C. Define profit. Profit is a financial gain that a company receives when the revenue of products and services are more than the cost to provide the service and / or product. 1. Explain the concept of profit
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.
These ratios assess the ability of the company to generate earnings, profits and cash flows relative to some metric, often the amount of money invested. They highlight how effectively the profitability of a company is being managed. Common examples of profitability ratios include return on sales, return on investment, return on equity, return on capital employed, return on capital invested, gross profit margin and net profit margin. All of these rations indicate how well this company is performing at generating profits or revenues relative to a certain metric. Solvency ratios this is one of many ratios used to measure a company’s ability to meet long-term obligations.
Profit Maximization is the process that a firm uses to establish where the best output and price levels are, in order to maximize its return. There are two primary methods that can be used to establish profit maximization. One method is the Marginal Revenue minus the Marginal Cost (MR-MC) method. When utilizing this method economists assume that profit would be at its highest when MR and MC are equal, which denotes that for every item made MP=MR-MC. When / if MR is higher than MC then MP would result in a profit for Company A.
As for the balance sheet, it shows the assets, liabilities, and stockholder’s equity for a specified date. The balance sheet reflects the organization’s financial position. The total assets within the balance sheet must equal the total liabilities and stockholder equity. The statement of cash flow states the cash inflows as well as outflows from the operating, financing, and investing transactions during a specific period. It reports the organization’s beginning and ending cash, investing and financing
The profit percentage of assets varies by industry, but in general, the higher the ROA the better. We can see a good trend over years in the company. Comments: Return on equity (ROE) is a measure of profitability that calculates how many dollars of profit a company generates with each dollar of shareholders' equity. The formula for ROE is: ROE is more than a measure of profit; it's a measure of efficiency. A rising ROE suggests that a company is increasing its ability to generate profit without needing as much capital.
Cash flow analysis Incremental cash flows Substitutionary analysis Pro forma analysis Which of these is the term for portfolios with the highest return possible for each risk level? Total portfolios Efficient portfolios Modern portfolios Optimal portfolios Which financial statement shows the total revenues that a firm earns and the total expenses the firm incurs to generate those revenues over a specific period of time — generally one year? Statement of
This determines the point in which a profit begins to be turned. c. What deficiencies does payback have as a capital budgeting decision method? d. Does payback provide any useful information regarding capital budgeting decisions? e.
1. What is meant by the term ‘economies of scale?’ The increase in efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods. 2. Explain why economies of scale are important to companies such as McDonald’s and GBK.
They can compare their cash flow forecast with the actual situation shown in the statement. If you look back at their forecast on page 71, you will see the received more cash inflows in December than they expected - £16,700 rather than £16,300. Their cash outflows were just a little higher (mainly due to spending more on wages than forecast). As a result, their cash outflows for the month were only £20 higher than their inflows. Consequences and solutions to cash flow problems Factor | Why It Causes a Cash Flow Problem | Low profits or (worse) losses | There is a direct link between low profits or losses and cash flow problems.