Another argument in favour of hedging is that the company is able to focus on their core business instead of focusing on the market movements of the underlying asset. In our case the interest rate plunged and the future was not favourable. On the contrary, if the interest rate had increased, the upside risk would have been limited. 2. Uncertainty and protection The first mortgage loans generate interest earnings which are not much affected by interest rate fluctuations.
d. Business entities will need far less assistance from accountants because the financial reporting process will be quite easy to apply. 26. In the conceptual framework for financial reporting, what provides "the why"--the goals and purposes of accounting? a. Measurement and recognition concepts such as assumptions, principles, and constraints b. Qualitative characteristics of accounting information c. Elements of financial statements d. Objectives of financial reporting 27.
A rising ROE suggests that a company is increasing its ability to generate profit without needing as much capital. It also indicates how well a company's management is deploying the shareholders' capital. In other words, the higher the ROE the better. Falling ROE is usually a problem. 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.
A good accountant from a utilitarian perspective would assess how the organization is creating and maximizing utility. Utility can be defined in many ways but a concise description is utility is the happiness added by a certain activity. This utility would be assessed all by values as utilitarians try to attach value created to every decision they make. Non-financial information is not important for good accountants to worry about, only financial information that is important for societal value. As long as the organization is maximizing the utility with the decisions they make, the good utilitarian accountant should not worry themselves with the moral implications of the decisions they made.
The constant hurdle rate results in a flat line and doesn’t correlate risk with return. With nearly $2 billion being invested in upcoming capital projects, the discount rate to be used within the firm needs to be more accurate, account for risk, and not destroy shareholder’s value. Currently the firm is not accurately assessing their future. Telecommunications Services is returning capital below the corporate hurdle rate and Products & Systems is above the rate, but the firm is not factoring in riskiness of the segments individually. Question 2 [pic] Use CAPM model to estimate their cost of equity.
Figures on the cash flow forecast at this point will look very poor. Therefore it is important for the company to make sure that they are making enough money from the products that they are selling and haven’t under-priced them if they have used expensive materials. If the materials are too expensive then they must make sure that they have looked into buying cheaper material as long as this doesn’t affect the quality of the product that they are selling or this may also affect how well the product sells. Expenditure Changing the company’s expenditure will have an effect on the profit or loss it makes. If there is a large increase in some of the figures of the expenditure, it could mean that there would be either a large decrease in the profits made by the company or that the company’s loss figure has increased suddenly.
CanGo has very low profitability ratios, low turnover ratios and a high debt equity ratio. All these demonstrates that it’s in Cango’s best interest to take control of their financial performance, and focus on generating cash for the company, make better use of available resources and ensure that they are able to generate profit. The company should not take more debt and need to focus on how to use their existing resources to generate more cash flow to be able to operate and meet their financial obligations. Under the current operating system debt is increasingly being
The CPA or CPA firm would at least have reputational interest in the financial report that it “managed”. This human nature will impair the CPA or CPA firm’s independence, and will decrease the reliability of the audit report. Second, self-interest focuses on the interest of decision makers. The CPA or the individual partner of the CPA firm would probably increase his own compensation by serving as both the entity’s consultant and auditor. On the other side, for the entity, hiring the same firm as both consultant and auditor can save it audit expense, since the CPA or CPA firm has already known a lot about it when performing consulting, thus decreasing its audit hours.
After the level goes to certain degree, adding up the same amount of inventory investment would lead to less increase in customer satisfaction. Therefore, in order to balance the cost with the desire to satisfy the customer, it is not enough to only increase inventory investment, the best solution
As inflation levels increase, it causes the spot rate of the currency in which the level of inflation is increasing to decrease. Therefore, as mentioned in the case, the level of inflation of Thailand could increase, due to strong consumer spending, the value of the baht would depreciate against the dollar. This occurs when Relative PPP is used. Absolute PPP, considers the absence of international barriers and how consumers ‘demand shifts towards the country with the cheapest prices. Relative PPP would affect Blades more than Absolute because they cannot adjust their prices if inflation increases because they are set in a fixed agreement.