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Principles of Accounting, Volume 1: Financial Accounting

Thought Provokers

Principles of Accounting, Volume 1: Financial AccountingThought Provokers

Thought Provokers

TP 1.

LO 14.1Your bakery is incorporated and is looking for investors. Write a one paragraph story of why investors should buy stock in your company. What makes your bakery special?

TP 2.

LO 14.1Do some research: why did Facebook choose to reincorporate in Delaware?

TP 3.

LO 14.1Do some research: why is Comcast incorporated in Pennsylvania?

TP 4.

LO 14.2On November 7, 2013, Twitter released its initial public offering (IPO) priced at $26 per share. When the day ended, it was priced at $44.90, reportedly making about 1600 people into millionaires in a single day.20 At the time it was considered a successful IPO. Four years later, Twitter is trading at around $18 per share. Why do you think that occurred? Is Twitter profitable? How can you find out? If it is not profitable, why do investors continue to support it?

TP 5.

LO 14.2Research online to find a company that bought back shares of its own stock (treasury stock) within the last 6–12 months. Why did it repurchase the shares? What happened to the company’s stock price immediately after the repurchase and in the months since then? Is there any reason to think the repurchase impacted the price?

TP 6.

LO 14.3As a bakery business continues to grow, cash flow has become more of a concern. The board of directors would like to maintain the market share price, so a discussion ensues about issuing a stock dividend versus a cash dividend. As a newly appointed board member you listen to the conversation and need to cast your vote. Which do you vote for: stock dividend or cash dividend?

TP 7.

LO 14.3Use the internet to find a company that declared a stock split within the last 1–2 years. Why did it declare the split? What happened to the company’s stock price immediately after the split and in the months since then? Is there any reason to think the split impacted the price?

TP 8.

LO 14.4Use the internet to find a publicly held company’s annual report. Locate the section reporting Stockholder’s Equity. Assume that you work for a consulting firm that has recently taken on this firm as a client, and it is your job to brief your boss on the financial health of the company. Write a short memo noting what insights you gather by looking at the Stockholder’s Equity section of the financial reports.

TP 9.

LO 14.4Use the internet to find a publicly held company’s annual report. Locate the section that comments on the Stockholder’s Equity section of the financial reports. What additional insights are you able to learn by looking further into the commentary? Is there anything that surprised you or that you think is missing and could help you if you were deciding whether to invest $100,000 of your savings in this company’s stock?

Footnotes

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