Arbotech Case Essay Example

Arbotech Case Essay Example Arbotech Case Essay Arbotech Case Essay This understates inventories. 3. Manipulation of physical counts of inventory: This overstates income tax expense and net income, inventories, retained earnings and income tax payable. This understates cost of goods sold. It was a ploy to overstate inventory to reduce cost of goods sold and inflate net income. 4. Failure to write down inventories adequately for product obsolescence: This overstates income tax expense and net income, inventories, retained earnings and income tax payable. This understates cost of goods sold. 5. Inclusion of certain costs in property, plant and equipment that the firm should have expense in the period incurred: This overstates fixed assets, income tax payable, retained earnings, operating expenses. This understates income tax expense. 6. Inclusion in advances to other technology companies of amounts that represented prepaid license fees: This overstates income net income, assets and retained earnings. This understates expenses on the income sheet. . Failure to provide adequately for unconvertible amounts related to advances to other technology companies: This overstates assets, retained earnings, income tax expense and net income. 8. Failure to write down or write off investments in other technology companies: This overstates assets, retained earnings, income tax expense and net income. D. Using information in the restated financial statements in ex 6. 31-6. 33, the financial ratios in ex 6. 4 and the information provided in this case, as a commercial banker, would you be willing to offer Arboretum a line of credit as of 7/31 year 7? If so provide the conditions that would induce you to offer such a credit. The conditions to offer such a credit depends on whether the company has recognized and dealt with its accounting regularities and can Arboretum continue to maintain product growth with its customer base. The negative cash flow is not uncommon with rapidly growing companies that must invest n accounts receivables and inventories. We know that all of the companies assets and capital are already used as collaterals. In order to provide credit, the company must allow the bank to audit the financial records of the company on a consistent basis to maintain ethical standards of reporting.