Make sure to use this as a study guide and do not submit as it is.

FIN 370 WEEK 2 TEAM ASSIGNMENT - ETHICS AND COMPLIANCE PAPER

Ethics and Compliance Paper
Select an organization from the following list:
PepsiCo. Wal-Mart
Lowes Starbucks
Barnes and Noble Amazon.com
Hewlett Packard Dell
Disney Microsoft
Be sure to obtain faculty approval of your selection prior to beginning this assignment.
Obtain a copy of your selected organizations annual reports and SEC filings for the past two years.
Prepare a 1,400-1,750-word paper in which you analyze the data in your selected organizations annual
reports and SEC filings. In your analysis, be sure to address the following:
o Assess the role of ethics and compliance in your selected organizations financial environment.
o Describe the procedures that your selected organization has put in place to ensure ethical behavior.
o Identify the processes the organization uses to comply with SEC regulations.
o Evaluate your selected organizations financial performance over the past two years using financial ratios.
Calculate the following ratios for each year:

Current Ratio
Debt Ratio
ROE (Return on Equity)
Days Receivable Outstanding

Be sure to define how each ratio is calculated, analyze the trend for each ratio, and discuss what it tells you
about the organizations financial health.

PEPSI
In todays market we see a much larger need as consumers to see direct accountability by larger
corporations.

Pepsi Co is no exception to this. The stockholders for these corporations have realized

the need to approve of the financial reports that are generated in order to determine whether or not
this is a good investment for their time and money. By examining the financial reports that Pepsi Co
makes available as well as analyzing the SEC filings, the stockholder is able to determine the
companies standing as well as their accountability.
The Pepsi Company (PepsiCo) has one of the largest portfolios in the world.
responsible for many transactions that occur in the industry.

This company is

As of any other group that is publicly

trading in the market, PepsiCo is accountable for the many financial dealings that happen within the
company and of the public.
be accessed publicly.

That accountability is vigorously shown in their annual report which can

In compliance with state laws and governing committees, the company has

shown adequate reliability in their statements and reports.

People who have a stake in the company

have

being

the

right

to

know

how

the

money

is

used

and

where

it

goes.

Nothing should be hidden as it is unethical to do so. In terms of ethics, the annual report should only
be of true facts and none should be embellished. This has been the goal of the company as stated in
their policies.

Also, their policies regarding their duties in managing finances demands integrity in

monitoring the different financial aspects of the company. Internal control is one of the important
tools used in keeping track or making sure that everything is within the guidelines and regulations of
the company.

Those internal controls are also tested out to see if they are according to law.

The company is evaluated annually to check the inconsistencies and correct them when given the
chance.

Evaluations are important as to keep the company on a straight path.

The company also

endorses the fact that if their policies or programs is in conflict with state law or federal law, that they
will respect those of the government as superior to theirs ("PepsiCo", 2011).
found

the

management

of

finances

by

PepsiCo

to

be

Outside sources has

effective

and

compliant.

PepsiCo as an organization has multiple procedures in place to ensure ethical behavior in every
department of the company. Ethical behavior practices can be applied in daily functions and routines
within the company. [PepsiCo has adopted strict corporate standards that govern our operations and
ensure accountability for our actions. Such policies cover areas of Corporate Governance, Human
Sustainability, Environmental Sustainability and Talent Sustainability (2011) PepsiCo]. Internal audits
are conducted by routine and surprise visits to all departments to ensure no wrong doings in
accountability

of

currency

or

data

recording

have

taken

place.

Business to business as a global and international company PepsiCo maintains a record of dealing with
other companies and corporations that comply with both international and domestic laws also.
Accountability of PepsiCos employees is maintained by releasing any employees who conduct any

actions UN ethical. Company meetings are held to give lessons by members of human resource to
ensure that each employee is aware of which practices are considered ethical by regulation and the
company regularly also.
In 1976 a code of conduct was created and is often updated and communicated to all PepsiCo
associates annually.

[The Code is available in 42 languages and includes provisions relating to

ethical business dealings, bribery, business gifts and entertainment, confidentiality of information,
insider trading, protection of company assets, discrimination, harassment, equal opportunity,
accounting and record-keeping, health and safety, environment, political activities and whistleblowing (2011) PepsiCo]. Annual reports are reviewed for accuracy and held to standards of the
United States Securities and Exchange Commission and are available for review by anyone online.
These reports are also communicated on a regular base to all shareholders and employees.
The United States financial markets are also used for individuals to borrow money to finance personal
needs. Financial markets are where barrowers, investors, and financial institutions come together. The
financial markets are used for companies and individuals to borrow money and investors to invest
their money.
One way the financial markets works is first there are investors that put money into financial
institutions (commercial banks, finance companies, insurance companies, investment banks, and
investment companies). Then the financial institutions borrow out the money to companies or
individuals that need the money to finance the things they want (some examples are automobiles,
company equipment, property, and company bills). The investor earns a small interest on the amount
of money they invested and the borrowers are charged an interest or borrowing the money. The
interest that the banks charge to the borrowers is higher than the interest that the investors earn for
their

investment.

This

is

where

the

financial

institutions

make

their

money.

There is also another type of financial market. This is where larger corporations sell securities to
investors. These markets are called primary and secondary markets. The primary market is where the
corporation sells the security for the first time to an investor. The secondary market is where
securities are sold from one investor to another investor. The security can either be in the form of a
debt or equity security. A debt security is a security that must be repaid where an equity security is a
security that represents ownership of the corporation. The equity securities are divided into common
stock and preferred stock. Common stock is a security that represents ownership of a corporation.
This gives the security holder voting rights, and entitles the holder to a share of the companys profits
in the form of dividends and any capital appreciation in the value of the security. Preferred stock is
like common stock, but the preferred stock holders receive dividends before the common stock
holders.
This leads to the stock market. A stock market is where the public is allowed to sell or trade stock of
companies. There are two classifications of stock markets these would be the organized security
exchange and the over-the-counter market. The organized security exchanges are tangible entities
and financial instruments are traded. The over-the-counter markets are where all other security
markets except the organized exchanges take place. The United States largest public market is the
New York Stock Exchange (NYSE) is considered a hybrid market because it occupies a physical space

which is an organized exchange, but it also does have automated electronic trading which makes it an
over-the-counter market. The other United States stock market would be the National Association of
Securities Dealers Automated Quotations (NASDAQ) is an over-the-counter market. Both of these
stock

markets

are

made

for

the

public

to

buy,

sell,

and

trade

securities.

PepsiCo works endlessly to ensure the companies compliances with SEC regulations. One of the ways
PepsiCo shows its willingness to comply with SEC regulations is by making the 10-K report accessible
to its shareholders. This report is used to carefully assess the financial performance of the company
over a period of time. With the use of corporation governance, the company sets and maintains high
standards in all aspect of the company operations. These standards set by the company holds the
company accountable for their actions and builds and strong relationship with the shareholders.
PepsiCo is one of the nation leader in providing its shareholders above average return on their
investments. The Company's approach to superior financial performance is owed to addressing three
issues, human, environmental and talent sustainability (PepsiCo, 2008). The use of an audit
committee is another way PepsiCo ensures the compliance with SEC regulation. The committee job is
to provide insight to PepsiCo incorporated board of directors on the corporations financial statements,
the internal controls that govern the financial reports (PepsiCo, 2008). The committee is also
responsible for making sure the processes for compliance with SEC regulations are taken seriously and
carried out.
The SEC regulations the Audit committee focus on are the regulations regarding the Corporations
financial reporting and disclosure process, disclosure requirements, and internal control systems
(PepsiCo, 2008). I all thing communication is the key to a good relationship and it is no different
when it comes to PepsiCo efforts to comply with the SEC regulations. The need for constant
communication between both PepsiCo and the SEC is greater now than ever before. The SEC has
constant rule changes and it is the job of PepsiCo to know and follow each new rule.
Financial ratios are used to standardize PepsiCos financial information from the income statement and
balance sheet. The ratios provide a look at the firms performance and health in relation to past
figures and offer information to create a comparison against other businesses in the financial market.
The current ratio is used to assess PepsiCos overall liquidity by comparing current assets to current
liabilities. In 2009, PepsiCos current ratio was $1.44 and in 2010, its ratio was $1.11. Comparing
PepsiCos current ratios show that the company was less liquid in 2010 than in 2009. The debt ratio
measures the percentage of the firms assets that were financed using current plus long-term
liabilities

(Titman,

Keown,

&

Martin,

p.85,

2011).

PepsiCos debt ratio in 2009 was 56% and 68% in 2010, which shows that the company used more
debt in 2010 than in 2009. Stockholders are interested in PepsiCos return on equity (ROE), the
amount returned on their investment. PepsiCos ROE in 2009 was 35.2% and the ROE dropped to 30%
in 2010. The ratio for days receivable in 2009 was 39 days versus 40 days in 2010, showing that the
amount of time PepsiCo took to collect receivables stayed relatively consistent for the two consecutive
years. Analysis of the trends for each ratio shows that PepsiCos financial health is reflected in the
ratios which show a noticeable declined in all areas between 2009 and 2010. The company is less
liquid, incurred more debt, produced a lower return on investment to shareholders, and took slightly
longer

to

collect

receivables.

After reviewing Pepsi Co as a whole, it is apparent that the company is completely compliant with SEC
regulations. The company is very straightforward with their financial standing and publicly offers
access to their reports. Pepsi is an extremely large corporation yet they maintain their integrity by
placing a high priority on the easy access to their information and being an open book for their
stockholders and anyone else who might be interested in the financial standing of the company.
Pepsi-Cola Financial Ratios
2010 2009
Current Ratio $1.11 $1.44
Debt Ratio $0.68 $0.56
Return on Equity 30% 35.2%
Days Receivable 40 days 39 days
References
PepsiCo Inc. 2011 Retrieved February 18, 2012 from
http://www.pepsico.com/Purpose/Overview/Policies.html
Titman, S., Keown, A. J., & Martin, J. D. (2011). Financial management: Principles and applications
(11th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.

Wal-Mart
Assess the role of ethics and compliance in your organizations (we chose Wal-Mart) financial
environment.
Ethics plays a big role in the fields of Finance and Accounting; Any actions
that violate ethical standards can cause a loss of trust, which can, in turn, have a negative
and long-lasting effect on the firm.
(Financial Management, Principles and Applications. Keown, J., Martin, J., Petty, J., & Scott, D. P. 312)
Having said that, we should point out that the viability of any firm mainly depends on its credibility with
its customers, employees, suppliers, as well as its competitors. This is in addition to the fact that
investors must believe that the firms published financial reports are a fair representation of the
firms financial condition. Without this trust outside investors would refuse to invest in the shares of
publicly traded firms and financial markets would collapse

(Ibid. P. 20)
Upon examining Wal-marts Statement of Ethics, one can easily see why it is consistently listed among
Americas most admired companies by fortune magazine. Starting with the message from the Chief
Executive Officer, we read The values that set us apart from others -- respect for the individual, service
to our customers and striving for excellence -- rest on the foundation of personal integrity and
responsibility. Associates in all areas and levels of our business are responsible for understanding and
complying with our
Statement of Ethics.
(http://ethics.walmartstores.com/WalMartEthics.pdf. P.3)

In his letter, Mike Duke (Wal-marts CEO) encourages employees to speak up whenever they have any
concerns about any inappropriate behavior they observe, he also encourages employees to use available
resources such as the Open Door Process and the Global Ethics Helpline to report such behaviors. He
concludes his letter by stating that A strong commitment to ethics and integrity isnt just the right way
to do business. Its how we earn the trust and respect that is critical to our success, and our ability to
help more people live better. Our customers trust us to be their advocate. Our suppliers trust us to be
an equitable partner. And as Walmart associates, we trust each other to uphold the highest standards of
conduct every day
(Ibid. P.3)
On page five of the same statement, Wal-mart lists its guiding principles; by following such guideline
Wal-mart encourages its employees to uphold and apply ethical behavior which proves that in Walmarts culture, ethics plays an integral part in the firms success.

Microsoft

Microsoft Corporation takes ethics and ethical behavior in the workplace very serious
and as such has many policies and procedures in place to ensure the company's ethics
remain on the highest level. Microsoft's office of Legal and Corporate Affairs is the
backbone of ensuring a compliant and ethical workplace. As such, the office of LCA
issues the company's code of conduct, known as the standards of business conduct,
which is a document that lays out specifically the guidelines that all employees at
Microsoft Corporation agree to abide by as employees. This governing document also
includes the company's core values which touch upon the following:

Integrity and honesty

Passion for customers, partners, and technology
Open and respectful with others and dedicated to making them better
Willingness to take on big challenges and see them through
Self-critical, questioning, and committed to personal excellence and selfimprovement
Accountable for commitments, results, and quality to customers,
shareholders, partners, and employees

In addition, according to Microsoft, on top of the standards of business conduct, the

"LCA's leaders reinforce our commitment to integrity as a fundamental part of every
job within the Department ? a commitment that goes well beyond compliance with
legal obligations" (Corporate Compliance, 2010, p.1). Thus, Microsoft creates an
environment where ethics are clearly expected, defined and enforced to all employees
on all levels. This creates an corporate identity where ethics are a part of the
company's culture and as thus become part of the fabric of Microsoft.

Yet still, when it comes to complying with SEC regulations, Microsoft has also
continued to ensure that procedures are in place as well to emphasize the company's
commitments to issues relating to corporate governance. This has been evidenced
through Microsoft's use of a lead independent director, as well as maintaining seven
independent Board Committee member's to ensure independent decision makers at the
corporate level. These individuals act as outside eyes and ears to make sure that SEC
compliance is evident in the actions, statements and public information that Microsoft
Corporation engages in.

Furthermore, the use of Deloitte & Touche LLP as the company's independent auditor
as well creates a clear foundation for an outside source to inspect and document that
Microsoft is a forthright corporation interested in corporate compliance and
regulation. All of these factors have combined to create an environment where
complying wit SEC regulations is at the forefront of Microsoft Corporation on all
levels, both on an internal and external basis.
References:
The Microsoft Corporation (2010). Corporate Compliance (Company website).
Retrieved on September 17, 2010. Fromhttp://www.microsoft.com

The Microsoft Corporation (2010). Corporate Governance (Company website).

Retrieved on September 17, 2010. Fromhttp://www.microsoft.com

Microsoft (Different)
In todays fast pace society corporate America seems to be above scrutiny. The time of
the watch dog presence seems to have become lack and almost non existent. Giant corporations
offer extremely attractive salaries and bonus packages to their employees.
Employees in exchange do a good job but loyalty to the company is the most important
thing.
One mega giant is Microsoft as a company they boast of integrity, honesty, openness, and
personal excellence. The company holds itself accountable to their customers and all of their
employees by providing the best product at the most economical price possible. Microsoft is
focused on employee training as well as employee promotion from within. These guidelines are
the reason that Microsoft feels the employees will do noting to jeopardize the reputation of the
company or any of its subsidiaries.
Ethics and Compliance
Microsoft values the employees and the values that were created in a foundation for the business.
Microsoft Company manages their business in compliance with laws and regulatory
requirements. They obey laws and regulations that are governed by global management. When it
comes to their financial integrity they are honest and accurately report any business information
as well as recording it. Microsoft complies with local, federal laws and state, regarding the
completion and accuracy of what is recorded. They have a requirement that financial transactions
be deleted with managements say so and recorded in a ethical manner to maintain accountability
for Microsofts assets. Our financial information reflects only actual transactions and is in
compliance with Microsoft and other applicable accounting practices. The CEO, CFO, Corporate
Controller and other employees of the finance organization are also required to comply with the
Microsoft Finance Code of Professional Conduct. (Microsoft, 2010).
Microsoft Procedures to Ensure Ethical Behavior
Microsoft Finance provides top-notch financial leadership to increase long-term share-holder
value and is a leader in using processes including innovative, tools, and systems. Microsoft
Finance team members value, results, service, integrity, and making others successful through
their labors. Microsofts Finance Code of Conduct mission promotes professional conduct in

worldwide financial management Microsofts Corporate Executive Officer, Chief Financial

Officer, controller, and other employees of the organization and finance department have and
extremely imperative task in corporate control and capable of ensuring the interest of the
stakeholders investments are protected ("Microsoft Investor Relations", 2012). Microsofts
finance professional code of conduct encompasses values that adhere to and support. The
professional philosophy of business ethics embodies rules for the responsibilities of individuals
and peers in addition to the stakeholders, the general community, and Microsoft employees.
The Corporate Executive Officer, Chief Financial Officer, and finance department employees
must follow Microsoft business ethical policies and standards and other codes. Noncompliance
of the Microsoft Finance Code of Professional conduct may result in immediate disciplinary
action up to and including termination ("Microsoft Investor Relations", 2012). According
to "Microsoft Investor Relations" (2012), Employees are advised to act with Honesty and
integrity, and avoid any conflict of interest in their personal and professional relationships. All
employees will provide stakeholders with information to be precise, complete, objective, fair,
relevant, timely, and comprehensible, including information in confidential files to the U.S.
Security and Exchange commission and other public bodies. All employees are advised to meet
the terms the rules and regulations of federal, state, local governments, and other private, and
public agencies.
All employees are advised to act in good faith, responsibility, competence, and truthfully to
material facts or acting insubordinate in judgment(1-3).
According to "Microsoft Investor Relations" (2012), All employees are advised to respect
information and confidentiality in the course of work except if asked to disclose information in a
legal situation. Employees should not use confidential information for personal gain. Employees
should maintain professional skill and share knowledge relevant to stakeholders needs.
All employees are advised to promote ethical behavior and be an example among peers, in the
community, and work environment. Employees will exercise responsible use, stewardship, and
control over all Microsoft assets and resources used as an employee
Microsofts Code of conduct also states advises against coercion, misleading, manipulating, or
influencing any official audit or obstruct any auditor engaged in performing internal or
independent audits of financial statements, accounting books, and records, or systems of internal
control. If there are any suspected violations employees should report concerns to a manager or
someone else holding management responsibilities, a human resources representative, a director
of compliance, or LCA contact ("Microsoft Investor Relations", 2012).
Financial Markets in the United States
Microsoft use in the financial arena includes individuals and organizations that trade money and

credit in financial markets. Three entities interact within the markets to move money from those
who have it to those who need it to operate including individuals, businesses, and governments.
Investors (savers) lend money to borrowers through financial institutions (intermediaries),
including commercial banks, finance companies, insurance companies, investment banks, and
investment companies. We call these institutionsfinancial intermediaries because these
institutions stand between those who have money to invest and those who need money (Titman,
Keown, & Martin, 2011, p. 20). Additional financial markets are the securities markets, which
include primary markets that enable corporations to sell interest in their organizations (equity
securities such as common or preferred stock) to the public to raise initial operating capital.
Secondary markets enable individuals to buy and sell existing public company stocks in the stock
markets.
The United States classifies stock markets as over-the-counter (OTC) and organized exchanges.
OTC exchanges are virtual and floorless like the National Association of Securities Dealers
Automated Quotations (NASDAQ) formed in 1971. Organized exchanges are like the New
York Stock Exchange (NYSE) formed on Wall Street in Manhattan, New York, in 1792.
However, today the NYSE also has the qualities of an OTC market.
Organizations can also raise money by borrowing money from investors through selling debt
securities in the debt securities market. If a company sells debt for a term of one year or less, it
is sold in what is known as the money market. However, if debt is sold with a maturity of one
to 10 years (a note) or over 10 years (a bond), it is sold in the long-term market known as the
capital market. (Titman, Keown, & Martin, 2011, pp. 26-29).
Compliance with SEC Regulations
This indiscretion prompted Microsoft to change their policies they now have a
transparent policy whereby anyone whether company affiliated or not can ask for the financial
records of the company at any time and they are surrendered upon demand. Microsoft also post
their information on the internet quarterly for all to see. .
Organizations Financial Performance
Microsofts financial performance over the last two years did show fluctuations.
,
Microsoft has improved its financial performance in 2011. The ratios show that the company
had more assets per dollar of debt in 2011 than it did in 2010, though it financed more of its
current and short-term liabilities with those assets than in 2010. The company owned $2.60 in

assets per $1 in debt in 2011, up from $2.13 in assets per $1 in debt in 2010. The company did
not do as well with collecting debts owed it in 2011 versus in 2010. The average time it takes to
collect on an unpaid invoice in 2011 was 78.2 days, compared with only 76 days per invoice in
2010. However, despite having more assets per dollar of liability in 2011, the return to each
stockholder did not change from 2010. The return on equity for both years was 40.6%. A
stockholder would not have noticed a difference in his or her personal income from the company,
even if the company was able to increase its assets from one year to the next.
Microsoft is a company that has long been at the forefront of enterprise and innovation including
standardizing practices. Microsoft as with all giant corporations has not been without its share of
problems. Investigations, allegations, and finally problem solving, and solutions. Microsoft
stands ready to meet the challenges of its customers, employees, and partners.
References
Retrieved from
http://Microsoft:www.microsoft.com/investor/AnnualReports/default.aspx
Retrieved from
http://Forbes.http://finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp?tkr=MSF
Retrieved from
http://www.microsoft.com/investor/CorporateGovernance/BoardOfDirectors/Contacts/MSFinanc
eCode.aspx
Retrieved from
http://www.microsoft.com/About/Legal/EN/US/Compliance/Buscond/Default.aspx
Retrieved from
http://www.sec.gov/news/press/2002-80.htm
Titman, S., Keown, A.J. & Martin, J.D. (2011). Financial management: Principles and
applications (11th ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.
----------------------In 2002 the U S Securities Exchange Commission brought a settled administrative enforcement
action against Microsoft Corp. ordering the company to cease and desist from committing
accounting violations and other violations of federal securities laws. Microsoft misstated its
income by material amounts in certain periodic filings with the Commission made between July
1, 1994, and June 30, 1998. The Commission also found that Microsoft did not properly
document the bases for these accounts and failed to maintain proper internal controls, as required
by the federal securities laws
.(news press)
2010

Current Ratio: 55676/26147 = 2.13 times

Debt Ratio: 39938/86113 = 46.4%

Return on Equity Ratio: 18760/46175 = 40.6%
Days Receivables Ratio: 13014/62484/365 = 76 days
2011
Current Ratio: 74918/28774 = 2.6 times
Debt Ratio: 51621/108704 = 47.5%
Return on Equity Ratio: 23150/57083 = 40.6%
Days Receivable: 14987/69943/365 = 78.2 days

Amazon
In order to be financially successful a business must adhere to several ethical rules in order to be in
compliance with the law and society. Amazon.com has become one of the number one online tools for
selling new and used products all over the world. Amozon.com contributes its success to their daily
customers but has also made sure to keep strict records and public files in order to prove their promise
to be ethically responsible to their sellers, buyers and the environment. This paper will cover the steps
that Amazon.com has implemented in order to be compliant with business law, and just as important,
how they have strived to keep the Amazon.com trade mark and positive and ethically correct symbol all
over the world.
Assess the role of ethics and compliance in your organizations financial environment.-

Amazon.com has 12 guidelines that define their Corporate Governance or their Code of Business
Conduct and Ethics. Within the company everyone, including the board of directors are held responsible
for upholding these guidelines at all time while working as agents of Amazon.com. The first guideline is
to be compliant with laws, rules and regulations. This requires that every person within Amazon.coms
company adhere to all laws and regulations. The second guideline restricts conflicts of interest. While
this guideline has been left open to the judgment of the specific employee, secondary guidelines,
concerning personal interaction with customers or accepting gifts of any nature, have also been

developed by their own legal department. This helps the employees understand when it is acceptable to
take such gifts or when it crosses the line and becomes a conflict of interest, impacting their job or
customer relations. The third guideline addresses the insider trading policy. Since employees may have
information that is not known to the public, Amazon.com restricts sales of stock amongst employees
until all information is made public in order to stay compliant with insider trading laws. The fourth
guideline addresses discrimination and harassment. Amazon.com has a strict zero tolerance policy
regarding any type of discrimination of harassment. The fifth guideline states that every employee is
responsible for the health and safety of the working environment and themselves. It requires that not
only the working areas be kept in compliance with safety guidelines, but that all employees also be free
from any kind of influence while on the job. The sixth guideline restrict employees from discussing or
setting and type of price fixing in order to stay compliant with anti-trust laws. The seventh guideline
prohibits any payments to government personal in order to stay compliant with the U.S Foreign Corrupt
Practices Act. It requires that any employee who is doing business with a government official be
reported to the legal department for review to make sure that the policy is adhered. The eighth
guideline requires that all record keeping reporting be of the upmost financial integrity and be within
accordance of the applicable law. They require that their accounting and legal groups take full
responsibility that everything that is reported is true, accurate and timely. The ninth guidelines has
implemented a process for anyone feeling the need to report violations as well as track those reports
and investigate, while keeping the safety of the reporting person a high priority. The legal department is
responsible for upholding the tenth guidelines and checking for periodic certification that states all
employees have read and agree to abide by the guidelines above. The eleventh guideline requires that
even the board of directors be held responsible in the upholding all of the guidelines set forth to uphold
the highest quality of ethical behavior. The last guideline states that the only waivers that may exist are
those that are allowed by law.

References
Libby, Libby, & Short.(2001) Financial Accounting. Manhattan, New York: The McGraw-Hill Companies,
Inc.

Pepsi (different )
Ethics and Compliance (Introduction)
Role of Ethics and Compliance (Josif)
In this study Team A will be determining the role that ethics and compliance plays in PepsiColas (PepsiCo) financial environment. By analyzing this information obtained through researching
Pepsi-Colas annual report we are able to understand the process that is used when filing the companys
regulations to the Securities Exchange Commission (SEC). Pepsi-Cola makes the 10-k report available to
its shareholders so that they will be able to see and evaluate the financial performance over the last two
years. These reports show the organizations current financial status through its current debts and
returns on equity it holds while also showing the trends between these ratios give an explanation of the
financial wealth of Pepsi-Cola.
Through company governances as an organization Pepsi-Cola believes and operates with strict
standards in operating the organization and holding it accountable in effort to deliver growth while
building a strong company financially for its shareholders. The companys approach to superior
financial performance is owed to addressing three issues, human, environment, and talent
sustainability (Pepsi-Co, 2008). The challenges that Pepsi faces if approached correctly will allow the
company to achieve both business and financial success while leaving a positive imprint on society.

The Audit Department for Pepsi-Cola maintains the financial statements and presents them to
the Board of Directors. There are also internal controls that help to govern the production of the
financial reports. The expertise of the department and its members give insight for the compliance
regulations for the companys financial reporting, the disclosure process and requirements, and
internally controlled systems. The tasks of this department are vital in maintaining effective
communication with the Board of Directors because of involvement of auditors and their agendas.
Subsequently, the audit department reports issues that concern internal quality control issues that are
at times investigated by government or professional authorities.

Ensuring Ethical Behavior (Barb)

At PepsiCo. they believe that Good for all is good for business.(PepsiCo., 2010) Performance
with purpose means delivering sustainable growth by investing in a healthier future for people and our
planet.(PepsiCo., 2010) PepsiCo. is working to reduce their carbon footprint and are also giving back to
the communities which they operate in by working with local farmers and providing jobs to local people.
The procedures that PepsiCo. has invested in to ensure a healthier environment are reducing water
usage, increasing recycling levels, and reducing packaging weights to reduce their carbon foot print. The
procedures that they use to ensure that their employees performance levels are up to par is to make
training and development a priority. PepsiCo. also provides their employees with options to stay healthy
because they believe that giving their employees options as such will expand their performance levels.
PepsiCo makes many options available to their consumers. PepsiCo. has three main product portfolios
available to their consumers. The first portfolio is the Fun-For-You portfolio which includes their fried
chips and full calorie beverages. The second portfolio is their Better-For-You portfolio which includes
baked chips and diet beverages. The third portfolio is their Good-For-You portfolio which includes whole

grains such as their Quaker Oatmeal, Izze, Gatorade, Tropicana Juice, Nut Harvest and Naked Juice. By
offering a variety of products they are able to capture a more diverse group of consumers. By working to
reduce their carbon footprint and providing a variety of health conscious options PepsiCo. plans on
expanding their portfolio to triple what it offers now with more healthy options by 2020.
Complying with SEC regulations (Eric)
The overall goal of the SEC is to ensure that investors have enough information to determine if
and when to invest in a company. Rather than to just trust a company and what it says it earns or is
worth, the SEC regulates the flow of information and makes companies run in compliance with the law.
As seen in the past, this is a necessity to have in any free market where independent investors are given
the opportunity to invest their own money into a company. Part of the SECs regulations states that
proper paperwork must be done by companies to keep potential investors up to date with the
companys latest financial information. As long as the company is publicly owned (that is, that it is
traded on the stock market and owned in stock form by multiple investors who may buy or sell their
shares), they must follow the SEC regulations. To keep with these regulations, Pepsi-co is almost
constantly submitting new documentation that becomes available to the public. One of the biggest red
flags that is seen on the stock market is insider trading. Insider trading is when an investor is given
special information that it not given to the public investor. This allows the insider to make a move with
their stocks just before the stock plummets. The SEC and their collection of documents and data
pertaining to any sort of spending and investing by companies helps to ensure that this does not
happen.
Pepsi-Cola Financial Performance Year 2008 and 2009 (Daniel)
In terms of the current ratio for year 2008 and 2009, Pepsi Cola has an average of $1.34 in
current assets for every $1.00 in current liabilities:

Year 2008 current assets

Year 2008 current liabilities

$10,806M

$8,787M

Current Ratio expressed as:

$10,806M / $8,787M = 1.23
Year 2009 current assets
Year 2009 current liabilities

$12,571M

$8,756

Current Ratio expressed as:

$12,571M / $8,756M = 1.44
This current ratio shows that Pepsi-Cola has more enough liquid assets relative to its short-term debt
obligations, an excellent indicator of the firms ability to meet any outstanding debt obligations.
For Pepsi-Colas debt ratio, we see that the companys debt as a percentage of total assets
averages 61.25%. The debt ratios for year 2008 and 2009 follow:
Year 2008 total debt

$23,888M

Year 2008 total assets -

$35,994M

Debt Ratio expressed as:

$23,888M / $35,994m =

66.3%

Year 2009 total debt

$22,406M

Year 2009 total assets -

$39,848M

Debt Ratio expressed as:

$22,406M / $39,848M =

$56.2%

This higher than average debt ratio may be due to the fact that Pepsi-Cola has more real assets such as
land and buildings and are able to finance more of their assets with debt (Keown, Martin, & Petty, 2005,
p. 81).
Ratio Trends and Financial Health (Christina)
Current ratios help determine the relative liquidity of a company by comparing cash and
other assets to the amount of debt coming due owned by year end. The Pepsi-Cola company appears to
be healthy despite its recent global financial status. Looking at 2008, PepsiCo finished very close to the
current ratio of 1, even though PepsiCo rebounded well in 2009. With all the factors of the current ratio
examined, PepsiCos ability to pay back short-term debts, using short-term assets is exceptionally
reputable (PepsiCo, 2009).
A companys debt ratio, total debt divided by total assets, indicates what portion of debt a company
has relative to its assets. This debt ratio measurement gives a view of the risks facing a companys debt
load. Pepsi-Colas debt ratio for the fiscal year ending in 2009 was over 56% and a greater value of
around 65% (PepsiCo, 2009). A debt ratio of greater than 1 indicates that a company has more debt
than assets, a debt ratio of less than 1 indicates that a company has more assets than debt
(Investopedia, 2011, p. 2).
It appears the 2008 fiscal figures of 65%, indicate PepsiCo financed its assets more by using debt than
equity, but rebounded in fiscal year 2009, posting a 56% figure. PepsiCos 2008 figures seem apropos
based on the financial quandary the United States economy faced. Team C observed PepsiCos 2008
debt ratio two ways. First, the companys financial health may have been the result of a weakening 2008

economy because of peripheral sources. Second, the company decided despite possessing available
assets to pay bills, the choice was made to focus more on equity than debt in 2009 (PepsiCo, 2009).
Return on equity (ROE), which is obtained by calculating net income divided by total equity, will
illustrate how well a company utilizes assets to generate income. In the fiscal year ending 2009, PepsiCo
showed a 34% ROE, and a 40% ROE for fiscal year ending 2008. A larger 2009 equity base of $16B
compared with a $12B equity base for 2008, may have contributed to the ROE disparity (PepsiCo, 2009).

Conclusion
References
Investopedia (2011) Debt ratio, Retrieved on June 5, 2011, from
http://www.investopedia.com/terms/d/debtratio.asp

Keown, A. J., Martin, J. D., Petty, J. W., & Scott, D. F. (2005). Financial
management: Principles and applications (10th ed.). Upper Saddle River, NJ:
Pearson/Prentice Hall.
PepsiCo. 2010 Annual Report. Retrieved from
http://www.pepsico.com/Download/PepsiCo_Annual_Report_2010_Full_Annual_Report.pdf
PepsiCo (2009) Annual reports, Retrieved on June 5, 2011, from
http://www.pepsico.com/Investors/Annual-Reports.html

Starbucks Ethics and Compliance

Research was conducted to seek out information pertaining to ethics and compliance
regulations at Starbucks Corporation. The analysis will provide oversight of ethics policies and
procedures, SEC compliance regulations and therefore illustrate the ethical health of Starbucks.
Furthermore, this paper provides an overview of financial health of Starbucks. The financial
health and viability of Starbucks is identified by calculating liquidity ratios (current ratio),
financial leverage management ratios (debt ratio), profitability ratios (return on investment) and
asset management ratios (receivable/day). The goal of the aforementioned analysis is to fully
understand the financial strength and path of Starbucks.

Ethics and Compliance within Starbucks Financial Environment

Starbucks ensures ethical behavior and identifies the rules and policies stipulated by the
Mission Statement, business ethics and compliance, corporate governance and the Board of
committee charters and policies. Starbucks mission statement states Our mission: to inspire
and nurture the human spirit one person, one cup and one neighborhood at a time
(Starbucks Corporation, 2010, Mission Statement). The business ethics and compliance program
is created to support Starbucks mission and ensure the integrity of Starbucks culture and
reputation worldwide. This program develops and distributes awareness materials, facilitates
compliance with legal requirements and aids in ethics training. Furthermore, this program also
enables investigation of potential conflicts of interest and is an excellent venue for addressing
partner concerns.

Corporate governance materials are posted on the companys website and available to the
public at http://www.starbucks.com/about-us/company-information/corporate-governance.
The materials in question include Starbucks Corporation Corporate Governance Principles and
Practices for the board of directors, Restated Articles of Incorporation of Starbucks Corporation,
Amended and Restated Bylaws of Starbucks Corporation, Code of Ethics for Company Executive
Officer and Finance Leaders (as of December 18, 2003), Starbucks Corporation Director
Nominations Policy, and Starbucks Corporation Procedure for Communicating Complaints and
Concerns. The Board of committee charters include: Starbucks Corporation Audit and
Compliance Committee Charter, Starbucks Corporation Compensation and Management
Development Committee Charter, Starbucks Corporation Nominating and Corporate
Governance Committee Charter, and Starbucks Corporation Audit and Compliance Committee
Policy for Pre-Approval of Independent Auditor Services (starbucks.com).

Starbucks strives for transparency and discipline of all the procedures presented in the
organization. All Starbucks reports and amendments are filed or furnished to the Securities
Exchange Commission (SEC).

These reports are available to the public at no charge on the companys Investor Relation
section of their website http://investor.starbucks.com or at www.sec.gov as soon as reasonably
practicable after these materials are filed with or furnished to the SEC. The information on the
Companys website is not part of this or any other report Starbucks files with, or furnishes to,
the SEC (Annual, 2009).

Starbucks Financial Performance for 2008-2009

An important aspect of any company is its liquidity or ability to pay its bills on time. One way
to determine the liquidity of a company is to calculate the current ratio. The current ratio
calculation is the result of current assets divided by current liabilities. Starbucks Corporation
annual reports of 2008 and 2009 are the source of information used to calculate the current
ratio.

Starbucks current assets for 2008 (in millions) = $1,748.0

Starbucks Corporation current liabilities for 2008 (in millions) = $2,189.7

Current ratio for 2008 = 0.7980.8

Starbucks Corporation current assets for 2009 (in millions) = $2,035.8

Starbucks Corporation current liabilities for 2009 (in millions) = $1,581.0

Current ratio for 2009 = 1.2871.29

By looking at the current ratios of 0.8 and 1.29 respectively, one can determine that
Starbucks Corporation has $0.8 and $1.29 in current assets for every $1 of current liabilities for
the 2008 and 2009, respectively. Therefore, to satisfy the claims of short-term creditors
exclusively from existing current assets, Starbucks Corporation must be able to convert each
dollar of current assets into at least $1.25 (1/0.8) and $0.77 (1/1.29) of cash respectively

(Moyer, McGuigan & Rao, 2007). According to Investor glossary, current ratio of more than
1.0 means that a company's short term assets exceed its short term liabilities (Investor
Glossary, 2010, Current Ratio). Considering the aforementioned data and results of the current
ratio for Starbucks Corporation, one can conclude that its liquidity has improved from 2008 to
2009 and that in 2009 Starbucks Corporation can meet its short-term obligations. However, the
financial strength of Starbucks Corporation cannot be determined solely by the current ratio.
Additional analysis in form of quick ratio, debt ratio, inventory turnover ratio, and WACC
analysis would provide more insight.

Debt ratio illustrates the percentage of creditors financing of the firms assets. Starbucks
Corporation debt ratio for years 2008 and 2009 is calculated by total debt divided by total
assets.

Starbucks Corporation total debt for 2008 (in millions) = $3,181.7

Starbucks Corporation total assets for 2008 (in millions) = $5,672.6

Debt ratio for 2008 = 0.56 =56%

Starbucks Corporation total debt for 2009 (in millions) = $2,531.1

Starbucks Corporation total assets for 2009 (in millions) = $5,576.8

Debt ratio for 2009 = 0.45 = 45%

A debt ratio of 56% indicates that 56% of company assets have been financed through debt
for year 2008. The situation has improved in 2009, indicating that only 45% has been financed
through debt. This may be the cause of the reduced debt from 2008-2009, possibly the direct
result of improved cost structure that removed $580 million in costs for fiscal 2009 (Starbucks
Corporation, 2009, Annual Report). The decrease in the debt ratio illustrates that the companys
cash flow has improved resulting in its ability to meet interest payments and its ability to issue
new debt obligations should it require additional funds (Moyer, McGuigan & Rao, 2007).

The return on equity (ROE) is important financial information for businesses and investors.
The amount of net income returned as a percentage of shareholders equity is a technique
utilized to analyze the risk of investing in a specific business. A corporations profitability can be
measured by examining the ROE that discloses the amount of capital produced by shareholder
investments. In other words, the ROE quantifies how well a business uses the capital bestowed
by its investors. This ratio can be used to determine the future growth rate so that investors can
assess the risk involved (Keown et al., 2005). ROE is expressed as a percentage and calculated
as:

Return on Equity = Net Income/Shareholder's Equity

Starbucks Corporation annual reports from 2008 and 2009 were used to determine the ROE
ratio as follows:

Starbucks Corporation total net income for 2008 (in millions) = $459.5

Starbucks Corporation total shareholders equity for 2008 (in millions) = $2,490.9

Return on Equity (ROE) ratio for 2008 = .18=18%

Starbuck Corporation total net income for 2009 (in millions) = $559.2

Starbucks Corporation total shareholders equity for 2009 (in millions) = $3,045.7

Return on Equity (ROE) ratio for 2009 = .18= 18%

A return on equity of 18% signifies that the company generates $18 of earnings for every
$100 that has been invested by the Starbucks Corporation shareholders.
The Days' Receivables Ratio is calculated by dividing the number of days in a year, 365, by
the Receivables Turnover Ratio. Measuring a companys efficiency in the use of its assets is an
essential business aspect to all of the shareholders involved. The quality and speed of a
company in protracting credit and collecting debt can be measured by using the receivable
turnover ratio. Therefore, the Days' Receivables indicates the average length of time a company
takes to collect on the credit sales to customers (Keown et al., 2005).
Average collection period (days receivable) = accounts receivable/annual credit sales/365
Starbucks Corporation Accounts receivable 2008 (in millions) = 329.5
Starbucks Corporation Annual credit sales (net revenues in millions) 2008 = 10,383.0
Starbucks Corporation Days Receivable for 2008 = 11.6 days
Starbucks Corporation Accounts receivable 2008 (in millions) =271.0

Starbucks Corporation Annual credit sales (net revenues in millions) 2008 = 9,774.6
Starbucks Corporation Days Receivable for 2009 = 10.1 days
The Days Receivable compared is about the same for each year. The 2009 year seems to have
found a better method to receiving funds on credit sales.
From the information presented herein, it is obvious that, Starbucks has put in place a
complete and comprehensive set of policies. Adherence to these policies is expected of all
employees of the Company. Additional safeguards and separate monitoring procedures have
been designed and implemented in aim of providing the investors with accurate evaluation and
oversight of financial health of the company. By combining the internal controls and the
external monitors, Starbucks has been able to comply with the SEC and other governmental
agencies thus providing the investors of the company a viable, profitable company to invest in.

References
Investor Glossary (2010), Current Ratio. Retrieved August 28, 2010 from
http://www.investorglossary.com/current-ratio.htm
Keown, A. J., Martin, J. D., Petty, J. W., & Scott, D. F. (2005). Financial Management: Principles
and

Applications (10th ed.). Upper Saddle River , NJ: Pearson/Prentice Hall.

Moyer, C., McGuigan, J. & Rao, R (2007), Fundamentals of Contemporary Financial Management
(2nd ed.), Thomson Learning: South Western Starbucks Corporation (2008), Annual Report.
Retrieved
August 28, 2010 from http://www.starbucks.com/about-us/companyinformation/corporate-governance
Starbucks Corporation (2009), Annual Report. Retrieved August 28, 2010 from
http://www.starbucks.com/about-us/company-information/corporate-governance

Starbucks (different)

Ethics and Compliance Paper

In todays society several people enjoy sharing coffee with family and friends in a nice quite
environment. A romantic environment is what Moby Dick had in mind when he came up with the name
Starbucks. In 1971 the first Starbucks was opened, it was a dingle store in Seattles historic Pike Place
Market. Starbucks was a narrow storefront that offered some of the worlds finest fresh-roasted whole
bean coffees. Over the years Starbucks has grown into one of the worlds most popular coffeehouses.
Starbucks is very popular among college students, often time lots of college students will go to Starbucks
to write papers, study etc. as they drink hot coffee and all of the other things that Starbucks have to
offer on the menu. Starbucks mission is to inspire and nurture the human-spirit one person, one cup and
one neighborhood at a time.
Within the Starbucks organization there are procedures in place to ensure ethical behavior is being
performed. In the Starbucks organization there is a business ethics and compliance guideline that is
available for the partners and employees to follow. Starbucks believe that conducting business in an
ethical manner is vital to the success of the company (Starbucks.com). Ethics is defined by Webster as
the principles of honor and morality, accepted rules of conduct and moral principles of an individual
(Webster, 2011). The business and compliance program supports the Starbucks mission statement and
also helps to protect Starbucks culture and reputation by providing resources to help employees make
ethical decisions (Starbucks.com).
Ethics has a lot to do with the financial environment within an organization. If an organization has poor
ethical skills it could lead to fewer customers which mean fewer profits.

The authors were asked to explain the financial market in the United States. We believe to be able to
explain it; one must have an understanding of the market. According to Titman, Martin, and Keown
(2011) a financial market is any place where money and credit are exchanged. When you take out a car
loan from your bank, you participate in the financial markets. Within the financial markets there are
three principal sets of players that interact. The three basic principles of financial marketing are savers,
borrowers, and intermediaries. The one thing that is well known, without borrowers, savers and
financial institutions what we refer to as banks the financial market could not work. Savers or investors
are people that always put a little money aside for rainy days. Borrowers are like most people or
companies that need money for buying a new home or business or making improvements to one or the
other. Intermediaries better known as a commercial bank for example Wells Fargo, Bank Of America,
and Fifth/third Bank just to name a few. These financial institutes try to match the right investor with
the right borrower. The way that these institutes do this is by using the money that you have deposited
in to an account. All in all The financial markets facilitate the movement of money from savers, who
tend to be individuals, to borrowers, who tend to be businesses. In return for the use of the savers
money, borrowers provide the savers with a return on their investment (Titman, Martin, & Keown,
2011).
Starbucks believes that conducting business ethically and striving to do the right thing are vital to the
success of the company. Business Ethics and Compliance is a program that supports the Starbucks
mission and helps protect our culture and our reputation by providing resources that help partners
make ethical decisions at work (www.starbucks.com,). Starbucks code of conduct facilitates legal
compliance and ethics training; investigates sensitive issues such as potential conflicts of interest; and
provides additional channels for partners to voice concerns. Partners are encouraged to report all types
of issues or concerns to the program through their choice of the offered communication channel
(www.starbucks.com). According to Business Ethics (2009) our mission is to inspire and nurture the

human spirit- one person, one cup, and one neighborhood at a time. As this team has reads through
Starbucks standard business code of conduct they find out that the fundamental success of the company
is managed by the willpower to do the right thing. Starbucks ethics and compliance program is there to
support the companys objectives, cultures by assisting their partners to do the right thing in the work
place. If at any time on matter where you are you have a list of contacts that one can call to get answers
from the resource partners.
The members of this team through research and calculations evaluated Starbucks organizations
financial performance during the past 2 years, using financial ratios. Here are the calculations of the
ratios for each year:
2011 2010
o

Current 1.8 1.5

Debt 0.13 0.15

Return on equity 6.31 5.16

Days receivable 34.0

37.3

Discuss the trend for each ratio and what it tells you about the organizations financial health.

With the increase of the Current Ratio, the business as a whole seems to be increasing their overall
profit; in short the business is bringing in more money. Their Debt ratio has decreased over the year,
thus increasing the profit is bring in. the business as a whole is spending less money and bringing more
in, forming a solid profit. Overall what started as a small business is turning into a formidable one, with
their expansion of products and company presence and the data provided one can see Starbucks
continuous growth for the next year?
As the authors prepared their information on the Starbucks Company they learned how the company
operates on a day to day base, and what steps are in place for each partner to follow according to SEC

regulations. They also came to unmans decision that Starbuck will be in business for a very long time.

References
Business Ethics. (2009). Retrieved from http://assets.starbucks.com/assets/sobc-fy09-eng.pdf
Starbucks. Retrieved from http://www.starbucks.com
Webster Dictionary, 2011

Disney
Ethics and Compliance Paper
Financial Ratios
Current Ratio
Current ratio is the ratio between current assets and current liabilities (Current Ratio, 2009). Current
ratio signifies how much amount of current assets is available to disburse for the current liabilities. The
current ratio of Disney for the year 2007 is 0.99 and for the year 2008 is 1.01. The current ratio of
Disney is does not show good signs of liquidity management. Even though the Disney has improved the
current ratio from the year 2007 to 2008, the current ratio is still well below the standard requirement
of 2:1.
Debt
Debt to total assets: The ratio of debt to total assets illustrates the percentage of total debt to the total
assets of the company (Total Debt to Total Assets, 2009, p. 1). The outstanding amount is shareholders
net worth. The debt to equity ratio is vaguely decreased from the year 2007 to 2008 which is the good
sign.
Return on equity
Return on equity ratio shows how much each rupee invested by the shareholders has yielded the
revenue. The return on equity has been decreased from the year 2007(15.2%) to 2008 (13.7%). The
return on equity needs to be compared with other companies in the same industry. If the return on
equity is higher than other companies, then the share price will be elevated and the company can
command a premium price for stocks because of goodwill the company has earned in the marketplace.
If the return on equity is less than industry average, then the stock price in the market will fall.
Days receivable
This ratio shows the number of days the company will need to collect the monies from customers. If the
ratio is low, then days receivable indicates that the company is able to collect the monies in fewer days.
Disney has increased the days from 61 to 62 days. Disney needs to take particular efforts to decrease
the receivables to evade the needless locking of companys funds in the hands of debtors.

References
Current Ratio (2009). In Investopedia ULC (p.2)
Total Debt to Total Assets (2009). In Investopedia ULC (p. 1