The computation of ratios facilitates the comparison of firms which differ in size. Ratios can be used to compare a firm's financial performance with industry averages. In addition, ratios can be used in a form of trend analysis to identify areas where performance has improved or deteriorated over time. Because Ratio Analysis is based upon Accounting information, its effectiveness is limited by the distortions which arise in financial statements due to such things as Historical Cost Accounting and inflation. Therefore, Ratio Analysis should only be used as a first step in financial analysis, to obtain a quick indication of a firm's performance and to identify areas which need to be investigated further Profitability.
In addition, this essay will propose some related recommendations to lighten the impact of ethical deficiency. Body: 1. Topic of paragraph: fraudulent financial reporting Topic sentence: Fraudulent financial reporting is pervasive phenomenon in the field of accounting. Managers’ purpose: in order to stimulate the stock price Focus on short-term profits Not available for the long-term development of a company 2. Topic of paragraph: embezzlement of assets Topic sentence: Embezzlement of assets is the use of company’s property for other personal purpose rather than for company’s profits or development.
Objective of the case: The main objective of the case is to bring emphasis on auditing high risk accounts, like cash and inventory. PricewaterhouseCoopers did an adequate enough job during their audits to show they questioned and investigated Campbell’s Riskier accounts. Most Important highlights: Stockholders file a class-action lawsuit against Campbell due to questionable business practices and accounting schemes to enhance reported earnings. Included in the lawsuit was it’s independent auditors PricewaterhouseCoopers (PwC). To maintain reasonable gross profit margins Campbell executives reportedly instructed it’s accountants to record large, period-ending trade discounts of 15-20% as selling, general and administrative expenses instead of reductions of gross revenues.
There must be an economic gain and that this gain must primarily benefit the taxpayer personally. In this case there was no direct economic gain. The Taxpayers received an indirect economic gain by receiving a benefit of the value of the trip without any reduction in their wealth. 2. The Court references code section 119 which excludes from gross income
The act has had a significant impact on financial institutions, ranging from a possible decline in profit margins to increased staffing to address regulatory compliance concerns. Lending decisions are under greater scrutiny, dictating that institutions practice greater discretion and decreasing capital available to potential borrowers. The Federal Reserve’s debit-card interchange fee rule, born out of the Durbin Amendment of the Dodd-Frank Reform Act, stipulates that certain debit-card issuers can no longer charge merchants as much as they once did for customers’ debit-card transactions. The interchange fee cap was intended to lower costs for merchants who will
Likewise, under the accrual basis, companies recognize expenses when incurred (the matching principle), even if cash was not paid. An alternative to the accrual basis is the cash basis. Under cash-basis accounting, companies record revenue only when cash is received. They record expense only when cash is paid. The cash basis of accounting is prohibited under generally accepted accounting principles.
Most scoring models are not sufficiently precise to trust small differences in total scores. Furthermore, ranking projects by their project scores is generally incorrect anyway (Campbell, G. M. (2014)). Typical scoring systems ignore project cost and, therefore, fail to represent "bang for the buck." Prioritizing projects requires being able to estimate the costs, value, and risks of alternative project portfolios. But, both sides of the equation are difficult.
Conversely, common-sense is very different. It is the ‘sound and prudent judgment based on a simple perception of the situation or facts’. (Merriam-Webster, 1996). Explanations are untested, rely on a limited global view and help to reinforce the familiar. As a result of this, these explanations are not at all reliable due to the fact that knowledge is not obtained from a dependable source and that the knowledge itself and evidence behind it is lacking in detail.
The Distress Risk Puzzle in Turbulent Times - Default risk during the financial crises SANNA BATZ* ANDERS NORDSTRÖM** Bachelor Thesis Department of Finance, Stockholm School of Economics Tutor: Jungsuk Han, Assistant Professor June 1, 2011 ABSTRACT Studies on whether risk of default is systematic or not have led to the discovery of the distress risk puzzle. It is a rather new anomaly and its implications are that empirical evidence seems to indicate that higher default risk results in lower returns. The purpose of this thesis is to clarify whether default risk is systematic, using Altman’s Z-score as a proxy for default risk. We also investigate some of the possible explanations of the distress risk puzzle by applying empirical tests on the times surrounding the financial crisis. We first confirm the existence of the puzzle during a longer period; however our findings suggest that this relationship is spurious due to a leverage effect.
Critically discuss the extent to which Fayol’s classic analysis of the management function has largely been made redundant by the more recent empirical studies of what managers actually do, such as that favoured by Mintzberg Henri Fayol’s classical analysis of management has been thought to have been largely disregarded by more recent empirical views such as that of Henry Mintzberg’s. Although many would agree with this statement, unavoidable evidence shows the opposite. It is undoubtable that Fayol and Mintzberg developed different approaches to management however, this does not imply that Fayol’s views are unsuitable for today’s management practices. Fayol’s and Mintzberg’s description of managers is the one that contrasts the most in terms of behavior however, when it comes to management functions and the roles that managers must perform, their core ideas are very much alike. Mintzberg adds more detail and reality to Fayol’s more abstract and idealistic perspectives on management and therefore expands on Fayol’s ideas, rather than making them irrelevant.