Week 4 Discussion 1&2 – ACME Company sells computer

Week 4 acc

Discussion Question One:

ACME Company sells computer components and plans on borrowing some money to expand. After reading a lot about earnings management, Bill, the owner of ACME, has decided he should try to accelerate some sales to improve his financial statement ratios. He has called his best customers and asked them to make their usual January purchases by December 31. Bill told the customers he would allow them, until the end of February, to pay for the purchases, just as if they had made their purchases in January.

· Explain if you think there are ethical implications of Bill’s actions.

· Which ratios will be affected, and how, by accelerating these sales?

Discussion Question Two:

You are thinking of purchasing some common stock. Now that you are studying about financial statement analysis, you want to use it to analyze some different stocks.

· Of the many ratios that we are studying, explain four different ratios that you think are the most important, what they tell you, and why they are the ones that you picked.

· For more than a decade, many companies have been buying back shares of their own common stock. What are the reasons they would do that?

· Explain if this share buyback program would affect your financial analysis decision about a stock and how.

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