Decision Cases
(30-40 min.) Decision Case 1
Req. 1
Based solely on these balance sheets, Insley Sales Co. appears to be
the better credit risk because:
1. Queens Service has more assets ($150,000) than Insley Sales
($65,000), but Queens Service owes much more in liabilities
2. You would be better off granting the loan to Insley Sales. You
should consider what will happen if the borrower cannot pay you
(20-30 min.) Decision Case 2
Req. 1
Flowers Unlimited, Inc.
Flowers Unlimited, Inc.
Income Statement
Balance Sheet
Year Ended Dec. 31, 2016
Dec. 31, 2016
Revenue…………
$140,0001
Cash……………
$ 6,000
$70,0004
Expenses………..
140,0002
Other assets….
90,0003
26,0005
Net income………
$ -0-
Total assets……
$96,000
$96,000
Req. 2
The company’s financial position is much weaker than originally
reported. Assets and stockholders’ equity are lower and liabilities are
higher. Results of operations are worse than reported. The company
did not earn any profit.
Req. 3
Ethical Issue
Note to instructor: student responses will vary on this problem.
Keep the discussion pointed toward use of the multiple-criteria model
for making good ethical decisions, pointing out elements of students’
Req. 1
The fundamental ethical issue in this situation is whether you should
accept a copy of the old exam from your friend.
Req. 2
The stakeholders are:
a. You
b. Your friend
(continued) Ethical Issue
Req. 3
Analysis of the problem:
Economic perspective: If use of the old exam turns out to help you (it
may not) you might improve your grade and allow you to retain your
scholarship. This might help you and your family financially. If you
use the exam to your unfair advantage, and you are reported, you and
case. If you use the old exam and it turns out that you violated the
University’s honor code, both you and your friend could be in trouble.
Your family and your friend’s family could also be impacted by any
adverse consequences to you or her. Academic institutions establish
policies against academic dishonesty because cheating hurts
(continued) Ethical Issue
the work of another without their permission. It is usually
accompanied by lying to cover it up, or at least, not revealing the
truth. Cheating violates other students’ rights to fair and equal
treatment. It violates the instructor’s rights to run a course as a “fair
These are just some of the arguments against cheating. Of course,
there is a question in this case as to whether taking the test actually
violates the professor’s or the university’s policies.
Req. 4
It would be helpful to find out what the professor’s policies are with
respect to the use of fraternity and sorority test files. The university
might have a blanket policy on this. (Some students might spend a
(continued) Ethical Issue
discuss the issue with the head of the department or the chair of the
university honor council.
Probably the best solution to this problem is “when in doubt, don’t.”
You may not do well on the test, but at least you won’t have to live
with the terrible consequences of being accused as a cheater. It
should make you feel better in the long run that, although you may
not make the highest grades in the class, at least you are not a
cheater.
Req. 5
Cheating is very closely related to stealing, which is a form of fraud.
When employees steal from their companies, they steal property that
Focus on Financials: Apple Inc.
(20-30 min.)
1. Students can emphasize a variety of points regarding Apple Inc.,
and its industry. For example, a discussion on the product
2. Some important information in this portion of the financials is the
description of their distribution channels (third-party resellers),
competitors (product innovation, market opportunities, etc.), and
3. Samsung, Google, Sony, or HP are some of Apple Inc.’s
competitors. It is important to identify competitors because
4. Net income, because it shows the overall result of all the revenues
minus all the expenses for a period. In effect, net income gives the
5. Apple Inc.’s largest expense is cost of sales. This is the cost of the
products that the company sells, such as iPhones, iPads, Apple
TVs, software, and Mac desktops. Another title of this account is
cost of goods sold.
6. Total resources (total assets) at September 27, 2014.….$231,839
million
Amount owed (total liabilities) at September 27, 2014….$120,292
7. At September 28, 2013, Apple Inc. had $14,259 million of cash and
cash equivalents. At September 27, 2014, Apple Inc. had $13,844
million of cash and cash equivalents.
Focus on Analysis: Under Armour, Inc.
(30 min.)
1. Under Armour, Inc. is an athletic apparel company. Students can
emphasize a variety of points regarding Under Armour, Inc. and its
2. Note 1 states Under Armour is a developer, marketer and
distributor of branded performance apparel, footwear, and
accessories. These products are sold worldwide and worn by
athletes of all levels and consumers with active lifestyles.
3. Nike, Adidas, and Columbia Sportswear are some of Under Armour,
Inc.’s competitors. It is important to identify competitors because
4. Under Armour, Inc.’s Accounting Equation (in millions):
Assets
=
Liabilities
+
Shareholders’ Equity
=
+
5. The result of operations for 2014 was a net income of $208,042
thousand. This is good news for Under Armour, Inc. Revenue
exceeded expenses for fiscal 2014, and there is a positive trend in
respectively).The increase in net income signals good news.
6. According to Under Armour, Inc.’s Consolidated Statements of
Stockholders’ Equity, the cause of the company’s large increase in
retained earnings during 2014 was comprehensive income of
$208,042 thousand. (Comprehensive income is closely related to
net income.)
7. The Consolidated Balance Sheets report cash and cash
equivalents as part of the company’s financial position. The
Consolidated Statements of Cash Flows tell why cash and cash
Group Projects
Student responses will vary.