borrowing, which reduces interest expense. II. Explain How Inventory Turnover Affects the Amount of Cash that must Be Invested in Inventory. Inventory Turnover affects the amount of cash invested in a company’s inventory because it is a measure of time and this can be in days. The longer the time (which causes lower turnover), that is how long it takes for the goods on average to sell and for cash from the sale to return to the business. For example, my sister in-law started a business, she made
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July 25, 1999 Chapter 2: Normative Accounting Theory The purpose of this chapter is to identify those characteristics of accounting information that are thought to make one system of accounting better than another. Since the material is based on eighty years of accounting research, by countless researchers, it is clearly neither possible nor desirable to review all the arguments, or even the main arguments, used by advocates of all the different competing accounting systems. For instance, it
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benefit from either proposal two or three, as opposed to the first proposal, as they stand to gain some funds. The restructuring proposal requires them to pay $40m cash for new shares but lose their control of the company (the shareholding falls to just under 13%). On the other hand the statement of financial position looks robust with a $20m cash float and bank overdraft facilities probably available at previous levels (see appendix, proposal 2). This may make the company more successful in the future
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Inventory represents the biggest concern to working capital as at 3.3 it represents an average stockholding of 110 days (365/3.3). The company needs to manage its ordering to a just-in-time basis. The cash flow statement shows that most cash has been used in 2009, hence working capital is strained by a lack of cash and slow debtor collections and inventory turnover. The result is too high days’ purchases outstanding of 78, representing over 2.5 months. This is
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AGENCY THEORY The agency theory concept was initially developed by Berle and Means (1932), who argued that due to a continuous dilution of equity ownership of large corporations, ownership and control become more and more separated. This situation gives professional managers an opportunity to pursue their own interest instead of that of shareholders.. In ‘theory’, shareholders are the only owners of a company, and the task of its directors is merely to ensure that shareholders’ interests are
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Introduction | This is the assignment for the Understanding Financial Management unit. The aim of this unit is to develop understanding of finance within the context of an organisation, as required by a practising or potential middle manager.The task requires you to demonstrate your understanding of finance and the value of recording financial information within the context of your organisation. You are then asked to explain the process of budget setting in the organisation and how budgetary
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15 $55,292 10,026 6,923 12.0% $ 2.43 2.53 1.03 NET SALES (in billions of dollars) DILUTED NET EARNINGS (per common share) 05 06 07 08 09 $55.3 $66.7 $74.8 $81.7 $79.0 05 06 07 08 09 $2.53 $2.64 $3.04 $3.64 $4.26 OPERATING CASH FLOW (in billions of dollars) 05 06 07 08 09 $8.6 $11.4 $13.4 $15.0 $14.9 Note: Previous period results have been amended to exclude the results of the Folgers coffee business from continuing operations. For more information refer to Note
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BestBuy Case Study TROYFONTAINE MACON: M6marketing [2011] [Best Buy is considering reducing their current store sizes, and changing their operational infrastructure. This is a good idea, and a typical retrenchment strategy, but I believe there to be better alternatives. Executive Summary According to multiple media sources, Best Buy is considering reducing their current store sizes by 10%, and changing their operational infrastructure. This is a good idea, and a typical retrenchment strategy
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part 2 - 40 MCQS 1. Which of the following financial statements is concerned with the company at a point in time? 2. A cost which remains constant per unit at various levels of activity is a: 3. M&M Proposition 1: Dynamo Corp. produces annual cash flows of $150 and is
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The Role of Accounting on Business and Our Society Financial statements are snapshots of a business's economic or cash flow condition. These are mainly formal financial activities, which are written to measure the performance, financial strength and the liquidity of the business. These financial reports include the balance sheet, income or profit and loss statements, and cash flow statement which are used to represent the businesses’ economic position. The income statement which reports the
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