Differences Between a Normal Corporation and an S-Corporation - Business Finance Assignment Help

Assignment Task:

Question 1
a. Explain the concept of a modern agency problem. Discuss whether it can be eliminated. If so, how? If not, why not?  
Agency problem occur when there is a conflict of interest between the management of the company and it stock holders. No, we cant eliminate such problem but we can reduce it by comparing mangers and giving them incentive packagepulse the CEO in hierarchy must be different from there must be financial report approved from the CFO.

b. Highlight and discuss any TWO similarities between a partnership and a proprietorship.
They are both easy to start require less effort to open business and expand. They are both taxed once as personal income not like others forms where it requires double taxation.

c. Critically evaluate the purpose of the Sarbanes-Oxley Act that has forever changed the face of corporate accountability.
Discuss the significance and implications of this act for the affected form(s) of business organization.

Sarbanes Oxley is a law which has been implemented to audit the financial practices of public companies and protect all people, employees and shareholders from frauds. It is a must to provide and certify the company's financial reports by the CEO & CFO and any violations may be considered as criminal issue. this law has created more control over the company and minimized any type of financial crimes.

a. Explain the following statement: “While the balance sheet can be thought of as a snapshot of a firm’s financial position at a point in time, the income statement reports on operations over a period of time.”               (1 point)
Balance sheet is considered as a snapshot or a photo. You can record the balance sheet every day because the assets, liabilities and owner equity keep changing from time to time due to buying and selling assets. Income statement is like a video about the company's performance for a period of time. It shows what is the company’s status in a period of time regarding selling a product, revenues and expenses

b. Outline and discuss any TWO differences between a normal corporation and an S-corporation.
Corporation has many shareholders unlike Small corporation where their shareholders not more than 100. Corporation is taxed double from the net income and dividends whereas Small corporation is taxed in their personal income only.
 
Question 2    
• The Volvo Company is an established American multinational automaker that has its main headquarters in Detroit, USA. 
• It was founded by Henry Michigan and incorporated on June 16, 1919 and had ever since been selling automobiles and commercial vehicles under the Volvo brand to the world. 
• The UAE has been one of Volvo’s most loyal customers since the 1980’s.
• You work as a financial analyst and have recently been placed onto an assignment with the Volvo Company.
• According to the most recent financial statements, the Volvo Company has reported a net loss of $3,900. 
• The firm’s earnings before interest, tax, depreciation &amortization are positive and amount to $20,000. 
• The amount of debt outstanding that the company has borrowed from the HSBC bank at the 10% interest rateis $14,000. 
• The applicable corporate tax rate used by the Volvo Company is 35%.
• In answering the questions below, show all the formulas used and calculations, along with the final answer. 
net lost = (3,900) $    EBITDA= 20,000 $   I=1,400 $   tax = 35%

a. Calculate the amount of taxes that the Volvo Corporation owes to the taxation office.             
Explain what this means for the company.
(2,100) $ that mean it will be Tax credit, that the GOV will support the company next year

b. Determine the level of the company’s pre-tax profit.
(6000) $

c. Calculate the amount annual interest expense that the Volvo company owes to HSBC.
1,400 $

d. Estimate the level of the company’s operating profit.
(4,600) $

e. Calculate the level of the firm’s depreciation and amortization expense.
24,600 $ 

Question 3        
• You are the CFO of a company called Wonderland Enterprises. Unfortunately, the firm’s headquarters (where all the records are kept) have recently been destroyed by fire. So, your task is to recreate the cash flow statement for the year that has just ended. 
• The firm originally had $3,400 in the bank at the end of the prior year (i.e., beginning cash), and its net working capital accounts, except cash, remained constant during the year.  
• The company earned $9,100in net income during the year and but only paid $4,900 in dividends to its common shareholders.
• During the year, Wonderland Enterprises had sold $3,700worth of machinery and $7,500 worth of land, which are no longer needed in the firm’s operations.
• You have just been spoken to the firm’s accountants and learnt that the annual depreciation expense for the year is $1,200. 
• Finally, you have discovered that the firm has obtained a bank loan from the Emirates Islamic Bank for the amount of $2,400. 
• To answer the questions that follow, place your responses in the templates provided below.
beginning cash = 3,400 $NWC= 0   PPE= 11,200  $      D= 1,200 $    N/P= 2,400 $    net income= 9,100 $    dividends = (4,900) $

Question 4    
• You work as an analyst in the finance department for the Bravo Corporation. 
• The company has been listed on the Abu Dhabi Stock Exchange (ADX) since 27July 2010. 
• The business operates in the Basic Materials sector and is involved with the discovery, development and processing of raw materials to be used in the construction of residential and commercial buildings in the GCC region. 
• This week, you have received a request from the firm’s finance manager to assess its liquidity and cash position.  
• You have access to the following financial statement information for the company:

a. Calculate the number of the company’s days in receivables outstanding in Year 2020.                 
If the average industry number of days in receivables outstanding is 10, explain whether the company is doing better or worse than the industry. Why yes or why not? Explain your answer. 
What is your recommendation to the company’s management?
DRO= A/R / (sales / 365) = 320 / (7,700 / 365) = 15.16 Days 
the number of days is 15.16  more than the AVE in industry 10 days to get back cash 
we can give promotion to the customers to pay early and get discount . 

b. Calculate the number of the company’s days in inventory outstanding in Year 2020.                     
If the average industry number of days in inventory outstanding is 65, explain whether the company is doing better or worse than the industry. Why yes or why not? Explain your answer. 
What is your recommendation to the company’s management?
DIO= inventory /(COGS / 365 ) = 350/ ( 1,700 / 365 ) = (75.14) days, it mean we the company the inventory staying for long time before it get sold and fill it again .

c. Calculate the number of the company’s days in payables outstanding in Year 2020.         
DPO= A/P / (COGS / 365)= (96.61) days            
If the average industry number of days in payables outstanding is 80, explain whether the company is doing better or worse than the industry. Why yes or why not? Explain your answer. 
What is your recommendation to the company’s management?
The company taking long time to pay their suppliers compare with the Aver of the industry , that will lead the supplier will trust the company again and they have to mange to pay on time.

d. Determine whether the Bravo Corporation needs to borrow money to finance their business in Year 2020.
Support your answer with both an explanation and calculations.

CA = 320 + 120 = 440 
CL = 450 + 360 = 810
Quick ratio = CA / CL without inventory = 440 / 810 = 0.5 
we don’t have enough asset to cover CL because its less than 1 and we can’t rely on the inventory to be sell.

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