Focus on Financials |, Inc (Learning Objectives 1, 2: Account for short-term…

Focus on Financials |, Inc

(Learning Objectives 1, 2: Account for short-term investments; apply GAAP for proper revenue recognition) Refer to, Inc.’s consolidated financial statements in Appendix A at the end of this book.

1. Examine the account “marketable securities” in the consolidated balance sheet, as well as

Notes 1 and 2.

a. What does this account consist of?

b. Why do you think the company has made these investments?

c. What percentage change has occurred in short-term investments from December 31, 2011, to December 31, 2012? What management business strategy might this reveal?

d. Using the financial statement footnotes for reference, explain how, Inc., accounts for marketable securities. What footnote contains this information?

e. Has the company profited from holding its portfolio of marketable securities during the year ended December 31, 2012? How do you know?

2. Using the “Description of Business” section of Note 1 as a reference, describe how, Inc., recognizes revenue.

3. The fourth account listed on’s Consolidated Balance Sheet is called “accounts receivable, net and other.” What does the “net” mean?

4. Refer to Note 1. What kinds of accounts receivable are included in, Inc.’s receivables?

5. How much is the allowance for doubtful accounts in 2012 and 2011?

6. Calculate the current ratio, quick (acid-test) ratio, and net working capital for, Inc. for 2012 and 2011. Evaluate, Inc.’s liquidity trend over the two years. What other information might be helpful in evaluating these statistics?