2013년 11월 23일 토요일

About 'total assets to debt ratio formula'|...Against Hudud, Education As A Smokescreen To Hide Apartheid With, Inability of BOTH BN and PR to Declare Assets, MCA Does Not Understand Equality or the Reid Commission’s Time Limits on...







About 'total assets to debt ratio formula'|...Against Hudud, Education As A Smokescreen To Hide Apartheid With, Inability of BOTH BN and PR to Declare Assets, MCA Does Not Understand Equality or the Reid Commission’s Time Limits on...









               As               SAC's               business               financial               analyst,               I               have               been               tasked               with               the               duties               of               providing               the               Board               of               Directors               and               the               executive               management               team               with               the               pertinent               financial               statements               that               are               necessary               for               helping               in               the               management               of               the               company.

Things               that               I               will               cover               are               the               statement               consists               of,               how               the               information               will               be               used               by               the               management               team,               how               it               will               help               them               manage               the               company,               its               limitations,               synopsis               of               the               company               as               a               whole               just               from               looking               at               the               data               in               these               statements.
               The               first               area               I               will               cover               is               the               different               type               of               financial               statements               and               their               purposes.

Financial               statements               are               a               crucial               part               of               a               company's               well               being.

In               blatant               speech,               a               financial               statement               is               all               about               showing               the               money.

They               actually               give               a               view               of               where               a               company's               money               is               coming               from               and               where               it               is               going,               and               the               current               state               of               it.

In               saying               this,               at               the               minimal,               there               are               at               least               four               statements               that               are               crucial               in               answering               the               question               of               the               company's               state               of               being               on               a               financial               basis.

They               are:               balance               sheets,               income               statements,               cash               flow               statements,               and               statement               of               the               shareholders'               equity.
               Balance               sheets               consist               of               things               such               as               what               SAC               owns               and               what               it               owes.

To               elaborate               a               little               further,               it               gives               more               precise               information               on               the               company's               assets               or               what               it               has               from               a               value               standpoint.

This               ranges               from               physical               items               to               equipment               or               its               inventory.

This               can               even               be               intangible               things               such               as               the               company's               trademarks               or               patents.

Liabilities               are               described               as               what               the               company               owes               to               others               (i.e.

banks,               rent,               suppliers,               employers,               taxes,               and               the               government.

To               get               a               better               understanding               of               how               to               construct               a               balance               sheet               you               would               use               the               formula:
               1.

Assets=Liabilities+Shareholders               Equity               The               assets               have               to               equal               or               at               least               balance               that               of               when               the               liabilities               and               the               shareholders               equity               are               added               up.

This               will               be               done               basically               at               the               end               of               a               reporting               period.
               Then               there               is               the               income               statement               in               which               it               is               a               report               that               gives               a               picture               of               how               much               the               company               has               earned               over               a               period               of               time               (i.e.

quarters,               semi-annual,               or               annually).

It               is               made               up               of               the               costs               or               expenses               accrued               over               that               given               period.

To               sum               it               up,               it               shows               the               company's               losses               or               net               profits.

This               statement               is               where               the               earnings               per               share               is               reported               and               this               will               give               an               idea               of               how               much               each               shareholder               would               get               if               the               company               decided               to               or               had               to               pay               them               out.

In               order               to               determine               this,               you               simply               take               the               total               net               income               of               the               company               and               divide               it               by               the               number               of               outstanding               shares.
               Once               all               of               these               things               have               been               calculated               and               looked               at,               the               income               tax               is               the               final               thing               that               is               deducted               and               this               leads               to               whether               SAC               has               a               net               profit               or               net               loss               during               the               period.
               The               third               statement               is               the               cash               flow               statement               which               deals               with               SAC's               money               that               is               flowing               in               and               the               money               flowing               out               of               the               company.

Its               importance               is               that               the               cashflow               statement               shows               it               or               not               if               a               company               actually               generated               any               cash.

Cash               flow               statements               look               at               three               different               activities               which               are:               its               operating               activities,               investing               activities,               and               its               financing               activities.
               The               fourth               statement               is               the               financial               statement               ratios.

It               consists               of               numerous               ratios               (i.e.

debt               to               equity,               inventory               turnover,               operating               margin,               price               to               equity               ratio,               and               price               to               equity               ratio).
               The               calculations               that               you               use               to               determine               how               these               ratios               will               be               calculated               are               listed               below:
               1.

Debt-to-Equity               Ratio:               Debt-to-Equity               =               Total               Liabilities               /               Shareholders'               Equity
               The               debt               to               equity               ratio               compares               a               company's               total               debt               to               shareholders'               equity.

These               numbers               actually               are               found               on               a               company's               balance               sheet               and               is               calculated               by               dividing               a               company's               total               liabilities               by               its               shareholder               equity.
               2.

Inventory               Turnover:               Inventory               Turnover               Ratio               =               Cost               of               Sales               /               Average               Inventory               for               the               period
               This               calculation               compares               a               company's               cost               of               sales               on               its               income               statement               with               its               average               inventory               balance               for               the               period.

To               calculate               the               average               inventory               balance               for               the               period,               look               at               the               inventory               numbers               listed               on               the               balance               sheet.

Take               the               balance               listed               for               the               period               of               the               report               and               add               it               to               the               balance               listed               for               the               previous               comparable               period,               and               then               divide               by               two.

In               calculating               the               inventory               turnover               ratio,               you               divide               a               company's               cost               of               sales               by               the               average               inventory               for               a               particular               period.
               3.

Operating               Margin:               Operating               Margin               =               Income               from               Operations               /               Net               Revenues
               The               operating               margin               compares               a               company's               operating               income               to               net               revenues.

These               numbers               are               found               on               a               company's               income               statement               and               is               calculated               by               dividing               a               company's               income               from               operations               (before               interest               and               income               tax               expenses)               by               its               net               revenues.
               4.

Price               to               Equity               Ratio:
               P/E               Ratio               =               Price               per               Share               /               Earnings               per               Share
               The               P/E               ratio               compares               a               company's               common               stock               price               with               its               earnings               per               share.

This               is               calculated               by               dividing               a               company's               stock               price               by               its               earnings               per               share.
               5.

Working               Capital:               Working               Capital               =               Current               Assets               -               Current               Liabilities
               The               working               capital               is               the               money               that               is               leftover               if               a               company               decide               to               pay               its               current               liabilities               or               debts               due               within               one-year               of               the               date               of               the               balance               sheet)               from               its               current               assets.
               To               bring               all               of               the               statements               together,               they               are               all               pretty               much               related               in               a               sense.

Changes               that               can               be               seen               in               assets               and               liabilities               are               what               you               will               see               on               the               balance               sheet               anyway               and               those               then               will               be               reflected               in               the               revenues               and               expenses               that               will               be               seen               on               the               income               statement.

This               in               essence               will               result               in               the               company's               gains               or               losses.

Then               as               for               cash               flows,               they               provide               more               information               about               cash               assets               that               are               listed               on               a               balance               sheet               also.

Cash               flow               statements               are,               as               I               said               very               much               listed               on               the               balance               sheet               but               are               not               as               much               so               related               or               equivalent               to               the               net               income               that               is               shown               on               a               income               statement.

So,               although               all               of               these               statements               are               very               crucial               in               determining               the               whole               conglomerate               of               a               company,               just               one               statement               by               itself               does               not               complete               the               process.

It               takes               all               of               them               to               tell               the               whole               story               and               when               they               are               combined,               they               provide               very               powerful               information               for               the               company.
               How               will               the               information               that               you               provide               on               a               financial               statement               be               used               by               the               management               team?
               Information               that               is               calculated               on               financial               statements               have               numerous               purposes               and               can               be               used               by               different               people               ranging               from               owners               and               managers,               to               that               of               the               employees.

This               in               essence               from               the               view               of               the               managers,               they               need               this               information               to               make               business               decisions               as               it               relates               to               the               company               and               its               business               operations.

An               analysis               is               done               to               give               them               more               detailed               information               about               the               figures               that               were               calculated.

This               information               is               definitely               used               as               a               major               part               of               the               annual               report               that               the               management               team               will               give               to               the               stockholders.

They               use               information               from               income               statements               for               the               purposes               of               hiring               new               employees.

Other               things               that               managers               are               concerned               with               when               it               comes               to               financial               statements               are               that               it               will               tell               them               if               they               can               afford               new               equipment               or               other               operating               expenses               and               even               where               they               need               to               cut               expenses               if               the               profit               for               the               company               is               relatively               low.
               How               will               it               help               them               manage               the               enterprise?
               When               it               comes               to               financial               statements,               they               are               very               crucial               in               many               ways.

In               fact,               creating               regular               financial               statements               will               help               to               keep               an               accurate               count               on               the               progress               of               the               company.

As               I               listed               earlier,               the               income               statements               and               cash               flow               sheets               are               detrimental               I               the               process.

By               maintaining               accurate               records,               it               helps               the               company               to               know               the               trends               in               their               sales               and               expenditures               so               that               if               problems               were               to               arise,               they               can               handle               the               issues               before               they               get               to               difficult               to               manage               from               a               financial               standpoint.
               What               are               the               limitations               of               the               information               regarding               financial               statements               that               you               provide               to               the               management               team?
               
               Financial               statements               have               numerous               limitations               when               it               comes               the               data               that               will               be               given               to               management.

It               is               evident               that               these               statements               are               basically               based               on               factors               that               are               historical               I               nature.

The               first               thing               that               limits               financial               statements               is               that               sometimes               the               financial               position               of               a               company               that               is               disclosed               is               not               correct               or               accurate               simply               because               they               end               up               leaving               some               of               the               economic               or               financial               factors               off               of               the               statement.

In               fact,               it               may               be               that               some               of               the               social,               economic,               or               financial               factors               that               are               truly               what               are               affecting               the               company.

The               second               thing               is               that               the               profits               that               get               revealed               on               the               profit               and               loss               statement               really               doesn't               click               in               a               sense               with               the               balance               sheet.

(Independent,               LLC.,               2011).
               There               is               limitation               as               well               because               there               is               a               personal               judgement               issue               on               the               behalf               of               the               financial               analyst.

These               things               that               are               of               issue               are               things               such               as:               bad               debt               provisions,               stock               valuation,               or               a               provision               of               depreciation.

As               I               said,               all               of               these               things               are               basically               left               on               his               shoulders               to               make               the               necessary               call.

Another               thing               that               is               a               limiting               factor               is               that               on               the               income               statement,               it               may               not               disclose               the               true               income               of               the               business               because               of               the               fact               that               some               probable               losses               were               considered               while               the               probably               incomes               were               ignored.

Then               there               is               the               fact               that               fixed               assets               get               shown               at               cost               less               depreciation               on               the               basis               of               just               what               the               financial               analyst               thought               was               the               right               thing               to               do.

(Independent,               LLC.,               2011).

With               that               being               said,               we               all               understand               that               we               are               human               and               are               very               prone               to               making               mistakes               at               any               given               time.
               How               can               the               management               team               ensure               that               they               obtain               a               complete               picture               of               the               enterprise?
               In               my               opinion,               I               think               that               a               company's               management               team               can               get               a               well               rounded               view               of               how               well               the               company               is               doing               first               by               making               sure               that               all               of               their               financial               statements               are               correct               and               accurate               so               that               there               are               no               discrepancies               or               conflicts               that               would               cause               them               to               lose               credibility               in               the               eyes               of               their               employees,               stockholders               and               the               like.

Then               another               thing               that               will               help               to               ensure               this               is               that               they               should               definitely               listen               to               the               concerns               of               the               people
               (i.e.

customers)               whether               they               are               internal               or               external.

Because               if               the               company               has               a               good               culture               and               the               employees,               shareholders,               and               owners               are               happy,               then               this               ensures               that               everything               is               fine               and               okay               within               the               company.
               References:
               Independent               Stock               Investing,               LLC.,               (2011).

What               are               the               Limitations               of               Financial               Statements.

Retrieved               on               August               19,               2011               from               http://www.independent-stock-investing.com/Limitations-Of-Financial-Statements.html
               Loth,               Richard,               (2011).

Things               that               You               Should               know               About               Financial               Statements.

Retrieved               on               August               19,               2011               from               http://www.investopedia.com/basics/financialreport
               Planview,               Inc.,               (2011).

Management.

Retrieved               on               August               20,               2011               from               http://www.planview.com/products/enterprise/ideation-management/
               SEC,               (2009).

Financial               Statements.

Retrieved               on               August               19,               2011               from               http://www.sec.gov/pubs






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