Project Senior Capstone:
Business
By
A. J. Cataldo II, Ph.D., CMA, CPA
Peter F. Oehlers, DBA, CMA, CPA
Sandra Pelfrey, MBA, CPA About the Author A. J. Cataldo is a professor of accounting at West Chester University in West Chester, Pennsylvania. He holds a B.S. in accounting/finance,
a master of accounting from the University of Arizona, and a Ph.D. from the Virginia Polytechnic Institute and State University. He has worked in public accounting as a government auditor, as a controller, and has provided expert testimony in business litigation engagements.
His articles have appeared in Journal of Accountancy, National Tax
Journal, Research in Accounting Regulation, Journal of Forensic Accounting, Accounting Historians Journal, and many others. He has
published in and served on editorial review boards for Institute of Management Accounting association journals, including Management
Accounting, Strategic Finance, and Management Accounting Quarterly. Contributing Authors Peter Oehlers, DBA, CPA, CMA is currently department head and assistant
professor of accounting at West Chester University. He has twice received the Leslie Quick School of Business Distinguished Undergraduate Teaching
Award and also received the Interfraternity Council Outstanding Professor
Award at Widener University. He serves as associate editor of the Journal of Mentored Management Accounting Research and on the accounting advisory boards of the Atlantic City Cape Community College and Widener University as well as Issues in Innovation and a number of student organi- zations. His work in identity theft, accounting theory, and tax Web site
research has been published in Issues in Innovation, The Journal of Financial Services Professionals, Accounting World and The Bottom Line. Sandra Pelfrey, MBA, CPA is an Associate Professor of Accounting at
Oakland University in Rochester, Michigan. All terms mentioned in this text that are known to be trademarks or service
marks have been appropriately capitalized. Use of a term in this text should not be
regarded as affecting the validity of any trademark or service mark. Copyright © 2015 by Penn Foster, Inc.
All rights reserved. No part of the material protected by this copyright may be
reproduced or utilized in any form or by any means, electronic or mechanical,
including photocopying, recording, or by any information storage and retrieval
system, without permission in writing from the copyright owner.
Requests for permission to make copies of any part of the work should be
mailed to Copyright Permissions, Penn Foster, 925 Oak Street, Scranton,
Pennsylvania 18515.
Printed in the United States of America Preview Welcome to your senior capstone project! You’ll begin your
course by planning the meetings you’ll attend for your
professional development assignment, which requires that
you participate in two networking activities to expand your
knowledge, experience, and contacts in the business world.
Then you’ll analyze two cases that draw on and integrate
much of the material you’ve learned throughout your business
coursework. Both cases were developed from real fact patterns
and real data. Your professional development work requires you to evaluate,
choose, and make arrangements to attend two workshops,
business meetings, or similar events. You’ll also document
your planning time and report on the activities you attended.
By beginning with this assignment, you’ll be able to plan and
attend your activities while you also work on the two cases.
Case 1 is from a firm called Purchase Point Media Corporation,
or PPMC. PPMC was a thinly traded over-the-counter stock
that issued some detailed financial projections. The data was
presented in a very poor form; however, the substance and
sequence of the data was organized in such a way that it was
possible to compute a break-even point. You’ll study PPMC’s
“Projected Statement of Net Income” and additional information provided, then integrate marketing and finance
techniques to write a report on your findings.
Case 2 is quantitative and involves the analysis of selected
financial data for a firm we’ll call “Motomart.” Motomart was
a retail automobile dealership seeking permission to relocate
in an area already served by a similar automobile dealership.
The existing dealership brought a lawsuit to block the relocation. Although the data provided by the company is flawed,
you’ll prepare a summary of your observations and answer
several questions about problems with the case. iii 1 CASE 1: PURCHASE POINT MEDIA CORPORATION 9 CASE 2: MOTOMART 27 SUBMITTING YOUR WORK 41 Contents PROFESSIONAL DEVELOPMENT PROJECT:
PD SEMINARS AND COMMUNITY NETWORKING v Senior Capstone: Business
Professional Development
Project: PD Seminars and
Community Networking
INTRODUCTION Professional development (PD) is an important aspect of business that enables you to network with other professionals,
continue learning, and expand your business experience. For
this part of your senior capstone project, you’ll plan, attend
and reflect upon at least two approved workshops, conferences, seminars, or professional business meetings at the
local, state, or national level. These activities or events must
represent a learning experience that contributes to your
development as a business professional. You’ll earn credit for your 15 hours of assigned PD-related
activities, including your attendance at two events. To receive
credit, you must provide documentation of your planning
efforts (approximately one hour for each event), your two
approved professional-development activities (approximately
three hours each), and a thoughtful report (approximately
four hours) reflecting on and summarizing your professionaldevelopment activity and/or event. Note: Read all the way through the assignment before you
begin, to make sure you choose acceptable activities, collect
the necessary information, and complete all the requirements
for the project. 1 OBJECTIVES When you complete this professional-development assignment,
you’ll be able to
• Explain the benefits of professional-development activities • Evaluate the professional-development potential of specific
workshops, conferences, seminars, and professional
business meetings
• Plan for and arrange to attend professionaldevelopment events • Present your reflections on the value of professionaldevelopment activities RECOMMENDED ACTIVITIES The following are suggested activities to consider for your
professional development activities. There may be other
opportunities in your area, but whether you choose one of
the suggested activities or find something on your own, your
instructor must approve your choices before you begin.
Attend a Local Chamber of Commerce Meeting A local Chamber of Commerce meeting is a good place to
meet people and to see what’s going on in business in your
area. You can Google the U.S. Chamber of Commerce Web
site or contact your local Chamber of Commerce for its meeting schedule. Spend some time navigating through the local
Chamber’s Web site to familiarize yourself with their mission
and/or vision statement, officers, members, and activities.
Typically, local Chamber of Commerce Web sites provide
information that’s valuable to the local members. Rather than just showing up at a meeting, first call the local
Chamber and speak with the staff. Tell them that you’re completing a coursework assignment and would like a mentor,
if available—someone willing to introduce you to Chamber 2 Senior Capstone: Business members and assist you in learning more about the organization. Doing so will enhance the quality of your experience and
afford greater success in both networking and maintaining
your connection with new contacts.
Attend a Guest-Speaker Event at a College or University Every college and university presents outside speakers to
enrich their students’ education and to attract local leaders
and community members to the campus. Look for a college
or university event in your area that’s related to business,
economics, or public-policy issues. Events are often publicized
in newspapers and on the institution’s Web site. You may wish
to call the university’s business department to ask if any
public events are coming up or contact several institutions
and ask to be placed on their mailing lists to receive e-mail
or printed notices for these opportunities.
Attend an Institute of Management Accountants
Chapter Meeting The membership of the Institute of Management Accountants
(IMA) includes professionals in accounting, finance, and
information technology. The vast majority of those attending
will be Certified Public Accountants (CPAs) and Certified
Management Accountants (CMAs). However, the CMA exam,
unlike the CPA exam, tests all business disciplines, so you
also may find attorneys and real estate brokers at these
meetings. Membership in each group will vary. Begin planning to attend a local meeting by reviewing the
IMA Web site. You should be able to locate a nearby IMA
chapter on this Web site; if not, send an e-mail asking for the
nearest group. Once you make contact, ask if they’ll recommend a mentor to introduce you to chapter members and
improve the quality of your networking experience. Senior Capstone: Business 3 PROFESSIONAL DEVELOPMENT
PLANNING TOOLS AND FORMS The following is a summary of your professional development
(PD) planning tools and submission requirements. Check
each step to help you organize and complete your assignments for this part of your capstone project.
1. Professional Development (PD)—What Counts Read the “What Counts” requirements and the section on
self-evaluation and planning before you choose your PD
activities. Then discuss your ideas with your instructor
and make sure you have approval for the activities before
you attend. 2. Self-Evaluation and Planning Framework Use the criteria to plan your intended PD activities and
to evaluate their value after you complete them. If you’re
not satisfied with the potential value of one or both of
them, look further to find a more worthwhile experience.
For instance, you may live in a small town and learn
that your local Chamber of Commerce or business professionals’ organization has a very small membership
and isn’t very active. You might decide to call an organization in a larger community or a nearby city to make
arrangements to attend their meeting instead. On the
other hand, if you plan to work in your small town, the
local group might be a better choice, since any contacts
you make through networking will be more helpful you
once you’re working. 3. Professional Development Sessions Essays During or immediately after an event, make notes on the
people you’ve heard speak, your mentor, and others
you’ve been introduced to. Answer the questions and
note the relationship of each aspect of your experience
to your area of interest. Also note important points and
new ideas that were part of the presentation or meeting
discussion. 4 Senior Capstone: Business 4. Writing Guidelines See the writing guidelines in the “Submitting Your Work”
section at the end of this book. 5. Sessions Summary Log the time you spend in planning, attending, and
reporting on your PD sessions. Professional Development Activities:
What Does and Doesn’t Count To clarify what kind of activities are acceptable as professional
development activities for your assignments, use the guidelines that follow. What Doesn’t Count The following activities do not qualify as valid experiences for
your professional-development assignment: • Staff meetings at work with your present employer—
these are required as part of your current employment
and don’t contribute to the development of new PD skills
or experiences.
• Mentoring others—the PD experience should represent a
new or novel experience and be directed by others.
• Time spent reading a book, an activity that’s not
interactive or directed by others. • Renewal courses for current position or certifications,
which are generally part of employment requirements. What Does Count The following activities do qualify as valid experiences for
your professional-development assignment:
• PD activities outside of or beyond the minimums
required by your current employer • Workshops, seminars, or meetings held by local professional societies, including the American Marketing Senior Capstone: Business 5 Association, American Management Association, Institute
of Management Accountants, Society of Certified Public
Accountants, or others closely linked to your area of
interest and associated with your degree program • PD activities requiring involvement and exposure to the
local community, such as a local Chamber of Commerce
meeting; a county commissioners’ or city council meeting,
where the agenda includes the approval process for
new or local businesses; a local, significant college
or university seminar; a conference or presentation
by relevant guest speakers
• Other PD activities approved by your instructor Self-Evaluation and
Planning Framework Use the following criteria to evaluate your proposed professionaldevelopment activities. Make sure your plan meets each
standard in relation to your area of interest or specialization.
If an activity doesn’t meet the criteria, continue searching
until you find one that does.
Make sure each activity meets the following criteria:
• It’s relevant to your area of interest. • It provides significant interaction with
business professionals. • It has potential to improve your future achievement
in business.
• It offers a significant opportunity for learning. • It provides an opportunity to integrate what you’ve
learned in your business and writing courses. 6 Senior Capstone: Business Your Professional Development
Sessions Essays You must complete one essay for each PD event you attend.
Essays will be graded according to the guidelines provided.
Essays that don’t meet minimum criteria may, at the instructor’s discretion, be returned to the student for revision.
Note: Read the project submission instructions at the end of
this book before beginning your session essays.
Each essay should be well written and should describe your
activity and present your opinion on the applicability of your
new knowledge and PD experience. Each PD experience
will be unique, depending on your interests, expectations,
and results.
Make sure you answer the following questions: • What were the educational benefits of the PD experience?
• Did you meet people who work in your area of interest?
If so, how do you plan to stay in contact with them? • Were you able to use your education and prior coursework experiences to identify any theoretical or
methodological strengths or weaknesses in the materials
presented for your PD experience?
• How will you apply the PD experience to your future
professional goals and objectives? Writing Guidelines Briefly describe the content of the session (fewer than 750
words, typed, double-spaced). Include a description of how
you prepared for your PD session, what you expected prior to
participating in it, and how this compared with your actual
PD experience. Where possible, reflect on how your session
relates to the coursework you’ve completed.
Refer to the “Submitting Your Work” section at the end of
this book for details on submission requirements for the
Professional Development Project. Senior Capstone: Business 7 Sessions Summary In addition to writing your summary or report, you must log
the time you spend on preparation, event attendance, and
writing the report. Record your PD activity hours on a separate
page and send it to your instructor with your reports. Use the
information below to create your time log. Professional Development Session Summary
Senior Capstone: Business Include a separate “sessions summary” page when you send
your PD activity reports to the school. Record a PD activity
summary for each of your two required experiences using the
following guidelines:
Your name and student number Event information and contact hours Include the name
of the activity and attach a copy of the agenda or flyer,
if available
Date and time of session Names of instructors and/or presenters (include titles
and credentials) Preparation hours Preparation date(s) and number of hours
spent planning
Activity hours Event start time and end (subtract break
time from total hours) Reflection/summary hours Time spent on your summary
report preparation, including date(s) and hours
TOTAL TIME SPENT ON ACTIVITY 8 Senior Capstone: Business Case 1: Purchase Point
Media Corporation (PPMC)
INTRODUCTION This case is based on actual financial projections developed
and provided by a publicly traded firm, Purchase Point Media
Corporation (PPMC). Carefully examine the PPMC projections,
which are presented in a sequence and format suitable for
break-even calculation and analysis. After you calculate the
break-even point, use additional, publicly available information to come to a decision with respect to market potential.
The increase in the price per share of PPMC stock suggests
that, over time, the market may have reacted to their results
and analyses, using a comparable methodology. OBJECTIVES When you complete this case, you’ll be able to • Identify discernable errors, irregularities, and improprieties in style and format within publicly reported data • Meet financial statement presentation requirements for a
specific “real world” example • Determine whether financial information provided follows
generally accepted accounting principles (GAAP) or is
presented in “good form”
• Distinguish between the substance and form of
financial statements • Estimate variable and fixed costs for a publicly
traded company • Assess publicly disseminated information from publicly
traded companies to determine the feasibility of market
potential and market penetration • Exercise enhanced critical-thinking skills Senior Capstone: Business 9 CASE BACKGROUND Purchase Point Media Corporation (Pink Sheets: PPMC) is
what some refer to as a thinly traded “corporate shell.” The
firm held patents in the United States, Canada, United
Kingdom, and Germany for a shopping-cart display device,
but was a nonreporting and nonoperating entity. On March 18, 2002, PPMC reported its intention to sell these
patents and related trademarks. The initial estimates suggested a stock price of nearly $2.50 per share, before related
per-share deductions for sale-related broker’s commissions
and legal fees. At the time of the news release, the firm’s
stock was trading at $0.04 per share. In less than 60 days
the stock was trading at more than $0.60 per share (Cataldo
2003, 55–60), for a 1,400 percent increase in price per share.
(Note that investors and speculators alike would view this as
a very risky investment, and the price per share for PPMC
stock would be expected to fall short of or sell at a significant
discount to the “anticipated” selling price for the firm’s intangible assets. See Arbel and Strebel 1982 and 1983; Arbel,
Carvell and Strebel 1983; and Arbel 1985 for guidance on
thinly traded or “neglected” firms.)
While this initial news release attracted speculators, causing
the stock price to rise, after months without any additional
news releases, the stock price drifted down again. On August
20, 2003, PPMC again announced its intention to sell the
firm’s intangible assets (Business Wire 2003).
In the second announcement, PPMC management referred
interested investors to their corporate Web site. Among the
data provided, PPMC included a financial projection and
other items they felt might be of interest to potential purchasers of the firm’s intangible assets (see Exhibit 1,
Purchase Point Media Corp. statement, which follows). To begin this case, review and comment on the “form” of
the public disclosure circulated by PPMC. Then use the
“substance” of this information to develop per-unit, salesbased contribution margins and break-even points for the
first year of operations. Last, gather other publicly available
information to determine the market feasibility of achieving
its break-even point. 10 Senior Capstone: Business Senior Capstone: Business 11 12 Senior Capstone: Business Senior Capstone: Business 13 14 Senior Capstone: Business Senior Capstone: Business 15 16 Senior Capstone: Business Senior Capstone: Business 17 18 Senior Capstone: Business Senior Capstone: Business 19 SUPPLEMENTAL INFORMATION
Brand Name versus Generic Stocks
Brand Name Stocks Generic Stocks Less information risk More information risk Higher quality of information Lower quality of information Large sample of consensus
estimates Small or no sample of consensus
estimates Monitoring service or fee No monitoring service or fee Lower return Higher return Higher price (premium) Lower price (discount) Lower uncertainty Higher uncertainty More consistency Less consistency Graphs Supplemental information is provided in Figures 1 and 2.
Figure 1 illustrates the price per share for PPMC common
stock for the time period August 20, 2003 through September
27, 2004. The latter date represents the specific event when
PPMC filed their 10QSB. Figure 2 compares the PPMC price
per share with comparable index measures, such as the Dow
Jones Industrial Average, Standard and Poor’s 500, NASDAQ,
and Russell 2000 indices, for the same period of time. 20 Senior Capstone: Business FIGURE 1—The price per share for PPMC common stock, August 20, 2003 through September 27,
2004, when PPMC filed their 10QSB FIGURE 2—Comparison of the PPMC price per share over comparable index measures, such as the Dow
Jones Industrial Average, Standard and Poor’s 500, NASDAQ, and Russell 2000 indices, for the same
time period Senior Capstone: Business 21 References Arbel, A. 1985. Generic Stocks: An old product in a new
package. The Journal of Portfolio Management 68: 4–13.
Arbel, A., Carvell, S., and Strebel, P. 1983. Giraffes,
Institutions and Neglected Firms. Financial Analysts
Journal 39: 57–63. Arbel, A., and Strebel, P. 1982. The Neglected and Small Firm
Effects. The Financial Review: 201–18. Arbel, A., and Strebel, P. 1983. Pay attention to neglected
firms! The Journal of Portfolio Management 9: 37–42. Business Wire. 2003. Purchase Point Media Corp.: Corporate
Update (August 20). Cataldo, A. Information Asymmetry: A Unifying Concept for
Financial and Managerial Accounting Theories (including
illustrative case studies). Studies in Managerial and
Financial Accounting 13, 2003. Oxford, England:
Elsevier Science (JAI). Series Editor: Marc Epstein. PROJECT REQUIREMENTS
Substance versus Form and
Critical Thinking
Step 1 In the infamous Enron bankruptcy case, the form of the
financial statements prepared by the Enron Corporation
and WorldCom was very professional; however, the substance
was lacking, leading to audit and market failures and the
eventual bankruptcy of both of these big-cap, or largecapitalization firms. PPMC represents a reverse case, in
which the form of the data contained in the PPMC news
release and corporate Web site was very poor. 22 Senior Capstone: Business To begin, read the PPMC report, focusing on problems with
the form of the report. There are many, including font changes
that have been corrected for printing here. Prepare a typed,
clearly communicated summary of all errors or weaknesses
you find in the form of this report. There’s no magic number
of errors that you must identify and different students will
produce variations in their responses to this part of the
assignment. Simply identify as many problems as you find,
including spelling, punctuation, and usage errors. Although
the PPMC report isn’t well-written, don’t attempt to correct
or rewrite the report.
Here are a few examples of the kinds of errors you may find
and how you’ll present them. Summary of Errors in the Form of the PPMC Report
1. There are two sentence fragments, plus a
spelling error, in the introductory paragraph,
as follows:
Safe harbor statement under the private
securities litigation act of 1995. Changes in assumptions or changes in other
factors effecting such statements. 2. The second sentence in the introductory paragraph refers to a project” statement of net
income (“This project statement of net income
contains . . .”). It appears that the author of
this report intended to refer to a “projected”
statement of net income, although that’s not
a conventional accounting term. 3. The third sentence in the introductory paragraph refers to “Corporate house,” in which the
first word of what appears to be a firm’s name is
capitalized and the second isn’t.
4. The last sentence in the introductory paragraph
uses “risk” in the singular form when it requires
the plural: “You should independently investigate and fully understand all risk before making
investment decisions.” Senior Capstone: Business 23 Next, reread the PPMC report, focusing on problems with the
substance of the report. Identify the obvious errors or problems
first by focusing on the addition or math errors. Prepare a
typed, clea...

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