intern

Questions:

• What are the ways a company can manipulate cash flows?
• Assume that you have a significant amount of inventory on hand. What control measures could you put in place to ensure employees aren’t running off with your inventory?
“There are three ways to account for oil exploration costs: The FIRST is to write-off all exploration costs as incurred, the SECOND is to capitalize successful explorations and write off the rest, and the THIRD is to capitalize all exploration costs. Which one results in the lowest Net Income, the highest Book Value, and the highest Cash Flow?”
• Your company’s weighted-average cost of capital is 12 percent. You believe the company should make a particular investment, but its internal rate of return is only 10 percent. What logical arguments would you use to convince your boss to make the investment despite its low return? Is it possible that making investments with returns below capital costs will create value? If so, how?
• If you want to assess the health of a company and you could choose between looking at 3 years of income statements or 3 years of balance sheets, which would you choose and why?