BSMAN 3009: Accounting for Managers

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BSMAN 3009 Accounting for Managers
BSMAN 3009 Accounting for Managers

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BSMAN 3009 Accounting for Managers
Assessment 1
Executive Summary
Financial crisis can be effectively predicted well in advance when an organization
undertakes regular and continuous analysis and review of its financial statement. The essential
management planning and decision making are facilitated with the help of financial statements
that enhance business performance. The current assignment includes two different assessments.
The Assessment 1 provides a detail explanation regarding the financial crisis in the Lehman
Brothers Company while the Assessment 2 focuses over the calculation of different types of
ratios for the BCE Company along with the suitable interpretation of the ratios.

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BSMAN 3009 Accounting for Managers
Table of Contents
Assessment 1............................................................................................................................................... 2
Executive Summary..................................................................................................................................... 2
Essay on financial crisis in Lehman Brothers...............................................................................................5
Introduction............................................................................................................................................. 5
Background of the company including the formation of the company...................................................6
Major primary success drivers, achievements and financial milestones achieved by the Lehman
Brothers................................................................................................................................................... 6
Changes in the structure of the Lehman Brothers over its useful life: Merger of Barclays and Lehman
Brothers................................................................................................................................................... 7
Causes of failure for the company........................................................................................................... 8
Social impacts of the failure of the company..........................................................................................9
Summary of the lessons learned from the financial crisis within the Lehman Brothers........................10
Conclusion............................................................................................................................................. 12
Assessment 2............................................................................................................................................. 13
Calculation of financial ratios for the BCE Company..................................................................................13
Introduction........................................................................................................................................... 13
Profitability ratios:................................................................................................................................. 13
Return on Assets:................................................................................................................................... 14
Return on Equity:.................................................................................................................................. 14
Profit margin ratio................................................................................................................................. 15
Asset Efficiency ratio................................................................................................................................ 16
Account receivable turnover ratio:.........................................................................................................16
Working capital ratio............................................................................................................................. 17
Liquidity ratios:......................................................................................................................................... 18
Quick ratio:............................................................................................................................................ 18
Time interest earned ratio:..................................................................................................................... 19
Capital structure ratios............................................................................................................................... 20
Debt to equity ratio:............................................................................................................................... 20
Equity to fixed assets ratio:.................................................................................................................... 20
Equity ratio:........................................................................................................................................... 21

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BSMAN 3009 Accounting for Managers
Market performance ratios......................................................................................................................... 22
Earnings per share................................................................................................................................. 22
Price earnings ratio................................................................................................................................ 23
Dividend payout ratio............................................................................................................................ 24
Conclusion................................................................................................................................................. 25
References................................................................................................................................................. 26

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BSMAN 3009 Accounting for Managers
Essay on the financial crisis in Lehman Brothers
Introduction
The financial crisis is identified as a combination of diverse circumstances and situations
that result in the reduction in the nominal value of the financial assets of an organization. The
various causes that can be held responsible for the occurrence of a financial crisis can be global
recessions, crashing of the stock market, and reduction in the monetary value of currency along
with sovereign defaults. The current essay is a critical evaluation of a public listed organization
that has recently faced severe financial crises or has become insolvent in the last ten to fifteen
years. For the purpose of this assignment, Lehman Brothers Company has been chosen which is
a publicly listed under the New Stork Stock Exchange.

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BSMAN 3009 Accounting for Managers
Background of the company including the formation of the company
The Lehman Brothers were identified as a global organization that was basically engaged
in financial services. The company became defunct in the year 2008 and before filling for the
bankruptcy, the company was considered to be the fourth largest investment organization in the
US after the competitors like Merrill Lynch, Goldman Sachs, and Morgan Stanley. The main
business of the company was investment banking, investment management, trading of private
equity and the sale of fixed income securities along with private banking (Azadinamin, 2012).
The organization was formed by Henry Lehman in the year 1850 and was soon joined by his
brothers Emanuel and Mayer and thereby received its name the Lehman Brothers.
The firm was considered as a symbol of power and prominence at both global and
domestic level. The American Express after owing the firm for ten years spun off Lehman
Brothers in 1994 through the creation of an initial public offering of around $ 3.3 billion
capitalizations. The offerings were further extended in the year 1999 with the repeal of Glass-
Steagall Act which resulted in the combination of investment banking and commercial activities
(Fernando, et. al., 2012). The expansion of the Lehman Brothers helped in developing newer
capabilities for dealing in the segment of proprietary banking, asset and securities management.
The uncontrolled expansion and the global financial crisis of the year 2008 laid the foundation
for the collapse of the Lehman Brothers.
Major primary success drivers, achievements and financial milestones
achieved by the Lehman Brothers
Considering the achievements and financial milestones that were achieved by the
Lehman Brothers, the core success factor was the mortgage orientation of the company. Lehman