To make their reports meaningful, a company reports the recorded data in a standardized way according to generally accepted accounting principles (GAAP). The remainder of this paper will illustrate examples of the income statement and balance sheet. In addition, this paper will discuss a few basic accounting principles along with a brief discussion of the difference in how equity is reported for an owner invested firm versus a not-for-profit entity. Construct Brandywine’s 2007 Income Statement In order to construct Brandywine’s 2007 income statement, one must first collect the data required for reporting. The income statement reports the success or profitability of a company’s operations over a specific period of time (The Income Statement, 2011).
TARGET CORPORATION FINANCIAL ANALYSIS AND INTERPRETATION The ability of a business to meet its short-term cash requirements is called liquidity. It is affected by the timing of a company’s cash inflows and outflows along with prospects for future performance. Efficiency refers to how productive a company is in using its assets, and it is usually measured relative to how much revenue is generated from a particular level of assets. They are both important and complementary. Two measures for evaluating a business's short-term liquidity are working capital and the current ratio.
The assets on the sheet are company holdings. The liabilities are the salaries, accounts payable, and notes payable. The balance sheet is a quick look at the company as a whole at any time which is usually over a specific period of time. The balance sheet should be available on demand for accounting managers to make decisions on where the company stands on dispensable cash and what can be used to purchase materials for inventory. The statement of cash flow tracks all the cash moving in a company during a specific accounting period.
The computation of ratios facilitates the comparison of firms which differ in size. Ratios can be used to compare a firm's financial performance with industry averages. In addition, ratios can be used in a form of trend analysis to identify areas where performance has improved or deteriorated over time. Because Ratio Analysis is based upon Accounting information, its effectiveness is limited by the distortions which arise in financial statements due to such things as Historical Cost Accounting and inflation. Therefore, Ratio Analysis should only be used as a first step in financial analysis, to obtain a quick indication of a firm's performance and to identify areas which need to be investigated further Profitability.
How do you explain the use of time value of money (TVM) in business? What considerations are made when calculating TVM? How may you use TVM to create your own, or someone else’s, retirement plan? Answer The time value of money (TVM) is used in businesses for the purpose of finding out the suitability of an investment and understanding returns in the context of opportunity costs. It helps us to understand the relationship between the usage of money and the value of returns it provides from a particular venture or avenue based on the time it would take for providing the return and the future value of the return.
The income statement is important because it will show whether the company’s revenue exceeded expenses for a specific period resulting in net income or the amount the company may have lost because the expenses exceeded the revenue. The retained earnings statement is equally important because it will indicate the exact reason why the company’s retained earnings increased or decreased over the reporting period. The balance sheet is important because it is the overview of the company’s financial condition at the time of the reporting period and the statement of cash flow’s is important because “Reporting the sources, uses, and change in cash is useful because investors,creditors, and others want to know what is happening to a company’s most liquid resource.” (Weygandt,
This expression is also used as a general evaluation of a firm's overall financial health over a given period of time, and can be used to compare related firms across the same industry or to compare industries or sectors in aggregation. While evaluating financial performance for our companies we can take help of the financial ratios as well. According to Barron the performance of a business enterprise is affected by its strategies and operations in market and non-market environments. (Baron, 2000) Financial ratios are an important element in determining the performance of an organization. Financial ratios should be analyzed by a professional accountant.
Caladonia Products Integrative Problem FIN/370 May 21, 2011 Caladonia Products Integrative Problem Capital budgeting in corporations is the method that rejuvenates and revitalizes itself ,by adjusting previous projects to the present and discovering new ones ( Keown, Martin, Petty, & Scott, 2005). The method entails how a corporation determines whether projects such as building a new plant or investing in a long-term investment are of value (Capital Budgeting, n.d.). Often potential project's lifetime cash inflows and outflows are evaluated in order to decide whether the returns created meet an adequate target measure (Capital Budgeting, n.d.). The subject of this assignment is to prepare calculations and a response to Caladonia Products Integrative Problem. The methods used in this assignment are the payback period, NPV, IRR, and describing factors if Caladonia Products were doing a lease versus a buy will also be considered.
Kevin Leonel Sonilal XACC/290: Principles of Accounting I Professor Steven German December 6th, 2013 Financial Statements The four basic financial statements are the balance sheet, the income statement, the retained earnings statement, and the statement of cash flows. The incomes statement demonstrates how well the business has performed for a certain period of time. The items reported in the income statement are its revenues and expenses. From an internal user’s standpoint, the financial statement is a management tool. It can be used to evaluate the business’ strengths and weakness, and helps in deciding what route the business should take to make improvements or further its success.
In this approach, the economic value of the assets of a company is the result of a multiple of its earnings: operating profit multiple or multiple of EBITDA. The multiple can be considered a multiple or a multiple stock transaction. It comes from the observation of the value of similar businesses. To obtain the value of equity, we subtract the value of the bank debt and net financial and possibly other elements.