Chapter 12 Solutions 5th Edition - 112612 Final Essay

Chapter 13 Chapter 12 Communication and Governance Discussion Questions 1. Amazon’s inventory increased from $3.2 billion on December 31, 2010, to $5.0 billion one year later. In addition, sales for the fourth quarter of those years increased from $12.9 billion in 2010 to $17.4 billion in 2011. What is the implied annualized inventory turnover for Amazon for these years? What different interpretations about future performance could a financial analyst infer from this change? What information could Amazon’s management provide to investors to clarify the change in inventory turnover? What are the costs and benefits to Amazon from disclosing this information? What issues does this change raise for the auditor? What additional tests would†¦show more content†¦2. b. How useful is financial accounting data for evaluating how well these two companies are managing their critical success factors? What other types of information would be useful in your evaluation? What are the costs and benefits to these companies from disclosing this type of information to investors? For a high-tech firm, non-financial accounting types of useful information could include: †¢ Long-term strategy for the firm; †¢ Market share by product; †¢ Introduction schedules for new products and updates of existing ones; †¢ Profitability of individual products; †¢ Forecasts of future performance; †¢ Third-party evaluations of firm’s products; and †¢ Estimates of switching between firm’s products and those of its competitors. For a large, low-cost retailer, types of useful non-financial accounting information could include: †¢ Long-term strategy of the firm; †¢ Sales and profitability per store, per existing store, per new store, and by region of the country; †¢ Number and locations of new stores; †¢ Number and locations of closed stores; †¢ Management initiatives to reduce costs; †¢ Disclosure of volume discounts negotiated with major suppliers; †¢ Understanding of how firm manages its value chain through use of technology; and †¢ Sales and cost projections. In general, both types of firms will benefit from greater disclosure by