So it’s less reliable than historical costs. From the relevance perspective, accounting numbers should be measured on market value. Market value accounting allows the decision maker to obtain true and fair view about the financial statement because it more representative about current
Are share repurchases good or bad? The answer, as might be expected, is a bit gray. Assuming the company has a certain amount of cash they wish to return to shareholders, the two ways they can do it are through dividends and share repurchases. Share repurchases are typically more flexible for the company, while dividends are more flexible for the shareholder. The basic answer is that share repurchases are great when the share price is undervalued, and not-so-great when the share price is overvalued.
The RRR can also be called as the discount rate, hurdle rate or the opportunity cost of capital. NPV takes into account the principle in economics referred to as the “time value of money” which implies that a dollar earned today is more valuable than a dollar earned tomorrow. It is to be noted that projects with zero or positive NPV are acceptable to a company from a financial viewpoint as the return from these projects equals or exceeds the cost of capital. Internal rate of return (IRR) is the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equal zero. IRR represents the discount rate at which the present value of the expected cash inflows from a project equals the present value of the expected cash outflows.
THE ALGEBRA OF BREAK-EVEN ANALYSIS Let QBE denote the break-even output level. By definition TR (at QBE) = TC (at QBE) or TR (at QBE) = TFC + TVC (at QBE) The break-even condition (1) holds true for any cost and demand functions. Hence, in general, when costs and demand are complex, the analysis of this condition might not be any simpler than the analysis of profit maximization. Yet, what is widely known in business as break-even analysis is indeed much easier than profit analysis, although it also starts with the above identity, because it makes a very important assumption: that price and average variable cost do not change with output level. Thus, if we assume that price and AVC are constant, (1) can be rewritten as follows P.QBE = TFC + AVC.QBE which yields: (1) Q BE = TFC P − AVC (2) K The difference “P !
All information relevant to financial asset prices must be costless, widely and quickly available. In information is costly to secure, or is known only to some investors, or spreads slowly, then asset prices might not reflect all information. 2. There must be no transactions costs in purchasing or selling financial assets. Otherwise, if news arrives that leads people to believe that some assets are more attractive, then their price may not rise to reflect this because the transactions costs involved in buying them could outweigh the gains that might be made.
SCF-Direct and Indirect Methods SCF-Direct and Indirect Methods A company may use a direct or indirect method to record cash flow and convert net income from accrual to a cash. The Financial Accounting Board allows both presentation methods of cash flows since both are appropriate depending on the company, both methods arrive to the same total amount. The main difference between direct and indirect methods is the way each method arrives to the amount and how it breaks down operating activities. The direct method of cash flow includes more details on operating activities; this method is also used to settle net income and cash from operating expenses. I believe the direct method is a better way for a business to keep track of cash flow because it accounts for every operating activity.
The consolidated corporation has substantially amount of internal sale derived from the component and subassembly sales but nevertheless, outsourcing is allowed. The problem in this case intertwined around the situation where the new product was designed by ISD and three potential component suppliers were invited to tender for supplying materials required in assembling the new product. Heidelberg’s quote was outstandingly more expensive from the second quote whereas the lowest quote was lower than Heidelberg can produce with zero gross profit even if ECD uses zero mark-up for the subassemblies which would be offered to Heidelberg. The reason for the one very low quote was that the supplier had recently entered the market. Zumwald is decentralized and ISD is willing to continue with the best bid which is far from the offer of the inside supplier, but the amount of independence in divisions seems to be creating conflicts instead of stimulating flowing cooperation and thinking of the common good.
Cash Basis and Accrual Basis Cash basis is an accounting method wherein revenues are recognized when cash is received and expenses are recognized when paid. This method is inferior to the accrual basis of accounting where revenues are recognized when they are earned and expenses are matched to revenues or the accounting period when they are incurred, rather than paid. The cash basis of accounting is usually followed by individuals and small companies, but is not in compliance with accounting's matching principle. It does not conform with the provisions of GAAP and is not considered a good management tool because it leaves a time gap between recording the cause of an action, sale or purchase, and its result of payment or receipt of money. 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.
But when he raised his query about dynamics of events he encountered other lacks: first of all Mr Hoffner’s weak willingness to handle his customer’s complaint, but also his own incompetence in trying to repair that issue. Now the question is: where Presto Cleaner should push itself about handling complaints? Mr Hoffner, basing on what Mr Shelton asks, assessed the damage more than $200. It may be too much only if there wasn’t any customer care. Providing a high-quality service has its risks, mostly being less cheap than competitors, so keeping your own customers loyal is very important.
Consequently, only suited to a direct-sale model. As such, may be more costly to market to customers iii. Relatively more vulnerable to supply chain disruptions • Benefits i. Lowers working capital needs, makes it easier to self-finance ii. Leads to beneficial cash conversion cycle iii.