$\bold{\text{Team Instructions:}}$ Divide the Class into Teams of Three or Four People

question 65

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$\bold{\text{Team Instructions:}}$ Divide the class into teams of three or four people.Each team member should work the following problem separately outside of class.Then give the students time in class to compare answers with their teammates and put together a final correct copy of the problem.Each team should turn in only one copy of the problem for grading,along with a copy of the annual report that it used.All team members will receive the same grade.
Provide students with copies of real merchandising companies' annual reports,or give students the Web addresses of real merchandising companies and ask them to print out and submit the annual reports.All team members should work with the same company's annual report.
Answer the following questions using the annual report assigned to your team:
1.What is the name of your company?
2.Which of the notes to the financial statements describes the company's revenue recognition policy?
3.Does anything seem unusual about the company's revenue recognition policy? If yes,describe it.
4.Perform a horizontal analysis for your company's revenue,using the earliest year shown as the base year.
5.Does the amount of revenue reported seem unusually high or unusually low in any of these years? If yes,which one?
6.Calculate total operating expenses as a percentage of sales for each of the three years shown.
7.Does the amount of total operating expense seem unusually high or unusually low in any of these years? If yes,which one?
8.Does your company report any non-operating gains or losses? If yes,describe them.
9.Calculate net income as a percentage of sales for each of the three years shown.
10.Does the amount of net income seem unusually high or unusually low in any of these years? If yes,which one?
11.Calculate accounts receivable as a percentage of sales for the current year.
12.Calculate accounts receivable as a percentage of sales for the prior year.
13.Does accounts receivable as a percentage of sales seem consistent for the two years?
14.Which of the notes to the financial statements describes the method your company uses to value its inventory?
15.Does your company use LIFO?
16.Describe how the choice of LIFO in a time of rising prices affects the quality of a company's earnings.
17.Does the company have any treasury stock?
18.Did the company purchase any treasury stock during the most recent year?
19.Which of the notes to the financial statements describes your company's purchase of treasury stock?
20.Does your company seem to have a legitimate reason for repurchasing its own stock? What is the reason?
21.What effect does purchasing treasury stock have on a company's earnings per share? Why?
22.Look in the management discussion and analysis portion of your annual report to find management's comments about "Forward-looking information and risk factors." (If you aren't sure that you have found the right pages, ask your instructor for help.) Does your company seem to operate in a particularly risky environment?
23.Describe the relationship between risk and quality of earnings.

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Definitions:

Nonprice Competition

A marketing strategy in which businesses attempt to attract customers through methods other than lowering prices, such as product differentiation, quality, service, and advertising.

Pure Competition

A market setup defined by many small businesses, identical products, unrestricted entry and departure, and complete information transparency.

Long-Run Average

A concept referring to the time period in which all inputs can be adjusted by firms, relating to production costs and decisions.

Differentiated Products

Goods or services that are distinguished from similar products by characteristics like quality, design, and features.