Assignment 1 (1 and ½ pages)
Case Study 7.1. Financial Analysis
The financial health of an organization can be ascertained by examining a number of financial ratios. Ratios are used to understand the implications of the information in reported data. They can provide a clearer picture of a company’s areas of concern and help shareholders and investors make informed decisions.
Of the ratios discussed in the Collier text on pages 114-121, some would say that ratios related to liquidity and debt (or gearing) are arguably more important than the other ratios discussed.
1. What might be the reasons for someone to take this position?
2. What kind of information can be derived by an acid test?
3. Explain the relationship between gearing numbers and debt repayment.
4. After reviewing Tables 7.5 – 7.13, identify one key ratio a manager could calculate in order to get a “true picture” of the current state of the HMV Group.
5. How is this one ratio most applicable?
Assignment 2 (1 and ½ pages)
The Role of IASB
Standards and best practices arise from application as well as from theory. As capital markets have become more global, international standards have appeared as an alternative to national
1. Describe the role of the IASB in international accounting.
2. How does this role compare with that of the FASB?
In light of the Securities and Exchange Commission’s recent Concept Release dealing with U.S. firms using IASB standards by 2009 and any additional sources you wish to cite,
3. What do you see as the pros and cons of using international standards in your own country?
4. Do you see any substantive differences between a rules-based approach and a principles-based approach to standards? Explain your answer.
Assignment 3 (2 pages)
1. Using the financial analysis in Case Study 7.1 of HMV Group and Tables 7.6–7 .13 of the course text (pages 114-121) as your example, prepare a ratio analysis of FedEx’s 2006 and 2007 year-end results. Your analysis should include each table from the case study as a template. Do not complete the Interest Coverage ratio as there is not enough data to calculate.
2. Prepare an interpretative write up of your financial analysis, explaining trends and items of concern for the directors of FedEx. For each ratio, you should define the ratio, inform the directors about the change in the ratio from one year to the next, and describe how this change impacts the company.
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