According to Marsha (2014), the main purpose of cash flow statement is to inform information about the change in cash receipt and cash payment during the period. On the one hand, there are several reasons why cash basic is well accepted by financial economists. The primary benefit of cash-based accounting is simpler to understand than other accounting methods (Tudor and Mutiu, 2006, p.2). Due to the cash rule, users are less likely to be confused due to the variety of financial information between revenues and expenses so effort to match an expense with the revenue it generates it’s not necessary. (Tudor and Mutiu, 2006, p.2).
Relevance and importance of cost accounting Cost control Cost control is a modus operandi utilized in minimizing cost of products and services without affecting its quality but instead, increasing its efficiency. There are various methods for controlling costs, namely, standard costing and budgetary control. Controlling cost is the rudiment of management accounting because it entails the juxtaposition of the actual results against the devised results. Costing provides management control in inventory levels, such as stock of materials, work-in-progress and finished goods. Costs can be retrenched in the long-run when alternatives would have been ventured.
The relationship between price elasticity of demand and total revenue bring together some important microeconomic concepts (Miller 2012). In the previous question, you can see how raising a price can bring the demand for a product down. This will have an obvious effect on total revenue and will help a firm when it comes time to change its price. There are times when changing the price of a product will not create less or more of a demand for a
Financial institutions have the required economies of scale and experience to reduce information costs by regular lending. 3.Liquidity Transformation - Depositors hold relatively undiversified portfolios. Without the opportunity to diversify, the undoubted risk will increase for the depositor who wishes to lend directly to the proposed borrower. Financial Institutions however are in the business of taking risk. The institution / bank will record deposits on their balance sheet as liabilities, however low risk.
Last but not least, Internal rate of return (IRR) is another discounted cash flow technique which is discount rate that cash inflows of a project, produces a zero net present value. The criteria of accept and reject is if the IRR is greater than the cost of capital, the project would accept and the excess amount will give to the shareholders as a return. The advantages using IRR are it recognize the time value of money. And it based on cash flows basis, no accounting profits. This will help the company evaluation the approximate or nearest rate of return.
MANIPULATION OF TRANSFER PRICING Transfer pricing is not, in itself, illegal or necessarily abusive . What is illegal or abusive is transfer mispricing, also known as transfer pricing manipulation or abusive transfer pricing. Transfer mispricing is a form of a more general phenomenon known as trade mispricing, which includes trade between unrelated or apparently unrelated parties. Transfer pricing thus provides for huge loss to the public exchequer as they are prevented from taxing a product or service or on the other hand are prevented from realizing the real tax at which a product was to be taxed in a country. Transfer pricing manipulation reduces revenue available for country development, and with increasing globalisation, the potential
The monetarists agreed with Keynesian transmission channel in the short run but in the long run they came to the same result with classical economists that money is neutral. The new classical economists decomposed monetary changes into expected and unexpected ones and argued that only unanticipated money would result in an income changes. The new Keynesians came to non-neutrality of money, at least in the short run, because of nominal and real rigidities, market failures and imperfections. The real business cycle theory argued that money supply endogenously responds to income increase through banking sector
The second type of profit, which results at the end of the holding period by selling the propriety is in contrary uncertain because this profit might be affected by current unexpected economic events turning the investment into a capital loss. This extreme event is in the case of real estate investments very seldom. The eventuality of a total capital loss is of some rarity because the owner can still detract a profit by the piece of land the propriety is
Introduction Real options analysis is a method used to value flexible strategies in this tentative world. It is usually built on the Traditional Discounted cash Flow method but it overcomes the disadvantages of Traditional DCF technique. Real options is a mix of quantitative techniques given by Black and Scholes along with binomial approach given by Cox et al(1979). Uncertainty, and the difficulty to value the flexibility are limitations of the Traditional DCF approach to value a project and thus this article researches on a flexible strategy that adapts to conditions as uncertainty is resolved. A real option gives the holder the right not the obligation to buy or sell a particular quantity of an underlying asset at a particular price also
2. It is levied after businesses deduct allowable expenses from their profits. This is unlike with other taxes. 3. It is equitable Corporations benefit from a country’s policies and services and should thus be taxed for benefitting from them.