Ratios can tell if the business is using its assets appropriately, and if liabilities of the company are well-managed. It shows whether a business can invest in more capital, or if there is room for business growth. It shows whether a business will be able to pay off its debts or their short-term expenses or their daily expenses. It basically shows the strength and weaknesses of the business. It helps for forecasting on making certain financial decisions.
By using the information, manager can use cost of capital for restructure the market price and earning per share in order to bring advantage for company. By extension, it can help determine the decision whether to cancel or invest in project. Moreover, the cost of capital can help investors to determine the performance of the top management. With the intention of compare the ability of financial managers based on evaluation between the
This method converts net income to net cash from operating activities. When using the indirect method a company must convert net income to net cash by gathering net income and adding or subtracting adjustments, this would give the company the Net cash, without having to go thru detail transactions. . Even though the indirect method may be easier for a company to manage their cash flow, I believe that this method may bring more work in case of an audit. (Weygandt, Kimmel, & Kieso, 2010. p 618).
The success and effectiveness of a manager will result in investors in the manufacturing company or people who withdraw their investment. Investors in a capital market can view a company’s performance through earnings reports, using different ratios, and let us not forget balance sheets as well. A capital market can be a basis for income of sorts aside from merchandise. In essence, a manager can only be so effective without the means to support production in a manufacturing company. The strength or limitation of a capital market will result in the indication of how well a manufacturing company market value will be perceived.
The EVA trend seems to be almost mandatory for the larger companies, but there is no reason that it shouldn’t work just as well for their smaller firm. The implementation of this decision tool would benefit the company in three distinct ways. First of all, EVA data would provide stockholders and potential investors with comparable data to their competitors. If the investors are looking for EVA valuations to help make their assessment of companies, then it would be dutiful for OSI to provide this data. Stock prices are determined by
This can affect the growth of the company. By adopting IFRS, U.S. will also be adopting a big risk, if the quality of the new standards do not match the U.S. GAAP. Looking at the various possibilities of adopting IFRS in the U.S, it can be said that it is a big decision to be made. Although, in my opinion we should adopt to IFRS in financial reporting only if the benefits outweigh the costs of transition. If adopting IFRS benefit monetarily and make the transition easy for the investors, auditors, and the public companies, then there should be no harm in accepting it for financial reporting
Because earning management allows managers to reach their desired outcomes by influencing firm’s financial statements. According to Graham, Harvey and Rajgopal (2005), it is acceptable for senior mangers to use earning management so that they can provide positive and steady earning growth for the firm. In addition, the reputation of a CFO or CEO depends on whether the company they manage has a good prediction of future earnings. The labor market will regard a CFO as a “managerial failure” if the CFO perceive inability to reach the earnings target. In this case, the managers were encouraged to do their best and spend whether it was necessary to bring revenue.
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.
c) Credit (delayed payment) Answer: In order to reduce financial risk and ensure payment from Yusuf the right choice for the Ferro Industries would be letter of credit. In other words letter of credit is a flexible banking instrument, issued on behalf of bank's customer in order to secure a payment to seller. By using a letter of credit Ferro Industries was going to recieve payment from Yusuf within a few days. Moreover, letter of credit is a secure instrument so it can be used as collateral in this case very helpful for Ferro Industries in order to obtain a loan to finance manufacturing or other costs associated with international expansion. The other option which is full advance payment will be too risky for the buyer (Yusuf), because of transactions risks in contracts such as: shipping risks or seller non compliance risk.
The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The higher the quick ratio, the better the position of the company. The quick ratio is calculated as: What Does Receivables Turnover Ratio Mean? An accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.