Discussion 1
The following is an excerpt from a conversation between two employees of WXT Technologies, Nolan Sears and Stacy Mays. Nolan is the accounts payable clerk, and Stacy is the cashier.
Nolan: Stacy, could I get your opinion on something?
Stacy: Sure, Nolan.
Nolan: Do you know Rita, the fixed assets clerk?
Stacy: I know who she is, but I don't know her real well. Why?
Nolan: Well, I was talking to her at lunch last Monday about how she liked her job, etc. You know, the usual ... and she mentioned something about having to keep two sets of books ... one for taxes and one for the financial statements. That can't be good accounting, can it? What do you think?
Stacy: Two sets of books? It doesn't sound right.
Nolan: It doesn't seem right to me either. I was always taught that you had to use generally accepted accounting principles. How can there be two sets of books? What can be the difference between the two?
How would you respond to Nolan and Stacy if you were Rita?
Post to the module discussion board and then reply to at least two of your classmates posts.
Discussion 2
Xentec Inc. has decided to expand its operations to owning and operating golf courses. The following is an excerpt from a conversation between the chief executive officer, Peter Kilgallon, and the vice president of finance, Dan Baron:
Peter: Dan, have you given any thought to how we're going to manage the acquisition of Sweeping Bluff Golf Course?
Dan: Well, the two basic options, as I see it, are to issue either preferred stock or bonds. The equity market is a little depressed right now. The rumor is that the Federal Reserve Bank's going to increase the interest rates either this month or next.
Peter: Yes, I've heard the rumor. The problem is that we can't wait around to see what's going to happen. We'll have to move on this next week if we want any chance to complete the acquisition of Sweeping Bluff Golf Course.
Dan: Well, the bond market is strong right now. Maybe we should issue debt this time around.
Peter: That's what I would have guessed as well. Sweeping Bluff Golf Course's financial statements look pretty good, except for the volatility of its income and cash flows. But that's characteristic of the industry.
Discuss the advantages and disadvantages of issuing preferred stock versus bonds.
Discussion 3
Assume that the president of Freeman Industries Inc. made the following statement in the Annual Report to Shareholders:
"The founding family and majority shareholders of the company do not believe in using debt to finance future growth. The founding family learned from hard experience during Prohibition and the Great Depression that debt can cause loss of flexibility and eventual loss of corporate control. The company will not place itself at such risk. As such, all future growth will be financed either by stock sales to the public or by internally generated resources."
As a public shareholder of this company, how would you respond to this policy?
Post to the module discussion board and then reply to at least two of your classmates posts.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.