• 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.
A cash flow statement will show not only the cash that is left at the end of the day, but also the amount that entered and left the business. This allows the company to see whether the cash in the business is increasing or decreasing. It is important to know this before the cash in the business gets too low. The business might have many active jobs but lagging receivables can be a problem when it comes to covering unexpected expenses. A cash flow forecast is also prepared which gives an estimate of the amount of cash the company expects to flow in and out and also includes all the projected income and expenses.
3) The sales budget is to estimate the profitability. As we know, sales budget is used to structure the company in a way to maximize profits. With an accurate projection of future sales, the company is actually can save the expenses and protects the company from failing. If the sales projection is overstated, the president has to decide whether to proceed or to have other alternative planning.
CAGR: Operating income, % Operating income (EBIT) measures a company's earning power from ongoing operations and it largely used by investor because it excludes the effects of different capital structures and tax rates used in different companies. EBIT is "capital structure neutral" and is therefore a more appropriate way of comparing the earnings of different companies than net income
It does this because it means that it’s not using retained profits to purchase property as this will reduce access to ready funds. It also allows the business to move on quickly if the new market proves to be unprofitable. In addition, Ikea leases some of its equipment such as cash registers because it provides the business with the latest technology and remedial action if the machines have a problem. Through the use of leasing as a funding option, Ikea is able to increase profits, grow into new markets, remain liquid and solvent and use its assets efficiently, thereby meeting its financial
Cost savings can be computerized accounting programs reduce staff time doing accounts and reduce audit expenses as records are neat, up-to-date and accurate. This system allows them to record business transactions accurately and generate financial reports quickly for management review. However if Rumble carry less transactions this means they won’t need to have computerised accounting system because it is very expensive for them to use. In this case it is best for them to have manual accounting system because it is reliable, cheap and easy to use. They can easily do their transaction without problems.
It is possible that a company will decide to retain all of the net income in lieu of paying the shareholders. It may be necessary to retain all the net income to expand the business. The retained earnings statement communicates these funds. Lenders watch their customer’s dividend payment on this statement carefully. If a company pays out dividends, it may reduce their capability to pay their liabilities.
Considering the time value of money is important when evaluating projects with different costs, different cash flows, and different service lives. Both methods of evaluating long-term investments, NPV and IRR, focus on the amount of cash flows and when the cash flows occur.. For the purpose of making NPV and IRR calculations, managers typically use the time period when the cash flow occurs. An investment project with a short payback period promises the quick inflow of cash. It is therefore, a useful capital budgeting method for cash poor firms. A project with short payback period can improve the liquidity position of the business quickly.
the general ledger include cash, account payable, accountant receivables and common stock. In the subsidiary ledger consists of customers and creditors. The purpose of the control account is to keep the general ledger free of unnecessary information yet have the correct balance for the financial statements. The advantages of using the subsidiary ledgers it keeps account information up to date and holds account information in one transaction another advantage is that it does not have unnecessary information in the journey only what is need it frees up the ledger. It also help pin point errors by focus more on one personal account other than any different ones.
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.