a. Adjusted trial balance b. Comparative balance sheets c. Current income statement d. Additional information 4. The primary purpose of the statement of cash flows is to a. provide information about the investing and financing activities during a period. b. prove that revenues exceed expenses if there is a net income.
Torie Freeman XACC 280 Randi Watts Ratio, Vertical, and Horizontal Analyses The Financial statement tools used are Horizontal, Vertical, and Ratio analysis. There functions are to evaluate the significance of financial statement data. Horizontal analysis function is to evaluate and compare data that is provided by the financial statement and is mainly used by stockholders and company management. Vertical analysis expresses the amount of the financial statement as a percentage and also makes it so that companies can compare how their doing compared to others. Ratio analysis is used to evaluate the liquidity, profitability, and solvency ratio.
INTRODUCTION This essay will discuss the concept of real options and their application in the capital budgeting exercise. We will describe a real option and its valuation using commonly used pricing formulae. We will then try and estimate project uncertainty, also known as volatility. Once we’ve estimated volatility we will demonstrate obtaining this estimate using ASX listed company, the Coca Cola Amatil Group. REAL OPTIONS AND THEIR INCORPORATION WITHIN CAPITAL BUDGETING A real option is a form of derivative, similar to a forward contract, but with a couple of important differences.
Earnings management can be fundamentally classified as either accounting related, involving the manipulation of accounting records through aggressive or fraudulent applications of accounting principles, or operating related, involving choices made by management regarding the timing of investment or operating activities, with the result that reported earnings are influenced by these choices (Lev 2003; Cohen, Dey, and Lys 2008; Roychowdhury 2006; Gunny 2010).1 The effect of earnings management on the value of the firm and the related issues of financial-based incentives for managing earnings has been widely examined in the accounting literature (e.g., Healy 1985; Dechow, Sloan, and Sweeney 1995, 1996; Healy and Wahlen 1999; Fields, Lys, and Vincent 2001; Marquardt and Wiedman 2004; Das, Shroff, and Zhang 2009; see Ronen and Yaari 2008 for a comprehensive review of earnings management studies). Ronen and Yaari (2008) classified earnings management activities as ‘‘black,’’ ‘‘white,’’ or ‘‘gray’’ in terms of their perceived transparency and intended purposes. ‘‘Gray’’ earnings management is defined by Ronen and Yaari (2008: 25) as
There are several issues to consider when comparing the financial ratios of a public company to the industry averages. It is important to allow for any material differences in accounting policies between the specific company and the industry norms. It is also important to determine whether ratios were calculated before or after adjustments were made to the balance sheet or income statement. (Atrill & McLaney, 1997) It is also extremely important that one make sure that the financial data was developed using comparable accounting methods, classification procedures, and valuation bases. I have chosen to analyze Branch Banking & Trusts financial ratios and compare them to industry averages.
Common variables include current share price and riskless long-term real yield that are observed in the market. Model-specific variables include two estimates – dividend growth rate and earnings - and one deterministic variable – the current dividend yield that is determined by a company’s dividend policy. Among all variables, we focus on the earnings estimate , an estimate of an I/B/E/S analyst, that enables corrections for idiosyncratic characteristics of the capital market and for problems of accounting treatment. Table 1 compares the decomposed models Table 1. Comparison of the two alternative methods Method I Golden Growth Model Method II Earnings Yield vs. Real Bond Yield Formula Common Variables : Current Share Price : 30-Year TIPS Yield : Current Share Price : 30-Year TIPS Yield Model- Specific
The accounts are assessed base in accordance with the generally accepted accounting principles (GAAP) to ensure they are represented fairly. Tests of Controls The test of controls purpose for the acquisition and payments cycle is for the detection of understatements. Tests of controls for this cycle would include: 1. Verify that correct documents (purchase order, purchase requisition and vendor’s invoice) are prepared and attached to the voucher and examined for existence when submitted to appropriate departments. 2.
GAAP cover such things as revenue recognition, balance sheet item classification and outstanding share measurements. Companies are expected to follow GAAP rules when reporting their financial data via financial statements. If a financial statement is not prepared using GAAP principles, be very wary! Therefore, you still need to be careful and review other financial reports which can be altered. Convergence means that the U.S. Financial Accounting Standards Board (FASB) and the Independent Accounting Standard-setting Body (IASB) would continue working together to develop high quality, compatible accounting standards over time.
3. Explain what is meant by “ratio analysis” Ratio analysis in the interpretation of the resulting data given by the accounting ratio(s). Examples are given in next section of this assignment. 4. Discuss the advantages and the limitations of “ratio analysis” There are several advantages and limitations of accounting ratios, I will address some of the key ones in this section Advantages * Accounting ratios can be used by investors to make decisions on whether or not to invest in a company or sell existing shares.
Justification for an Internal Control System ACC/544 Justification for an Internal Control System Internal control systems contain a set of rules, policies, and procedures that an organization should implement to provide assurance that its financial reports are reliable. It should also provide assurance that operations are effective and efficient and its output complies with applicable laws and regulations. The organization’s board of directors, managers, and other personnel are responsible for the internal control system. The most important purpose of the internal control system is to determine the risks of the organization to alleviate economic disaster or fabrication. The present control system is an assortment of insurance and portfolio controls.