“Speeding up the close”
The article I choose to review is “Speeding up the close” by Gaye van den Hombergh and Laurie Streling from the magazine Financial Executive June 2004 issue.
Companies with a 12-month accounting period otherwise known as a fiscal year are coming up with alternative ways to reduce time and speed up the process to meet the impending 60-day deadline. This article discusses fiscal year and the abilities of companies to close the books quickly to access real-time financial results, which, in turn, lead to better decision making. Companies spend or invest funds in projects that hopefully make the firm more profitable, having real-time financial results would make this more efficient. Faster closings means more time for the company to process the numbers, also a rapid close is a sign of the efficiency and success of management and the company. If management has real-time financial results it allows them to respond more efficiently to changes in the market, which, in turn, help investors make significant investment decisions.
The article goes on to discuss the pressure mounting for virtual close, but how urgent is it, and is it worth the investment? A survey was conduct of financial executives in companies to see if the pressure mounting for virtual close is significant often to proceed with further action. The Johnsson Group found less than one out of five respondents reported a fully automated close, more than half said that their close process is semi-automated and requires some manual intervention, and a quarter replied that their systems need significant manual intervention. Speed up the close should not be viewed as a vital step to be taken all at once, but as an evolutionary process. The concept of virtual close shows us how far the finance organization have come in the pass couple of years in the time it takes to performing closings. Two-thirds of companies closed their books for the quarter in 4 to 7 business days, 16 percent are accomplishing their closings in 1 to 3 days, but on other hand 21 percent of the companies reported needing more than 7 business days for closing. Although companies have to be prepared to confront certain issues while obtaining faster closing, like less emphasis on training, leaving companies with fewer finance “historians who in fact know the rationale behind the processes and have a deeper understanding of the business”.
The next paragraph in this article discusses a more strategic role for finance.
The Securities and Exchange Commission requires that publicly owned businesses provide annual reports, which are available to the public. Many different people use annual reports, to make informed business decisions. Management from the company uses the information to determine a number of items. Some of these items are the profitability of the company, the inventory turnover rate, and the accounts receivables rate. Creditors use the annual report to determine how well a company can satisfy its current liabilities, as well as, how the company is doing in the aspect of long tem survival. Another group of people who use the annual reports furnished by companies are the investors, who can purchase shares of stock from the publicly company. Annual reports are very important to these people, because they are an over all picture to help them determine the over all stability and reliability of the company’s financial outlook. These annual reports are important because they do not only contain the financial statements of the company, but there is a management ‘s note to discuss reasons for any unexpected numbers, and an auditor’s report, from an independent accounting firm, who either agrees or disagrees with the financial numbers. Market reporter Matt Krant said, “Ignoring these reports is akin to driving down the freeway blindfolded.”
When a business follows the accounting cycle they are making the correct steps towards a successful business. The accounting cycle makes sure that every transaction is recorded. For three months Peyton approved journalized to track transactions. An accounting cycle has ten steps, in steps 1-4 journal entries and T-accounts are prepared. In steps 5-7 the trial balance and adjusted entries are completed and in the final steps, 8-10 the income statement, a statement of retained earnings, a balance sheet, the closing entries, the post closing trial balance, and reversing entries are completed. Peyton Approved promotes operation efficiency, and it ensures accurate and reliable accounting records by following the Accrual basis of
First, Splitting commercial banks and investment banks could train two employees in two lines, whether professional techniques or professional management skills. Because in securities areas, employees could increase their professional technology and services by performing customers’ requirements, while commercial banks,
Gerald, J. M., Samuel, J. Y., W, B. H., & Rabin, J. (2005). How financial managers deal
Volcker, Paul (2011). "Financial Reform: Unfinished Business”, New York Review of Books, Retrieved December 28, 2013 from http://www.nybooks.com/articles/archives/2011/nov/24/financial-reform-unfinished-business/
Schofield (2014) researches the difference between public and private company financial reporting. For instance, a private company has fewer consumers reviewing their financial statements, whereas public companies could have multiple consumers reviewing financial statements. In addition, private companies typically have less specialized accounting personnel, whereas public companies will have several. Lastly, Schofield (2014), reviewed the number of amendments proposed and finalized to help benefit private companies financial reporting.
On September 28, 1998, Chairman of the U.S. Securities and Exchange Commission Arthur Levitt sounded the call to arms in the financial community. Levitt asked for, "immediate and coordinated action… to assure credibility and transparency" of financial reporting. Levitt’s speech emphasized the importance of clear financial reporting to those gathered at New York University. Reporting which has bowed to the pressures and tricks of earnings management. Levitt specifically addresses five of the most popular tricks used by firms to smooth earnings. Secondly, Levitt outlines an eight part action plan to recover the integrity of financial reporting in the U.S. market place. What are the basic objectives of financial reporting? Generally accepted accounting principles provide information that identifies, measures, and communicates financial information about economic entities to reasonably knowledgeable users. Information that is a source of decision making for a wide array of users, most importantly, by investors and creditors. Investors and creditors who are responsible for effective allocation of capital in our economy. If financial reporting becomes obscure and indecipherable, society loses the benefits of effective capital allocation. Nothing illustrates the importance of transparent information better than the pre-1930’s era of anything goes accounting. An era that left a chasm of misinformation in the market. A chasm that was a contributing factor to the market collapse of 1929 and the years of economic depression. An entire society suffered the repercussions of misinformation. Families, and retirees depend on the credibility of financial reporting for their futures and livelihoods. Levitt describes financial reporting as, a bond between the company and the investor which if damaged can have disastrous, long-lasting consequences. Once again, the bond is being tested. Tested by a financial community fixated on consensus earnings estimates. The pressure to achieve consensus estimates has never been so intense. The market demands consistency and punishes those who come up short. Eric Benhamou, former CEO of 3COM Corporation, learned this hard lesson over a few short weeks in 1996. Benhamou and shareholders lost $7 billion in market value when 3COM failed to achieve expectations. The pressures are a tangled web of expectations, and conflicts of interest which Levitt describes as "almost self-perpetuating." With pressures mounting, the answer from U.S. managers has been earnings management with a mix of managed expectations. March of 1997 Fortune magazine reported that for an unprecedented sixteen consecutive quarters, more S&P 500 companies have beat the consensus earnings estimate than missed them.
Contemporary management of the business. 7 ed. of the book. New York, NY: McGraw-Hill. McComb, S., Schroeder, A., Kennedy, D., & Vozdolska, R. (2012).
The conceptual framework identifies the primary users of accounting information as investors, creditors, and those who advise them. It also assumes a “prudent” investor; that is, an investor who takes the time to become reasonably well informed with respect to accounting theory and practice. Discuss this concept with respect to the current economic environment. Are different groups of investors “prudent”? According to the conceptual framework, the potential users of financial statements are investors, creditors, suppliers, employees, customers, governments and agencies, and the general public (Financial Accounting Standards Board, 2006).
The most recent edition covers approximately 4.7 million active corporate federal income tax returns, including those owned or controlled by foreign persons. The publication profiles corporate performance in two analytical tables for each industry. Table I reports operating and financial information for all corporations, those with and without net income. Table II provides the same information as Table I, but only for corporations with net income. It provides 50 performance indicators for each industry. At the end of each industry section, performance indicators for the last ten years are shown.
Most critical to this discussion is a clear understanding of what a financial manager is and does and how his or her role aids in helping to establish the valuation of a corporate entity in today's global financial market. Quite simply, a financial manager helps to measure a company's market value and its risk, while also helping to systematically reduce its costs and the time necessary to make informed decisions regarding objective driven operations. This is quite a demanding game plan for an individual and most often financial managers, in the corporate world, working in cooperation with a team of financial experts. Each member of that team perhaps having expertise in differing areas of activity, but each however, being no less expert in his or her respective area of endeavors on behalf of the corporation. The team is assembled under the direction of the officer known in the corporation as the Chief Financial Officer who today is becoming increasingly indispensable to the CEO who directs a modern model of action driven, bottom-line oriented corporate activity (Couto, Neilson, 2004).
Over recent years companies have become less dependent on paper and more dependent on technology. Take American Honda Motors for example; the Davenport Parts facility recently converted computer systems to more efficiently manage its inventory. Prior to its new system months of preparation was needed in order to ensure a smooth change over. Without the four basic functions of management all working together success would not have been possible.
The success of a company is very dependent upon its financial accounting. In accounting there are numerous Regulatory bodies that govern the accounting world. These companies are extremely important to a company because they set the standards when it comes to the language and decision making of a company. These regulatory bodies can be structured as agencies, associations, commissions, and boards. Without companies like the Security and Exchange Commission (SEC), The Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB), Internal Accounting Standards Board (IASB), Internal Revenue Service (IRS), and other regulatory bodies a company could not make well informed decisions. In this paper the author will look at only four of them.
I dealt with strategy and financial matters for our virtual enterprise, while my colleagues were working on marketing and manufacturing. During the four months of the exercise, I have experienced finance from various aspects: capital budgeting, through selecting favorable investments for upcoming quarters; debt management, by assessing the necessary amount and efficiency of loans; profitability analysis and dividend policy, which have been used to compile the company’s general performance index. Working in a multinational team, which included an American, a Norwegian and a Moldovan, strengthened my negotiation skills, as well as flexibility and cooperation. But above all, this experience intensified my passion for finance. Of course, a pleasant bonus was the fact that, in the end, our company’s financial performance was six times the performance of the second-best team.
This is followed in section 5 by an analysis of the recent changes in the banking industry. With the development of the financial system, declining entry barriers and the deregulation of the banking industry make banks no longer the monopoly suppliers of banking services and reduce their comparative advantages which they usually hold in the past. Whether the reasons give rise to the existence of banks are still powerful will be examined here, while section 6 offers a way of considering whether banks are declining by looking at the value added by the banks. When the value added by banks is examined, banks are not a financial intermediation, which not only conduct the traditional services but also provide more diversified