In order to create a budget you must have a forecast, there is no way you can forecast after the budget is done. The production volume is important for the next step because you will need to know how much a business is making in order to create a budget. Estimating manufacturing cost and operating expenses is important because it enables the business to know how to create the right budget. The cash flow and the financial effects is important for the next step because it allows the business to know all the flow of cash from all of the steps that were done prior. Formulating the projected statements is meant to be the last step because you need all of the prior steps in order to create an appropriate
The manager would whether the competitor produced a new product or is working on a new project, and how is the project doing. Quantitative Forecasting: Find a new way to expand the market, which it can be done through numerous ways. It can be expand through renovating, producing a new product or buying out competition, etc. Budgeting: The regional manager would set a budget to determine what is needed to expand. Once that’s been done, the profit budget can be used to calculate the break-even analysis to determine or set a sales goals.
Can we include the directly attributable acquisition costs, like legal and accountants fees when working out the cost of acquisition? No. You can do this for things like plant and equipment measured at cost, but not for business combinations. You might read in some older textbooks that you can, and it was allowed until 2008 when IFRS 3 was revised. But since IFRS 3 was revised, all costs relating to the acquisition of a subsidiary must be expensed to the P&L in the period of acquisition.
FLEXIBLE BUDGET A flexible budget, which is also known as variable budget as the name typifies flexes for alteration in the volume of operations and it is calculated using the actual activity level for a particular period (not the budgeted sales) multiplied by the standard cost per unit. It uses the incomes and expenses generated in the recent production as a baseline and measures how the income and expenditures will vary based on the changes in the output. In addition, it is established after a period to foretell both the successful and the unsuccessful areas for the forthcoming accounting period. (My Accounting Course, n.d.) To accomplish this in the real world, the managers carefully identifies the fixed and the variable cost and then compares
1) Sources of capital to be included when estimating Harry Davis’s WACC: The WACC is primarily used for making long-term investment decisions that is capital budgeting. The WACC should include the types of capital used to pay for long-term assets like as long-term debt, preferred stock and common stock. Short-term capital consists of account payable, accruals, short-term debts and note payable. WACC should include short-term debt component if the firm is using short-term debt to acquire fixed assets rather than just to finance working capital needs. Non-interest bearing debt is not included in cost of capital estimate as theses funds are netted out when determining investment needs which is net rather than gross working capital is included
Additionally, the Sharpe Ratio can be used to determine if a hedge fund is generating excess returns over what was predicted using the Capital Asset Pricing Model (CAPM). This excess return can be measured using alpha where an alpha of 1.0 indicates that the fund has outperformed
The first estimate figure I will choose is the cost of inventory, because Intel Corporation is an information technology company mean the inventory will go out to date in the short time. Intel need to constantly doing the innovation on their product to remain their position in the market, for example Intel processor. Intel needs to keep doing the innovation so the product can fit the market needs like smaller, faster and cheaper system. Intel’s inventory is a combination of raw material, work in progress and finish goods. Raw material is unprocessed items to be used to manufacturing or production process.
It measures the proficiency of a company, as to how well can they manage their assets to earn return on its investment. In other words, ROA determines how resourcefully a company can convert the money employed to acquire assets into net income or profits. Owing to the funding of all the assets by either equity or debt, often a few investors add back interest expense in the formula and take no notice of the costs involved during acquiring the assets in the return
Current Ratio = Current Assets Current Liabilities Mainly, the current ratio measures the ability of a company to meet short term obligations using short term. It also helps to know the firms cash flow in the near future (Houston and Brigham, 2009). Quick Ratio = Cash +AR + Marketable Securities Current Liabilities Quick ratio or acid ratio indicates whether the firm has enough short-term assets to cover its immediate liabilities or not and therefore whether it isin a position to pay its bills without selling the inventory (Houston & Brigham, 2009). Working Capital = Current Assets – Current
In this technique a budget is prepared for future period. It helps in planning and controlling the costs based on the budget prepared. In Reliance Digitals a budget is prepared at the beginning of the year, and then at the end of the year all the costs incurred are calculated and compared with the budget done initially. If the calculated values at the year end are within the budget prepared then the company is said to have made profits, and if it exceeds the budget plan then the company is said to have incurred loss. Types of Costs: Fixed Costs: Fixed Costs cannot be changed with the output.