This is “End-of-Chapter Exercises”, section 1.4 from the book Business Accounting (v. 2.0).
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Ramon Sanchez is a loan officer at Washington Bank. He is in the process of deciding whether or not to loan money to Medlock Corporation. Which of the following would have the most influence on Sanchez when making this decision?
Which of the following is not a reason for an investor to purchase capital stock in a relatively large corporation?
Which of the following is not a decision that is normally made using financial accounting information?
Which of the following individuals is most likely to have a say in the policy decisions made by a large corporation?
Leon Williams is an investor in Springfield Corporation. On January 1, Year One, he purchased 150 shares of the corporation’s capital stock at a price of $45 per share. On October 15, Year One, Springfield distributed a cash dividend of $1.50 per share to its stockholders. On December 31, Year One, Springfield’s stock is selling for $47 per share. What is the annual rate of return on William’s investment during Year One, rounded to one decimal point?
At the beginning of the current year, the capital stock of the Ajax Corporation was selling for $24 per share, but, by the end of the year it was selling for $35 per share. Which of the following individuals is the least likely to pay significant attention to this jump in stock price?
Which of the following is least likely to be found in the financial information provided in the annual report of a large corporation?
William Alexander invests money to become one of the owners of a local restaurant. He sells his interest three months later because he wants to invest in a bookstore. Which is the most likely legal structure for the restaurant?
Professor Joe Hoyle discusses the answers to these two problems at the links that are indicated. After formulating your answers, watch each video to see how Professor Hoyle answers these questions.
Your roommate is an English major. The roommate has just learned that you are taking a course in financial accounting. The roommate has never once considered taking a class in business and is mystified that you have chosen to spend your time learning this material. One evening, over pizza, you two are discussing your classes for the semester. The roommate wants to know why anyone could possibly benefit from a class in financial accounting. How would you respond?
Your uncle has worked for a large office supply business for twenty years. They have approximately one hundred retail stores located across the country. He is responsible for a small team of employees who do the interior design work in each of these stores. One day he sends you the following e-mail: “As a reward for twenty years of service, my company has offered to sell me one thousand shares of their capital stock for $23 per share. That’s $23,000, and that is a lot of money. I’ve never been interested in this aspect of business. I understand you are taking a financial accounting course in college. What are capital shares? More importantly, how can I determine whether to spend $23,000 for these shares?”
Explain how each of the following individuals might use the information provided by financial accounting about the Nguyen Company, which is located in Falls Church, Virginia.
Mark each of the following with an (F) to indicate if it is financial information or an (N) to indicate if it is nonfinancial information.
Metro Corporation has the following:
Assume that a person you know tells the following story: “I inherited $3,000 from a distant uncle. I took that money and invested it all in the capital shares of Ford Motor Co. I had looked at several other corporations including Intel, PepsiCo, Microsoft, and Google. Eventually, though, I put my money into Ford.”
Answer the following questions:
The chapter introduced several forms of business, including a corporation, sole proprietorship, and partnership. Other forms of business exist as well. Do an Internet search to learn as much as you can about each of the following business forms:
For each of these legal forms, discuss the following issues: ease of organization and maintenance of form, number of people involved, government involvement, liability to owners, ease of exit, taxation, day-to-day management, and funding sources.
A great amount of financial information is available on the Internet about most business corporations of any significant size. For example, visit http://www.google.com/finance/. In the “Get Quotes” box, type in “Starbucks Corporation.”
Answer each of the following questions based on the information provided at this site:
The U.S. Department of Labor has a page on its Web site at http://www.bls.gov/oco/ocos001.htm that is titled “Accountants and Auditors.” Go to this site and read this page. Use that information to answer the following questions:
Go to http://www.target.com/. At the Target Corporation Web site, scroll to the bottom of that page, find “Company Information,” and click on “Investors.” Then, click on “Annual Reports.” Click on the 2010 annual report and answer the following question:
Starting on page 2, a two-page letter is included “to our shareholders” from the chairman, president, and CEO. Read that letter. Assume you are thinking about buying shares of the capital stock of Target. List two or three pieces of information that you found in this letter that you felt were especially relevant to your decision.