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 information “Bookings” convey is that: the company record sale of virtual goods as deferred revenue and then recognize the revenue over the estimated average life the purchased virtual goods or as the virtual goods are consumed. The way that Zynaga recognized revenue is based on the estimated life of virtual goods. This is not the same information available in the GAAP-based financial statements. Under GAAP, companies use accrual basis which they recognize revenue when they perform the service. 2) Do you think this is a useful measure?
The total cost approach would recognize this to be the case, and would hopefully result in not implementing such a change. 1.14) What are several areas in which finance and logistics might interface? Finance and logistics interface in many aspects of an organization’s life, including budget decisions that impact the type of equipment the logistics personnel will use, and in inventory concerns, especially where inflation and deflation create differing values in stocked inventories of the same item. 2.1) In what ways can information be helpful in logistics and supply chain management? Information creates greater knowledge and visibility across the supply chain, greater awareness of customer demand, which can help improve planning and reduce variability in the supply chain, better coordination across the entire supply chain, and streamlined order
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
(Venkat, 2012). When businesses are able to centralize certain functions, such as finance or marketing, economies of scope are realized. (Hindle, 2008). Common or shared inputs, when one input is not completely consumed and then is available to produce a second product at no or little cost is another form of economy of scope, (Thomas & Maurice, 2011) as is utilizing the output of one process as the input of another. (Hindle, 2008).
Some expenses will increase as sales increase, whereas some expenses will not change as sales increase or decrease. Variable and Absorption Costing At least two methods can be used in manufacturing companies to value units of product for accounting purposes—absorption costing and variable costing. These methods differ only in how they treat fixed manufacturing overhead costs. Variable costing includes only variable production costs in product costs. Direct materials, direct labor and variable manufacturing overhead costs would ordinarily be included in product costs under variable costing.
c. (3) expand testing of automated application controls used to reduce control risk to cover greater portions of the fiscal year under audit. d. (3) The sales system automatically computes the total sale amount and posts the total to the sales journal master file. 12-18 a. (1) A system that performs relatively uncomplicated processes and produces detailed output. b.
Loyalty points program PDL operates a loyalty points program, which will impact on the measurement of sales revenue, important for analysts. Currently, a sale transaction with point value attached is recognized as a sale entirely in the current period. An expense and liability for the expected cost – not sales value – of goods to be redeemed in the future is recognized in the same time period as the sale. This policy maximizes the sales value recorded with the initial transaction. It does not reflect the substance of the transaction, though, which is that PDL has rendered multiple deliverables in sale: both the initial sale, and the subsequent sale based on points value are being sold.
Managers need to be careful of overpricing or under-pricing goods due to allocation of costs to each product. As was shown with the Wilkerson case on further analysis of costs using the activity based costing method the company had been under-pricing some goods while over pricing others. This was affecting their profits and their ability to make sound business decisions on the pricing of products to meet market demands. 6. Activity based costing is more complex to use however used correctly should improve the accuracy of allocating indirect costs to cost objects.
Incremental cash flow is additional revenue that is generated when a business or other type of organization launches a new project. Cash flow of this type is considered to be outside the standard and usual sources of cash that the organization enjoys, and remains in that class or status until the project is fully integrated into the normal operations of the entity. One of the benefits of identifying incremental cash flow is that it makes the task of measuring the progress, or lack of it, associated with the new project. This in turn aids in evaluating the value of the project to the organization, making it easier to determine if the project should continue or be abandoned. In identifying the true contribution of the incremental cash flow, several factors must be considered.