1: Why is it important that we differentiate the sources of a company's capital structure between debt and equity issuances like common stock?
2: How does the use of ratios and percentages help us to significantly enhance our understanding of financial statements - more so than just looking at the raw numbers? In particular think of comparing companies of dissimilar size.
3: Describe in your own words how a job order cost system facilitates understanding how much it cost to produce a given unit of product - for example, a machine or a house. In what way does it help management to know how much to charge, what kind of profit will be earned at a given price, how profit could be improved by specific production decisions, etc.
4: A company has the opportunity to sell 1,000 extra units of product to a new customer outside the US. The price at which this sale can be made is $95 per unit. The normal price is $125. The standard cost is $75 of variable costs plus $25 of fixed costs - a total cost of $100. Should the company accept this sale? Why? How much more (or less) bottom line profit will the firm have if it makes the sale?
5: How does the use of a flexible budget, instead of a fixed budget, help the process of "actual vs. budget" variance analysis much more valuable in situations where volume is significantly different from what was projected?
6: How can use of tools like "ROI" and "Residual Income" help evaluate whether a business unit's performance is excellent vs. average vs. subpar and how do they help us compare the performance of different business units of different sizes and with different levels of capital investment?