Last_Exam

Answer Only (5 out of 8) of the following questions

1. Explain the three ways managers influence financial reporting. How does this affect how the analyst uses financial reporting in valuation?

2. Respond to this comment: "I believe that the U.S. stock market is efficient. Because it is efficient, the prices fluctuate randomly and cannot be predicted. So, I do not want to invest my savings in the stock market-anything could happen!"

3. Customer analysis is an important step in external analysis. What should we know about our customers to help us prepare our business analysis?

4. Here is some information about Starbucks' historical sales.

5. What part of the product life cycle do you think Starbucks is in? Why is the product life cycle important to a valuation of Starbucks? How would you decide how to forecast sales into the future?

6. PepsiCo, Inc.'s balance sheet as of December 30, 2000 includes an item called "accounts and notes receivable, net" of $1.8 billion. What does the word "net" mean in this caption?

7. Before beginning a ratio analysis, you must consider several important caveats. Explain these caveats and how they would affect your ratio analysis process.

8. In April 2002, the FASB eliminated extraordinary item treatment for gains and losses on early retirement of debt. Under the previous rules, all such gains and losses were shown as extraordinary items (if material), even if they did not meet the unusual and nonrecurring tests.

1. Prepare arguments supporting extraordinary item treatment for these gains and losses.
2. Prepare arguments supporting the elimination of extraordinary item treatment for these gains and losses.

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