ACC/291 Week 1 Discussion Questions 1. How are bad debts accounted for under the direct write-off method? What are the disadvantages of this method? The direct write-off method is when a company determines that an account is uncollectible and it charges the loss to the Bad Debts Expense. An example of this would be when a customer is not able to pay their bill because due to a downturn in the economy, money may be tight if they have been laid off from their jobs or faced with unexpected hospital bills.
“For instance, the fall in the wage lowers people’s income and thereby reduces demand. That reduction may feed back to firms and reduce the demand for their goods, which might reduce the firms’ demand for workers” (Colander, The Limitation of Supply/Demand Analysis, 2010). “If these effects do occur, and are important enough to affect the result, they have to be added for the analysis to be complete. A complete analysis always includes the relevant feedback effects” (Colander, The Limitation of Supply/Demand Analysis,
This choice does, however, affect how individual shareholders’ accounts are reported in the balance sheet. Formally retiring shares restores the balances in both the common stock account and paid-in capital - excess of par to how those balances would have looked if the shares never had been issued. Any net increase in assets produced from the sale and ensuing repurchase is reflected as Paid-in capital—share repurchase. On the other hand, any net decrease in assets resulting from the sale and subsequent repurchase is repeated as a subtraction of retained earnings. Inversely, when a share repurchase is seen as treasury stock, the cost of the treasury stock is naturally disclosed as a decrease in total shareholders’ equity.
The first way to improve working capital is to make the excess liquid funds work for the company. These funds should be invested back into the company. This can be accomplished by reducing long-term liabilities with high interest rates such as the mortgages on facilities. The second is to manage the inventory held by the company. Currently Competition Bikes purchases inventory for production the month before it goes to the production line.
CanGo has very low profitability ratios, low turnover ratios and a high debt equity ratio. All these demonstrates that it’s in Cango’s best interest to take control of their financial performance, and focus on generating cash for the company, make better use of available resources and ensure that they are able to generate profit. The company should not take more debt and need to focus on how to use their existing resources to generate more cash flow to be able to operate and meet their financial obligations. Under the current operating system debt is increasingly being
Mantkelow (2014) explains lean manufacturing as based on "finding inefficiencies and removing wasteful steps that don't add value to the end product." Lean operations helps to reduce waste in production by using resources to only produce what the customer is demanding. A company that is using lean operations has measurable throughput. “Every minute that a product is not sold the cost accumulates and the competitive advantage is lost, this is the manufacturing cycle time” (Heizer and Render, 2010) this analysis could have been used to scale down production in the third and fourth quarter when it became obvious there was excess inventory. For starters, there is no value in holding 60 days' worth of inventory, to adopting lean principles would immediately help us to commit to inventory reduction and better alignment between production and demand.
The main purpose of the cash flow statement is to allow external users to assess the solvency and profitability of the company, to ensure the safety of their investment decisions. This projection can be made for the entire period covered by the business plan but because the date from it is used for making the Balance sheet it is recommended to go gradually year by
Like the partnerships the S-corporations basically have no federal income taxes. S-corporations owners are taxed on their portion of earnings. The popularity of S-corporations fluctuate with the income tax law. Sometimes the corporation taxes are more than the individual and vice versa. Some of the similarities to a closely held corporation is each shareholder's liability is limited to the amount of their investment.
E. Usually when operations get close to capacity limits, costs go up. Bottlenecks are more common, there may be congestion in the plant, and production could slow down. These costs need to be considered when setting a price for a special order that will move an organization out of its normal operating range (relevant range). In addition, managers need to think about whether the business will lose some customers because demand cannot be filled. ------------------------------------------------- 4.42 Make or Buy, Qualitative Factors - The Vernom Corporation A.
At this point, sales are virtually diminished, pricing is considerably offset from market trends, and the ability to maintain a level of profitability becomes a major challenge. An organization can put forth efforts in the attempt to reverse, or otherwise avoid, the decline stage by a few idealogic strategies, all of which are designed to readapt and conform to newly enhanced demands by the industry and its respective consumers. Most importantly, an organization can empower itself to readapt and act in a proactive manner by analyzing market trends and determining the future scope of a certain type of product or service within a reasnable timeframe prior to the onset of saturation and declination. Perhaps it would be in the best interest of an organization to produce/ provide a product of similar fashion, yet a unique alternative, before actually retiring or discontuing a product. For production to end indefinitely of a specific good, an alternative must be researched, produced, and introduced into the marketplace at the same time to create an equilibrium of market introduction of one product and declination of another.