The most important thing in chapter one is the Lean Thinking Model. My reason is it allows you to see the concept of doing more with less. A practical example of this is TESCO a grocery retailer in Britain uses lean thinking to improve its replenishment process for cola products.
The most important points or concepts in chapter two are how to prepare an INCOME STATEMENT and a BALANCE SHEET. My reason is they are the most important in understanding the financials of a business. They give you a picture of the performance of your business. A practical example of this is as follows:
Company revenue-expenses= net income= 6000-4700=1300 this 1300 net income must also be shown on the balance sheet as equity. (Garrison, 2010)
The most important point or concept in chapter three is JOB ORDER COSTING. My reason is allows one to distinguish overhead cost versus direct labor cost. Example is the cost of service in a law firm. The time expended on clients by an attorney is direct labor and the legal documents preparation, and secretaries , legal aid, etc can be categorize as overhead. (Garrison, 2010)
The most important point or concept in chapter five is the behavior of FIXED and VARIABLE COST. An example of fixed cost would be rent and taxes paid to utilize a facility for doing business. This cost is constant and can only decrease on a per unit basis as the level of activity increases. In contrast variable cost reacts to some activity occurring. This activity is what drives the cost up or down. (Garrison, 2010)
The most important point or concept in chapter six is determining the CONTRIBUTION MARGIN RATIO. Determining the contribution ratio allows one to see the impact of fixed expenses and sales on the profit. Practi...
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...rall cash balance. An example could be the household budget. For instance your inflow of cash would be your paycheck and the out flow that affects overall cash balance in your check book ledger could be anything from utilities to mortgage. The picture allows you to know whether you will be able to meet other financial obligations. (Garrison, 2010)
The most important concept and point in chapter 16 are ratios and their effect. Ratios are not a cure all but they do give an organization the ability to take a quick glance at their ability to meet certain financial obligations. For example a ratio analysis can give a bank that is making a loan to you a clear example if you have enough liquid or disposable income to repay the loan. (Garrison, 2010)
References
Garrison, R. H. (2010). Managerial Accounting (13th edition ed.). Ney York, New York: McGraw-Hill Irwin.
[1] Noreen, Eric W., Brewer Peter C., et al., Managerial Accounting for Managers, Second Edition, McGraw-Hill/Irwin, New York, NY, 2011.
The first analysis will be on Verizon. The current ratio and the debt to equity ratio both improved in 2006 when compared to 2005. However, the net profit margin dropped from 9.8% to 7.0%. What does this tell us as investors...
Donal E. Kieso, Wegandt J. Jerry, Warfield D. Terry. (2012). Intermediate Accounting. Hoboken, NJ: Wiley.
The first method we will review is the accounting method. Through this accounting approach we will analyze specific ratios and their possible impact on the company's performance. The specific ratios we will review include the return on total assets, return on equity, gross profit margin, earnings per share, price earnings ratio, debt to assets, debt to equity, accounts receivable turnover, total asset turnover, fixed asset turnover, and average collection period. I will explain each ratio in greater detail, and why I have included it in this analysis, when I give the results of each specific ratio calculation.
This statement is used to report cash payments and cash receipts of an organization’s during a certain period. During 2015, the Group had operating free cash flow amounting to 606 million euros, versus a negative 164 million euros a year earlier (Air france-klm group, 2016). The statement displays the relationship of the net income to the changes in the cash balances. It is important to understand that cash balances can wane despite and increase in net revenue or vice versa Horngren, 2014, p. 674). The statement also aids in the evaluating management’s use of cash and management’s generation, defining a company’s capability to pay dividends and interest to pay debts when the time comes to pay them, and forecasting upcoming cash flows (Horngren, 2014, p. 674).
Hermanson, R., Edwards, J., & Maher, M. (2010).Accounting principles: A business perspective. (Vol. 2). Textbook Equity inc. DOI: www.textbookequity.com
Financial statement users around the globe use financial statements to evaluate the performance of companies (Fundamentals of Financial Accounting, 2006). In order to locate a company’s reported assets, liabilities, expenses and revenues, statement users rely on four types of financial statements. The four financial statements include: Balance Sheet, Income Statement, Statement of Retained Earnings, and Statement of Cash Flows (Fundamentals of Financial Accounting, 2006, p. 6). Each of these reports provides different information to the financial statement user. The Balance Sheet reports at a point in time: a company’s assets (what it owns), liabilities (what it owes) and stockholder’s equity (what is left over for the owners) (Fundamentals of Financial Accounting, 2006, p.7). The Income Statement shows whether a business made a profit (net income) during a specific period of time (Fundamentals of Financial Accounting, 2006, p. 10). The Statement of Retained Earnings illustrates what portions of the company’s earnings was paid to stockholders and retained by the company for future operations (Fundamentals of Financial Accounting, 2006, p.12). Finally, the Statement of Cash Flows reports summarizes how a business’ “operating, investing, and financial activities caused its cash balance to change over a particular range of time” (Fundamentals of Financial Accounting, 2006, p.13).
Marshall, D.H., McManus, W.W. & Viele, D.F. (2011). Accounting: What the numbers mean (10 ed). New York, NY: The McGraw-Hill Companies, Inc.
Hermanson, R., Edwards, J., & Maher, M. (2010).Accounting principles: A business perspective. (Vol. 2). Textbook Equity inc. DOI: www.textbookequity.com
Net Profit Margin = Net Income $1,267m / Net Sales $4,980m = 0.2544 or 25.44%
[6] Colin Drury, Management and Costing Accounting, (7th edition), Chapter 8, Cost-volume-profit analysis, p. 165-173
Monea, M. (2009). Financial ratios – Reveal how a business is doing? Annals of the University Of Petrosani Economics, 9(2), 137-144. Retrieved from http://www.upet.ro/eng
Contribution Margin is nothing but the amount of money that a firm has to cover its fixed costs after it pays off all the variable cost components. Contribution margin, in other words, is defined as “Sales revenue left over after deducting variable costs from sales” (Heisinger & Hoyle, 2012, p. 348).The formula to reach a contribution margin is Revenue - Variable costs = Contribution margin. On the other hand, a break-even analysis has to do with the calculation and examination of the margin of safety for a company based on the revenues collected and associated
Financial statements can provide a wealth of information about a given organization. These statements provide information about the company’s financial position, cash flows, operations, performance and changes in the financial position. This information may be used as part of the decision making process for employees, shareholders, investors and competitors. Based upon these financial statements, key ratios are used to provide additional insight as to the financial health of a given company. Being familiar with financial statements can increase financial literacy. For this discussion, Citigroup’s (Citi) financial statements will be reviewed.
Managerial accounting has historical antecedents that stretch back to the beginning of the 1900s. Whether it was called cost accounting, or industrial accounting, or administrative accounting it is certain that concerns regarding production cost calculation, expenses’ classification and analysis, resource consumption administration, and pre and post cost calculations, have existed since the beginning of the 90s (Cardos & Cardos, 2010).