Summarize the case in half a page (Font Size 12/ Paragraph Spacing 1.5/ Font Type Times New Roman) and answer the following questions
Using the Excel spreadsheet provided, and the recommended consequential disclosures as a basis for your analysis, what recommendations would you give Phillips on each of the items listed below? In each case, justify your recommendation and estimate how much the decision will change the true value of the company?
(You must identify the main changes in the balance sheet. income statement and cash flow between each decision, what account is moving when you change the assumption). For example, if you choose capital lease, the lease liability will be categorized separately from debin in the liability section of the balance sheet). Also, attach the excel file. Provide an estimation of the 6 proposed changes. Discuss ethical issues and justify each proposed change and release of footnotes disclosure.
- The lease or buy decision, including whether to structure as an operating lease
- The regular price of soup, whether or not to run an end-of-year promotion and target end-of year inventory level.
- Whether or not to ask Dunwood to guarantee the account receivable.
- Whether or not to reduce the end-of -year provision for bad debts due to recent strong collection experience.
- Whether or not to sell the different investments and, if the recommendation is not ot sell the mortgage-backed securities, how to value them on the end-of-year balance sheet assuming market conditions do not change.
- Given your recommendation, how much do you think a potential buyer will offer based upon a valuation earnings multiple of ten times sustainable earnings, plus the value of cash and marketable investments on the balance sheet.
- In the case, Philips questioned how far he should push the envelope. Why should he be concerned if all the actions you recommended are legal? Do you think the associated disclosures satisfy the SEC requirements that a company provides a narrative explanation of its financial statements that enable investors to see the company through the eyes of management?