Sometimes the government makes up depreciation methods in order to stimulate or dampen the economy and for other political reasons. By tradition, many of these accounting methods are accepted and still in use today. Since the objective of depreciation is to match revenues and expenses, it is probably best to choose the method that meets that requirement. Sometimes a machine will be more productive in the early years and less productive in the later years. An accelerated method may be best in cases such as that.
A campaign for either the product size may lead to short term sales increase, but could also potentially eat into the market share of alternative company products. According to the comparison of sales volumes provided within the case study, estimates for the indirect costs of such cannibalization negated the potential benefits of a targeted national campaign. Based on the data provided, such national campaigns have ultimately negatively affected the overall marketing margin (Bharadwaj & Delurgio,
To try to fix the imbalances previously discussed, two main changes have been suggested: take more in and send less out. Currently Social Security is financed by a 12.4% tax on wages and salary, up to $118,500. The ‘take more in’ approach would be executed by raising the tax by 2.9% or removing the cap to close the funding gap. The ‘send out less’ approach is the less accepted approach, because it is seen as more beneficial to those with higher incomes. The main focus of this approach is getting people to retire later, but people with higher incomes enjoy higher life expectancies.
Key Issues The key issues in this case include the recapitalization effects to the rest of the company. The immediate benefits include the value of te tax shield and in turn will have effects on he share price at Wrigley. Taking on $3 billion of long-term debt will also affect the WACC due to the increased risks of Wrigley as the company went from having $0 long-term debt to $3 billion. In addition, the recapitalization and re-purchase of shares will decrease or contract the number of shareholders, which could possible affect the Wrigley Family’s voting ability
Secondly, the company recognizes revenue when the deliver occurred that means the products had been shipped. Then the risk of loss can be transferred. Thirdly, the company usually defers revenue until the customer receives the products through the online sales to individuals, which will be recognized as counts payable. As a result, the assets of this period would increase and it also has influence on asset structure. There are also other subjects which required by company accounting policies would have a material impact on the financial report, such as the inventory, income taxes and warranty
Along these lines, unemployment may decrease, as this has different favorable circumstances, for example, lower government using on profits and less social issues. However, this phenomenon includes a number of different expenses. Firstly, if economic growth is unsustainable and is higher than the long run pattern rate, inflations are liable to be seen. An increase in economic growth could prompt an equalization of issued installments. In case the expanded customer expenditure causes further development, there will be an increase in the import sector.
• Government regulations: Another major threat to virgin mobile can be change in government regulations domestically and globally. This can usually impose extra duties and taxes on services and telecom regulation. Also, if the government were to change regulations due to inflation or deflation, interest rates also increase which would make it harder for companies to fund or take loans and might even cause them to increase prices to cope with the changes in economy. Other than this, globally, tariffs and cultural differences can act as a problem for the
Sometimes companies do have other alternative of giving the money back to shareholders and buybacks are an example of that, but they are inconsistent, hence we can make a little adjustment in the payout ratio to adjust the differences, which is as under Augmented Dividend payout= (Dividends+ Stock buybacks-Long term debt issues)/Net Income H Model: This model was devised to address the issue of sudden migration from Initial high growth to Stable growth rate in a 2 stage model. This model suggests that Initial growth rate does not have a sustained high growth rate but falls linearly over the period of time till it reaches a stable growth rate. This model proposes that the growth will fall linearly but the payout ratio will remain constant, which is not true,since the payout ratio should increase with decreasing growth rate. Due to this reason this model is inappropriate and does have very limited applicability. Three Stage Model: This model combines the features of earlier two models and also attempts to overcome the shortcomings of the earlier
A country can attract foreign direct investment by devaluing the currency because foreign direct investment will benefit from the weakness of the currency of the host country. The depreciation of the national currency against the Malaysian Ringgit foreign investors will increase foreign direct investment inflows. The exchange rate is one of the most important factors that affect trade between the countries. If the exchange rate rises, banks are relatively more favorable to the exporter, the exporter will be aware to changes in exchange rates. Statutory corporate tax rate is used as a proxy for the effects of fiscal policy to all new investors, ignoring tax holidays, accelerated depreciation and other incentives that reduce the effects of the statutory rate.
Having different accounting standards in the world is a problem for multinational public limited companies and investors in order to be able to compare and evaluate financial statements (Doupnik & Perera, 2009). Due to the economic and financial scandals and meltdown in recent years, the pressure has been increased on some countries such as United States. Therefore, it must eliminate the gap between the International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (GAAP). The world of accounting diversity will have consequences on such changes, and the standard convergence of US GAAP with International Financial Reporting Standards also largely affect corporate management, investment, stock market, accounting personnel and accounting standard setters. In addition, the convergence of accounting standards will change the approach for international accounting harmonization to CPA and CFO, it affects the quality of international accounting quality standards and the effort made toward GAAP and IFRS convergence