Financial statements are based on historical costs and as such the impact of price level changes is completely ignored. They are interim reports. The basic nature of financial statements is historic. These statements are neither complete nor exact. They reflect only monetary transactions of a business. The following limitations may be noted: 1. The financial position of a business concern is affected by several factors-economic, social and financial, but financial factors are being recorded in these
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approach was originally defined as the process of identifying, measuring and communicating information about human resources in order to facilitate effective management within an organisation. It is an extension of the accounting principles of matching costs and revenues and of organising data to communicate relevant information in financial terms. The accounting of human resources can be seen as just as much a question of philosophy as of technique. This is one of the reasons behind the variety of approaches
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QUESTION: THE RELEVANCE OF CORPORATE REPORTING BASED ON HISTORICAL ACCOUNTING PRACTICE HAS CONTINUED TO GENERATE INTENSIVE DEBATES OF DIFFERENT FORCES IN THE WORLD, WHICH IS ESPECIALLY TRUE IN A HIGH INFLATIONARY AND DISTORTED ECONOMY LIKE NIGERIA. DISCUSS THE STATEMENT IN RELATION TO JUSTIFICATION FOR INFLATION ACCOUNTING IN NIGERIA. NOVEMBER, 2011. INTRODUCTION Inflation account is a system of accounting which, unlike historical cost accounting takes into account changing prices. Inflation
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information need not to be limited to accounting data. White ratios and other relationships based on past performance may be helpful in predicting the future earnings performance and financial health of a company, we must be aware of the inherent limitations of such
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business as well as predict the potential of a business and if they are capable of financial growth. Ratio analysis allows companies to analyze the future revenue of a company’s profit or a company’s loss. This paper will examine the benefits and limitations of ratio analysis, explain what factors impact the meaningfulness of such measures and what new practices or theories may be emerging regarding the application of ratio and financial statement. The paper concludes that ratio and financial statements
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The data provided in the financial statements will convert into a ratio analysis. Common size analysis, and accounting analysis limitations are tools for review. The pros and cons of each of these statistical tools will also be discussed. To understand the importance of statistical tools, a review of ratio analysis, common size analysis, and accounting analysis limitation will be the starting point for this paper. Ratio Analysis Ratio analysis is the most powerful tool of financial analysis (Accounting
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tons of coal reserves. The company sells its mined coal to primarily US and overseas electric utilities and industrial companies. Foresight Energy was formed in early 2012; it filed to go public a short time after its formation. The Company is a low cost producer of high quality thermal coal with expertise in operating and developing highly productive underground mines in the Illinois Basin. It has invested over $1.5 billion in four mining complexes with long reserve lives which it believes will provide
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size being quite fixed, the private labels have the prospect of growing within the market. Review of Historical Financial Data HPL’s historical financial performance has been steadily increasing for the past five years. As displayed in exhibit 1, revenue has increased from $503.4 in 2003 to $680.7 in 2007. However, in spite of the yearly increasing revenue, due to an unusually high cost of goods sold in 2005, the net income decreased this year. This has occurred
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intangible assets such as intellectual property. Cost Based Approach This approach is based upon on the principle of substitution, i.e., value of an asset is estimated on the basis of cost to construct a similar asset at current prices. The assumption underlying this approach is that the cost to purchase or develop new property is commensurate with economic value of the service that the property can provide during life. It considers the cost of the inputs spent on making particular intellectual
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rate and the beta of a particular investment or portfolio (Investopedia, n.d.). Beta represents the investment or portfolio sensitivity to the market fluctuation. The CAPM is based on few assumptions: * There are no transaction and taxation costs. * Investors are assumed to invest in diversified portfolios. * Investors are rational. * Investors do not have the power to influence market price. * Investors can borrow and lend unlimited amounts under the risk-free rate. *
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