{"id":259,"date":"2017-06-12T20:59:16","date_gmt":"2017-06-12T20:59:16","guid":{"rendered":"http:\/\/bocchinfuso.net\/?p=259"},"modified":"2017-07-25T15:18:28","modified_gmt":"2017-07-25T15:18:28","slug":"fit-mgt-5000-week-6","status":"publish","type":"post","link":"https:\/\/bocchinfuso.net\/index.php\/2017\/06\/12\/fit-mgt-5000-week-6\/","title":{"rendered":"FIT \u2013 MGT 5000 \u2013 Week 6"},"content":{"rendered":"<p><strong>Discussion Post<\/strong><\/p>\n<p><span style=\"color: #999999;\">Consider three different businesses:<\/span><\/p>\n<p><span style=\"color: #999999;\">1. A bank<\/span><\/p>\n<p><span style=\"color: #999999;\">2. A magazine publisher<\/span><\/p>\n<p><span style=\"color: #999999;\">3. A department store<\/span><\/p>\n<p><span style=\"color: #999999;\">For each business, list all of its liabilities &#8211; both current and long-term. Then compare the three lists to identify the liabilities that the three business have in common. Also, identify the liabilities that are unique to each type of business.<\/span><\/p>\n<div><\/div>\n<p>Short-term liabilities or current liabilities do not differ greatly between industries when viewed from a balance sheet perspective, at least not at first glance. \u00a0 Short-term liabilities are obligations due within twelve months and may include items such as short-term loans from banks including lines of credit, accounts payable balances, dividends and interest payable, bond maturity proceeds payable, consumer deposits, and reserves for taxes. \u00a0Long-term liabilities are obligations due outside of the twelve month window or the companies operating cycle should it happen to be longer than twelve months, these liabilities might include items such as debentures, loans, deferred tax liabilities and pension obligations.<\/p>\n<p>&nbsp;<\/p>\n<p>Below we can clearly see both similarities and differences between short-term (current) and long-term liabilities by sector.<\/p>\n<p>&nbsp;<\/p>\n<ul>\n<li>All three balance sheets represent both current (short-term) and long-term liabilities.<\/li>\n<li>Macy&#8217;s and Time, Inc. list &#8220;Accounts payable and accrued liabilities&#8221; as their largest current (short-term) liability while Wells Fargo (a bank) shows deposits and borrowing (aka loans) as its largest short-term (current) liability.<\/li>\n<li>On the Macy&#8217;s balance sheet we see &#8220;Merchandise accounts payable&#8221; as a current (short-term) liability which represents Macy&#8217;s cost of inventory (i.e. &#8211; liability to vendors).<\/li>\n<li>On the Time, Inc. balance sheet we see &#8220;Deferred revenue&#8221; which likely represents pre-paid magazine subscriptions where Time, Inc. has collected money from the customer but has yet to ship magazines to the customer. Time, Inc. would recognize this revenue over the next N months as they ship magazines to customers.<\/li>\n<li>Both Macy&#8217;s and Time, Inc. show deferred tax liability which is triggered when the business&#8217;s taxable income differ from the net income on the financial statements. This is typically triggered by the differences between financial accounting and tax accounting; deferred tax liabilities indicate future cash outflows.<\/li>\n<li>All three balance sheets represent long-term debt which could be long-term loans, capital leases, pension liabilities, post-retirement healthcare liabilities, deferred compensation, deferred revenues, deferred income taxes, derivative liabilities, etc&#8230;<\/li>\n<li>The Wells Fargo consolidated balance sheet shows a single line item for long-term debt but it is possible that this line item includes deferred revenue and\/or income taxes.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<div><b>Retail: \u00a0Macy&#8217;s (millions)<\/b><\/div>\n<div>&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.. Jan 28, 2017 &#8230;&#8230;&#8230;&#8230; Jan 30, 2016<\/div>\n<div>Current Liabilities:<\/div>\n<div>\u00a0 Short-term debt&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.. $ 309 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;. $ 642<\/div>\n<div>\u00a0 Merchandise accounts payable &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.. 1,423 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;. 1,526<\/div>\n<div>\u00a0 Accounts payable and accrued liabilities&#8230;&#8230;&#8230;&#8230; 3,563 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;. 3,333<\/div>\n<div>\u00a0 Income taxes&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;\u00a0 352 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;..\u00a0 \u00a0227<\/div>\n<div>\u00a0 \u00a0 Total Current Liabilities&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230; 5,647 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;. 5,728<\/div>\n<div>Long-Term Debt&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;. 6,562 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;. 6,995<\/div>\n<div>Deferred Income Taxes&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;. 1,443 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;. 1,477<\/div>\n<div>Other Liabilities&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.. 1,877 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;. 2,123<\/div>\n<div><\/div>\n<div><\/div>\n<p>&nbsp;<\/p>\n<div><b>Banking: \u00a0Wells Fargo (millions)<\/b><\/div>\n<div>&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;. Dec 31, 2016 &#8230;&#8230;&#8230;&#8230;. Dec 31, 2015<\/div>\n<div>Liabilities<\/div>\n<div>Noninterest-bearing deposits&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.. $ 375,967 &#8230;&#8230;&#8230;&#8230;&#8230;.. $ 351,579<\/div>\n<div>Interest-bearing deposits&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.\u00a0 \u00a0930,112 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.\u00a0 \u00a0871,733<\/div>\n<div>\u00a0 Total deposits&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.. 1,306,079 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230; 1,223,312<\/div>\n<div>Short-term borrowings&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;\u00a0 \u00a0 96,781 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;..\u00a0 \u00a0 97,528<\/div>\n<div>Derivative liabilities&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;\u00a0 \u00a0 14,492 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;..\u00a0 \u00a0 13,920<\/div>\n<div>Accrued expenses and other liabilities (1)&#8230;&#8230;.\u00a0 \u00a0 57,189 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;..\u00a0 \u00a0 59,445<\/div>\n<div>Long-term debt&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;..\u00a0 \u00a0255,077 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.\u00a0 \u00a0199,536<\/div>\n<div>\u00a0 Total liabilities (4)&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.. 1,729,618 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230; 1,593,741<\/div>\n<div><\/div>\n<div><\/div>\n<p>&nbsp;<\/p>\n<div><b>Publishing: \u00a0Time, Inc. (millions)<\/b><\/div>\n<div>&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230; Dec 31, 2016 &#8230;&#8230;&#8230; Dec 31, 2015<\/div>\n<div>LIABILITIES AND STOCKHOLDERS&#8217; EQUITY<\/div>\n<div>Current liabilities<\/div>\n<div>Accounts payable and accrued liabilities &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;. $ 598 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.. $ 683<\/div>\n<div>Deferred revenue&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;..\u00a0 \u00a0403 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.\u00a0 \u00a0436<\/div>\n<div>Current portion of long-term debt&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;\u00a0 \u00a0 \u00a07 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;\u00a0 \u00a0 \u00a07<\/div>\n<div>\u00a0 Total current liabilities&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230; 1,008 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230; 1,126<\/div>\n<div>Long-term debt&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.. 1,233 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230; 1,286<\/div>\n<div>Deferred tax liabilities&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.\u00a0 \u00a0210 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.\u00a0 \u00a0242<\/div>\n<div>Deferred revenue&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;\u00a0 \u00a0 86 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;..\u00a0 \u00a0 89<\/div>\n<div>Other noncurrent liabilities&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.\u00a0 \u00a0328 &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.\u00a0 \u00a0332<\/div>\n<div>Commitments and contingencies (Note 15)<\/div>\n<div><\/div>\n<p><b>References<\/b><\/p>\n<div>Macy&#8217;s Annual Reports\/Fact Book. (n.d.). Retrieved June 08, 2017, from <a href=\"http:\/\/investors.macysinc.com\/phoenix.zhtml?c=84477&amp;p=irol-reportsannual\">http:\/\/investors.macysinc.com\/phoenix.zhtml?c=84477&amp;p=irol-reportsannual<\/a><\/div>\n<div>Time, Inc. SEC Filings. (n.d.). Retrieved June 08, 2017, from <a href=\"https:\/\/invest.timeinc.com\/invest\/financials\/sec-filings\/\">https:\/\/invest.timeinc.com\/invest\/financials\/sec-filings\/<\/a><\/div>\n<div>Wells Fargo Annual Reports and Proxy Statements. (n.d.). Retrieved June 08, 2017, from <a href=\"https:\/\/www.wellsfargo.com\/about\/investor-relations\/annual-reports\/\">https:\/\/www.wellsfargo.com\/about\/investor-relations\/annual-reports\/<\/a><\/div>\n<div><\/div>\n<p><strong>Follow-up question<\/strong><\/p>\n<div><\/div>\n<div>Thank you for your post. Many times current maturities of long-term debt are re-classed from long-term to current. Why is this reclassification important?<\/div>\n<div><\/div>\n<p><strong>Response to follow-up question<\/strong><\/p>\n<div><\/div>\n<div>Current Portion of Long-Term Debt (aka current maturity or current installment) is the amount of the principal that is payable within one year. \u00a0Debt which is re-classed from long-term to current may significantly impact a companies balance sheet. \u00a0Creditors and investor use current maturities to evaluate liquidity on a cash basis, the ratio of a company&#8217;s total cash and cash equivalents to its current liabilities = the company&#8217;s cash ratio. \u00a0This conservative metric which excludes other assets and accounts receivable is used to determine if a company has the ability to repay its short-term debt obligations. \u00a0Creditors may use this conservative metric when determining credit worthiness and investors may use this metric when making a determination regarding an investment in a company.<\/div>\n<div><\/div>\n<p><strong>Assignments<\/strong><\/p>\n<div><\/div>\n<div>[google-drive-embed url=&#8221;https:\/\/drive.google.com\/file\/d\/0B1fr2Qqx-moWMThoN1hhRmRTUVE\/preview?usp=drivesdk&#8221; title=&#8221;Bocchinfuso_FIT-MGT5000_Week6-Chapter9_Problems.xlsx&#8221; icon=&#8221;https:\/\/drive-thirdparty.googleusercontent.com\/16\/type\/application\/vnd.openxmlformats-officedocument.spreadsheetml.sheet&#8221; width=&#8221;100%&#8221; height=&#8221;400&#8243; style=&#8221;embed&#8221;]<\/div>\n<div><\/div>\n<div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Discussion Post Consider three different businesses: 1. A bank 2. A magazine publisher 3. A department store For each business, list all of its liabilities &#8211; both current and long-term. Then compare the three lists to identify the liabilities that the three business have in common. Also, identify the liabilities that are unique to each [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":37,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,7,2],"tags":[],"_links":{"self":[{"href":"https:\/\/bocchinfuso.net\/index.php\/wp-json\/wp\/v2\/posts\/259"}],"collection":[{"href":"https:\/\/bocchinfuso.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bocchinfuso.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bocchinfuso.net\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bocchinfuso.net\/index.php\/wp-json\/wp\/v2\/comments?post=259"}],"version-history":[{"count":11,"href":"https:\/\/bocchinfuso.net\/index.php\/wp-json\/wp\/v2\/posts\/259\/revisions"}],"predecessor-version":[{"id":340,"href":"https:\/\/bocchinfuso.net\/index.php\/wp-json\/wp\/v2\/posts\/259\/revisions\/340"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bocchinfuso.net\/index.php\/wp-json\/wp\/v2\/media\/37"}],"wp:attachment":[{"href":"https:\/\/bocchinfuso.net\/index.php\/wp-json\/wp\/v2\/media?parent=259"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bocchinfuso.net\/index.php\/wp-json\/wp\/v2\/categories?post=259"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bocchinfuso.net\/index.php\/wp-json\/wp\/v2\/tags?post=259"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}