M5.1 Discussion

Business Liabilities

For this discussion, please address the following questions:

• What are employment taxes?
• What are Social Security taxes and how do these taxes work?
• Does it make a difference if you are self-employed, or employed by a business?
• If you are a lender, do you think you may rely on any payroll data to assess business solvency?
• How about the rest of the liabilities a business may have recorded? Does it make a difference if it is short-term or long-term liability? Would you please, provide us with links to some real financial statements of a business of your and provide your analysis of the business’s liabilities. Don’t forget to read the “Notes to Financial Statements” where the liabilities may be discussed.

M5.2 Discussion

Name three (3) different companies with which you are familiar, preferably in different industries. By different industries, I am talking about a manufacturer, retailer, a service business like a hair salon or a college, or your local vet. These are just examples. Try to mix up the types of businesses.

Now, what types of long-lived assets you would expect to see on the balance sheets of each of these companies?

M5.3 Discussion

Liabilities of a company shares a lot about a company’s reliance on debt in their day to day financial activities. Identify ways that we can tell if a company is in financial trouble. Where do we look for comparisons?

Please identify a public company (one who sells stock on one of the exchanges) and share how healthy or unhealthy the company is compared to two of their competitors when relying on borrowed money. What is the focus of their borrowings? Are they current liabilities or long-term liabilities to purchase capital assets, for example. Please remember to cite your source of information.

Exercises should be done in Excel.