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Type: Posts; User: manik chand dey
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Yes earnings management should be perceived as a bad thing. Through this tool companies often show a catchy picture about its own financial status.Some of the common methods for earnings management...

par value = 1000
coupon rate = 10%
maturity = 25 years
interest rate  10%
*required
1.how much is the expected annual interest?
2. how much is the interest every 6 months?
3. how much is...

It is the effective interest rate that really matters.orin other words it is called the annualized yield.Now ifa borrower has decided totake a loan on semi annually compounded basis,then the money...



required rate of return=dividend/market price

Nominal rate of return(R) is equal to dividend/market price
so in the first case R=0.08*100/60= 13.33%

1this transaction will not be affecting the working capital position in any way, as cash(current asset) as well as dividend payable(current liability) reducing in the same proportion.
2This...

Extending credit to the customers(debtors) means some funds got blocked in for some time till payments made by the customers. Hence in order to release the funds from debtors the enterprise needs to...

In working capital we use two conceptsnet working capital(NWC) and gross working capital(GWC).
As we know NWC is the positive difference between current assets and current liabilities, while GWC is...

future value(1000)=present value,613.31(1+r)^10

When treasury stock is bought back,paidin capital is reduced by the amount treasury stock is purchased.in this case expenses(fees) and commissions should be charged as expense in the income...

Par value=1000, coupon rate8% that is 80,YTM or required rate of return 7%,number of years for maturity=25 years
current price=findthe value of80,annuity for 25 years at YTM at 7%, that is...

yes it is right and only applicable for cash dividend. We donot need to take $75, the par value into consideration because dividend is always paid on the par value of the stock. So in any case the...

Under the head of Current liabilities and provision

Once dividend is declared, that should be treated and to be shown under the head "current liabilities and provision". And in fact this is the significance of declaration date.
Hence it should not...

In many cases some of the resources, including human, needed for a new project may be a part of the already existing business. Such resources have alternative uses.These alternative uses create...


Price of the bond will fall.This is because a bond's price will be lower when it pays a coupon that is lower than prevailing interest rates. As market interest rates increase, bond prices decrease.

Par value is $1000
Coupon rate is 8 % that is 8% on 1000= $80
Maturity period is 25 years
Yield to maturity is 7%, which is nothing but the interest rate by which the present values of all the...

1what I feel, that for a non dividend paying company, it is better to use CAPM valuation model.One thing very much special about CAPM is that, it differentiates the total return into risk free and...

Risk free rate is 5%, Market risk premium is 6%, beta is 1.2
Required rate of return is 5%+(1.2*6%)

P(current market price)=D(dividend)/r
where r is the required rate of return
P=$60, D=$5
Here it is mentioned that it pays a dividend of $5 a year. That is it is case of perpetuity.
Put the...

In construction sectors it is very difficult to differentiate between current assets and non current assets, due to difficulty in calculation of an exact operating cycle period. Hence some ratios...

In investment analysis, one does not required to consider sunk costs which has already been incurred by the firm. For example though preliminary expenditure to start a firm is a resource owned by the...

1. What I understood by allowance for bad debts is provision for bad debts.this is not a current asset rather this a current liability, but it is shown as deductions from the sundry debtors after...

what I understood by net income is profit after tax.
As we know equity earnings(earnings to be distributed among the equity shareholders) is profit after tax(PAT) preference dividend(if any).
so...

Balance sheet shows the snapshot view about assets and capital & liabilities, that business has, as on a particular date, while income statement summarises various expenses incurred and incomes...

It is the earned capital because dividend distribution depends on the earned capital.

Recognising an item as an asset in the balance sheet depends on whether its cost or value can be estimated reliably. Hence all the assets are not recognised in the balance sheet.For example...

On January 1, there is a prepaid insurance amounting to $600 for the month of January.So the journal entry will be
Jan 1 Prepaid insurance a/c DR 600
To cash a/c ...

10,000 for 2 years is coming approx to Rs. 417 per month
so for 9 months (Apr 1 through dec 31) the amount will be Rs. 3750 (expired amount)
April 1 prepaid insurance a/c DR 10,000
...

Actually going by the definition, product costs is related to the units of products purchased or manufactured. For example product costs for a retailer will be the amount paid to the supplier plus...

Prepaid insurance is treated like any other kind of prepaid expenses for the business, which the business has to pay normally in advance for a year ahead.Hence as the business has already paid the...

Balance sheet for Taylorsville Construction as on dec 31 2009
Liabilities
Owners' equity 1/1/09 314,300
Add Net income for 2009 ...

Insurance claim receivable a/c DR 6,000
Loss by fire a/c DR 4,000
To Purchase a/c 10,000
Insurance claim receivable a/c...

Actually the question is not understandable. What iscurrent ratio NA and working capital na? Make it clear.
Thanks manik

I think residual creditors are similar to unsecured creditors. Because in case of bankruptcy they are the last to receive their payments(residual amount) after paying to all the secured creditors.
...

d)Growth” companies with valuable future investment opportunities
Current earnings should distribute very low dividend
PriceEarnings Ratio should be...

Residual dividend model is used to determine the target payout ratio of a stock based on the optimal capital budget of the company. From there, amount of equity required to finance the capital budget...

I am confused whether the net cash flow is negative.Because there are cases, where cash flow under financing activities (for example) can be negative, but the net cash flow is positive (if we add all...

This is not understandable, what exactly you want to ask?

Balance Sheet of The Apricot Company
As on 2001 As on 2002
Liabilities
Notes payable ...

It need not be a case. As in the question it is mentioned that shares are issued at Par value. Here it is a case of oversubscription by the public.
Hence 2 ways of recording the transaction are...

Most of the financial ratios we use,for instance Current ratio(an indication of efficiency of the firm to discharge short term liabilities normally within one accounting year) and debt equity...

Let say x= the level of EBIT
Debt Equity Plan All equity Plan
EPS (x960000)(10.40)/600000 ...

B) In order to calculate the level of EBIT at which both plans will have same EPS, we need to equalise the EPS under both the plans.
Let say x = the level of EBIT
...

40% debt asset ratio Vs all equity
A)No of shares 600,000 100,00,00

Property, plant and landthese are non monetary items in balance sheet.

