chapter 15

http://www.bloomberg.com/apps/news?pid=20601087&sid=al4bzUS2.JWM

Madoff Auditor Under Investigation by New York State Prosecutor

SUMMARY

This article is about a famous investor Bernard L. Madoff’s auditor was charged in a $50 billion Ponzi scheme in New York’s Rockland County. On Dec. 11 Madoff was sued by the U.S. Securities and Exchange Commission. Madoff told his employees that the firm was financially ruined. “‘We’re trying to determine if there have been any state crimes here,’ Rockland County District Attorney Thomas Zugibe said in a telephone interview today. ‘When you have a key player like that operating in your county, you have to look.’`` According to the annual financial statement on Dec. 18, 2006 that everything followed the accounting principles. ``The financial analysis said Madoff Securities had $1.3 billion in assets, including $711 million in marketable securities and $67 million in U.S. debt. Members’ equity, the firm’s net worth, was $604 million, according to the document. `` The auditor was described a man who comes in the office for 10 to 15 minutes and leaves. The man drives a Lexus and he doesn`t dress in business attire.

CONNECTION

In Chapter 15 I have learned use formulas for ratios and percentage to compare financial statements with different companies. I have use $711million in marketable securities assets divided by the $1.3 billion total asset, $67 million in U.S. debt. Members’ equity divided by the $1.3 billion total asset and Members’ equity, the firm’s net worth, was $604 million divided by the $1.3 billion total asset and multiplies it by 100% to show how much the assets are worth. The marketable securities assets are 54.6 % of the total asset, The U.S. debt. Members’ equity is 5.2% is of the total asset and the Members’ equity, the firm’s net worth is 46.5 % of the total asset. As you can see the big part of the assets is from marketable securities assets. Marketable securities assets are very liquid as they tend to have maturities of less than one year. In this section it has taught me to be able to compare, financial statements and to compare if a company is doing better. This can be done by using Current Ratio, Current Ratio, Current Ratio, and Current Ratio. I would want to use all these equations to compare the financial statements of Mad off’s firm, but unfortunately I was unable to find his financial statements.

REFLECTION

As I have learned that using ratios and percentages is very important to compare and to see what is going on in companies if you are an outsider investor or an insider. As an investor although even if you have compared and done a lot of research in companies you like to invest, I believe that you have to be careful in the companies you invest in. As you can see that Mad off’s firm was a large trusted company and the whole time they were lying about invest their customer`s money. No matter what, where or who you are investing your money in; the formula and equations can only help you so far. Just remember you can`t trust anyone, but yourself. So make the right decision by being a smart investor.