Accrual and Cash Basis Accounting Commercial accounting and generally accepted accounting principles, generally prescribe the accrual basis of accounting over the cash basis. Describe both bases of accounting and explain the differences. Cash basis is used mostly by small businesses where owners and creditors want a simple way to understand the financial statements. Cash basis is used when a company or creditors does not worry about the accuracy of the statements but just want to understand if there is profit or loss in the company. Revenues are recorded when cash is received and expenses are recorded when cash is payment.
Welch acquired these businesses to improve them and reap the profits in the process. GE in the Welch era had high rate of profitability to its shareholders that boosted economic growth- market actions. According to the text book definition, corporate social responsibility is the corporate duty to create wealth by using means that to avoid harm to, protect, or enhance societal assets. Jack Welch contributed to society by paying $5.7 billion tax for a government in 2000. Taxes can be considered as the major income of the government.
The goal of the bank is to create a flow of funds so from the many deposits, the bank can lend out to a wide variety of borrowers and this creates the flow of funds, which is crucial in the banking system. In order for the bank to generate a profit they need their money to be put to work through earning interest. Therefore when it comes to the assets of the bank, cash plays a very minimal role because the banks main interest is earning assets so it keeps its money in loans and investments. Loans represent the majority of a bank’s assets. A bank can normally earn a higher interest rate on loans than on securities, roughly 6%-8%.
These benefits are often referred to as arising from synergy which accrues to the shareholders of the target as well as to those of the bidder. VF Corporation is offered something in excess of what they perceive to be the current value of those shares. In spite of the eurozone financial crisis, VF’s revenues rose by 20 per cent in constant dollar terms in Europe, while sales in Asia surged 43 per cent. This is the right time to take the Timberland to the next level, with expected 2011 revenues of $1.6bn, over half of which are generated internationally. For the full-year 2010, Timberland reported revenue of $1.4bn, an increase of 11.2% over the prior year and up 11.7% on a constant dollar basis.
The benefits of accrual basis accounting include equal distribution of expenses paid in advance and in arrears. Cash basis accounting is beneficial to smaller businesses especially when the company does not have to maintain an inventory, there are no customer accounts of returns, and when most of the sales are cash sales. This method of accounting is typically easier and cheaper to maintain. Although there are numerous benefits to both options the business must determine which method is best for them and that is usually based off the
It is, however, simpler than the accrual basis accounting and quite suitable for small organizations that transact business mainly in cash, which is also called cash accounting. Accrual basis is the accounting method under which revenues are recognized on the income statement when they are earned rather than when the cash is received. The balance sheet is affected at the time of the revenues by either an increase in cash, if the service or sale was for cash, an increase in accounts receivable, if the service was performed on credit, or a decrease in unearned revenues if the service was performed after the customer had paid in advance for the service. Under the accrual basis of accounting, expenses are matched with revenues on the income statement when the expenses expire or title has transferred to the buyer, rather than at the time when expenses are paid. The balance sheet is also affected at the time of the expense by a decrease in cash if the expense was paid at the time the expense was incurred, an increase in accounts payable if the expense will be paid in the future, or a decrease in prepaid expenses if the
Rolls-Royce numbers are 16.81% and 83.19 % respectively. In both cases we see that firms prefer to use their own capital. We cannot tell with certainty why this structure was chosen, but we can look for example at the level of liquidity. Unilever has 93% (cash to current liabilities). We can conclude that the firm has enough cash to meet its obligations and able to generate cash flow to use it for project financing when needed.
It has utilized its assets as leverage to obtain competitive differentiation and is intent on expanding its global presence due to higher material costs in its home market and losses incurred by some of its largest customers such as the U.S. automotive manufacturers. Goodyear Financial Analysis Company Overview Goodyear Tire & Rubber Company (Goodyear) is one of the world’s most recognized tire and rubber manufacturers. Goodyear also operates a global truck and truck tire service and retreading networks. Goodyear is headquartered in Akron Ohio and employs in excess of 77k individuals and operates 96 plants across 28 unique markets (Goodyear, 2007). The company has traditionally been a strong market performer but is recent financial performance has begun to exhibit some deficiencies.
Globalization is beneficial to developing countries because it raises income, creates jobs and creates an economy where it is possible for people to afford nice things. Throughout Meredith and Hoppough’s article readers are presented with strong examples of logos. Meredith and Hoppough give hard facts and evidence that support globalization and make readers see the good in globalization. The author’s choose to show the positive effects of globalization through facts and statistics. For example Meredith and Hoppough state “Per-person income in china has climbed from $16 a year in 1978 to $2,000 now” (Meredith and Hoppough 393).
Clarkson Lumber’s Company Case Analysis GROUP A: ANA GABRIELA SOTILLO JOHNSON FABIAN FREIHERR VON ROSEN IMRE IGNACIO SZAPARY GIL-CASARES RAYAN SEIF STEFAN RADISAVLJEVIC VERENA RIEDHART YANIS ALEM IE business School Section 4 September 2014 Question 1. Evaluate Clarkson Lumber’s financial performance. Can you explain why Clarkson borrowed so much of money during 1993-1995 despite its positive profitability? Although, the Income Statement of Clarkson Lumber seems profitable from 1993 to 1995 by generating positive net income of 60k and 77k respectively. Further it increased both sales and net income by 54% and 28% vs. 1993, but the company has a problem of a liquidity and a shortage of cash.