Being able to track sales compared to the previous years’ numbers is a valuable tool in being able to track business. They use this information to forecast on where they think the business will be heading in the next week, month, or year. If the debt percent gets to high then they need to adjust the amount of liabilities that they have to bring that number down. Knowing the times interest earned ratio allows the managers to know at what percent the company is earning interest on its net income. Investors find this information lucrative because the more expendable cash a company has the more likely they are to pay out in dividends for the stock holders..
The interest charged on the multimillion dollar loan clearly will have a significant impact on the company’s financial reports. Thus, the Financial Accounting Standards Board (FASB) established SFAS No. 34, “Capitalization of Interest Costs,” to provide guidance on how to record this type of interest properly. Basically, this standard explains that the interest on the loan for building your new facility can be capitalized, as part of the costs of the facility because it meets their two criteria, (1) it is not yet ready for use, and (2) it is currently under construction (p.
In order to achieve that goal, a plan must be implemented. The operating budget is that plan. This plan forces management to think critically about the firm’s operations and consider potential obstacles or issues it may face in the future. Most importantly, an operating budget is essentially a road map used by the management team to reach its destination in the most efficient manner possible. It contains several sub-budgets which serve as a plan for management to follow in order to attain the firm’s goals.
This document will discuss the purpose of pro forma financial statements. It will then illustrate how to prepare pro forma statements. Finally, it will identify some of the limitations involved in preparing and using pro forma statements. PURPOSE OF PRO FORMA FINANCIAL STATEMENTS Pro forma financial statements show the financial impact of achieving management’s forecasted level of sales and the projected costs associated with achieving those sales. Quantifying the impact of those projections enables management, the board of directors, and current and prospective shareholders and lenders to: 1.
WESTERN GOVERNORS UNIVERSITY Financial Analysis RJET Task 1 Executive Summary An extremely crucial element to any business entity is the financial analysis process. So what exactly is financial analysis? The actual definition is The assessment of the (1) effectiveness with which funds (investment and debt) are employed in a firm, (2) efficiency and profitability of its operations, and (3) value and safety of debtors' claims against the firm's assets. It employs techniques such as 'funds flow analysis' and financial ratios to understand the problems and opportunities inherent in an investment or financing decision. (WebFinance, Inc, 2013) Simplified it is the process of evaluating the current business, let’s say their effectiveness, and their future in their industry.
Capital Planning, also known as Capital budgeting, (or investment appraisal) is the planning process used to determine whether a firm's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing. It is budget for major capital, or investment, expenditures. IRR, Internal Rate of Return helps organizations figure out what the rate of return is on individual projects; what the project earns. This is important to companies as it helps gauge which projects to accept or reject. To accept a project, the IRR is equal to or greater than or equal to the required rate of return.
Accrual and Cash Basis Accounting Shayla Johnson ACC/290 April 25, 2012 Courtney Wilson Accrual and Cash Basis Accounting Accrual basis and cash basis accounting are two major methods of accounting that are used to keep track of a company’s financial status. The two methods are very different. One is more difficult and more expensive than the other, and only one is recognized and accepted by the generally accepted accounting principles (GAAP). Accrual accounting is a method that recognizes revenue when it is earned, and when it is realized. This means that it is reasonable to expect cash is to be received at a later date, though service has already been performed.
DFA is a firm believer in efficient markets. DFA is built around the theories of Fama and French, who are advocates of EMH that see high returns as a reward for taking on high risk. In their paper “luck versus skill in the cross section of mutual fund returns” (2009), they found that active management is always a zero sum game thru the idea of equilibrium accounting. They concluded that passive investing is more relevant. DFA believes in the value of sound academic research and the exceptional skills of traders in adding values into DFA seemingly passive funds.
Personal Budget, Balance Sheet, and Cash Flow Statement ACC547 June 03, 2013 Vaughn Johnson Personal Budget, Balance Sheet, and Cash Flow Statement Memorandum To: Mr. Peter and Lois Griffin From: Quahog Accounting Firm, Melissa Johnson, CPA Date: June 3, 2013 Subject: Personal Budget, Balance Sheet, and Cash Flow Statement Mr. Peter and Lois Griffin, Personal budgeting is an important tool for individuals who want to improve their financial status. Budgeting is the foundation needed to help get a handle on expenses and assist in reaching these goals. Careful planning and accurate record keeping will provide a better understanding of one’s financial status. When examining an individual’s financial success Quahog Accounting Firm determines the Griffins net income and gathers the expenses. This provides an understanding of how much income is needed to pay bills and how much is left to save.
Awareness of a person’s current financial position is the foundation of moving them towards a better financial position. Personal financial statements will help people understand the basics increasing and decreasing personal net worth. Ramsey (2013) could not emphasize the concept that a person’s earnings are their greatest resource. This article emphasizes it in even greater magnitude by discussing the necessity of protecting this greatest resource with insurance. Murphy’s (2009, lecture 4) time value of money with the compounding of earnings and Murphy’s (2009, lecture 7) investing recommendations correlate beautifully with this article’s third important point from young adults to invest early and develop a diversified investment