Ethical Violations Within Business Other Assignment Help

Read the

following

extract

from

The Financial Review

of May

6th, 2010

by

Vesna Poljak

.

Westpac sails

to $3 billion

super

profit

Bad debts down,home loans

up

GFCaftershocksa

concern

Westpac BankingCorp chiefexecutive Gail

Kelly

delivereda firsthalfcash profit

of $3

billion, up 30

percent,as bad debts

from

institutional borrowers shrank

dramatically

and earnings

from

wealthmanagement and NewZealand

improved.

However,she warned

that the

impact

of the global

financial

crisis would be felt

by

Australia

for

many

years.

Westpacused the

tail

end

of

the financialcrisis

to

snarea

2

percentage point

increase in

mortgagemarket share

over the

past 18/months,valued

at an

extra

$15billion in

loans

–

something

Mrs Kelly

estimated

would

havetaken

10

years

to

claw from her

rivals

in

ordinary

times.

The bank now writesmore than one

in four

mortgages,

with

a 27 per cent share

of the

market,and dominates home loans alongside Commonwealth Bank

of Australia.

Mrs Kelly

predicted credit growth

would

improve

for

the remainder

of this

year

and

next, led

by

a turnaround

in

business lending, which

will

swing

from

a contraction

of

3

per cent

to

growth

of 6

per cent

by 2011.

She sought

to

temper the optimism

f

anned

by

the strongresult,

which

puts the

bank

within

striking distance

of

a full-year

cash

profit of

$6

billion.

“W

e

are advocates

for

caution.

I’m

always concerned when people

talk of

the GFCas

being over,

implying

that we’reback

to

normal,” she

said.

“There’

s

no doubt we

will

be

living with

the effectsand the consequences

of

this

crisis

for

manyyears

to come.”

Statutorynet

profit

increased 32 per cent

to

$2.9

billion…….

…..Mrs

Kelly

dampened expectations

for

the bank’s outlook

by

saying that

delivering

cash earnings growth

in

the second

half

wouldbe

challenging.

“Giventhe

f

act

that we had such a

strong first-half

result on such a materialreduction

in

the impairmentcharge,

I

thought

it

was prudent

to

call out that

to

continue growing

of

f

that

kind of

base

will

be quitechallenging,” she said, stressing

this did not

constitute

earnings

guidance……

….Asked

of

the

risk

posed

to

banks

by a tax to mirror that

already seen

with

r

e

gar

d

to

the new proposed

tax on

miningcompanies

r

ecommended

in

the government’s

re-

sponse

to

the Henry

r

e

vie

w

,

Mr

s

Kelly

said the financial services industrywas

already

the highest taxpaying

secto

r

.

“

W

e

are alreadythe sector that actuallypays

the

highest

effective tax

rate

Question 2

The following is an extract from the article entitled “St George tops $500m”, reported on May

3,

2006 in the Herald Sun (p. 33).

“ST GEORGE Bank’s national expansion plans continue to bear fruit, yesterday helping it crack

the half billion dollar interim profit mark.

A sluggish Sydney economy was overcome by stronger growth from its expansion regions of

Victoria, Queensland and Western Australia.

The Dragon produced a profit of $502 million, up nearly 12%. The number slightly

disappointed analysts, which had tipped a marginally higher figure.

In a day when the overall market was off 0.6%, St George finished down 59 cents, or 1.9%, at

$30.37. The board declared a dividend of 74 cents a share, up from the previous interim dividend

of 67 cents a share. It will be paid on July 4 after going ex-dividend on June 14.

St George chief executive Gail Kelly told reporters she’s done a dance with Happy – the St

George dragon mascot – before coming in to face them in the afternoon. “It is a quality result

. .

.

(and) it is an exceptionally clean result,” she said.

Mrs Kelly backed comments by her counterpart at ANZ, chief executive John McFarlane, who last

week said his bank had experienced a particularly strong finish to the reporting period to March

30. February, March and even April had shown particularly strong growth in volumes and

profitability,

but Mrs Kelly stopped short of delivering a profit upgrade.

Sydney, rather than NSW, stayed sluggish, with flatter housing prices weighing on growth. But

chief financial officer Steve McKerihan said he believed there were early signs of a recovery in

Sydney’s economic fortunes, which should accelerate in 2007.

The bank’s key indicators showed strong to glowing performances. Earnings per share are “on

track to

deliver” 10% growth for 2006 and 2007 under the new Australian International Financial

Reporting Standards system. Return on equity was 23.8%, while the

expense-to-income

ratio fell

to 44.1%, putting St George ahead of all larger rivals. Mrs Kelly said home loan growth was at

13% and deposits were up

13.5%, putting both above peer system

growth.”

St George’s share price decreased, although it reported a record profit and increase in

dividend. This seems inconsistent with an efficient securities market.

Required:

Give three reasons that might have

contributed

to this share market reaction. Provide three

headings in your answer: “Reason 1”, “Reason 2” and “Reason 3” and carefully highlight

whether each

reason is consistent with stock market efficiency.

1. Activity based costing is considered to be a traditional costing method.True False
2. 2.Under ABC, indirect manufacturing costs are predominantly assigned on the basis of direct machine hours.True False
3. 3.Which of the following would not be included in a product’s cost for inventory valuation for the financial statements?Factory Supplies Quality Control Interest Expense
4. 4.Which would be the least favorable basis for allocating manufacturing overhead for a factory with automated equipment and a significant variation of services by its indirect labor?ABC Direct Labor Hours Machine Hours
5. 5.Which would be the most favorable basis for allocating manufacturing overhead for a factory with automated equipment and a significant variation of services by its indirect labor?ABC Direct Labor Hours Machine Hours
6. 6.Activity-based costing will provide greater accuracy when allocating costs than a manufacturer’s machine hours when its products and customers are __________ diverse.Less More

1. 7.When using machine hours for allocating manufacturing overhead (instead of activity-based costing), a low-volume item requiring a significant amount of special handling will be assigned too __________ manufacturing overhead.Little Much
2. 8.The cost to set up production equipment is best allocated directly to products via machine hours.True False
3. 9.Setup cost is an example of a batch-level cost.True False
4. 10.Manufacturing costs are often organized in the general ledger by function and department. When applying activity-based costing, these manufacturing costs will be sorted by activities.True False
5. 11.In activity-based costing, the manufacturing overhead cost per unit will depend partially on the number of units in a batch.True False
6. 12.In ABC the assumption is that __________ use resources or cause costs.Activities Products
7. 13.If products are uniform and customers are similar in their demands, activity-based costing may not offer a significant advantage over machine hours when assigning overhead.True False
8. 14.A product with a high gross profit could be an unprofitable product.True False
9. 15.Activity-based costing can be used to allocate SG&A expenses in order to assist management with pricing and other marketing decisions.True False