Match the terms with the definitions.

__Lowering your chance of loss by not doing high-risk activities

a. deductible

b. risk assessment

c. risk assumption

d. risk avoidance

e. risk management

f. risk reduction

g. risk shifting

Chemax Inc. manufactures a wide variety of pharmaceuticals, medical instruments, and other medical supplies. Eighteen months ago the company developed and began to market a new product line of antihistamine drugs under various trade names. Sales and profitability of this product line during the current fiscal year greatly exceeded management's expectations. The new product line will account for 10 percent of the company's total sales and 12 percent of the company's operating income for the fiscal year ending June 30, 20X0. Management believes sales and profits will be significant for several years.

Chemax is concerned that its market share and competitive position could suffer if it discloses the volume and profitability of its new product line in its annual financial statements. Management is not sure how ASC 280 applies in this case.

Required

What options, if any, does Chemax Inc. have with the disclosure of its new antihistamine product line? Explain your answer.

Why do small firms export? The Journal of Small Business Management (Vol. 40, 2002) published a study of what motivates small firms to export. In a survey of 137 exporting firms, each CEO was asked to respond to the statement "Management believes that the firm can achieve economies of scale by exporting" on a scale of 1 (strongly disagree) to 5 (strongly agree). Summary statistics for the $n=137$ scale scores were reported as $\bar{x}=3.85$ and $s=1.5$. Explain why the researcher will be unable to conclude that the true mean scale score exceeds $3.5$ if the standard deviation of the scale scores is too large.

Match the terms with the definitions.

__Taking measures to lessen the frequency or severity of losses that might occur

a. deductible

b. risk assessment

c. risk assumption

d. risk avoidance

e. risk management

f. risk reduction

g. risk shifting

The Sarbanes-Oxley Act increased top management’s responsibility for what?

Devon Turner, who has been playing shortstop for the St. Louis Titans for five years, made the All-Star team in 2014. He has three years left on a contract that pays him $2.4 million a year. He wants to renegotiate his contract because other players with records similar to his are receiving as much as$10.5 million per year for five years.

Titans’ management has a policy of never renegotiating a current contract but is willing to consider extending Turner’s contract to additional years. In fact, the Titans have offered Turner an additional three years at $6.0 million,$9.0 million, and $12.0 million, respectively. They have also added an option year at$15.0 million. Management points out that this package is worth $42.0 million, or$10.5 million per year on average. Turner is considering this offer and is also thinking of asking for a bonus if and when he signs the contract.

Write a memorandum to Turner that comments on management’s position and evaluates the offer, assuming a current interest rate of 10 percent. (Hint: Use present values.) Propose a range for the signing bonus. Finally, include other considerations that may affect the value of the offer.

Effect of transactions on working capital and current ratio Management of Rivers Co. anticipates that its year-end balance sheet will show current assets of $12,639 and current liabilities of$7,480. Management is considering paying $3,850 of accounts payable before year-end even though payment isn’t due until later. Required: a. Calculate the firm’s working capital and current ratio under each situation. Would you recommend early payment of the accounts payable? Why? Round your current ratio answer to two decimal places.

The following data are from the income statements of Haskin Company.

(b) What conclusions concerning the management of the inventory can be drawn from these data?

Speculative fiction is based on projecting from current trends and facts. Describe two possible scenarios for waste management in the year 2040. Base one on the current trend of ever-increasing waste per person. Base the other on the assumption that people will generate less waste in the future.

Greensboro Golf Corporation’s long-term debt agreements make certain demands on the business. For example, Greensboro may not purchase treasury stock in excess of the balance of retained earnings. Also, long-term debt may not exceed stockholders’ equity, and the current ratio may not fall below 1.50. If Greensboro fails to meet any of these requirements, the company’s lenders have the authority to take over management of the company.

Changes in consumer demand have made it hard for Greensboro to attract customers. The company’s current liabilities have grown faster than its current assets, causing the current ratio to fall to 1.47. Before releasing financial statements, managers are scrambling to improve the current ratio. The controller points out that the company owns an investment that is currently classified as long-term. The investment can be classified as either long-term or short-term, depending on management’s intention. By deciding to convert an investment to cash within one year, Greensboro can classify the investment as short-term—a current asset. On the controller’s recommendation, Greensboro’s board of directors votes to reclassify long-term investments as short-term.

Requirements

1. What is the accounting issue in this case? What ethical decision needs to be made?
2. Who are the stakeholders?
3. Analyze the potential impact on the stakeholders from the following standpoints: (a) economic, (b) legal, and ( c ) ethical.
4. Shortly after the financial statements are released, sales improve; so, too, does the current ratio. As a result, Greensboro management decides not to sell the investments it had reclassified as short-term. Accordingly, the company reclassifies the investments as long-term. Has management acted unethically? Give the reason for your answer.

A member of a firm’s investment committee is very interested in learning about the management of fixed-income portfolios. He would like to know how fixed-income managers position portfolios to capitalize on their expectations concerning three factors that influence interest rates. Assuming that no investment policy limitations apply, formulate and describe a fixed-income portfolio management strategy for each of the following interest rate factors that could be used to exploit a portfolio manager’s expectations about that factor. (Note: Three strategies are required, one for each of the listed factors.) Changes in yield spreads as to a particular instrument.

a) National Welding uses industrial robots in some of its assembly-line operations. Management has determined that, on average, a robot breaks down after 1000 hr of use and that the lengths of time between breakdowns are exponentially distributed. What is the probability that a robot selected at random will break down between 600 and 800 hr of use? b) National Welding uses industrial robots in some of its assembly-line operations. Management has determined that, on average, a robot breaks down after 1000 hr of use and that the lengths of time between breakdowns are exponentially distributed. What is the probability that a robot will break down after 1200 hr of use?

Palm Pals Inc. manufactures toy stuffed animals. The direct labor time required to cut, sew, and stuff a toy is 12 minutes per unit. The company makes two types of stuffed toys—a lion and a bear. The lion is assembled in lot sizes of 40 units per batch, while the bear is assembled in lot sizes of 5 units per batch. Since each product has direct labor time of 12 minutes per unit, management has determined that the lead time for each product is 12 minutes.

Is management correct? What are the lead times for each product?

The management company of a local mall with 21 stores plans to survey 3 of the stores to determine the hours they would like to stay open during the holiday season. Describe how to select an SRS of 3 stores using a random number generator.