At the head of the accounting system is the controller, who manages all accounting activities of the company. CMAs emphasize the role of accountants in the planning and overall strategy of the company in which they work.
11·11 Analyzing Financial Statements
Return on equity, return on sales, and earnings per share are three commonly used profitability ratios (sometimes called shareholder return ratios or performance ratios). Return on Capital Owners are interested in the net income earned by a business for every dollar invested. Return on equity measures this performance by dividing net income (recorded on the income statement, Figure 11.3) by total owners' equity (recorded on the balance sheet, Figure 11.2).
But if 11.3 percent is lower than the ratios of other companies in the same industry, they should be concerned. The rate of return on sales is calculated by dividing net profit by sales revenue (see Figure 11.3). Earnings per share Earnings per share—calculated by dividing net income by the number of common shares outstanding—affects the size of the dividend a company can pay to its shareholders.
EARNINGS PER SHARE A profit margin calculated as net income divided by the number of common shares outside of it.
The higher the ratio, the more products are sold and the more income comes in.
Summary of Learning Obj ectives
If assets exceed liabilities, equity is positive; If the company goes bankrupt, the owners receive some cash (a profit) after selling assets and paying off debts. If liabilities exceed assets, equity is negative; assets are not enough to pay off debts. If the company goes bankrupt, the owners will not get any cash and some creditors will not be paid, causing them to lose their remaining investments in the company.
Describe three basic financial statements and show how they reflect the activity and financial condition of a business. The balance sheet summarizes a company's assets, liabilities and owners' equity at a given point in time. The statement of cash flows reports cash receipts and payments from operating, investing and financing activities.
Questions and Exercises
Ask the manager about the company's primary purpose for the inventory and how often this is done.
TEAM EXERCISES
Building Your Business Skills
Putting the Buzz in Billing
Exercising Your Ethics
Confidentially Yours
NON: Suppose you are approached by another company, Electrolast, one of the most successful companies in the electronics industry, and you are offered a job at a higher level.
BUSINESS CASE 1 1
Deloitte also faced several other lawsuits, including one arising from the collapse of Italian dairy company Parmalat. A very specifically Canadian response is the creation of the Canadian Public Accountability Board (CPAB), which oversees the supervision, inspection and discipline of Canada's largest accounting firms. We should not conclude from all this that there is doom and gloom in the accounting world.
In tact, things look better, thanks in part to the Sarbanes-Oxley Act, which was passed by Congress in 2002 and is intended to restore public confidence in companies' accounting practices. Section 404 of the law requires U.S.-based companies to analyze their reporting controls and make any improvements that are necessary. Many in the accounting community believe that the Canadian legislature will soon introduce similar legislation.
Do you think business practices such as disclosure and audit procedures will change as a result of Sarbanes-Oxley?
Appendix B
Using Technology to Manage Information in the Internet
Internet Usage
The Impact of Information Technology (IT)
Many companies coordinate e.g. activities from one centralized location, but their deliveries flow from multiple remote locations, often at lower costs. For example, the design of Boeing's 787 Dreamliner aircraft is the result of collaboration not only between engineers, but also from passengers ~on desired electronic outlets to recharge personal electronic devices), cabin crew (\Nho wanted more bathrooms and wider aisles) and air traffic controllers (who wanted bigger, safer air brakes). Consider Lockheed Martin's contract to design the Joint Strike Fighter and supply thousands of the aircraft in various versions to Canada, the United States, the United Kingdom, Italy, Denmark and Norway.
A manager at Hershey Foods, for example, uses ERP to check the current status of each customer order for Hershey Kisses, inspect productivity statistics for each workstation, and analyze delivery performance on each shipment. For example, when treating combat injuries, surgeons at Walter Reed National Military Medical Center in the U.S. 11 Meanwhile, vitamin-sized cameras that patients swallow are providing doctors with computer images of the inside of the human body, helping them heal. diagnosis for diseases such as ulcers and cancer.
For example, scientists connect with Epemlcus, top executives use Meet the Boss, and graduate students connect with Graduate Junction.13.
IT Buildi ng Blocks: Business Resources
The extranet at Chaparral Steel, for example, allows customers to shop electronically across its storage yards and gives them electronic access to Chaparral's planned inventory of industrial steel products. For example, Lockheed Martin's Joint strike Fighter project, discussed earlier, uses online collaboration systems with both voice and video capabilities. For example, on a university or college local area network, an application store stores the word processing, spreadsheet, and other programs used by all computers connected to the network.
Local Area Networks (LANs) In Local Area Networks (LANs), computers are connected together in a smaller area, such as a. For example, a LAN brings together hundreds of operators who enter dial-in commands into TV's Home Shopping Network facility. For example, the BlackBerry system shown in Figure B.2 consists of devices that send and receive transmissions over the wireless wide area networks (WWANs) of more than 100 service providers, such as Cellular One (United States), T-Mobile (United Kingdom and United States) and Vodafone (Italy) in countries around the world.
Wi-Fi networks have many advantages, for example, employees can wait for a delayed plane at the airport and still be connected to the Internet.
Information Systems
Harnessing the Competitive Power of Information
Technology
In fact, Kroger Co., an Ohio-based grocery store chain, collects data on customer shopping habits to find ways to gain greater customer loyalty. Data Mining After gathering information, managers apply data mining—the use of electronic technologies to search, sift, and reorganize databases to uncover useful information. DATA MINING The use of electrical technology to search, sift and collect data for IIICO\Iel" use with onlormotion.
Because employees have a variety of responsibilities and decision-making needs, a company's information system may actually be a collection of different information systems that share data while serving different levels of the organization, different departments, or different activities. KNOWLEOOE INFORMATION SYSTEMS Information system that "4lppr1a knovolledge worlalra by prCNIOOg reeourooe toaeote, alent, .a, End trw1IIITlt rwu knovolledge for IS3IIJ epipicatione. Because they work on different types of problems, managers and their subordinates need access to the specialized information systems that meet their different information needs.
Management Information Systems Management information systems (MISs) support managers by providing reports, schedules, plans and budgets that can then be used to make decisions, both short and long term.
IT Risks and Threats
For example, a credit scoring system can decide which loan applicants are creditworthy and which are too risky, and then draft acceptance and rejection letters accordingly. For example, Campbell's developed an expert system to mimic complex decision-making processes and save expert knowledge that would be lost when a longtime expert soup maker announced its intention to retire.21. Almost every company faces the dilemma of protecting product designs, new inventions, industrial processes, and other intellectual property—something produced by the intellect or mind that has commercial value.
Its ownership and right to use may be protected by patent, copyright, trademark and other means. Intellectual property theft is evident when, for example, individuals illegally download unpaid movies, music, and other resources from file-sharing networks. For example, it can rapidly copy itself over and over again, consuming all available memory and effectively shutting down the computer.
Once installed, it crawls around to monitor the host's computer activities, collecting email addresses, credit card numbers, passwords and other internal information that it transmits to someone outside the host system.
IT Protection Measures
In difficult economic times, individuals and businesses alike are drawn to schemes that they would likely ignore if they were not under financial pressure. Cyberthieves use "targeting" (also known as spear phishing) to identify wealthy individuals and professional money managers. Victims receive friendly-sounding emails containing contaminated attachments that, once opened, infect their computers and expose bank account and other identity information to fraudsters.
CRAFTING A BUSINESS PLAN
Part 3: Managing Operations
Goal of the Exercise
Your Assignment m ybusinessla~
The first option is to use the Microsoft Word versions found in the Business Plan Student Template itself. The other option is to use the specific Microsoft Excel templates created for each statement found on the book's MyBusinessLab. These Excel files are convenient to use because they already have preset worldsheet calculations - all you have to do is plug in the numbers and the calculations will be done automatically for you.
If you make adjustments to the various values in the Excel world sheets, you will automatically see how changes in e.g. expenses can improve the bottom line. Tip When drawing your floor plan, consider where equipment, supplies and furniture will be placed. Tip: See the discussion of operations in Chapter 10 for information to get you started.
Tip: Refer to the discussion of quality improvement and total quality management in Chapter 10 for information on getting started.
VIDEO CASE 111-1
Tree Planters
VIDEO CASE 111-2
African Accountants
