Accounting Angel Martinez Acc 11/28/2011 Accounting Accounting requires collecting information and displaying it on statements so that business decisions can be made for the future of a company. The purpose of accounting is to document what the company is spending and what revenue is being collected. Accounting provides a business with correct and documented information on what is profitable and what is negative. Without accounting, businesses can not prosper or make decisions on growth or downsizing. Accounting requires that all transactions be recorded to ensure accuracy when giving financial details to board members, stock holders, and the IRS for tax purposes The income statement posts revenues and expenses.
Executive summary The performance of a firm is most frequently measured by their accounting earnings. What the performance statistics show are of major interest to management, employees, suppliers, investors, customers, the public, and regulators. (Prior, Surroca, & Tribó, 2008) To better distinguish themselves from poor performers, better-performing firms look to financial reporting to facilitate stakeholders to make financial decisions. In an attempt to control fluctuations in reported earnings, firms often use a type of management accounting behavior called income smoothing to steer earnings to levels they consider desirable. In addition, an inherent conflict of interest exists when management, which has the responsibility for preparing financial reports, cannot impartially report on its own achievements.
The analyses reveal many things about the company’s financial position and performance, and also which users are interested in each type of ratios. Liquidity Ratios Liquidity Ratios measure the short-term ability of the company to pays its maturing obligations and to meet the unexpected needs for cash. Short-term creditors such as bankers and suppliers are particularly interested in assessing liquidity. The current ratio, the acid test, receivables turnover, and inventory turnover are ratios that are used to determine Berry’s Bug Blasters short-term debt paying ability. (Scott.
This is just one of many statements that investors will look at when looking into a company whether it is because they want to invest or are shareholders. Information from the income statement shows the users the activity of the company. The gross profits and the expenses are also important because of the profit. Expenses give the net income or (net loss) for the accounting period in question. These are important to the investors who are looking at the company but also to managers.
Substantive Procedures for Cash Outflow Irregularities ACC/566 Forensic Accounting September 13, 2014 Businesses have goals that include making a profit. In order to have a profitable business, it must be one that offers goods and services that are appealing to the people. When this occurs, there is a demand for the products and services and in some cases a need. Because the financial industry has its ups and downs, businesses must comply with certain rules and regulations in order to stay in business. Not only should they adhere to these guidelines and laws set forth, but they must internally protect their assets or prized possessions in order to continue the inflow of prosperity.
The income statement is important because it will show whether the company’s revenue exceeded expenses for a specific period resulting in net income or the amount the company may have lost because the expenses exceeded the revenue. The retained earnings statement is equally important because it will indicate the exact reason why the company’s retained earnings increased or decreased over the reporting period. The balance sheet is important because it is the overview of the company’s financial condition at the time of the reporting period and the statement of cash flow’s is important because “Reporting the sources, uses, and change in cash is useful because investors,creditors, and others want to know what is happening to a company’s most liquid resource.” (Weygandt,
You will be introduced to Monte Carlo analysis and you will use this to decide on the optimal capital structure for Diageo. Learning Objectives The static trade-off theory of capital structure is one of the models used to determine the optimal capital structure. While tax shield are well understood, the sources and costs of financial distress, particularly in a dynamic setting, is less understood. This case studies the capital structure decision of a firm that is undergoing fundamental changes in the business. The heart of the case is a model that is developed by the firm’s corporate treasury staff to help them think about the static tradeoff of tax shields and financial distress in a dynamic setting.
P7 Solvency is when a business is able to pay is expenses as it has money available within the business. To determine solvency, businesses can use ratios such as current ratio and acid test ratio. These ratios allow businesses and potential investors to see how well that are able to meet their liabilities. Current Assets Current ratio = Current liabilities The acid test ratio shows the assets compared to liabilities, like the current ratio, but by taking out the stock figure from the current assets, it shows how well a business can meet its liabilities without having to sell stock, Current assets - stock Acid test ratio = Current liabilities Profitability Ratios can also show how profitable a business really is either as a snapshot or over time. There are three ways of working out how profitable a business really is: * Gross profit percentage – This calculation shows gross profit as a percentage of the turnover.
The Four Financial Statements Merced Villalobos ACC/290 January 11, 2012 Eleazar Pando The Four Financial Statements There are four basic financial statements. The first statement is an income statement that shows the companies’ revenues and expenses. The second statement is a retained earnings statement that shows the amount and causes of changes of retained earnings in a given period of time. The third statement is a balance sheet that shows what the business owns and what it owes. The fourth is a cash flow statement that shows where the business got earnings in a period of time and where that money was used.
Other reason is that accurate accounts allow ASDA financial team to compare its financial performance with previous year, it is really important because this can show business its future prospects and forecast cash flow and will show them profit and loss. Good records provide the