1.1 INTRODUCTION TO THE STUDY
Asset Management involves the balancing of costs, opportunities and risks against the desired performance of assets, to achieve the organizational objectives. This balancing might need to be considered over different timeframes. Asset management also enables an organization to examine the need for, and performance of, assets and asset systems at different levels. Additionally, it enables the application of analytical approaches towards managing an asset over the different stages of its life cycle (which can start with the conception of the need for the asset, through to its disposal, and includes the managing of any potential post disposal liabilities).
Asset Management is the art and science
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The cycle has 7 steps:
Acquisition: The cycle begins with the acquisition, purchase, gift or otherwise, of an asset and the determination that the asset is to be capitalized. To be capitalized the asset has to meet the agency’s capitalization limit and have a useful life of one year or more.
Receiving: The asset is formally received and accepted by the agency. Receipt may be verified by entry into an automated purchasing system or by hard copy document. In the case of donated Asset Management, receipt can be verified by a letter to the donor.
Payment: Payment is made for the asset according to the terms of the purchase order or recognition of acceptance of a gift to the donor. The payment includes the acquisition cost, freight and all other costs to put the asset. Acquisition cost of donated Asset Management is determined by its fair market value.
Identification: The asset is identified as an asset, tagged or otherwise identified and entered into the Asset Management inventory system. Assets are identified with a permanently attached identification tag, etching or by painting on the identification
Arnott comments on how investors should balance these risks to better understand the health of their company, or at least strive to manage two of the three. As talked about recently in class, I believe all focus should be pointed towards matching assets to liabilities because the safety accomplished through ALM opens up opportunities for increasing the companies net worth. I would
...ndise before it is shipped, because it is the safest form of payment for us. Once we establish an ongoing business relationship, we will accept documentary collection, where a bank acts as an intermediary without accepting financial risk. If the importer’s credit rating is questionable, we may use a letter of credit, where the importer’s bank issues a document stating they will pays us when we fulfill the terms of the document. For our most trusted customers, we may use open account, where we ship first and bill the customer later.(22)
While an acquisition is when one company or entity takes over another and clearly establishes itself as the new owner. From a legal perspective, the target company or entity ceases to exist. The buyer absorbs the target and the new organization is recognized either publicly or privately. (CIPD, 2009) Although both terms are different, they are
...To check how successful it has been, we calculate debtor collection period ratio. (Dyson, 2004) Fixed Asset turnover: In this ratio, we seek the amount of sales that can be generated (or the amount of fixed assets necessary to achieve a level of sales) from a given level of fixed assets. (Klein, 1998) Total asset turnover: This ratio determines that how efficiently a firm is utilizing its assets. If the asset turnover ratio is high, the firm is using its assets effectively in generating sales. If this ratio is low, the firm may not be using its assets efficiently and shall either increase sales or eliminate some of the existing assets. (Argenti, 2002) Solvency Ratio Gearing: Gearing reflects the relationship between a company’s equity capital (ordinary shares and reserves) and its other form of long-term funding (preference share, debenture, etc.) (Black, 2000)
The next dimension is a much more difficult one to come to terms with, particularly for students who have never had the skill of emotional management fostered. It’s this learning how to manage one’s own emotions will allow students to not only see the ebb and flow of their emotions, but to alter their reactions to it (Lynch, 2016). Management of emotions is tied closely to self-control, in which a child learns to delay their own gratification in support of their future success. Emotional management is challenging for all of us, not just for children. But the waves of emotion can be, if not controlled completely, then at least tamed.
Acquisition analysis includes determining consideration transferred, goodwill (or gain on bargain) and fair value of assets at the date of acquisition. When Woolly Ltd purchased Jumper Ltd; they paid more then the consideration transferred (fair value of assets less liabilities) of the entity, thus there was goodwill provided. Business combination valuation entries occur when assets or liabilities fair value differs from their carrying amount at the date of acquisition. As Jumper Ltd had assets with a higher fair value than carrying amount; there was reasoning for BCVR entries. Intragroup transactions come about through the transferal of assets or liabilities such as inventory or dividends from the subsidiary to the parent or visa versa (within the group). When Woolly Ltd and Jumper Ltd conduct intragroup transactions, as separate legal entities these transactions are recorded as normal however, from the point of the group these transactions are internal and therefore are not recognized by external users, thus the transactions must be eliminated. Finally, non-controlling interest occurs when the parent owns less than 100% of the subsidiary, however this is not relevant to Woolly Ltd as ownership of Jumper Ltd is 100%. These steps are
Portfolio Analysis is considered a key strategic planning tool and a necessity within any cash reproductive organization or industry as it also allow for a close view into how excessive growth in any business venture could be attained and how the resources needed for this growth could be appropriately distributed, enhanced and capitalized on since the main goal is to reap financial gains in any industry and with all investments made.
Bargain purchase occurs when a company buys an asset for less than its fair value in the market. This bargain purchase is also called negative goodwill. So it is a transaction that arises when a business must be sold because of the reasons like liquidity crises where the business does not have the liquid assets that are necessary to meet its short term obligations for example repayment of loans and paying bills. A bargain purchase is recorded as a gain in earnings in the period of acquisition (an asset of object obtained). But historically such bargain purchases were not clear in the financial statements until SFAS No. 141 introduced such shortcomings under Business Combinations. Previously, whenever the transaction of the amount by which fair value of net assets acquired exceeded the purchase price occurred, the term negative goodwill was used to reduce
Additionally, all acquisition transactions initiated after June 30, 2001, require the use of purchase accounting for financial reporting purposes. FAS 141 discusses purchase accounting and requires the price to be allocated to all assets acquired and liabilities assumed based on their fair market values. The excess purchase price is then allocated to goodwill and instead of being amortized, is tested for impairment each year.
Evidently, business transaction involves a case of exchange of goods whereby there is acquisition of one commodity
Intangible assets are assets that cannot be physically held, such as copyrights, brand names, trademarks, goodwill, and patents. There are two kinds of intangible assets, definite and indefinite. Definite assets have a useful life and would be amortized ever year to decrease the value, such as trademarks and patents. Indefinite do not have a definite life time and would last as long as the company stays in business. Definite assets need to be amortized based on their useful life by determining the pattern of use for the asset. For example, if a company uses an asset 40% the first year, 30% the next year, and 15% the next 2 years, then it would amortize the value following that pattern. If they do not know the pattern they would use the straight-line
TAK Asset Management Limited (‘TAML’) is a Securities & Exchange Commission licensed Funds and Portfolio Manager founded in 2015. We are a boutique firm that emphasizes on growing the purchasing power of our client’s capital. We focus on developing a thorough accepting of our clients’ investment goals and create tailored solutions that generate real returns. TAML is also attentive on extensive due diligence, independent investment judgment and a decision matrix based on the fundamental and technical evaluation. We have a dedicated team that consists of highly experienced and diverse investment professionals.
When compared to the physical capital maintenance concept, the financial capital maintenance concept is the better choice for standard setting when distinguishing between a return of capital and a return on capital. The main argument in favor of physical capital maintenance is that it provides information that has better predictive value, confirmatory value, and is more complete. However, due to agency theory, prospect theory, and positive accounting theory, neutrality and completeness under physical capital maintenance would be impaired so gravely that predictive value and confirmatory value become inefficacious. As a result, financial capital maintenance, with its use of historical cost, is able to provide information to decision makers with stronger confirmatory value and predictive value.
The main method used by businesses to classify assets is to split them into tangible assets, which have a separate existence from the business (examples of which would include buildings, land and machinery), and intangibles which do not. Some clear examples of intangibles include goodwill, patents, research and development expenditure and trademarks. Intangible assets are usually created within the organisation over a period of time, by the company itself, rather than acquired from an external source and are rarely sold off individually they can normally only be sold in conjunction with associated tangible assets.
Assets turnover ratio is calculated yearly basis as per the monetary policy of the organization. Assets turnover ratio is also use to check if the company’s assets is improving or deteriorating.