MULTIPLE CHOICE QUESTIONS 1. The statement of cash flows should help investors and creditors assess each of the following except the a. entity's ability to generate future income. b. entity's ability to pay dividends. c. reasons for the difference between net income and net cash provided by operating activities. d. cash investing and financing transactions during the period.
Income budgets: a measure of how much cash is flowing into the business for a period of time through sales for example. Income budgets: a measure of how much cash is flowing into the business for a period of time through sales for example. Expenditure budgets: A plan of cash outgoing from the business to maybe cover costs for example, over a future period. Expenditure budgets: A plan of cash outgoing from the business to maybe cover costs for example, over a future period. Budget definition: Budgets are financial plans looking at expected costs and revenues over a future period.
Is GDP a good enough indicator of understanding the economy? How GDP contributes to growth and development of a nation? What is GDP? The gross domestic product (GDP) is an aggregate measure of total economic production for a country and represents the market value of all goods and services produced by the economy during the period measured, including personal consumption, government purchases, private inventories, paid-in construction costs and the foreign trade balance (adding exports and subtracting imports). Gross domestic product, adjusted for inflation, also known as "real GDP", can tell economists whether an economy is growing or contracting from year to year or from quarter to quarter, a key determinant in deciphering whether the economy is expanding or in a recession.
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
The Income Statement. It shows a business’s sources of income as well as the expenses it has incurred over a given time period that is being examined. The difference between the total incomes of the business and its expenses gives its net profit. The main aim of a business is to maximize its profit. The importance of an income statement therefore is to help in making an analysis of how the different decisions the business makes affect its level of profitability.
There are two approaches for presenting the operating activities direst method and indirect method. Direct method reports the components of cash flow from operating activities as gross receipts and gross payments. The indirect method starts with the net income from the income statement and then eliminates noncash items to arrive at net cash inflow and outflow from operating activities. Investing activities include (a) purchasing and disposing of investments and productive long-lived assets using cash, (b) lending money, and collecting the loans. Cash flow from investing activities is cash inflows and outflows related to the purchase and disposal of long-lived productive assets and investments in the securities of other companies.
As for stockholders they mainly use this information for forecasting dividends, earnings on the free cash flow. Question 2 What qualitative factors should analysts look for when evaluating a company’s likely future financial performance? Explain. When evaluating a company's future financial performance, some qualitative factors that should be considered are future prospects, the current environment weather it may be legal or regulatory, the competition , economy, the level of dependents on the
The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets. Formula: Asset Turnover What Does Asset Turnover Mean? The amount of sales generated for every dollar's worth of assets. It is calculated by dividing sales in dollars by assets in dollars. Formula: Also known as the Asset Turnover Ratio.
The amount of cash, or its equivalent, that could be obtained by selling an asset in an orderly liquidation. Net Realizable Value Method. The amount of cash, or its equivalent, into which an asset is expected to be converted in the due course of business, less any direct costs necessary to make that conversion. Discounted Future Cash Flows Method. For an asset: the present value of future cash inflows into which an asset is expected to be converted in the due course of business, less present values of cash outflows
The RRR can also be called as the discount rate, hurdle rate or the opportunity cost of capital. NPV takes into account the principle in economics referred to as the “time value of money” which implies that a dollar earned today is more valuable than a dollar earned tomorrow. It is to be noted that projects with zero or positive NPV are acceptable to a company from a financial viewpoint as the return from these projects equals or exceeds the cost of capital. Internal rate of return (IRR) is the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equal zero. IRR represents the discount rate at which the present value of the expected cash inflows from a project equals the present value of the expected cash outflows.