Page 30 - Should the government force people to save more? What is the opportunity cost of saving? The opportunity cost is the next best alternative to good or service.
Hill Country practices the conservative capital structure, which has excessive liquidity and lower interest rates that will bring negative impacts on the company’s financial performance measures. So, it is a good opportunity for Hill Country to implement a more aggressive capital structure. For example, the Chief Executive Officer (CEO) of this company can increase the leverage ratio by either increase the debt or reduce the equity or both. At first, debt financing usually used when a firm raises money for capital expenditures by issuing debt instruments to individual or institutional investors.
Tax deferred deductions will lower the gross taxable wages for the paycheck by the amount of that deduction. Taxes will not be paid on this deducted amount until a later date, usually after retirement. Many people like this type of deduction because it lowers the amount of taxes being withheld from the paycheck increasing the net pay. These style of deductions could be 401(k), IRA and some insurance premium deductions. 401(k) and IRA accounts have their tax liability paid at the time the money is withdrawn out of the account.
In other words, Berkshire can sell some of its debtor invoices(receivables) to a third party financial organization (factor).The transaction normally happens at a discount(advanced up to 80% in return for a commission and interest is charged for the amount advanced) in return for prompt cash, but with recourse of liability. If the original debtors do not pay, factor will not take the responsibility and the eventual liability will come back to Berkshire. Short Term Loans If the company faces financial deficit for a while then short term funding would be a good one. Short term loan is for less than a year to finance our short-term working capital needs.
When the policyholder cashes out, they will receive a lump sum or fixed payments for a specific length of time or the rest of their life and these amounts are tax deductible. The benefits of a retirement annuity include having a secure income to lead the same standard of life, once the insured has retired. The money invested in the annuity is tax-free with no capital gains or income tax on the insured’s investment returns. The amount invested is compounded annually with substantial long-term growth.
As a result of the time value of the money, NPV considers the compounding of the discount rate over the span of the project. The NPV of a project mirrors how much cash inflow or outflow and it measures up to or surpasses the amount of project capital required to reserve it. An organization utilize NPV as a method for contrasting their relative profitability with assurance that exclusive the most lucrative endeavors are sought while evaluating numerous projects. A higher NPV shows that the project is more fruitful. The forecasted cash outflow and inflow for every period must be recognized and additionally the expected discount rate in order to compute NPV.
The big amount in the trial balance was the cash with 22,000 and it have not changed even after the adjustment while in credit it was the common stock with $28,000 which also have not been changed after the adjustments . Income statement . Income statement is a financial statement which measures a business financial performance over a specific accounting period. A financial performance is assessed by giving a brief summary of how the business incurs it's revenues and expenses through both operating and non operating activities, it also shows the net profit or loss . Consulting revenue is the same which is $23,000 taken from trial balance .
ARR AND NPV Accounting rate of return (ARR) is the average profit you expected from an investment; (Average annual profit/ total value of investment)= ARR. Net present value (NPV) determines the value of a project whether to accept or to reject it. According to the scenario; it stated Mr.Javins sometimes used ARR method rather than NPV, since he preferred.
The owner intends to gain profit at the end of holding time after the tenant has paid the entire mortgage. Thus, the owner gains two forms of cash income. This graphs shows that the rental income which represents a percentage of the capital return remains very stable over the holding period. 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.
In the job market, the increase in minimum wage will cause a shortage, making it less profitable for companies to employ many workers. This will result in higher unemployment. In response to such criticisms, the government has come up with a concept called the “voluntary living wage,” which is an “attempt to encourage firms to pay higher wages” (Economics Help). A living wage is an “hourly wage rate considered the minimum level to provide the essentials of modern living” (Pettinger, 2012). To put it into simpler words, a living wage is an adjusted type of wage that takes into account the average price level of the country.
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.
The budget process helps evaluate and plan a specific course of action for a particular financial situation. Goals are set to lay a foundation for information gathered on financial statements. The financial statements are used to determine the figures for limitations included in the budget. A time frame is set to reassess whether the budget is being followed and what course of action the variances have changed. The variances are determined by macroeconomic factors like the price of gas and microeconomic factors like the reduction of labor hours at work.
Oil and gas companies use LIFO, much like the rest of the business world, to gain the tax benefit that LIFO provides. However, LIFO allows Chesapeake to record the cost of inventory at the most recent price paid- even though some of the inventory was purchased when oil was selling at a much lower price. Profits would then be understated for that particular year since LIFO would yield a higher cost of goods sold. Although it is legal to use LIFO as an accounting method for inventory Chesapeake could change the estimates and assumptions used to calculate LIFO balances and the LIFO reserve.