responses

I HAVE BEEN SICK IN HOSPITAL AND NOT UP TO ANSWERING THESE RESPONSES

I NEED AN ANSWER TO THIS

You stated “Issues stock will not impact the earning capacity of the organization but, issuing bonds will impact the earning targets to a certain level. The earning targets will be impacted as the organization will be required to make the payment of interest on the bonds.” How would taxes impact the required interest payments?

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Part A

Bing a SCUBA diver and the new equipment, rebreathers, I would like to buy a rebreather. In twelve years there might be even better equipment so using today’s prices of $20,000 for a high end unit with all the latest bells and whistles. I would use CDs that yield an average of 6% or greater if available. Using the formula from the text:

PV=FV/(1+r)^t=20000/(1+0.06)^12= $9939.39

This means I would need to invest $9939.39 now so that in 12 years I would be able to buy the rebreather and start enjoying the silence of diving.

Part B

I would want to have my heirs to be in a different country on a yacht each year and would require at least $2 million for the rental of the yacht and crew. The interest of my endowment would have to pay for the future activities. The problem as I see it is first what is the present value of $2 million. Then finding the present value of $2million + PV, to allow for continued use for every (providing the interest never changes) Using the present value:

PV=FV/(1 + r/q)nq =2000000/ [ (1 +0.06) ^ 12]=993938.73

This shows how much to meet the needs for the $2 million but I need $2993938.73 every year to maintain the endowment. $2 million for activity and the 993938.73 to grow into $2 million

PV=FV/(1 + r/q)nq =2993938.73/ [ (1 +0.06) ^ 12]=1487895.83

PV=FV/ [ (1 + rate) ^ (12*T )=993938.73/[(1+.06)^(12*50)=493957.10  a single investment or monthly payments of

Payment= FV*((monthly interest(1+monthly interest)^#months)/(((1+monthly interest)^#months)-1))

                   = 993938.73*((.06*(1+.06)^600)/(((1+.06)^600)-1))=59636.32

Not very practical but I hope the family enjoys the trip

I NEED AN ANSWER A RESPONSE TO THIS

I don’t that these practices are UN ethical. In companies and corporate America the actual problem has been the proper use and management of funds and investments. I think that the keeping accounting earnings growing is not unethical. This is you are supposed to do in a company. Where companies go wrong is when according to our text “earnings management occurs when managers use judgment in financial reporting and in structuring transactions to alter financial reports to mislead some stakeholders about underlying economic performance of the company or to influence contractual outcomes that depend on reported accounting numbers” (Byrd, 2013 p. 3).

Two tactics that a financial manager can use to manage is to go according to GAAP rules. I remember learning about GAAP in one of my other classes. “(GAAP) and the ever-present conflict of interest between the independent auditor and the corporate client continue to provide the perfect environment for such activity. Due to these factors, investors who purchase individual stocks or bonds must be aware of the issues, warning signs and the tools that are at their disposal in order to mitigate the adverse implications of these problems”(McEnroe, 2005)

The cash flow statements are very important. They keep a tab on what is coming in and what is going out. They also show where they are with funds and where they should possibly look to go in the future. According to our text “”The time value of money and the mathematics associated with it provide important tools for comparing the relative values of cash flows received at different times. Just as a hammer may be the most useful item in a carpenter’s toolbox, time value of money mathematics is indispensable to a financial manager” (Byrd, 2013)

I NEED A RESPONSE TO THIS

Earnings management is basically the altering of the company’s profits to make the income statement look more attractive. It is my opinion that these practices are not ethical, especially when it is not done in moderation. It is the ability to manipulate the income statement to work in the favor of the company. Two tactics that  a financial manager may use to manage earnings would be to add or remove money from stable accounts and by reporting money as income before deals are actually finalized.
Therefore, the purchase of  bonds could potentially impact the earnings target because a company could choose to include the revenue received from the bond before it has matured. The implications for cash flow and shareholder wealth is that the management of earnings has become a fraudulent occurrence because it changes cash flow in order to reflect positive numbers  and in order to provide income to shareholders. Companies attempting to participate in this unethical practice are subject to felony charges and detrimental consequences such as the shutting down of their company.