Decision on the financial statements

Assignment Help Accounting Basics
Reference no: EM13514616

Recently, your Uncle Carlos Beltran, who knows that you always have your eye out for a profitable investment, has discussed the possibility of your purchasing some corporate bonds. He suggests that you may wish to get in on the "ground floor" of this deal. The bonds being issued by Neville Corp. are 10-year debentures which promise a 40% rate of return. Neville manufactures novelty/party items. You have told Neville that, unless you can take a look at its financial statements, you would not feel comfortable about such an investment. Believing that this is the chance of a lifetime, Uncle Carlos has procured a copy of Neville's most recent, unaudited financial statements which are a year old. These statements were prepared by Mrs. Andy Neville. You peruse these statements, and they are quite impressive. The balance sheet showed a debt-to-equity ratio of 0.10 and, for the year shown, the company reported net income of $2,424,240. The financial statements are not shown in comparison with amounts from other years. In addition, no significant note disclosures about inventory valuation, depreciation methods, loan agreements, etc. are available.

Instructions

Write a letter to Uncle Carlos explaining why it would be unwise to base an investment decision on the financial statements that he has provided to you. Be sure to explain why these financial statements are neither relevant nor representationally faithful.

Reference no: EM13514616

Questions Cloud

Determine the recipient and amount of the partner bonus : Determine the recipient and amount of the partner bonus and provide the journal entry to admit Lane into the partnership.
Calculate the force exerted on the window by air pressure : On a vacation flight, you look out the window of the jet and wonder about the forces exerted on the window. calculate the force exerted on the window by air pressure
Define the partial pressure of oxygen gas at equalibrium : At 800 k, Kc for the following equalibrium is 4.2 x 10 ^-3. 2HgO(s) 2Hg(l) + O2(g), suppose 96.5 g of mercury(ll) oxide is placed in a sealed 3.50 vessel at 800 k. What is the partial pressure of oxygen gas at equalibrium
Calculate the speed of water in the nozzle : Water flows at the rate of 3.02 kg/s through a hose with a diameter of 3.08 cm. What is the speed of water in this hose, what is the speed of water in the nozzle
Decision on the financial statements : Write a letter to Uncle Carlos explaining why it would be unwise to base an investment decision on the financial statements that he has provided to you. Be sure to explain why these financial statements are neither relevant nor representationally ..
What recent advance has been found in the grants research : Did Darwin ever see evolution in action? Why or why not? How many people around the world are documenting evolution now? What recent advance has been found in the grant's research?
What is the resistance of the heater when it is turned on : In her bathroom, Mindy has an overhead heater that consists of a coiled wire made of nichrome that gets hot when turned on. The wire has a length of 2.2 m when it is uncoiled. What is the resistance of the heater when it is turned on
Define what is the equalibrium concentration of hi : In an experiment, 0.30 mol H2 and 0.30 mol I2 are mixed into a 1.00-l container, and the reaction forms HI. If Kc =49. for this reaction, what is the equalibrium concentration of HI. I2(g) + H2(g) 2HI(g)
Find the speed of the first glider : Two air-track gliders of equal mass are initially moving in the same direction along a straight line. What is the speed of the first glider (rearmost) after the collision

Reviews

Write a Review

Accounting Basics Questions & Answers

  Manufacturing accounting system-direct labor costs

Canoe Company's manufacturing accounting system uses direct labor costs to apply overhead to goods in process and finished goods inventories. Canoe Company's manufacturing costs for the year were:

  Determine basic earrings per share of common stock

A) calucate the basic earrings per share of common stock for the year ended Jan 31,2011

  Prepare journal entries to record accrued payroll including

the following monthly data are taken from ramirez company at july 31 sales salaries 620000 office salaries 124000

  The company is at a critical juncture from issues

The company is at a critical juncture from issues such as high attrition of the accounting staff, current economic conditions, and increased competition.

  Which of the following accounts would not appear on a

which of the following accounts would not appear on a balance sheet?equipmentinterest payableinterest revenueretained

  What is self-employment tax explain its components

What is self-employment tax? What are its components? How does this compare with FICA payments and payroll taxes that an employee pays on earned income?

  Tax deductible program

Which of the following is issued by the IRS to indicate the tax consequences of a particular transaction in which several taxpayers may engage such as whether or not a stop smoking program is tax deductible?

  Appropriate adjusting journal entry basics

Bee-In-The-Bonnet Company purchased office supplies costing $6,000 and debited Office Supplies for the full amount. At the end of the accounting period, a physical count of office supplies revealed $2,400 still on hand. The appropriate adjusting j..

  Expenditures which should be capitalized

During 2004, Yvo Corp. installed a production assembly line to manufacture furniture. In 2005, Yvo purchased a new machine and rearranged the assembly line to install this machine. The rearrangement did not increase the estimated useful life of th..

  How can management practices speed collection of receivables

How can management practices speed the collection of receivables? Which management practices tend to slow the collection of receivables?

  Fireout inc manufactures steel cylinders and nozzles for

fireout inc. manufactures steel cylinders and nozzles for two models of fire extinguishers 1 a home fire extinguisher

  What is the cost of the land

Land is purchased for $456,000. Additional costs include a $30,300 fee to a broker, a survey fee of $3,400, $2,750 to construct a fence, and a legal fee of $12,500. What is the cost of the land?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd