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.
Can you explain the differences and what they might be due to? The average performance of DFA 9-10 fund excess crsp 9-10 index, but slightly lower than s&p500 index. It means the portfolio is diversified to eliminate unsystematic risk, but tracking error is also exist.The reason of the tiny difference may be timing or security selection. Can you explain the differences and what they might be due to? The average performance of DFA large company value fund has very small difference with crsp cap decile #1.
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).
Cash Basis and Accrual Basis Cash basis is an accounting method wherein revenues are recognized when cash is received and expenses are recognized when paid. This method is inferior to the accrual basis of accounting where revenues are recognized when they are earned and expenses are matched to revenues or the accounting period when they are incurred, rather than paid. The cash basis of accounting is usually followed by individuals and small companies, but is not in compliance with accounting's matching principle. It does not conform with the provisions of GAAP and is not considered a good management tool because it leaves a time gap between recording the cause of an action, sale or purchase, and its result of payment or receipt of money. It is, however, simpler than the accrual basis accounting and quite suitable for small organizations that transact business mainly in cash, which is also called cash accounting.
In contrast, if there is not active market, market value accounting requires the use of estimation subject to uncertain assumptions, personal judgment, and subjective information about future values, such as discount rates and allowance for doubtful accounts. FASB has broadened the framework and disclosure practices to increase the reliability of market value accounting. However market value accounting is still emphasize the role of managerial judgment in the valuation process. Besides, market value accounting offers management the opportunity to manipulate the bottom line. So it’s less reliable than historical costs.
The knowledge of a firm finding out where marginal costs equal marginal revenue is very difficult so some firms may not be able to profit maximise as they do not have the correct knowledge required to do so. Instead firms may decide to do cost plus pricing, this occurs when a firm sets its price equal to the average costs at a normal capacity output and then they add a certain percentage mark up. So the level of the price is the level of average cost plus a certain percentage which will be the profit gained. They may decide to do this as it may stop attracting other firms into the market as they are not producing large amounts of profits. Another different objective a firm could have could be to revenue maximise.
What steps do you recommend the company take? Base your forecasts on the 1996 performance. • Finance it through debt; it has so little and is a big company by this point. But don’t take too much, still achieve a DPO reduction so that the debt is minimal • No, it will not be possible. • Would need to reduce working capital by $260M • Would need to increase gross margins by 328bps • If growth is so important, then a price raise would likely slow that.
The opposite occurs for a balance of payments surplus. However, the extent to which this occurs depends on the price elasticity of demand for exports and imports on the Marshall Lerner Condition. This condition states that devaluation (a fall in the value of the currency) will lead to an improvement on the current balance will be seen if the combined elasticities of demand for exports and imports are greater than 1. The size of any J-curve affect in the short run will also affect this extent. The J-curve effect is a short term
From an accounting prospective, the major problem with the calculations mentioned in the article is determining the rate of return and length of the marketing investment. While the initial value of the “investment”, i.e. marketing expense, can be easily determined, determining the real value after the investment has been made has the potential to be biased without a commonly used measurement. The value of the investment could also fluctuate from year to year based on the companies’ profitability even though marketing had not direct
The consolidated corporation has substantially amount of internal sale derived from the component and subassembly sales but nevertheless, outsourcing is allowed. The problem in this case intertwined around the situation where the new product was designed by ISD and three potential component suppliers were invited to tender for supplying materials required in assembling the new product. Heidelberg’s quote was outstandingly more expensive from the second quote whereas the lowest quote was lower than Heidelberg can produce with zero gross profit even if ECD uses zero mark-up for the subassemblies which would be offered to Heidelberg. The reason for the one very low quote was that the supplier had recently entered the market. Zumwald is decentralized and ISD is willing to continue with the best bid which is far from the offer of the inside supplier, but the amount of independence in divisions seems to be creating conflicts instead of stimulating flowing cooperation and thinking of the common good.