Can you journalize the following? a) A private equity firm pays $35 to owners of a target firm; b) then, the target firm borrows $65; c) finally, the target firm pays out all $65 to buy out the remaining owners. What are the qualitative effects on current leverage ratios from the above? What are some probable effects on future earnings (net income) from the above? Why is debt a double-edged sword?
Should the amount of disclosure in financial statements be reduced? Can you give an example of superfluous disclosure? What are some criteria you would use to decide which disclosures should be cut, which ones should be maintained, which ones enhanced?
What is your reaction to the statement, “. . . countries that have adopted IFRS are usually looking for some improvement in capital markets or the greater society that can only be achieved by adopting IFRS.”
Oracle has joined the list of firms paying special/early dividends to avoid the expected tax increase. What do you think will happen to future tax inflows to the government based on its decision to increase the tax rate on dividends? Do you agree with this statement: “if you tax it, you get less of it; if you subsidize it, you get more of it”?
Why do so many firms have so much of their cash balance overseas? Is this a problem? Why or why not? If it is a problem, for whom is it one?
What is your opinion about Costco’s borrowing the cash to pay shareholders the dividend before taxes on dividends increase? What are some of the ratios that will be affected by this change in capitalization?
Costco and other firms are declaring special dividends? Why? What does this bode for future dividends? Why? How might stock prices be affected?
Mary Shapiro is resigning at the SEC. What are the personal attributes and qualifications that you think are necessary to be an effective regulator, particularly as the head of the SEC? Do you have those attributes? Would you want the job? Why or why not?
The Best Buy big box business model has been under threat for several years. What ratios indicate a problem? If you were the CEO, what would you do? If you were on the Board of Directors, how would you structure compensation to motivate the CEO to act?
HP’s “marriage” to Autonomy apparently isn’t working, but it seems Autonomy may have been hiding something. Who do you think bears the blame? Whitman? Apotheker? Lynch? the auditors? Investment bankers? Others? If true that sales of hardware were booked as sales of software, why does this matter if bottom line (net income) was unaffected? Where was COGS reported?
Do you think the contemplated “expected loss” model in accounting for loan impairment is “better” than the current “incurred loss” model? If so, how? For whom?
Capex is trending down for major corporations. Do firms have to provide investors with their planned capex for the next year(s)? If so, where? Is this sort of information useful? If so, why?
UBS is shutting down much of its investment banking services because it isn’t covering its cost of capital. How do you think it measures its cost of capital? Why do you think UBS’s stakeholders appear to be less patient than those at other banks?
Why do you think the author attributes so much of the basis (and “success”) of capitalism to the simple bookkeeping method of the double entry system? How did the notion of “profit” fit into the religious views of the time?
Why do you think it is a “battle” to try to bring leases on-balance-sheet? Why does it matter if the information about lease contracts is in the notes or on the balance sheet? To whom, besides standard setters, does it (or should it) matter?
If you are a young student or someone just entering the workforce, is retirement income a concern to you? Why or why not? Do you know what kind of pensions (if any) your parents have: defined benefit or defined contribution? If you end up having a pension, do you know what kind it is likely to be? Why? Why do you suppose public sector pensions are more likely to be defined benefit plans?
HarperCollins is closing warehouses for printed books. Do you think this move surprises investors? Why or why not? Will HarperCollins likely book an impairment loss? A restructuring charge? Why?
Do you think that Hyundai will accrue a contingent liability for the false mileage claim? Why or why not? Assuming they do, what would the “journal entry” be? How do you think investors will react to the false claim?
