• A financial asset is considered to have value if it has the ability to generate positive cash flows. • A financial asset is considered to have value if it is acquired at its market value • A financial asset is considered to have value if it is acquired a its book price. When determing the value of a firm, which of the following statements is true? • The timing of cash flows a firm can generate is very important in determing the value of a firm. All else being equal, cash received sooner is better.
The four financial statements therefore assist them to determine if their resources are being put into efficient use since this provides an indication of whether there is any risk they will end up losing the invested funds (Debarshi, 2011). Potential shareholders also rely on the financial statements to make a comparison of the performance of different entities before making important investment decisions (Taparia, 2004). Creditors Creditors supply goods and services to businesses on credit. They are mainly concerned with the liquidity of the firm and its ability to meet their obligations when they are due (Debarshi, 2011). They therefore rely on the balance sheet and income statement to determine the profitability and liquidity levels of different firms in order to make well grounded decisions relating to whether to go ahead and advance them goods and materials on credit (Debarshi,
As it determines the price of the product, and the price based on absorption costing does ensure that all costs are covered. Absorption can provide management with accurate information concerning product cost. The variable method is beneficial by providing an output that is closer to the cash flow of the company that may be short on cash flow. Variable costing aids in the analysis of cost-volume – profit by separating the variable and fixed in the income statement is another benefit. Which method would lead to the best decision when a competitor is submitting a lower bid for your product?
• A differentiator must control its cost structure to ensure the price of its products does not exceed the price customers are willing to pay for them • When differentiation stems from the design or physical features of the product, differentiators are at great risk of being imitated ▫ Example? • When differentiation stems from superior service or reliability, or from any intangible source a company is much more secure. ▫ Example?
ALL WK 1, DQ’s: WK 1, DQ 1: What is a business’s obligation to build an ethical culture and balance its desire for profit with ethical responsibilities to employees, customers, society, and the environment? Ethics is different from one person to the next, so it is imperative that business clearly define the norm for staff members and management. The decisions organizations make influence more than business partners, affiliates, culture, and others. It is important for organizations center of attention on maximizing shareholder revenue. Therefore, maximizing profit without causing destruction to the business culture can be a balancing act for most organizations.
Without proper cash management and regardless of how fast a firm’s sales or reported profits on the income statement are growing, a firm cannot survive without carefully ensuring that it takes in more cash than it sends out the door. When analyzing a company's cash flow statement, it is important to consider each of the various sections that contribute to the overall change in cash position. In many cases, a firm may have negative overall cash flow for a given quarter, but if the company can generate positive cash flow from its business operations, the negative overall cash flow is not necessarily a bad
These ratios will be calculated from the income statement, balance sheet and statement of cash flows Liquidity Liquidity Ratios measure a company’s ability to meet its short-term debt obligations without disrupting normal operation. The higher the ratio the better a company will be at meeting its short-term obligations as well as have extra cash to cover any unforeseen cash requirements. The liquidity measures we will use are the current ratio, current cash debt ratio, inventory turnover, average days in inventory, receivable turnover ratio and average collection period. The current ratio measures the company’s ability to pay its short-term liabilities (payables and debt) with short-term assets (cash, receivables and inventory). Tootsie Roll exceeds its ability to meet short-term debt obligations with $3.45 in current assets for every $1 in current liabilities.
Businesses require a tool to measure the execution of objectives. As far as the goals of objectives they are supposed to align with a stated vision and mission. Effective objectives ensure that daily activities align with the big picture or if there will be a need to adjust redirect focus. A balanced scorecard is a tool, generated by Robert S. Kaplan and David P. Norton. Authors Pearce and Robinson (2009) suggest, a balanced scorecard “Is a set of measures that are directly linked to the company’s strategy,” “Directs a company to link its own long-term strategy with tangible goals and actions,” and “Provides a framework to translate a strategy into operational terms” (p. 202).
Accrual and Cash Basis Accounting Shayla Johnson ACC/290 April 25, 2012 Courtney Wilson Accrual and Cash Basis Accounting Accrual basis and cash basis accounting are two major methods of accounting that are used to keep track of a company’s financial status. The two methods are very different. One is more difficult and more expensive than the other, and only one is recognized and accepted by the generally accepted accounting principles (GAAP). Accrual accounting is a method that recognizes revenue when it is earned, and when it is realized. This means that it is reasonable to expect cash is to be received at a later date, though service has already been performed.
Also, which approach leads to higher number of sales and or larger dollar amount of total sales? The purpose of this research project is to answer these questions and to make a determination and hypothesis. There are many other questions to which my research will be directed. One question that comes to mind is whether lowering the price of the product of service to the lowest price possible at the onset of the sales process is better than coming out with a higher price and negotiating a lower price as the sales pitch progresses. Many of the people I work with including the sales managers for whom I work, constantly tell sales people on the sales floor to “hold your value” in other words telling you to start high with the price and then you have room to come down.