SWEDEN MOBILE
Sweden Mobile Ltd (SM or Company) is a small Swedish public company with telecommunication operations throughout Djurgården, Stockholm. The company sells cellphone handsets and offers a range of data and voice calling plans.
The Company is currently undergoing restructuring and is in the midst of union negotiations. The Chief Financial Officer (CFO) is committed to reducing costs and bringing the company back to profitability in the future. In a recent news release the CFO was quoted saying "this year, we expect to incur a net loss of approximately$690,000 coupled with a significant increase in debt levels...the union needs to understand that the Company cannot operate at this level and salary concessions will need to be made...the Company needs to become profitable and solvent!"
You have been recently hired by the CFO as the new Vice-President of Finance, responsible for overseeing all accounting matters, including finalization of the draft financial statements.
On your first day, you receive a request from Timothy Marley to review selected financial information (outlined in Appendix A) and provide your preliminary comments. As the largest shareholder of CAM and a prominent member of several internal committees, Mr. Marley is concerned about the drastic drop in profitability and that the CFO may have influenced some of the accounting decisions.
Your professional opinion is requested on this matter.
It is currently February 17, 2017.
Required:
Prepare a professional memo addressed to Timothy Marley. Among other things, ensure your memo:
• is detailed, specific, and well supported;
• includes restated (i.e., adjusted) financial statements (if necessary); and
• includes any ratio analysis you feel is necessary to support your overall analysis.