Week_One_Assignment

Running Head: GUILLERMO FURNITURE STORE SCENARIO Guilermo Furniture Store Scenario Christopher Lacey University of Phoenix When overseeing Guillermo finances, a key monitoring task is to compare the actual revenues and expenses with those which were projected in the budget. This information is crucial. Most managers need to take immediate action when revenue is lower or expenses are higher than projected in the budget. Furthermore, you cannot prepare a realistic budget for the next year without comparing this year's budget with the actual results. A budget performance report allows a manager to monitor actual revenues and expenses against those projected in the budget. A performance reporting system provides periodic information on the achievement of desired outcomes. Effective performance reports align results with manager’s goals and objectives, provide guidance to mangers, communicate goals and their level of attainment throughout the organization, and enable organizations to anticipate and respond to change in a timely manner. Ethics in finance is of utmost importance to finance professionals and those who rely on their services. Certified Public Accountants (CPAs) and other finance professionals know that people who use their services, especially decision makers using financial statements, expect them to be highly competent, reliable, and objective. Those who work in the field of finance must not only be well qualified but must also possess a high degree of professional integrity. A professional's good reputation is one of his or her most important possessions. The general ethical standards of society apply to people in professions such as medicine and finance just as much as to anyone else. However, society places even higher expectations on professionals. People need to have confidence in the quality of the complex services provided by professionals. Because of these high expectations, professions have adopted codes of ethics, also known as codes of professional conduct. These ethical codes call for their members to maintain a level of self-discipline that goes beyond the requirements of laws and regulations. Guilermo will need to assess his business by using the basic make or buy decision model and decide on whether to go Hi-tech with his business -or- become a distribute for a Norway furniture company looking to outsource. The main finance information he must asses is the A=L+OE and R-E = income or loss The balance sheet includes a statement of the number of shares outstanding. Now a change in the shares outstanding in a company can change the earnings per share on the income statement. “This is how it works: given the income does not change the more shares a company has on its balance sheet, the lower the earnings per share. This means that if a company had a lot of shares and very little income it would have a low earnings per share. The opposites also true, if a company has very few shares with respect to the earnings that it generates then the earnings per share will be higher.” (Emery Finnerty Stowe) ”The interaction between the income statement and the cash flow statement is a little simpler. The cash flow statement begins with the net income of a company and works backwards through depreciation, inventory changes and changes in receivables and payables until it gets to pure cash change for the operations of the company. It is important to understand that income may not readily translate into cash flow and therefore a company with a good income may not have a really high cash flow. The cash flow, either positive or negative, from investing and financing activities will change their respective areas of the balance sheet. For example, if a company issues more long term debt which is shown on the cash flow sheet as an increase in cash from investing activities, then you will see a subsequent increase in cash on the asset side of the balance sheet and an increase in the long term debt on the liability side of the balance sheet. Finally; the statement of owner's equity is influenced by the income statement by the income that is available to common stock. This income can have two major directions to go: retained earnings, where it is reinvested into the company, or as a payout in the form of a dividend. Either way the income available to common is what an investor invests in.” (Emery Finnerty Stowe) References Emery Finnerty Stowe (2007) Corporate Financial Mgmt (14th ed.) Pearson Education