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What does impairment of operational assets mean?
An operational asset is impaired when it suffers a permanent loss of benefits due to casualty, lack of demand for the asset or obsolescence. If a write-down due to impairment is required by determining whether the value of an asset has fallen below its book value. the asset will be reduced on the balance sheet and the loss is normally reported in the income statement as a separate item included in operating expenses.
Is biological asset is a fixed asset?
No, because biological assets constantly change. Examples of biological assets are property, equipment, etc. A fixed asset does not change.
When debt to equity ratio rises why does the asset beta not change?
The asset beta reflects the risk of the firm's underlying assets, independent of its capital structure. When the debt-to-equity ratio rises, the firm's financial leverage increases, which may affect the equity beta but not the asset beta itself. The asset beta remains constant because it is based on the business's operational risk and market conditions, rather than the financing mix. Therefore, while the equity beta adjusts to reflect the higher financial risk, the asset beta remains unchanged.
How do you calculate initial investment in an asset?
Cost of new asset+cost of installation - after tax proceeds from sale of old asset +/- change in net working capital
Does a change in current assets increase or decrease cash flow?
It depends on the current asset, so the change of current asset might be increase or decrease cash flows.
Is there any difference between absolete asset and assets at written down value?
Obsolete asset is that asset which suddenly becomes obsolete due to any technological change or any reason and has no value while written down asset is asset which is usable asset with written down value
What key information about an asset might you include in asset register?
In an asset register, key information typically includes the asset's unique identification number, description, purchase date, acquisition cost, and current value. Additionally, it may include details on the asset's location, condition, maintenance history, and depreciation schedule. This information helps organizations track their assets effectively and manage their financial reporting and operational needs.
What type of ratio is used to measure activity?
An activity ratio, such as asset turnover or inventory turnover, is typically used to measure how efficiently a company is utilizing its assets to generate revenue. These ratios help assess the company's operational efficiency and effectiveness.
When capital work in progress transferred to asset?
Capital work in progress (CWIP) is transferred to an asset when the construction or production of the asset is complete and it is ready for its intended use. This transfer typically occurs when the project meets the necessary criteria for capitalization, such as completion of construction, installation, or necessary testing. At this point, the costs accumulated in CWIP are reclassified to the appropriate fixed asset account on the balance sheet. This transition reflects that the asset is now operational and contributes to the company's productive capacity.
Where to Post write off loans in balance sheet?
You reduce the value of the asset/liability you write-off against income/or expenses in the P&L after the operational result
How can derivative increase risk?
Since derivatives are typically highly leveraged, they are almost always riskier that the underlying asset. That is, a small change in asset value will typically produce a much larger % change in the value of the derivative.
Where is the retirement of an asset recorded?
The "retirement" or "disposal" (as it's usually listed as) is recorded in a couple of different ways depending on how the asset is disposed of. One entry that will not change regardless of how the company disposes of the asset is the account related to said asset. For example, if the company is disposing of a truck, the one account entry that will not change will be Equipment-truck, this account will be credited for the balance. The fact that the fixed asset account has a debit balance, we now credit the account to bring it to a zero balance and remove the truck from our records. Company's may choose to dispose of, sale, or trade the fixed asset. Disposing of the fixed asset does not involve the exchange of money or another asset. Selling of the asset involves receiving cash for the asset. Trading involves receiving another asset in exchange for the asset the company is disposing of. This transaction will affect the balance sheet as it affects the assets of a company.
