Reporting in Action — BTN 2-1
1. Apple reports ($ millions):
2. Apple reports ($ millions):
3. ($ millions):
As of September 28, 2013 Debt Ratio = $83,451/$207,000 = 40.3%
As of September 29, 2012 Debt Ratio = $57,854/$176,064 = 32.9%
4. Apple employed more financial leverage as of September 28, 2013, when
40.3% of its assets were financed by debt, relative to September 29,
5. Solution depends on the financial statements accessed.
Comparative Analysis — BTN 2-2
1. Apple ($ millions)
2. Google ($ millions)
Current year debt ratio: $23,611/$110,920 = 21.3%
Prior year debt ratio: $22,083/$93,798 = 23.5%
3. Apple has the higher degree of financial leverage. Apple’s debt ratio is
markedly higher for the current year than that of Google (40.3% vs.
Ethics Challenge — BTN 2-3
This case involves a conflict between the need for efficiency and the need
for control. While it makes sense to take and process lunch orders quickly,
The assistant manager’s explanation about the head manager not arriving
until 3 o’clock suggests that the head manager doesn’t know about the
proposed shortcut. Thus, the new employee is faced with the dilemma of
It is possible that the assistant manager does not understand the potential
for fraud and abuse if this shortcut is used. If the relationship between you
and the assistant manager is such that you feel you can do so, you should
If the assistant manager insists, you may want to work as instructed to get
an idea of whether the shortcut is being abused by the assistant manager
and perhaps to find out discreetly whether the head manager knows about
Communicating in Practice — BTN 2-4
MEMORANDUM
To: Lila Corentine
From:
Subject: Financial statements explanation
Date:
The four major financial statements and their purposes are:
Income statement describes a company’s revenues and expenses along
with the resulting net income or loss over a period of time. It helps
explain how equity changes during a period due to earnings activities.
These financial statements are linked to each other across time.
Specifically, a balance sheet reports an organization’s financial position at
a point in time. The income statement, statement of owner’s equity, and
Taking It to the Net — BTN 2-5
1. The prior three years’ net income or (loss) for Amazon are ($ millions):
2. The three years net cash provided by operations follows ($ millions):
3. In 2013, Amazon had net income of $274 million and operating cash
flows of $5,475 million; and, in that same year, total net cash increased
by only $574 million (see its statement of cash flows).
Teamwork in Action — BTN 2-6
<Instructor note: There is no specific solution to this activity.>
The following sample solution gives a summary outline of what a minimum report
needs to include. Assume a team member selects assets:
Category: Assets
a. Increases (decreases) in assets are debits (credits) to asset accounts.
b. Owner investment of $10,000 cash in business.
c. Assets = Liabilities + Owner, Capital – Withdrawals + Revenues – Expenses
d. Paid rent expense with $2,000 cash.
e. Assets = Liabilities + Owner, Capital – Withdrawals + Revenues – Expenses
Entrepreneurial Decision — BTN 2-7
There are several issues that this entrepreneurial owner should consider.
Those considerations include the following three issues (among others):
If she chooses to contribute her own funds for the expansion, she will be
risking her own money, but she will not have the expense of interest
payments, nor will she have the risk of the inability to repay a loan.
Entrepreneurial Decision — BTN 2-8
1.
MARTIN MUSIC SERVICES
Balance Sheet
December 31, 2015
Assets Liabilities
Cash……………………………… $ 3,600 Accounts payable………………. $ 2,200
Accounts receivable ........ 9,600 Unearned lesson fees ........... 15,600
Prepaid insurance............. 1,500 Total liabilities………………..….. 17,800
Prepaid rent……….............. 9,400
2.
Debt ratio = Total liabilities / Total assets = $17,800 / $80,700 = 22.1%
3. The prospects of a bank loan are likely to be good. (i) The debt ratio
indicates that 78% of the company’s funding is from equity. Also, there
Note: The loan does carry some risk—fueling this risk are (i) poor
recordkeeping, (ii) lack of information on growth potential, and (iii) a
much higher pro forma debt ratio—that is, if the loan is granted, the debt
ratio will jump to 43%, computed as:
Hitting the Road — BTN 2-9
Findings will vary. It is advisable that the instructor obtain a few classified
sections from newspapers that were published over the period of the
assignment. If student reports lack responses for question 2, it is
Global Decision — BTN 2-10
1. An analysis of return on assets suggests that Apple (19.3%) yields the
2. An analysis of the debt ratio suggests that Apple (at 40.3%) presents the
greatest risk, followed by Samsung (29.9%) and then Google (21.3%)
3. In this case, there is no clear answer based on these two ratios alone.
Apple has a relatively higher return on assets but also the highest debt
ratio. Google has the lowest return (slightly lower return on assets