Have six accounting related questions that need written. They are all 100 words for each question and the summary/introduction. A
Have six accounting related questions that need written. They are all 100 words for each question and the summary/introduction. All details are on the attached document. Thanks
THE SHERWIN-WILLIAMS COMPANY
Sherwin-Williams; NYSE: SHW
SEC 10-K: https://www.sec.gov/ix?doc=/Archives/edgar/data/89800/000008980021000010/shw-20201231.htm
Requirements: answer the following questions after each week and should be 100 words for each. In addition, create an introduction and a summary that is 100 words each. Everything is based on the SEC 10-k report at the above link.
Introduction: 100 words
Summary: 100 Words
Wk1:
1. What does your company produce?
2. Analyze the trends in sales, cost of goods sold, gross profit, and operating income for your manufacturing company.
3. What segments does your company have? Are they by product or by region? What note number in the SEC 10K financial statements notes did you locate this information? Prepare a trend analysis for percentage changes from a base year for these key indicators of performance. Comment on cost management issues based on your analysis of these trends?
3. Report on segments, divisions, or any other reporting entities and on any diversity in products.
Founded in 1866, The Sherwin-Williams company manufacture, develop, distribute, and sells paints, coating, and other related product. The products vary in different brands such as Krylon, Valspar, Sherin-Williams, Cabot, and Minwax (SEC 10-K, 2020). These products are sold to industrial, professional, commercial, and retail customers based in South and North America inclusive of the Caribbean region, Australia, Europe, and Asia.
Trend analysis
|
|
2020 |
2019 |
|
Net sales |
$8,149,719 |
$7,986,252 |
|
Cost of goods |
$4,448,450 |
$4,363,774 |
|
Gross profit |
$3,701,269 |
$3,622,478 |
|
Operating Income |
$1,782,698 |
$1,595,952 |
2020 Net sales index number = $8,149,719/$7,986,252= 1.02 or 102%
2020 Cost of goods index number = $4,363,774/ $4,448,450= 0.98 or 98%
2020 Gross profit index number = $3,622,478/ $3,701,269= 0.98 or 98%
2020 Operating income index number = $1,595,952/ $1,782,698= 0.90 or 90%
Over the 2020 year, there was an increase in the company net sales, cost of goods, and company’s gross profit. However, the operating income was high considered with the base year.
The company reports its segment internally as the management (SEC 10-K, 2020). This is done to ensure there is a better assessment of the performance and decision when allocating resources. The company has three operating segments; the performance coating group, the American group, and the consumer brand group. Due to the company's diverse operations, the segment is based on product since the company operating decision maker allocates resources based on the segment profit or loss and cash gained in the process (SEC 10-K, 2020). However, this report was retrieved from Note 21- Reportable segment information.
Trend analysis
|
|
2020 |
2019 |
|
Operating Income |
$1,782,698 |
$1,595,952 |
2% change of Operating income= $1,595,952-$1,782,698/ $1,782,698= -0.105
The operating income of the company increased in the year 2020. This shows a negative trend analysis that was below 100%. Although the company had an improved sale, the high rate of spending may lead to different management issues. This was characterized by the Covid-19 pandemic with the degree of effectiveness affecting direction and production.
When reporting in the segment, the company considers the management structure, nature of business activities, information given to the board of directors, and administrating activities (SEC 10-K, 2020). The company also allows customers that are significant to some portion of production to report on related profitable segments. These segments are incurred in company capital expenditure with related internal and external environments.
References
SEC 10-K: (2020). UNITED STATES SECURITIES AND EXCHANGE COMMISSION. Inline XBRL Viewer. Retrieved January 22, 2022, from https://www.sec.gov/ix?doc=%2FArchives%2Fedgar%2Fdata%2F89800%2F000008980021000010%2Fshw-20201231.htm
Question to Answer (100 words): Any discussion of why the increases during the pandemic?
Wk2:
1. Inventory disclosures:
Are there any disclosures about raw materials, WIP inventory, Finished Goods inventory levels?
How is inventory described for your SEC 10-K company? Relate your answer to topics in our course.
Report on any costing information such as inventory valuation methods–LIFO, FIFO, and/or average cost.
Comment on supplemental information provided related to inventory for your SEC 10-K company.
2. Cost and sources for production materials: Notice how cost is used in the SEC 10-K.
3. Briefly provide an overall SWOT (strengths, weaknesses, opportunities and threats) analysis for your manufacturing corporation as related to cost accounting-related topics. Although details are high level in the SEC 10-K filing, what do you learn related to operations and strategy?
1, a. Disclosures about raw materials, WIP inventory, and Finished Goods inventory
The Sherwin-Williams Company has inventory disclosures about finished goods, raw materials, and WIP inventory. Inventory was stated at a minimum level of the cost and the net realizable value. The primary cost was determined through the last in, first-out (LIFO) method. In 2020, finished goods were 1,427.6 million dollars while the work in process and raw materials were $376.5 million (SEC, 2020). Where the values were increasing, there was positive income in the level of sales despite the pandemic affecting the company’s production and distribution.
1, b. How inventory is described in The Sherwin-Williams company
The company views the changes of the previous year in comparing the current period. The company summarized the inventory through the LIFO cost method (SEC, 2020). After the summary presents the effect of the intended inventories that the company had used through the First in, first-out (FIFO) evaluation method. The percentage is determined through excess determining of FIFO over LIFO in overall inventories of the current year and the base year.
1, c. Cost information through LIFO and FIFO valuation method
Sherwin-William's company value of the overall inventory would be approximately $2,116,200 on 31st December 2020 when using the FIFO inventory valuation method. However, if the company used the LIFO method to value the inventory in the same period, the inventory would be $1,804,100 (SEC, 2020). This would have been $312,000 more than the intended one if the FIFO method was used instead, as reported on 31st December 2020.
1, d. Comment of the supplemental information
The company had recorded a reserve for obsolescence of $125.8 million (SEC, 2020). This was meant to reduce the inventories and their estimated realizable value. When the company reviews its process in meeting the set valuation, different measures must be implemented. Older inventory must be sold. If the inventory cost rises or is likely to increase over the period, the LIFO method could favor the company. However, despite the factors such as covid-19 affecting the company's overall production, the overall inventory cost was lower than expected.
2. Cost and Sources for production material in Sherwin-William company
The Sherwin-William company suppliers had an increase in their sales. The sale has increased over the period. With adequate resources such as fuel and coating, there are increased raw material prices for the various segments (SEC, 2020). While there is Covid-19 which disrupts operation, the company enhances shifts in meeting customers' behavior and preferences. However, the company reduced the spending in various areas such as voluntary and involuntary programs for capital expenditures. Other programs such as share repurchases and discretionary spending were banned to closely monitor the effects of the pandemic, cash flows, financial performance, liquidity, and operations.
3. SWOT analysis for Sherwin-Williams company
SWOT analysis of the Sherwin-William company analyzes the brand in a different form. In the company, strengths and weaknesses are the internal factors, while opportunities and threats exist in the external factor (SEC, 2020). The overall framework is a condonation of the company management who benchmark on a different company and evaluate their performance as compared to competitors. Industrial products and other chemical brands ensure the company meets the target through segmentation, unique selling proposition, and positioning. On the operation and strategy, there is coordination in the company's different departments to ensure more network and successful return in the act of being a strong dealer community.
Reference
SEC, F. O. R. M. (2020, 31st December). UNITED STATES SECURITIES AND EXCHANGE COMMISSION-THE SHERWIN-WILLIAMS COMPANY. Inline XBRL Viewer. Retrieved 29th January 2022, from https://www.sec.gov/ix?doc=%2FArchives%2Fedgar%2Fdata%2F89800%2F000008980021000010%2Fshw-20201231.htm#
Questions to Answer (100 words): What would constitute obsolescence in the paint and coatings field? Colors or products that do not meet EPA standards?
Are there any distribution issues?
WK3:
1. Comment on the management of risk and uncertainty as discussed in the Management Discussion & Analysis (MD&A) report.
2. Divisions and Product Lines may be discussed in the MD&A section. What cost accounting issues may arise in these areas as you consider our chapters for the week.
3. Comment on any specific cost accounting-related information in the MD&A report. For example, management often explains higher or lower than expected performance in this section of the filing. Does management discuss cost or cost fluctuations, profitability, pricing, emerging markets, competitive positioning in the global market or any other key factors and performance indicators in the 10-K filing?
1. Comment on the financial management of risk and uncertainty as discussed in the MD&A report.
The Sherwin-Williams Company is aware of several risks that might affect its company. The MD&A report is based on the forward-looking statement on managing risks and uncertainties. The management clearly states that the readers should not place more reliance on forward-looking statements because they are subject to change. The company is aware of the financial risks and uncertainties caused by COVID-19, the management discusses how they ensure compliance with the rules and regulations. The company complied with the health authorities and government closely in addressing the risk, and with that, they continued with the business's operations. It is clear from the report that the company is aware of the marketing risks which are associated with the value changes in foreign exchange, commodity fluctuation, and interest rates. The company's ability to use the derivative instrument tool for the management policy helps mitigate the risks and uncertainties associated with the marketing risk. Since the company offers some unaddressed forward-looking statement on managing risk and uncertainties, it is essential to state that the company does not properly mitigate the risk and uncertainties.
2. Division and product lines may be discussed in the MD&A section. What cost accounting issues that may arise in these areas?
Division and product line are essential for a company because they are cost-effective. Discussing product line and division in the MD&A section raises several accounting issues. Recording and presentation of the data will change, and the company will be required to ascertain the profit of each activity. The inclusion of paint, coating, and other products into the MD&A section will increase data to be analyzed. Financial reporting will be complicated, which will pose challenges in the cost accounting process. The discussion in the section will have financial disclosures and will impact how the company's cash flow was being reported earlier, thus affecting the financial reporting. Tracking expense accounts of the different product lines might be difficult, which will pose a challenge to the accounting and reporting of the company's products. Since the company operates under three different groups, pricing the products in different regions might make the process of cost accounting inefficient and unreliable. In some regions, the prices might be higher depending on the demand; thus, accounting for the cost of such products might be different.
3. Comment on any specific cost accounting-related information in the MD&A report
The management discusses the costs of its unsettled warranties based on the historical results and experience and adds the costs to the other accruals. The management adjusts the costs of warranty as necessary, implying that they use their own measures to dictate the warranty cost, which sometimes is not appropriate. The management explains the reasons for cost fluctuations as seen in the case of the cost of the warranty. The management explains that variation in the three years (2018,2019 and 2020) is due to the company divesture approximated to the book value. The company explains its financial condition in the section and states that the liquidity and cash flow of the company have continued to improve. Notably, the management explains its capital expenditures of the different groups approximated to $303.8 million. The management also discusses the company's competitive positioning and describes how the company was planning to increase more capital expenditures to set up a research and development center. The management expects the center to research how the company will improve its competitive positioning in the future.
Reference
Sec Gov. (2021). United States Securities and Exchange Commission-The Sherwin-Williams Company. Inline XBRL viewer. SEC.gov. https://www.sec.gov/ix?doc=/Archives/edgar/data/89800/000008980021000010/shw-20201231.htm#i49a1606a43bd4252889ae41b10edea46_49
Question to Answer (100 words): Warranty costs? Are their products not meeting warrantied timeframes?
WK4:
1. Liabilities and Contingencies: Can they be estimated? Are they probable to occur? What did you learn about estimated liabilities and contingencies from the note disclosures in the SEC filing? How may these items impact profitability and other cost accounting-related topics for your manufacturing company?
2. Does management disclose any information about Corporate Social Responsibility (CSR) and Sustainability policies? How would this emerging framework impact on cost and profitability for your corporation? (NOTE: Some large multinational corporations maintain a separate CSR and/or Sustainability website.)
1. Liabilities and Contingencies: Can they be estimated? Are they probable to occur? What did you learn about estimated liabilities and contingencies from the note disclosures in the SEC filing? How may these items impact profitability and other cost accounting-related topics for your manufacturing company?
Liabilities are claims placed by consumers on the company or manufacturer due to injuries or damages caused by the product. These liabilities always arise as long you are in business because faulty products might find their way to the consumer occasionally. And therefore, it is necessary to have contingency plans to handle any litigations that may arise. When liabilities occur, it calls for some form of payment based on the value of the product and injury caused. That is where the U.S. Generally Accepted Accounting Principles (GAAP) guideline help in the resettlement of the claim.
In some cases, the liability may be higher to the extent of causing contingency losses to the company. This may impact the business’ profitability. Contingent liability is usually an unforeseen future event, and the impact on company profitability will depend on its time and the accuracy of the estimated amount. Contingent liability should be recorded with high precision per the accounting guidelines and principles (prudency, full disclosure, and materiality). Examples of contingent liability are warranty, guarantees, lawsuits, and government probes. Since liabilities can impact the company’s assets and profitability, it is crucial to know about them before making any investment decision (Fajaria & Isnalita, 2018). For example, when investing in company shares, it will be prudent to consider the amount of contingent liability set by the company and if it can impact its profitability and growth.
2. Does management disclose any information about Corporate Social Responsibility (CSR) and Sustainability policies? How would this emerging framework impact on cost and profitability for your corporation? (NOTE: Some large multinational corporations maintain a separate CSR and/or Sustainability website.)
Corporate social responsibility (CSR) is a business technique that guides companies towards enhancing positive impact to stakeholders and society in terms of their social, economic, and environmental welfare. At the same time, sustainability policies are a statement of commitment to upholding all areas of sustainability. Sherwin-Williams deals with production and sale of paints, and related products. The onset of COVID 19 in 2020, led the company to engage with the government as part of its CSR and sustainability policies to continue operating the business amid COVID 19 crisis. The company resorted to doing business online and on phone calls to protect the customers and society. The company’s decision to opt for non-physical business operations for the sake of the health and wellbeing of everyone involved did seemingly never affected the company’s financial inflows. Disclosure of company CSR and sustainability policies may bring conflicts between the shareholders and management due to reconciling shareholders' interest in profitability versus social welfare. However, if the CSR and sustainability policies rake in some financial gains to the company, then its disclosure and implementation will be supported (Zielinski & Jonek-Kowalska, 2021).
Reference
Fajaria, A. Z., & Isnalita, N. D. (2018). The effect of profitability, liquidity, leverage, and firm growth of firm value with its dividend policy as a moderating variable. Journal of managerial studies and research, Vol 6 (10), 55-69.
SEC 10-K: (2020). UNITED STATES SECURITIES AND EXCHANGE COMMISSION. Inline XBRL Viewer. Retrieved January 22, 2022, from https://www.sec.gov/ix?doc=%2FArchives%2Fedgar%2Fdata%2F89800%2F000008980021000010%2Fshw-20201231.htm
Zielinski, M., & Jonek-Kowalska, I. (2021). Does CSR affect the profitability and valuation of energy companies? An exmple from Poland. Poland: MDPI.
Question to Answer (100 words): Does Sherwin-Williams have any legal liabilities from their chemicals or paints?
(NOTE: Take care with the concept of $ dollars. Many financial statements are expressed in millions of $. You would report $895 million for the value $895,000,000. Be a very careful reader.)
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