2. a. Critique Ace Repair’s current method of estimating its before-tax cost of debt. b. Is the earnings yield (E/P) an appropriate measure of the firm’s cost of equity? 3. a.
When you lend, you are a Debt Investor. 2. When you own, you are an Equity Investor. When you lend money you get back the interest, on top of the money you lent out. When you own, you own a commodity or a business, or part of a business.
This choice does, however, affect how individual shareholders’ accounts are reported in the balance sheet. Formally retiring shares restores the balances in both the common stock account and paid-in capital - excess of par to how those balances would have looked if the shares never had been issued. Any net increase in assets produced from the sale and ensuing repurchase is reflected as Paid-in capital—share repurchase. On the other hand, any net decrease in assets resulting from the sale and subsequent repurchase is repeated as a subtraction of retained earnings. Inversely, when a share repurchase is seen as treasury stock, the cost of the treasury stock is naturally disclosed as a decrease in total shareholders’ equity.
Why are CRAs (particularly, Moody’s Investors Service and Standard & Poor’s) so entrenched in financial markets? 3. What are the criticisms of CRAs and is it feasible for regulators to attempt to reduce the reliance of financial markets on CRAs? 4. The article refers to the various sovereign rating changes that have recently occurred.
The balance sheet connects to income statements, in turn also connected to cash flow statement. Occurrences or a change to the net cash activities of the cash flow statement affects the balance sheet. The balance sheet is useful when estimating the potential of the organization in order for them to achieve there long-term mission. However, cash flow statement displays the exchange of currency among an organization and external agents. For example, the cash flow can be affected when the company purchases products, and if the costs of the products are an outstanding amount in turn it will affect the assets on the balance sheet.
WESTERN GOVERNORS UNIVERSITY Financial Analysis RJET Task 1 Executive Summary An extremely crucial element to any business entity is the financial analysis process. So what exactly is financial analysis? The actual definition is The assessment of the (1) effectiveness with which funds (investment and debt) are employed in a firm, (2) efficiency and profitability of its operations, and (3) value and safety of debtors' claims against the firm's assets. It employs techniques such as 'funds flow analysis' and financial ratios to understand the problems and opportunities inherent in an investment or financing decision. (WebFinance, Inc, 2013) Simplified it is the process of evaluating the current business, let’s say their effectiveness, and their future in their industry.
| Huffman Trucking | Memo To: Graham Grove, Vice President of Industrial Relations From: Paul Johnson Director of Accounting CC: Simone Ojeda Accounting Specialist Date: [ 4/9/2012 ] Re: Results from ratio calculations and horizontal and vertical analysis What do the liquidity, profitability, and solvency ratios reveal about the company’s financial position? Liquidity ratios are the ratios that measure the ability of Huffman Trucking to meet its short term debt obligations. These ratios measure the ability of this company to pay off its short-term liabilities when they fall due. Profitability ratios measures Huffman Trucking’s ability to generate earnings relative to sales, assets and equity. These ratios assess the ability of the company to generate earnings, profits and cash flows relative to some metric, often the amount of money invested.
only the portion of the loss attributable to inventory sold during the period is recorded in the financial statements. B. the market value figure for ending inventory is substituted for cost and the loss is buried in cost of goods sold C. a loss is recorded directly in the inventory account by crediting inventory and debiting loss on inventory decline. D. there is a direct reduction in the selling price of the product that results in a loss being recorded on the income statement prior to the sale. 15) Designated market value A. may sometimes exceed net realizable value. B. should always be equal to net realizable value less a normal profit margin.
Equity vs. debt securities Debt securities represent debt incurred by the issuer. （拥有此证券代表你拥有对证券发行人的债权，发行人是你的债务人) Equity securities represent equity or ownership in the firm.（拥有此证券代表你拥有证券标的物的财产所有权） Primary vs. Secondary markets Primary markets facilitate the issuance of new securities. Secondary markets facilitate the trading of existing securities and is liquidity. Money vs. Capital markets Money markets facilitate the sale of short-term (one year or less)
Investors and creditors are examples of external users of accounting information. Investors make the decision to buy, sell, or hold stocks and creditors evaluate the risk of selling on credit or lending