0
Financial Statements
A financial statement is a record of the financial activities of a person or business entity where all related financial information are presented in an orderly manner and can be easily understood.
5,583 Questions
If sales increase will profits always increase?
Sales might increase because prices dropped. They might increase because more expensive salesmen were hired. They might increase because the neighborhood improved in value, however, taxes will go up or rent will go up. Thus, just because sales increase does not mean profits always increase.
The revenue received from the sale of an additional unit of a product is called what?
The marginal benefit to the firm
Cash inflow is the money flowing in and out of a business within a given period of time. this can be predicted using a spreadsheet which will indicate the effects of changing fifures. Example of Cash inflow is: ■ Sales - amount to be received from selling good or service. ■ Cash from debtors. ■ Capital. ■ Lone from bank.
TYPES OF financial statement analysis?
There are numerous financial ratios use to analyse different aspects of a company's financial performance Profitability ratios * Profitability ratios measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return. * Gross margin, Gross profit margin or Gross Profit Rate * Operating margin, Operating Income Margin, Operating profit margin or Return on sales (ROS) * Profit margin, net margin or net profit margin * Return on equity (ROE) * Return on investment (ROI ratio or Du Pont ratio) * Return on assets (ROA) * Efficiency ratio * Net gearing Liquidity ratios Liquidity ratios measure the availability of cash to pay debt. * Current ratio * Acid-test ratio (Quick ratio) * Operation cash flow ratio Activity ratiosActivity ratios measure the effectiveness of the firms use of resources. * Average collection period * DSO Ratio * Average payment period * Asset turnover * Inventory turnover ratio * Receivables Turnover Ratio * Inventory conversion ratio * Inventory conversion period * Receivables conversion period * Payables conversion period Debt ratios (leveraging ratios) Debt ratios measure the firm's ability to repay long-term debt. Debt ratios measure financial leverage. * Debt ratio * Debt to equity ratio * Long-term Debt to equity (LT Debt to Equity) * Times interest-earned ratio * Debt service coverage ratio Market ratios Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. * Earnings per share (EPS) * Payout ratio * Dividend cover (the inverse of Payout Ratio) * P/E ratio * Dividend yield * Cash flow ratio or Price/cash flow ratio * Price to book value ratio (P/B or PBV) * Price/sales ratio * PEG ratio
What does financial liberalization mean?
Financial Liberalization refers to deregulation of domestic financial market and liberalization of the capital account.
What are examples of variable cost in business?
Variable costs are costs that typically vary in conjunction with the Company's volume of sales. For example, if we sell an additional unit of X, we will need to purchase unit Y which is one of the component sembedded in unit X.
What is the meaning of '' mark to market''?
mark to market means capturing the latest price of a stock that might be different in its purchasing price which represents its book value. example lets say you buy 100 stocks of ABC corp at $20 a share on Oct 15 and today oct 22 the stock closed at $25 a share for ABC Corp - this usually represents your mark to market value of your stock - this expresses either as a profit or loss i hope this helps
What is the difference between Gross Income and Net Income as it is applied to the typical worker?
Gross income usually is the money someone or something has earned before any deductions such as taxes, expenses, or promotion has been deducted. If you are receiving money after such expenses have been deducted, you are receiving money based on NET income.
an entry made in the opposite side of an account to offset an earlier entry, for example, a debit against a credit
3 A dollar today is worth more than a dollar to be received in the future because?
there are two reasons.
1. A dollar today can earn interest so you will have more than a dollar in the future.
2. Inflation will reduce the purchasing power a dollar over time, so it's better to get the dollar today and spend it today because it won't buy as much stuff tomorrow.
What the benefits calculating loss and profit?
can c perfomence
We can have many advantages and benefits by calculating the profit and the loss of the entrepreneur as below,
1. We can make future plans about the Organization according to the loss or the profit.
2. We can compare the situation of the Organization with other Organizations.
3. It is helpful to have new Investors for the company.
4. We can manage the Capital & other Assets according to the loss and the profit.
5. We should calculate the profit or the loss because it is a necessary requirement of the Accounting Law.
Advantages and disadvantages of value-based pricing approach?
The advantage of value based pricing is increased profits and customer loyalty. The disadvantages are labor cost, competition, and the niche market.
Can you distinguish between fixed costs and variable costs?
Fixed costs are costs that will be the same for the next year. In my Construction Business fixed costs are office rent, office utilities, advertising costs, etc. In a year, these costs can be known ahead of time and won't need to change even if my company does more work.
Variable costs are costs that can rise or fall depending on how much work I contract. Say I sign up 20 jobs this year, I will have to hire more employees, buy them trucks, rent them cell phones, and those costs will correspond to the amount of work going on, therefore variable.
What is the formula for net assets?
The total assets (balance) equal the sources of funding for resources; liabilities (external borrowings) and equity (owners' contributions and earnings from firm operations).
If any country printed more money, they wouldn't magically become more rich, because the more dollars the exist on the country, the less they will be worth, thus leading to massive inflation, rendering the US Dollar worthless.
How would you analyse the financial position of a company from the point of view of an:
(i) Investor
(ii) A creditor,
(iii) A share holder
What are the DISADVANTAGES of INTERNATIONAL REPORTING FINANCIAL STANDARDS?
The major disadvantage in the short run will be the cost to businesses of adopting the new standards. For some years into the future, accountants will have to understand both their own country's "traditional" GAAP (Generally Accepted Accounting Principles) rules, as well as the IFRS (International Financial Reporting Standards). Having to understand two different sets of rules requires extra time and work on the part of accountants, and that costs money.
There will be some inefficiencies (e.g., the cost of changing historical audited financial statements prepared under the old rules, just for the sake of comparability with later year financial results) and resulting extra expense (those accountants have to be paid for all that extra work!) for the company whose financial statements will have to be restated.
The financial markets community, whose members analyze American financial statements, will also have to re-learn how to read the financial statements of U.S. companies under the new accounting rules.
Another disadvantage is related to the fact that under the old rules, the financial statements of companies of a given country were geared to specific user groups. For example, German financial statements were geared mostly toward creditors and potential creditors, while American financial statements were geared toward investors and potential investors. So there will be some users of financial statements who won't find statements prepared under the new standards as useful as those prepared under the old standards. As time passes, this problem will go away as readers of financial statements become accustomed to seeing financial data prepared under IFRS.
The ultimate advantage is that the financial statements of (e.g.) a German pharmaceutical company will be prepared under the same set of accounting rules as those of an American pharmaceutical company, so investors will be able to directly compare the financial statements of the two companies in deciding where to invest in this increasingly global economy.
How is data and information distinguished?
Data is raw information. In other words you collect data and process it into information. Data is incoherent while information is logical and can be used in a decision making process.
Does the Depreciation measure the actual decline in market value of an asset?
No.
Depreciation is the process of allocating to expense the cost of a plant asset.
Who are users of financial statement?
it could be: shareholders (to know about how there company is performing) banks( to provide loans for example) suppliers(to know whether it's worthwhile to supply to this company) potential shareholders (to decide whether it's worthwhile to invest in this company)
How do you find Days Sales Outstanding?
The DSO ratio is a financial ratio that illustrates how well a company's accounts receivables are being managed. Here accounts receivables refer to the amount of money due to the company for the services/goods provided to its customers.
Formula:
DSO = Accounts Receivable / Average sales per day or
DSO = Accounts Receivable / (Annual Sales / 365)
What items should be included in a balance sheet?
The sections you would find are assets, liabilities, and equity.
More specifically:
Fixed Assets (non-current assets)
Current Assets
Current Liabilities
Long Term Liabilities (non-current Liabilities)
Equity.
International accounting concepts do not give a defined layout for a balance sheet. So you can lay it out as Assets less Liabilities balanced to the Equity or Assets balanced to Equity plus Liabilities.
What category does Paid-in Capital fall into on the Cash flow statement?
Paid in capital is shown under cash flows from financing activities in cash flow statement.
Which is better High break even point or low break even point?
It need not be.
A lower break even point means that you stop making losses sooner. But it is possible that you make no profit at all. Ever. You just manage to break even.
With a higher break even point it would be more difficult to stop making a loss but, once beyond that point, you could make loads of profit.
Nothing ventured, nothing gained, as the saying goes.
What defference between cash flow and funds flow ststement?
A distinction between these two statements may be briefed as
Funds Flow Statement is concerned with all items constituting funds (Working Capital)for the business while Cash Flow Statement deals only with cash transactions. In other words, a transaction affecting working capital other than cash will affect Funds statement, and not the Cash Flow Statement.
In Funds Flow Statement, net increase or decrease in working capital is recorded while in Cash Flow Statement, individual item involving cash is taken into account.
Funds Flow statement is started with the opening cash balance and closed with the closing cash balance records only cash transactions.
Cash Flow Statement is started with the opening cash balance and closed with ht closing cash balance while there a no opening or closing balances in Funds Flow Statement.
