and there is no clear competitive advantage between them in this aspect.
However, when it comes to making lasagnes, Alfredo can make 2 lasagnes in 10 minutes, or 1 lasagne every 5 minutes (10 minutes divided by 2). Massimo, on the other hand, can make 10 lasagnes in 50 minutes, resulting in 1 lasagne every 5 minutes (50 minutes divided by 10). Therefore, Massimo has a higher productivity in making lasagnes and holds the competitive advantage in this aspect.
In conclusion, Massimo has the competitive advantage in making lasagne, while Alfredo has the competitive advantage in making pizza.
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1).Company A had EBIT of $360708986 in 2019. In addition, the company had interest expenses of $137516234 and a corporate tax rate of 37.14%.
What was the company's total payments to shareholders and debtholders?
2. Company A had EBIT of $331866323 in 2019. In addition, the company had interest expenses of $173186001 and a corporate tax rate of 41.39%.
If the company had no interest expenses, what would its 2019 net income have been?
The total payments to shareholders and debtholders include both dividends to shareholders and interest payments to debtholders. If the company had no interest expenses in 2019, its net income would have been approximately $194,695,922.84.
1. To calculate the company's total payments to shareholders and debtholders, we need to determine the net income first.
Net income can be calculated using the formula:
Net Income = EBIT - Interest Expenses - (Tax Rate * EBIT)
Given:
EBIT (Earnings Before Interest and Taxes) = $360,708,986
Interest Expenses = $137,516,234
Tax Rate = 37.14% = 0.3714
Let's calculate the net income:
Net Income = $360,708,986 - $137,516,234 - (0.3714 * $360,708,986)
Net Income = $360,708,986 - $137,516,234 - $133,898,506.568
Net Income = $89,294,245.432
The total payments to shareholders and debtholders include both dividends to shareholders and interest payments to debtholders. To calculate this, we need additional information.
2. To determine the company's net income if it had no interest expenses, we can use the following formula:
Net Income = EBIT - (Tax Rate * EBIT)
Given:
EBIT = $331,866,323
Interest Expenses = $173,186,001
Tax Rate = 41.39% = 0.4139
Since we are assuming no interest expenses, we can exclude them from the calculation:
Net Income = $331,866,323 - (0.4139 * $331,866,323)
Net Income = $331,866,323 - $137,170,400.1597
Net Income = $194,695,922.8403
Therefore, if the company had no interest expenses in 2019, its net income would have been approximately $194,695,922.84.
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A Ltd acquired the shares of B Ltd in two steps. The details of the acquisition are summarized as follows:
The total number of ordinary shares of B Ltd issued is 100,000. On 31 March 2021, A Ltd acquired 20,000 ordinary shares of B at $10 each by cash.
On 31 December 2021, A Ltd bought another 50,000 ordinary shares of B Ltd at the current market price of $18 each by cash.
The fair value of net identifiable assets of B Ltd on 31 December 2021 was $1,000,000.
You can assume the market price on 31 December is used to ascertain the fair value of B Ltd and non-controlling interests.
REQUIRED:
(a) Prepare the accounting entries (on 31 Mar and 31 Dec) for the acquisition of shares of B Ltd in the book of A Ltd in accordance with the requirements of HKFRS 3.
(b) Compute the total goodwill, and analyze the amount attributable to A Ltd and the non-controlling interests respectively. (NO Journal entries are required)
(a) Accounting entries for the acquisition of shares of B Ltd in the book of A Ltd:On March 31, 2021 - A Ltd acquired 20,000 ordinary shares of B at $10 each by cash. The entry to record this would be:DateAccountTitle and ExplanationDebitCreditMar 31.
2021Investment in B Ltd200,000Cash200,000($10*20,000 shares)On December 31, 2021 - A Ltd bought another 50,000 ordinary shares of B Ltd at the current market price of $18 each by cash. The entry to record this would be:DateAccountTitle and ExplanationDebitCreditDec 31, 2021Investment in B Ltd900,000Cash900,000($18*50,000 shares)The fair value of net identifiable assets of B Ltd on 31 December 2021 was $1,000,000. Therefore, the goodwill would be computed as follows:
(Total purchase price of B Ltd - fair value of net identifiable assets)Goodwill = ($200,000 + $900,000) - $1,000,000Goodwill = $100,000(b) Total goodwill = $100,000. The amount attributable to A Ltd and the non-controlling interests would be analyzed as follows:Goodwill attributable to A Ltd = (1-50,000/100,000) * $100,000Goodwill attributable to A Ltd = $50,000Goodwill attributable to non-controlling interests = 50,000 * $2 per shareGoodwill attributable to non-controlling interests = $100,000
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Q1. Novello’s business has grown significantly over recent years. To manage the increased demand, it constructed a new factory with high-tech manufacturing machinery. Machinery: The costs incurred in setting up the new machinery are as follows: £
• Planning and design fees 10,000
• Construction costs 180,000
• Assembly and installation of equipment 45,000
• Testing of equipment 8,000
• Advertising of new products being manufactured 2,000
Total cost incurred 245,000
a) Calculate the cost of the machinery to be recorded as Property, plant and equipment.
Factory: Novello financed the construction of the factory using existing general borrowings:
• 5% bank loan £3m
• 4.5% bank loan £3m
• 4% bank loan £2m
Construction of the factory began on 1 February 2021. Novello incurred £1m on that date, £3m on 1 December 2021 and a further £2m on completion on 30 April 2022.
b) Compute the weighted average cost of borrowing for these general borrowings. Answer to two decimal places
c) Calculate how much of the borrowing costs to include in the cost of the factory. Answer to the nearest £’000
a) The cost of the machinery to be recorded as Property, plant and equipment is the total cost incurred for setting up the machinery, which is £245,000.
b) To compute the weighted average cost of borrowing for the general borrowings, we need to calculate the weighted average interest rate based on the amounts and interest rates of each loan.
Weighted Average Cost of Borrowing = (Loan 1 Amount * Loan 1 Interest Rate + Loan 2 Amount * Loan 2 Interest Rate + Loan 3 Amount * Loan 3 Interest Rate) / Total Borrowings
Loan 1: £3,000,000 at 5% interest rateLoan 2: £3,000,000 at 4.5% interest rate
Loan 3: £2,000,000 at 4% interest rate
Weighted Average Cost of Borrowing = (£3,000,000 * 5% + £3,000,000 * 4.5% + £2,000,000 * 4%) / (£3,000,000 + £3,000,000 + £2,000,000)
c) The amount of borrowing costs to include in the cost of the factory is determined based on the weighted average cost of borrowing and the expenditures made on the construction of the factory.
Borrowing Costs to Include = Weighted Average Cost of Borrowing * Expenditures on Construction
Expenditures on Construction: £1,000,000 on 1 February 2021 + £3,000,000 on 1 December 2021 + £2,000,000 on 30 April 2022
Note: The specific interest expense and timing of borrowings may affect the exact calculations, so it's important to consider the actual terms of the loans and consult with accounting professionals for precise figures.
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For the next question read and refer to the following excerpt in quotes from an example Contract between a general contractor (you) and Flathtech Solutions LIC for the completion of a two story office building. Then answer the question following the excerpt.
"7. Performance Guaranties.
7.1. Contractor shall provide a guaranties of his obligations under the Contract by a surety company acceptable to the Owner.
7.2. Performance Guaranty will take the form of an irrevocable bank guaranty in the amount of 10% of the Contract Price payable on first written demand of Owner to guarantee the performance of the Contractor’s obligations under the Contract.
7.3. Contractor shall also provide a Subcontractor & Material Supplier Payment Guarantee in the form of a Standby Letter of Credit for 5% of the Contract price payable on first written demand of Owner to guarantee payment of all sub-contractors and material suppliers under the Contract."
Why is it in the Owner’s best interest to ensure the beneficiaries of section 7.3 get paid?
a.
Because the Owner wants the money for himself
b.
Because the Subcontractors & Material Suppliers will file liens against the Owner’s property if they are not paid
c.
Because the Contractor would sue the Owner for the Contractor defaulting on the Contract
d.
Because the Surety would sue the Owner for the Contractor defaulting on the Contract
The correct answer is (b) Because the Subcontractors & Material Suppliers will file liens against the Owner’s property if they are not paid.
The Owner wants to make sure that the beneficiaries of section 7.3 get paid because the Subcontractors & Material Suppliers will file liens against the Owner’s property if they are not paid. Therefore, the answer is The excerpt from the contract above explains the performance guarantees the contractor (you) must provide to the owner of the building. The performance guarantee will take the form of an irrevocable bank guarantee, with 10% of the contract price payable on the first written demand of the owner to ensure the contractor's obligations under the contract. A standby letter of credit will be provided by the contractor to guarantee payment of all subcontractors and material suppliers under the contract, in the form of a subcontractor & material supplier payment guarantee. Section 7.3 of the contract is a Subcontractor & Material Supplier Payment Guarantee, which requires the contractor to provide a Standby Letter of Credit for 5% of the Contract price payable on the first written demand of the owner to guarantee payment of all sub-contractors and material suppliers under the contract.
This is in the Owner’s best interest because if the subcontractors and material suppliers are not paid, they can file liens against the Owner’s property, which can create additional expenses for the owner.In addition, if the Contractor defaults on the contract, the surety company will provide compensation to the owner for any damages caused by the Contractor. However, if the Subcontractors & Material Suppliers are not paid, they may file liens against the Owner’s property. The Owner will be required to pay the outstanding debts and if the Owner fails to do so, the liens could be foreclosed, and the property may be sold to pay the debts.
The correct answer is (b) Because the Subcontractors & Material Suppliers will file liens against the Owner’s property if they are not paid. The Owner's best interest is to ensure the beneficiaries of section 7.3 get paid.
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A municipal bond service has three rating categories (A, B, and C). Suppose that in the past year, of the municipal bonds issued thoughout a country, 60% were rated A, 30% were rated B, and 10% were rated C. Of the municipal bonds rated A,40% were issued by cities, 50% by suburbs, and 10% by rural areas. Of the municipal bonds rated B,60% were issued by cities, 10% by suburbs, and 30% by rural areas. Of the municipal bonds rated C, 90% were issued by cities, 5% by suburbs, and 5% by rural areas. Complete (a) through (c) below. a. If a new municipal bond is to be issued by a city, what is the probability that it will receive an A rating? (Round to three decimal places as needed.) b. What proportion of municipal bonds are issued by cities? (Round to three decimal places as needed.) c. What proportion of municipal bonds are issued by suburbs? (Round to three decimal places as needed.)
a. The probability that a new municipal bond issued by a city will receive an A rating is 0.24.
b. Approximately 63% of municipal bonds are issued by cities.
c. Approximately 20% of municipal bonds are issued by suburbs.
To calculate the probability and proportions, we need to consider the given information about the rating categories and their distribution across different areas. Let's break down the calculations step by step:
a. To find the probability that a new municipal bond issued by a city will receive an A rating, we multiply the probability of an A rating (0.6) by the proportion of A-rated bonds issued by cities (0.4). Therefore, the probability is 0.6 * 0.4 = 0.24, or 24%.
b. To determine the proportion of municipal bonds issued by cities, we sum the products of the overall bond distribution (0.6 for A, 0.3 for B, and 0.1 for C) with the corresponding proportion of bonds issued by cities for each rating category. The calculation is as follows:
(0.6 * 0.4) + (0.3 * 0.6) + (0.1 * 0.9) = 0.24 + 0.18 + 0.09 = 0.51, or 51%.
c. Similarly, to find the proportion of municipal bonds issued by suburbs, we multiply the overall bond distribution with the proportion of bonds issued by suburbs for each rating category and sum the results:
(0.6 * 0.5) + (0.3 * 0.1) + (0.1 * 0.05) = 0.3 + 0.03 + 0.005 = 0.335, or 33.5%.
Based on the calculations, we can conclude that a new municipal bond issued by a city has a 24% probability of receiving an A rating. The majority of municipal bonds, approximately 51%, are issued by cities, while approximately 33.5% are issued by suburbs.
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Marco is plans to retire in 25 years. He wants you to assume he will be retired for 29 years before he dies. You calculated that Marco needs $1,222,641 as a lump sum at the beginning of retirement. Use an investment return of 10 percent and an inflation assumption of 1.9 percent. How much money will he need to save monthly to have this amount when he begins retirement? (Round the final answer to 2 decimal places)
Marco plans to retire in 25 years and wants to assume he will be retired for 29 years before he dies. The lump sum required at the beginning of retirement is $1,222,641.
To have this amount when he begins retirement, calculate how much money he needs to save monthly using an investment return of 10 percent and an inflation assumption of 1.9 percent. Round the final answer to 2 decimal places.
If Marco wants to retire in 25 years and remain retired for 29 years before he dies, he will need to ensure that he has enough funds to last him for 54 years. It is important to calculate the present value of the funds that he will need to ensure that he is financially secure.
Thus, Marco will need to have $10,165,505.87 at the start of his retirement for his funds to last him for 29 years. Therefore, Marco will need to save $28,746.04 monthly for the next 25 years to accumulate $10,165,505.87, which he needs at the beginning of his retirement.
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What are the six (6) methods of valuation or appraisement of imported goods?
The six methods of valuation or appraisement of imported goods include transaction value, transaction value of identical goods, transaction value of similar goods, deductive value, computed value, and fallback method.
The World Trade Organization's Agreement on Customs Valuation provides six methods of valuation or appraisement of imported goods. The primary method is the transaction value, which is the price actually paid or payable for the goods when sold for export. If the transaction value is not available or deemed unreliable, the following methods are considered:
Transaction Value of Identical Goods: This method involves using the transaction value of identical goods that were imported at or around the same time.
Transaction Value of Similar Goods: Here, the transaction value of similar goods is used. These goods should closely resemble the imported goods in terms of characteristics, quality, and commercial level.
Deductive Value: This method is based on the selling price of the imported goods in the country of importation, after deducting the costs incurred in the country of importation, such as transportation and insurance.
Computed Value: Computed value is determined based on the cost of production, general expenses, and profit margins in the country of origin.
Fallback Method: If none of the previous methods can be applied, the customs authorities may use a reasonable means consistent with the principles and general provisions of the valuation agreement.
Customs typically prefer to use the transaction value method when reliable data is available. However, if the transaction value cannot be determined or is deemed unreliable, the other methods provide alternative approaches for the valuation of imported goods.
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Flint BookWarehouse Ltd. distributes hardcover books to retail stores. At the end of May, Flint's inventory consists of 240 books purchased at $19 each. Return rates in the book industry are high, with Flint experiencing a 15% retumrate historically. During the month of June, the following merchandise transactions occurred: June 1 Purchased 160 books on account for $17 each from Reader's World Publishers, terms N/45. 3. Sold 250 books on account to The Book Nook for $25 each, with an average cost of $18, terms n/45. 5 Received a $170 credit for 10 books returned to Reader's World Publishers: 8 Sold 75 books on account to Read-A-Lot Bookstore for $25 each, with an averape cost of $18, terms n/45. 9 Issued a $325 credit memorandum to Read-A-Lot Bookstore for the return of 13 damaged books. The books were determined to be no longer saleable and were destroyed.
11 Purchased 130 books on account for $16 each from Read More Publishers, terms n/45. 12 Received payment in full from The Book Nook 17 Received payment in full from Read-A.Lot Bookstore 22. Sold 125 books on account to Reader's Bookstore for $25 each, with an averape cost of $18, terms 1/45. 25 Granted Reader's Bookstore a $400 credit for 16 returned books. These books were restored to inventory. 27 Paid Reader's World Publishers in full.
(a) Record the June transactions on Flint Book Warehouse's books, assuming it uses a periodic inventory system. (List all debit entries before credit entries. Credit occount titles are outomatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the occount tities and enter Ofor the amounts. Round answers to 0 decimal places, eg. 125)
The June transactions for Flint Book Warehouse Ltd. using a periodic inventory system are recorded through various journal entries.
To record the June transactions for Flint Book Warehouse Ltd., assuming a periodic inventory system, we will go through each transaction and make the necessary entries. Here are the journal entries:
June 1:
Inventory (Reader's World Publishers) 2,720
Accounts Payable 2,720
(Record the purchase of 160 books at $17 each on account from Reader's World Publishers)
June 3:
Accounts Receivable (The Book Nook) 6,250
Sales Revenue 6,250
Cost of Goods Sold 4,500
Inventory 4,500
(Record the sale of 250 books at $25 each on account to The Book Nook with an average cost of $18)
June 5:
Accounts Payable 170
Inventory (Reader's World Publishers) 170
(Record the return of 10 books to Reader's World Publishers, receiving a $170 credit)
June 8:
Accounts Receivable (Read-A-Lot Bookstore) 1,875
Sales Revenue 1,875
Cost of Goods Sold 1,350
Inventory 1,350
(Record the sale of 75 books at $25 each on account to Read-A-Lot Bookstore with an average cost of $18)
June 9:
Sales Returns and Allowances (Read-A-Lot Bookstore) 325
Accounts Receivable (Read-A-Lot Bookstore) 325
(Record the return of 13 damaged books to Read-A-Lot Bookstore with a credit memorandum of $325)
June 11:
Inventory (Read More Publishers) 2,080
Accounts Payable 2,080
(Record the purchase of 130 books at $16 each on account from Read More Publishers)
June 12:
Accounts Receivable (The Book Nook) 6,250
Cash 6,250
(Record the receipt of payment in full from The Book Nook)
June 17:
Accounts Receivable (Read-A-Lot Bookstore) 1,875
Cash 1,875
(Record the receipt of payment in full from Read-A-Lot Bookstore)
June 22:
Accounts Receivable (Reader's Bookstore) 3,125
Sales Revenue 3,125
Cost of Goods Sold 2,250
Inventory 2,250
(Record the sale of 125 books at $25 each on account to Reader's Bookstore with an average cost of $18)
June 25:
Sales Returns and Allowances (Reader's Bookstore) 400
Inventory (Reader's Bookstore) 400
(Record the return of 16 books from Reader's Bookstore, adding them back to inventory)
June 27:
Accounts Payable (Reader's World Publishers) 2,720
Cash 2,720
(Record the payment in full to Reader's World Publishers)
These journal entries reflect the transactions for June in Flint Book Warehouse's books using a periodic inventory system.
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Sunlight design comporation sells glass vases at a wholesal price of $3.50 per unit. The variable cost to manufacturing is $1.76 per unit. The current seles are 30.000 units per month. If the company wants to increase its operating income by 20%, how many additional units must it sell? (Round any intermediate calculations to two decimal places and your final answer up to the nearest whole unit.) A. 105,000 glass vases B. 7,500 glass vases C. 35,143 glass vases D. 5,143 glass vases
The correct answer to this question is option A, 105,000 glass vases. To calculate how many additional units must be sold in order for Sunlight design corporation to increase its operating income by 20%, we can use the formula below:
Contribution margin = Sales price per unit - Variable cost per unitContribution margin = $3.50 - $1.76 = $1.74Using this formula, we can calculate the contribution margin per unit. This is the amount of money that each unit sold contributes to covering the company's fixed expenses and generating profit.
If Sunlight design corporation wants to increase its operating income by 20%, it will need to increase its contribution margin by the same percentage. So, the new contribution margin per unit will be:
New contribution margin per unit = $1.74 x 1.20 = $2.09
Next, we can use this new contribution margin per unit to calculate how many additional units need to be sold in order to achieve the 20% increase in operating income. This can be done using the formula below:
Additional units = (20% x Fixed expenses) ÷ New contribution margin per unit
The fixed expenses are not given in the question, but we do not need to know this value in order to solve the problem. Instead, we can use the current operating income (before the 20% increase) as a proxy for fixed expenses. This is because the fixed expenses and operating income are equal at the breakeven point.
Therefore, we can assume that the current operating income is equal to the fixed expenses, and use it in the formula above.
The current operating income can be calculated as follows:
Operating income = (Sales price per unit - Variable cost per unit) x Units sold
Operating income = ($3.50 - $1.76) x 30,000
Operating income = $52,200
Now we can substitute the values we have calculated into the formula for additional units:
Additional units = (20% x $52,200) ÷ $2.09
Additional units = $10,440 ÷ $2.09
Additional units ≈ 4,995.22
We must round this value up to the nearest whole unit, which is 5,000. Therefore, Sunlight design corporation needs to sell an additional 5,000 units in order to increase its operating income by 20%.
However, this is only true if the fixed expenses do not change. If the fixed expenses increase as a result of producing and selling more units, then more units will need to be sold to achieve the 20% increase in operating income.
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Starbucks Corporation is an American multinational chain of coffeehouses and roastery reserves headquartered in Seattle, Washington. It is one of the world’s largest coffeehouse chains. It serves hot and cold drinks, whole-bean coffee, juices, beverages, pastries, and other snacks. Some offerings are seasonal or specific to the locality of the store.
Describe and analyze how Starbucks exercise Procurement Management, according to all knowledge you have gained from the provided educational material. Make sure that in your answers you address the below aspects: - Explain and procurement structure and strategy of Starbucks - Explain whether and how procurement creates competitive advantage for Starbucks.
Procurement Management is a critical function for Starbucks Corporation, as it plays a vital role in ensuring the availability of high-quality products and ingredients to support the company's operations across its global network of coffeehouses.
Quality Control: Starbucks places a strong emphasis on procuring high-quality products and ingredients. By carefully selecting suppliers and implementing strict quality control measures, the company ensures consistency in its offerings and reinforces its brand reputation for premium and enjoyable coffee experiences.
Sustainability and Ethical Sourcing: Starbucks' commitment to sustainable and ethical sourcing practices differentiates it from competitors. By working closely with suppliers to promote environmentally friendly practices and fair treatment of farmers and workers, Starbucks enhances its brand image and attracts environmentally conscious and socially responsible consumers.
Innovation and Differentiation: Procurement also supports Starbucks' ability to introduce innovative and unique products to its menu. By actively seeking out new ingredients, flavors, and packaging options, the company can differentiate itself in the market and stay ahead of evolving consumer preferences.
Cost Efficiency: While quality and sustainability are key drivers for procurement at Starbucks, the company also strives for cost efficiency. By leveraging its global scale and negotiating power, Starbucks can secure favorable pricing agreements with suppliers.
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Suppose the risk-free interest rate is 4%, and the stock market will return either + 26% or 25% each year, with each outcome equally likely. Compare the following two investment strategies: (1) invest for one year in the risk-free investment, and one year in the market, or (2) invest for both years in the market.
a. Which strategy has the highest expected final payoff?
b. Which strategy has the highest standard deviation for the final payoff?
c. Does holding stocks for a longer period decrease your risk?
a. Strategy (2) of investing in the market for both years has the highest expected final payoff.
Since each outcome in the market has an equal probability, the expected return for each year is the average of the possible returns, which is (26% + 25%)/2 = 25.5%. By investing in the market for both years, the overall expected return is compounded, resulting in a higher expected final payoff compared to strategy (1) of investing in the risk-free investment for one year and the market for one year.
b. Strategy (2) of investing in the market for both years also has the highest standard deviation for the final payoff. The standard deviation measures the variability or volatility of the investment returns. Since the market returns have a higher range (+26% or +25%), investing in the market for both years introduces more variability into the final payoff compared to strategy (1) that includes a risk-free investment. The risk-free investment has a fixed return of 4% each year, which leads to lower volatility and, consequently, a lower standard deviation.
c. No, holding stocks for a longer period does not necessarily decrease your risk. The risk associated with investing in the stock market is primarily influenced by the volatility or variability of the market returns. In this scenario, both investment strategies involve investing in the market for one year.
The holding period for stocks remains the same in both strategies. However, strategy (2) that invests in the market for both years has a higher standard deviation, indicating higher risk or volatility compared to strategy (1). Holding stocks for a longer period may potentially increase the exposure to market fluctuations and risks. Therefore, the duration of the investment alone does not determine the level of risk; it is the characteristics of the investment, such as the volatility of returns, that primarily influence the risk associated with holding stocks.
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Bob signs a note promising to pay marie $3250 in 4 years at 8.5% compounded monthly. Then, 120 days before the note is due, Marie sells the note to a bank which discounts the note based on a bank discount rate of 14%. How much did the bank pay Marie for the note?
Bob signs a note promising to pay marie $3250 in 4 years at 8.5% compounded monthly. Then, 120 days before the note is due, Marie sells the note to a bank which discounts the note based on a bank discount rate of 14%. So, bank paid Marie $3,047.76 for the note.
When Marie sells the note to the bank 120 days before it is due, the bank applies a discount rate of 14% to calculate the amount they will pay Marie. To determine how much the bank paid, we need to calculate the present value of the note.
1. Calculate the future value of the noteBob promises to pay Marie $3,250 in 4 years at an interest rate of 8.5% compounded monthly. To find the future value, we use the formula for compound interest:
FV = PV * (1 + r/n)^(n*t)
Where:
PV = Present value (unknown)
r = Annual interest rate (8.5%)
n = Number of compounding periods per year (12)
t = Number of years (4)
Plugging in the values, we have:
$3,250 = PV * (1 + 0.085/12)^(12*4)
Solving for PV, we find that the future value of the note is $3,841.68.
2. Calculate the present value of the noteThe bank discounts the note based on a bank discount rate of 14%. The formula to calculate the present value of a discounted note is:
PV = FV / (1 + (r*t/365))
Where:
FV = Future value of the note ($3,841.68)
r = Discount rate (14%)
t = Time remaining until the note is due in days (120)
Plugging in the values, we have:
PV = $3,841.68 / (1 + (0.14 * 120/365))
Solving for PV, we find that the present value of the note is $3,047.76.
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Why is a progressive disciplinary system important when an
organization is terminating an employee for cause? What should such
a system involve?
A progressive disciplinary system is important when terminating an employee for cause because it promotes fairness, provides opportunities for improvement, and reduces legal risks. Such a system should involve clear policies, documentation of performance issues, and a gradual escalation of consequences.
When an organization is considering terminating an employee for cause, a progressive disciplinary system ensures fairness in the process. It allows the employee to understand the expectations and consequences of their actions and provides them with an opportunity to correct their behavior. By implementing a step-by-step approach, the organization demonstrates its commitment to treating employees consistently and impartially.
Additionally, a progressive disciplinary system provides opportunities for improvement. It allows the employee to receive feedback and guidance on their performance issues, giving them a chance to address and rectify the problems. Through counseling, coaching, and additional training, the employee can develop the necessary skills or make the required adjustments to meet the organization's expectations.
Moreover, a progressive disciplinary system helps mitigate legal risks associated with terminating an employee for cause. By documenting performance issues and following a structured process, the organization establishes a clear record of the employee's behavior and the corrective actions taken. This documentation can be crucial in defending against potential legal claims, as it demonstrates that the termination was not arbitrary or discriminatory but based on a well-documented pattern of misconduct or underperformance.
In summary, a progressive disciplinary system is vital when terminating an employee for cause as it ensures fairness, offers opportunities for improvement, and reduces legal risks. Such a system should involve clear policies, thorough documentation, and a progressive escalation of consequences to provide employees with the chance to rectify their behavior and avoid termination.
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Answer the question. What types of projects would you be
interested in exploring and building with your Arduino and IoT
bundle of parts? Why are you interested? How would you approach
building them?�
One interesting project could be a smart home automation system that controls various electronic devices within the house, such as lights, air conditioning, and security cameras. With the help of sensors and actuators, the system can automatically adjust the temperature, turn on/off the lights based on occupancy, and send notifications to the homeowner's smartphone in case of any suspicious activity detected by the cameras.
Another potential project could be a weather station that collects real-time data on temperature, humidity, pressure, and rainfall using various sensors. The data can be transmitted over the internet to a cloud server, where it can be analyzed and visualized using web-based tools. This can be a useful tool for farmers, meteorologists, or anyone who needs to monitor the weather conditions in their area.
To approach building these projects, it is important to start with a clear idea of what you are trying to achieve and what components you need to make it happen. You can then assemble the necessary hardware, write code to interface with the sensors and actuators, and integrate everything into a functional system. There are many resources available online, including tutorials, forums, and open-source libraries, that can help you along the way.
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Two scheduled debt payments of $796 each are due three months and nine months from now respectively. If interest at 7% is allowed, what single payment today is required to sottle the two scheduled payments? The single payment required to settle the two scheduled payments is s (Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)
To calculate the single payment required to settle the two scheduled debt payments, we need to find the present value of those payments. We'll discount each payment separately and then sum them together.
Using the formula for the present value of a future payment:
PV = FV / (1 + r)^n
Where:
PV = Present value
FV = Future value (the scheduled debt payment)
r = Interest rate
n = Number of periods
First, let's calculate the present value of the first payment due in three months:
PV1 = $796 / (1 + 0.07)^3
PV1 = $796 / (1.07)^3
Next, let's calculate the present value of the second payment due in nine months:
PV2 = $796 / (1 + 0.07)^9
PV2 = $796 / (1.07)^9
Finally, we can find the single payment required to settle both payments by summing the present values:
s = PV1 + PV2
Calculating each component:
PV1 ≈ $737.23 (rounded to two decimal places)
PV2 ≈ $689.19 (rounded to two decimal places)
s ≈ $737.23 + $689.19
s ≈ $1,426.42
Therefore, the single payment required to settle the two scheduled debt payments is approximately $1,426.42.
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For Differences-in-Differences (DID) regression, which of the following methods is not designed for fixing the bias caused by the violation of the common trends assumption?
a. Include leads and lags of the "switched-on/switched-off" dummy.
b. Construct synthetic control group.
c. Control group-specific time trends.
d. Differences-in-differences-in-differences (DDD) regression.
b. Construct synthetic control group.
The method that is not designed for fixing the bias caused by the violation of the common trends assumption in Differences-in-Differences (DID) regression is to construct a synthetic control group.
The common trends assumption in DID regression states that, in the absence of treatment, the average treatment group and control group would have followed parallel trends over time. This assumption is crucial for identifying the causal effect of the treatment. When the common trends assumption is violated, it introduces bias into the estimated treatment effect.
Including leads and lags of the "switched-on/switched-off" dummy, controlling for group-specific time trends, and using Differences-in-Differences-in-Differences (DDD) regression are all methods that aim to address the violation of the common trends assumption. These methods help control for time-varying factors and account for differences between treatment and control groups.
However, constructing a synthetic control group is not designed to fix the bias caused by the violation of the common trends assumption. This method involves creating a weighted combination of control units to construct a "synthetic" control group that closely matches the pre-treatment characteristics of the treated unit. It assumes that the untreated units can be combined to mimic the counterfactual trend of the treated unit. While it can be a useful approach in certain cases, it does not directly address the violation of the common trends assumption.
In summary, constructing a synthetic control group is not specifically designed to mitigate the bias resulting from the violation of the common trends assumption in DID regression.
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Question 10
If a firm wants a 5% chance of running out of inventory, then what is the implied Cu relative to C0 ? Use the picture given in a previous question in this problem set. • Cu=20Co • Cu/Co=2 • Cu=5Co • Cu/Co=100 Question 11
If a firm sets a 90% service level and runs out of inventory, this means: • The realization and expectation are equal. • The realization may be higher or lower than the expectaiton, depending on the standard deviation. • The realization was higher than the expectation. • The expectation was higher than the realization.
In question 10, if a firm wants a 5% chance of running out of inventory, the implied Cu relative to C0 is Cu/Co=100. In question 11, if a firm sets a 90% service level and runs out of inventory, it means that the realization may be higher or lower than the expectation, depending on the standard deviation.
Question 10 asks about the implied Cu relative to C0 when a firm wants a 5% chance of running out of inventory. The correct answer is Cu/Co=100. This means that the cost of an inventory shortage (Cu) is equivalent to 100 times the cost of an order (Co). By setting Cu/Co=100, the firm ensures a 5% chance of running out of inventory.
In question 11, if a firm sets a 90% service level and runs out of inventory, it implies that the realization may be higher or lower than the expectation, depending on the standard deviation. The correct answer is that the realization may be higher or lower than the expectation. The service level represents the probability of meeting customer demand, and in this case, the firm aimed for a 90% service level. However, due to factors such as variability in demand or supply chain disruptions, the actual realization of the service level may deviate from the expected level.
In summary, question 10 relates to the implied cost of inventory shortage relative to the cost of an order, while question 11 discusses the relationship between the service level and the realization of inventory availability, indicating that the realization can vary from the expected level depending on factors like standard deviation.
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Prepare a report to explain how you went about applying the framework in Fig 1.2. in selecting your stocks. Report on whether the stocks in your portfolio trade on a Stock Exchange or on an Over-the Counter (OTC) market. What are the differences between the two types if financial markets? Demonstrate how you applied the rule prescribed above and explain if it is an appropriate rule to follow. Choose one stock in your portfolio and obtain its most recent financial statements. (Click on the link here look up your firm using the appropriate ticker symbol, and select "Financials" under the menu options. Under financials, you will have the opportunity to select and upload each of the three financial statements one at a time. However, since downloading the data requires a subscription, go around this requirement by copying and pasting (paste special) the data into excel.) With the data in excel, you can compute the various liquidity, asset management, debt management, profitability and market values ratios for your selected company for the years 2019, 2020, and 2021. Evaluate the changes in the ratios and comment on how its liquidity, asset management, debt management, profitability and market values have change over this period.
The selection of stocks in a portfolio is based on the application of the principles of Fundamental analysis. This analysis is based on the application of a framework, which is presented in Fig 1.2.
The framework involves six steps.
Step 1: Examination of the Macro-Economic Environment: Before selecting any stock, I examined the macro-economic environment. I examined the economic indicators such as inflation, interest rates, GDP, etc. The economic environment is an essential factor to consider in the stock selection process because it influences the performance of the stock.
Step 2: Examination of the Industry: After examining the macro-economic environment, I examined the industry in which the company operates. I examined the industry trends, growth prospects, competitive position, and market share of the company. This analysis provided a better understanding of the company's performance in the industry and its growth potential.
Step 3: Examination of the Company's Business Model: In this step, I examined the company's business model, including its revenue sources, cost structure, and competitive advantages. This analysis provided an understanding of how the company makes money and how sustainable its business model is.
Step 4: Examination of the Company's Financial Statements: After examining the company's business model, I examined the company's financial statements. I looked at the company's balance sheet, income statement, and cash flow statement. I analyzed the company's financial position, profitability, liquidity, solvency, and efficiency.
Step 5: Application of Valuation Techniques: After analyzing the company's financial statements, I applied various valuation techniques to estimate the intrinsic value of the company's stock. The valuation techniques used included Price to Earnings (P/E) ratio, Price to Sales (P/S) ratio, Dividend Discount Model (DDM), and Discounted Cash Flow (DCF).
Step 6: Monitoring the Investments: After selecting the stocks for my portfolio, I monitored the investments regularly. I tracked the performance of the stocks and the market trends to determine when to buy or sell the stocks. Report on whether the stocks in your portfolio trade on a Stock Exchange or on an Over-the Counter (OTC) market.
The stocks in my portfolio trade on a Stock Exchange. A stock exchange is a centralized marketplace where stocks are traded publicly, under the regulations of the Securities and Exchange Commission (SEC). The Over-The-Counter (OTC) market is a decentralized market where stocks are traded between two parties outside of formal exchanges. The main difference between the two types of financial markets is that the stocks on a stock exchange must meet certain requirements, such as financial disclosure, minimum share price, and market capitalization. In contrast, the stocks traded on the OTC market do not have to meet these requirements, making them less regulated and less liquid.
One of the rules prescribed in the framework is the "Price to Earnings (P/E) ratio." This ratio is used to determine whether a company's stock is undervalued or overvalued. I applied this rule by calculating the P/E ratio for each stock in my portfolio. The P/E ratio is calculated by dividing the market price per share by the earnings per share. If the P/E ratio is high, it means the stock is overvalued, and if it is low, it means the stock is undervalued. This rule is appropriate to follow because it provides a quick and simple way to determine whether a stock is overvalued or undervalued.
From the table above, Apple Inc.'s liquidity ratios have declined over the years, which could be a red flag. The company's current ratio declined from 1.54 in 2019 to 1.03 in 2021, indicating a reduction in the company's ability to meet its short-term obligations. Similarly, the company's quick ratio declined from 1.28 in 2019 to 0.81 in 2021, indicating that the company's ability to meet its short-term obligations has reduced further. Apple Inc.'s asset management ratios have also declined over the years. The company's inventory turnover declined from 83.13 in 2019 to 57.55 in 2021, indicating that the company is holding onto inventory longer.
Apple Inc.'s profitability ratios have also improved over the years. The company's gross profit margin increased from 37.8% in 2019 to 41.6% in 2021, indicating an improvement in the company's profitability. Similarly, the company's net profit margin increased from 21.0% in 2019 to 23.8% in 2021, indicating that the company is earning more profit on each dollar of sales.
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(e)
(e) Discuss FIVE (5) advantages of preparing annual budgets for any organization. (15 Marks) Group Assignment (ACC4245/August 2022) Page 3
The five advantages of preparing annual budgets for any organization are as follows :
1. Planning:Preparation of a budget aids in the planning process of an organization. It serves as a roadmap for achieving the objectives of the company. The budgeting process also assists in determining where the company should focus its resources. It aids in identifying which objectives require increased attention and which are of lesser significance.
2. Coordination:Budgeting serves as a means of coordinating various departments within an organization. Departments must collaborate to achieve the objectives and targets established in the budget. By establishing a clear set of goals and objectives, the budgeting process enhances coordination across departments.
3. Control:Budgeting helps in controlling the expenses of an organization. By determining how much money can be allocated to each department, the budget acts as a guide for controlling expenditures. Departments are given a predetermined amount of money to spend, and any expenditure that exceeds the budgeted amount must be approved before it can be authorized.
4. Communication:The budgeting process aids in communication within an organization. Each department communicates its needs and requirements to the budgeting committee, which then develops a budget based on these inputs. The budget acts as a tool for communicating these requirements and expectations to each department.
5. Performance Evaluation: Budgeting aids in evaluating the performance of an organization. It provides a means of assessing the company's actual performance against its budgeted performance. Any significant variances can be identified, and corrective action can be taken to correct these deviations. The budgeting process allows for an organization to continually improve its performance based on the feedback provided by the budgeting process.
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for many investors, mutual funds have become the investment of
choice. In your own words describe why investors purchase mutual
funds.
Mutual funds are preferred by many investors as their investment of choice due to several reasons.
Investors purchase mutual funds for various reasons. Firstly, mutual funds offer diversification, allowing investors to spread their risk across a wide range of securities, such as stocks, bonds, and commodities. This diversification helps reduce the impact of individual security performance on the overall portfolio. Secondly, mutual funds are managed by professional fund managers who have expertise in selecting and managing investments. This allows investors to benefit from the knowledge and experience of these professionals, particularly if they lack the time or expertise to manage their investments themselves. Additionally, mutual funds offer convenience and accessibility, as they can be easily bought and sold through brokerage firms or directly from fund companies. They also provide flexibility, with options for different investment objectives, risk tolerance levels, and investment styles. Lastly, mutual funds provide liquidity, allowing investors to redeem their shares and access their investment capital relatively quickly.
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Question 4
The Ting Hai effect is a Hong Kong stock market phenomenon in which there is a sudden and unexplained drop in the stock market.
The effect is named after Ting Hai, the main character in the drama The Greed of Man, who was portrayed by Adam Cheng. Initially, the Ting Hai effect occurred whenever the drama or its sequel was broadcast in Hong Kong.
However, it was observed later that the phenomenon also takes place whenever a new film or a television series starring Adam Cheng is released. In the two decades since 1992, nearly every time Cheng has appeared in a movie or television show - which has been more than 30 times the Hang Seng Index declined.
(a) Assume that some investors did take advantage of Ting Hai effect and made abnormal profit from it. Judge whether any form of market efficiency is violated in the Hong Kong stock market. Explain your reasoning. (Word limit - 120 words)
(b) You are a financial advisor, and your client Alice is an Adam Cheng fan. A new film of Adam will be released in 2 weeks' time, and Alice is asking whether she should sell all her positions now. How should you respond? (Word limit - 150 words)
Emphasize the importance of a well-rounded approach to investing rather than reacting to specific events or personal preferences.
(a) The Ting Hai effect suggests a violation of the weak form of market efficiency in the Hong Kong stock market. The consistent and predictable reaction of the market to the release of dramas, sequels, or movies featuring Adam Cheng indicates that stock prices do not fully reflect all available information. Investors who can predict and exploit this effect are making abnormal profits, which implies that the market is not fully efficient.
The weak form of market efficiency assumes that past price and trading information is already incorporated into stock prices. However, the Ting Hai effect suggests that certain events related to Adam Cheng contain additional information that is not fully reflected in stock prices, indicating a violation of market efficiency.
(b) As a financial advisor, it is important to advise Alice based on investment principles rather than personal preferences. While the Ting Hai effect has been observed in the past, it does not guarantee the same market reaction in the future. It is prudent to maintain a diversified portfolio and adhere to a long-term investment strategy aligned with Alice's goals. Selling all positions solely based on the release of a single movie may not be a wise decision.
Instead, encourage Alice to consider fundamental analysis, company financials, industry trends, and market conditions when making investment decisions. Emphasize the importance of a well-rounded approach to investing rather than reacting to specific events or personal preferences.
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A life insurer issues a special 5-year endowment assurance contract to a life aged 55. The death benefit is $10,000 and is payable at the end of the year of death during the 5-year term. The maturity benefit payable on survival to age 60 is $20,000. Level annual premiums are payable in advance. Reserves are held equal to the net premium policy values at the end of each year, assuming mortality according to AM92 ultimate life table, and interest of 4% p.a. (a) If the basis used to calculate the policy values and that used to calculate the premium are the same, state the policy value at outset. (b) Calculate recursively the reserves required at the end of each year of the contract, assuming that the policyholder survives.
(a) The policy value at the outset of the special 5-year endowment assurance contract can be calculated based on the given death benefit and maturity benefit, as well as the premium payments. (b) The reserves required at the end of each year of the contract can be determined recursively by considering the premium payments, policy values, mortality assumptions, and interest rates.
(a) To calculate the policy value at the outset, we need to consider the death benefit and maturity benefit. The death benefit of $10,000 payable at the end of the year of death is included in the policy value. The maturity benefit of $20,000 payable on survival to age 60 is also included. If the basis used to calculate the policy values and the premium is the same, the policy value at the outset will be the sum of the death benefit and maturity benefit.
(b) To calculate the reserves required at the end of each year, we need to consider the premium payments, policy values, mortality assumptions, and interest rates. The reserves are held equal to the net premium policy values at the end of each year. The net premium policy value is the difference between the premium paid and the expected present value of future benefits. This calculation takes into account the mortality assumptions according to the AM92 ultimate life table and an interest rate of 4% per annum. By recursively calculating the reserves required at the end of each year, assuming the policyholder survives, we can determine the accumulated reserves throughout the contract period.
It's important to note that specific calculations may vary depending on the exact terms and conditions of the endowment assurance contract, including any additional factors or adjustments. It's recommended to refer to the specific contract details or consult an actuarial professional for accurate calculations.
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