Question 1. Suppose you are a new board member for an emerging not-for-profit organization hoping to attract new donors. Contributors want to know how efficiently not-for-profit organizations use their donations. Unfortunately, your fellow board members see little value in financial reporting and analysis and believe the good works of the organization speak for themselves. Prepare a fact sheet convincing the board of the need for effective financial reporting with arguments about why it helps the organization's fundraising goals.
Question 2. Obtain a recent annual report for a company of your choice. (Hints: The Wall Street Journal has a free annual reports service, and virtually all major companies post their annual reports on their websites.) Look over the firm's financial statements and see whether they match the information in this chapter. Read the auditor's opinion (usually at the end of the report) and evaluate what you think are the most important conclusions of the auditors.
Question 3. Obtain a recent annual report for a company of your choice (see the hints just above in exercise 4) and try your hand at computing financial ratios. Compute the current ratio, debt to owners' equity ratio, and basic earnings per share ratio. Then request an annual report from one of the firm's major competitors and compute the same ratios for that company. What did you find?
Question 4. Go online and check the capitalization required to open a franchise of your choice, like Subway or McDonald's. Does the franchisor offer financial assistance to prospective franchisees? Evaluate the cost of the franchise versus its business potential using the risk/return trade-off.
Question 5. If you are considering investing in the bond market, how could information provided by Standard & poor's, Moody's Investors Service, and Fitch Ratings help you?
Question 6. Explain the role of the World Bank and the International Monetary Fund in providing loans to countries. Is it important for U.S. citizens to lend money to people in other countries through such organizations? Why or why not?