Fundamentals of Financial Management - Essay Example

Thomson One Thomson One Q The Disney Company offers the public with s that entail floating rates. These referto certain debts that enable investors to accrue an individual rate interest rate for each quarter. The above notes allow a company to offer bonds of diverse benchmarks distinctive from the US affiliated treasuries. Consequently, they help buyers eliminate the worry for the skyrocketing interest rates. In addition, the company offers the public with property referred as power rangers and the provision of lifetime services of entertainment together with A&E networks of television. It is worthwhile noting that, Disney’s success in its marketability is mainly through incorporation of certain key fundamental franchise approaches. Firstly, the company has ensured conformity with the US universal accounting principles. In addition, it fully maintained effective control over its internal financial reporting basing on the ICIF criteria issued by the COSO. Critically, the company conducts an internal appraisal of the efficiency of its financial reporting. Moreover, the company has engaged itself in the guard of its intellectual properties. It has done so through the registration of its business name, product design and the company’s trade mark. Consequently, the company has kept unnecessary competition at a distance through the enjoyment of the above intellectual rights. Secondly, Disney ensures that the management exercises its responsibility of expressing estimations on the said audits in accordance with the PCAOB in the US. Consequently, the management could plan and conduct the audits; hence, it obtained a rational assurance of the lack of material misstatement in their financial statements. In addition, it could ascertain the efficiency its internal control of financial reporting in totality. Significantly, their financial statements entail a thorough examination of the evidence attached to the amounts and the financial statement’s disclosures. Accordingly, they are able to evaluate the employed accounting principles and the made momentous estimates. Moreover, they evaluate the presentation of the financial statement in totality. Finally, the company’s audit of control over internal financial reporting relies on realizing an understanding of control over internal financial reporting. In addition, they review the risk of the existence of a material risk. They also investigate and evaluate the organization and effectiveness of the operations of internal control according to the assed risk. It is significant concluding that, the company’s audit entailed performance of other numerous procedures as necessitated by circumstances in reciprocation, the company believe that its audits provide logical basis for its estimation. Other market approaches entail the company’s intensive advertisement that relies heavily on the modern and post modern technology. Significantly, it has assigned advertisement agencies in order to ensure that the products circulate over diverse distances. Q. 2. Disney sold bonds amounting amount to $3 billion offered in four parts. The bonds entailed coupons between the range of 0.45 percent on a debt of three years and 3.7 percent for securities of 30 years. It is significant noting that such an amount was an historical increase ever recorded. Researchers such Brigham have associated the historical increase with factors such as inadequate supply Coupled with momentous demand. He has emphasized that one has to consider the two market forces while dealing with the shorter term. However, for a period exceeding three to twelve months one has to consider the economic factor. Another significant factor for the increase is the bank deposits. The deposits at the banks are more than the loans by $1.91 trillion; hence making a critical change from 2008, when the loans were more than deposits by approximately $200 billion. Consequently, numerous people have utilized a myriad of the surplus money in buying government treasuries and agency debts, thus advancing holdings to $1.86 trillion. In addition, bank treasury holdings increased by approximately 15 percent to about $531.7 billion (Brigham, 2010). Lastly, the tremendous increase traces its roots in the gross borrowing and mortgage rates. According to statistics from the government, the Gross borrowing from treasury sales has increased from the year 2008. Public debt has increased to approximately $10.1 trillion from about $5.75 trillion in 2009. Q.3 the percentage of the company’s sales price after commissions refers to the net proceeds. This is the money received from transactions after the calculation of commissions, expenses and discounts. In order to determine the net proceeds for Disney Company one has to multiply the price of the security by the resulting figure after Lessing the commission of brokerage and any incurred taxes or other fees from the sold shares. Calculation; Revenues=$38063 Charges=$31337 Other income= $270 Interest expense= $ 409 investees income= $ 440 Income taxes= $ 2314 ($38063+$31337+$270+$ 440+$ 2314)= $34461 Price of security = $2.03 Net proceeds= $2.03*$3602= $7312.06 Notably, the amount has increased immensely from 2008 to 2010. Significantly, some of the factors for the above trend include; the numerous covenants on the debt agreements. These covenants limit the company’s investments and financing services by requiring the company to accomplish certain financial performance covenants annually (Washington DC, 2010). Q 5. The company plans to reinvest the above proceeds for the anticipated future. This is because distributing the earnings to the states of the US would amount to additional taxes. However, it is evident that the company did not use the earnings for the purposes described in the prospectus hence the need for investors to hold it accountable. This is because the company’s status was plan funded and it had commitments of uncalled capital. Consequently, the company has left huge funds unutilized yet the investors are expecting a return on their investments. The company is vulnerable to price volatility of its commodities, and it designates numerous forward contracts of commodity as hedges of cash flow for the speculated commodity purchases. In addition, the company engages in numerous contracts of risk management that do not embrace the hedges hence do not qualify for accounting of hedges (Gibson, 2010). Lastly, the investors can hold the company accountable due to its contingent features. Typically, its copied gadgets of finance may require it to place in case of liability that exceeds limits specified by contract which vary with the company’s rating of credit. References Brighan, E & Houston, J. (2009). Fundamentals of financial management. Florence, KY: cengage learning publishers. Brighan, E & Daves, P. (2009). Intermediate financial management (book only). Florence, KY: Cengage learning publishers. Gibson, C. (2010). Financial reporting and analysis: using financial accounting information. Florence, KY: Cengage learning publishers. Washington, DC. (2010).”United States Securities and Exchange Commission” Annual report Pursuant To Section 13 or 15d of the Securities Exchange Act of 1934. Retreaved on 14th February 2013 from < thewaltdisneycompany.com/sites/default/files/.../fy10-form-10k.pdf.> Read More