Prof. Mark Lang Ba 270

PROF. MARK LANG BA270, FALL 2003

WHAT YOU SHOULD KNOW FOR THE FINAL

The final will be a case exam based on a manufacturing company, much like the second half of the midterm. The old finals are generally representative with a couple of exceptions. First, as I mentioned in class, we did not cover the residual income valuation approach this year, but did in prior years—it will not be on the exam. Second, last year’s exam did not cover intercompany investments, but 2001 and (especially) 2000 did. Coverage of a topic on the exam will be approximately proportional to the time spent in class (with the exception of tax, which will have at most one very easy brief question).

I. Valuation and Evaluation Be able to compute and interpret EVA and the first few terms of a valuation equation using the discounted dividend and free cash flows approaches. If you understood the material covered in class, the Coke pro forma and the handout “Takeaways on Valuation and Evaluation” you should be in good shape. The valuation sections of all previous exams are generally representative (excluding the residual income approach).

II. Accounts Receivable and Asset Impairments Understand the allowance method of accounting for bad debts. Be able to record the journal entries from a set of transactions or from financial statement disclosures. Be able to solve accounts receivable and allowance t-accounts given information from the balance sheet and income statement. Understand the link to inventory obsolescence, asset impairments and warrantees. If you understood the example worked in class, problem 6.14, the Warnaco case and the inventory obsolescence piece of Callaway golf, you should be in good shape. The receivables sections of prior exams are very representative.

III. Manufacturing and Absorption Costing Understand the basics of manufacturing accounting relative to merchandising and be able to trace costs through the various inventory accounts to cost of goods sold like we did in class. If you understood the Callaway Golf case and problem 7.33, you are in good shape. Manufacturing from previous years’ exams is very representative.

IV. Taxes Having showed up for class is enough (really!).

V. Intercompany investments Understand the basic distinction in accounting based on percentage ownership. Be able to follow the stuff we did in class on marketable securities, equity method investments and consolidation. If you could work problem 11.22, you should be in good shape. Coverage of these topics in class was fairly cursory, as will be the coverage on the exam.

VI. Equity Exam topics will be limited to material covered in class, probably employee stock options and treasury stock but will not include topics we don’t get to. Again, coverage on the exam will be brief.