| cash conversion cycle | b. | inventory conversion period | c. | receivables collection period | d. | payables deferral period | e. | days sales outstanding | 6. The average length of time between the purchase of raw material and labor and the payment of cash for them is called the ____. a. | cash conversion cycle | b.
The practice of business valuation The first method of business valuation, discounted cash flow (the "DCF"), is based on the idea that the economic value of the asset is equal to the amount of future cash flow Company updated to reflect its risk. The discount rate used is the weighted average cost of capital. Is calculated as follows: • cash flows discounted at the explicit forecast horizon (visibility of the company); • the terminal value from estimating a growth rate to infinity; • the value of equity is the difference between the asset value and the resulting economic value of the bank debt and net financial and possibly other elements. The second evaluation method, the method of multiple analog approach is compared with other companies in the same sector. 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.
Two measures for evaluating a business's short-term liquidity are working capital and the current ratio. Working capital is the dollar amount of a company’s current assets less current liabilities as shown below: Working capital = Current assets - Current liabilities An excess of the current assets over the current liabilities implies that the company is able to pay its current liabilities. If the current liabilities are greater than the current assets, the company may not be able to pay its debts and continue in business. The current ratio is another means of expressing the relationship between current assets and current liabilities. The current ratio is computed by dividing current assets by current liabilities, as shown below.
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.
(i.e. If cash is invested in these investments, the cash decreases by the same amount that the cash equivalent increases; later on, when cash is withdrawn, the cash increased by the same decrease in the investment) Except the case if they were sold at a gain, the gain would be reported under operating activities which is not a part of the situation here. 3. Issuance of debt securities and issuance of equity securities are classified as Financing Activities in a statement of cash flows. Issuance of bonds and other debt and equity securities are included as cash inflows resulting from external financing.
Financial Statements Paper Ambar Rivera ACC 290 Stephen Wilson January 24, 2012 The four basic financials statements are balance sheet, income statement, retained earnings statement, and statement of cash flows. The balance sheet shows a picture at a point in time of your business’ assets (owns), and your business‘ liabilities (owes). An income statements reports the business revenues and expenses during a period of time. Presenting a retained earnings statement, indicates how much of the previous income was distributed, and how much was retained in the business to allow future growth. The statement of cash flows contains the information to show where the business obtained cash during a period of time and how that cash was used.
The retained earning statement reports changes in the interest of the company and retained interest in profits or surplus. This statement typically contains profits and losses, dividends, and issuance of stock. This report is given to the board of directors for a company, issued during a press release, or during a quarterly report earnings statement. The balance sheet tracks the assets, liabilities, and stockholders equity. The assets on the sheet are company holdings.
P7 Solvency is when a business is able to pay is expenses as it has money available within the business. To determine solvency, businesses can use ratios such as current ratio and acid test ratio. These ratios allow businesses and potential investors to see how well that are able to meet their liabilities. Current Assets Current ratio = Current liabilities The acid test ratio shows the assets compared to liabilities, like the current ratio, but by taking out the stock figure from the current assets, it shows how well a business can meet its liabilities without having to sell stock, Current assets - stock Acid test ratio = Current liabilities Profitability Ratios can also show how profitable a business really is either as a snapshot or over time. There are three ways of working out how profitable a business really is: * Gross profit percentage – This calculation shows gross profit as a percentage of the turnover.
Prior period adjustments are added to (or deducted from) the beginning retained earnings balance. Which of the following would be reported as other comprehensive income? An unrealized holding gain on available-for-sale securities is reported as other comprehensive income. The correction of an error is reported, net of tax, as an adjustment to the opening balance of retained earnings. Losses on impairment and gains from sales are reported as part of net income.
The year-to-date’s net cash provided by operations is $4,717.37 3. The cash balance at the end of period for the current month is $32,060.92 4. The beginning Retained Earnings balance is $189,037.60 5. The ending Retained Earnings balance is $214,102.64 The statement of cash flows information is important to users because what it shows is where the cash came from, what the cash is used for and the overall changes within the cash for the accounting