Peter Swap I. Issue: Will recognizing compensation expense as part of Mizri Corporation’s stock compensation plan faithfully represent the exchange? II. GAAP List: * 718-10-30-22: An equity instrument for which it is not possible to reasonably estimate fair value at the grant date shall be accounted for based on intrinsic value * 718-20-35-3: A modification of an equity award shall be treated as an exchange of the original award for a new award incurring additional compensation cost for any incremental value III. Alternatives: A.
Net operating cash flow. This cash flow is the revenue net of expenses and tax liabilities for the time period under consideration. Net salvage value. The net salvage value is the after tax net cash flow for the termination, liquidation or sale of an investment, project or business that is financially unsustainable or which the owner simply no longer wishes to keep. This
If a company pays out dividends, it may reduce their capability to pay their liabilities. The first entry is the retained earnings from the previous financial period. The next entry is the net income from the income statement. If dividends were paid to shareholders, the amount would be deducted from the sum of previous retained earnings and the net income. The result would be the retained earnings from the current financial period.
Net initial investment outlay which is investment cash and the sale of old equipment cash expenditures as well as net cash flows. Net salvage value which is the after tax net cash flow projects businesses will not use. The incremental cash flows are different because of the way Caledonia operates with the cash. 3. What is the project’s initial outlay?
The second ratio measures the effect of interest; it indicates the proportion of earnings before interest and tax that is retained after paying interest. It should be considered together with the leverage component (assets/equity). The third ratio measures the company’s operating profit on sales; it can be broken down into subcomponents such as gross profit margin. Common-sized income statements can help with
Decrease Cash Increase Assets (c) Issued common stock to investors in exchange for cash Increase Cash Decrease in Stock Equity. (d) Paid an account payable in full. Decrease Cash Decrease Liability 10. What is the normal balance for each of these accounts? (a) Accounts Receivable.
b. The value of equity is calculated by discounting the horizon value, the tax shields, and the free cash flows at the cost of equity. c. The value of operations is calculated by discounting the horizon value, the tax shields, and the free cash flows before the horizon date at the unlevered cost of equity. d. The value of equity is calculated by discounting the horizon value and the free cash flows at the cost of equity. e. The APV approach stands for the accounting pre-valuation approach.
Cash flow is more vibrant and holds to the true value. Cash flow is concerned with the movement of money in and out of a business. The concept of accounting profit can be somewhat narrow with its results only looking at income and expenses at a certain point in time and is taxable. By comparing the information provided from the two reports the free cash flow information from will provide the company with a much truer understanding how the project will be performed. Comparing the company’s net income to its actual cash generated, an investor can determine whether the company is more aggressive or conservative in accounting for its performance.
a. They are recorded at cost and adjusted for inflation. b. They are recorded at market value for financial reporting because historical cost is arbitrary. c. Accounting principles require that companies report assets on the income statement.
Decrease the use of restrictive covenants in bond agreements. b. Take actions that reduce the possibility of a hostile takeover. c. Elect a board of directors that allows managers greater freedom of action. d. Increase the proportion of executive compensation that comes from stock