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on 28-Sep-2017 (Thu)
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Flashcard 1448309558540
| status | not learned | measured difficulty | 37% [default] | last interval [days] | |||
|---|---|---|---|---|---|---|---|
| repetition number in this series | 0 | memorised on | scheduled repetition | ||||
| scheduled repetition interval | last repetition or drill |
Parent (intermediate) annotation
Open itA company needs cash to pay returns (interest and dividends) to providers of debt and equity capital.
Original toplevel document
2. SCOPE OF FINANCIAL STATEMENT ANALYSISd to earn that income. Overall, profit (or loss) equals income minus expenses, and its recognition is mostly independent from when cash is received or paid. Example 1 illustrates the distinction between profit and cash flow. <span>EXAMPLE 1 Profit versus Cash Flow Sennett Designs (SD) sells furniture on a retail basis. SD began operations during December 2009 and sold furniture for €250,000 in cash. The furniture sold by SD was purchased on credit for €150,000 and delivered by the supplier during December. The credit terms granted by the supplier required SD to pay the €150,000 in January for the furniture it received during December. In addition to the purchase and sale of furniture, in December, SD paid €20,000 in cash for rent and salaries. How much is SD’s profit for December 2009 if no other transactions occurred? How much is SD’s cash flow for December 2009? If SD purchases and sells exactly the same amount in January 2010 as it did in December and under the same terms (receiving cash for the sales and making purchases on credit that will be due in February), how much will the company’s profit and cash flow be for the month of January? Solution to 1: SD’s profit for December 2009 is the excess of the sales price (€250,000) over the cost of the goods that were sold (€150,000) and rent and salaries (€20,000), or €80,000. Solution to 2: The December 2009 cash flow is €230,000, the amount of cash received from the customer (€250,000) less the cash paid for rent and salaries (€20,000). Solution to 3: SD’s profit for January 2010 will be identical to its profit in December: €80,000, calculated as the sales price (€250,000) minus the cost of the goods that were sold (€150,000) and minus rent and salaries (€20,000). SD’s cash flow in January 2010 will also equal €80,000, calculated as the amount of cash received from the customer (€250,000) minus the cash paid for rent and salaries (€20,000) and minus the €150,000 that SD owes for the goods it had purchased on credit in the prior month. Although profitability is important, so is a company’s ability to generate positive cash flow. Cash flow is important because, ultimately, the company needs cash to pay employees, suppliers, and others in order to continue as a going concern. A company that generates positive cash flow from operations has more flexibility in funding needed for investments and taking advantage of attractive business opportunities than an otherwise comparable company without positive operating cash flow. Additionally, a company needs cash to pay returns (interest and dividends) to providers of debt and equity capital. Therefore, the expected magnitude of future cash flows is important in valuing corporate securities and in determining the company’s ability to meet its obligations. The ability to meet short-term obligations is generally referred to as liquidity , and the ability to meet long-term obligations is generally referred to as solvency . Cash flow in any given period is not, however, a complete measure of performance for that period because, as shown in Example 1, a company may be obligated to make future cash payments as a result of a transaction that generates positive cash flow in the current period. Profits may provide useful information about cash flows, past and future. If the transaction of Example 1 were repeated month after month, the long-term average monthly cas
Flashcard 1450712894732
| status | not learned | measured difficulty | 37% [default] | last interval [days] | |||
|---|---|---|---|---|---|---|---|
| repetition number in this series | 0 | memorised on | scheduled repetition | ||||
| scheduled repetition interval | last repetition or drill |
Parent (intermediate) annotation
Open itIn the long run, however, the firm is not able to survive if fixed costs are not completely covered. Any operating point above point B (the minimum point on ATC), such as point D, generates an economic profit.
Original toplevel document
Open itd A), it shuts down because of its inability to cover variable costs in full. Between points A and B, the firm can operate in the short run because it is meeting variable cost payments even though it is unable to cover all of its fixed costs. <span>In the long run, however, the firm is not able to survive if fixed costs are not completely covered. Any operating point above point B (the minimum point on ATC), such as point D, generates an economic profit. A firm’s shutdown point occurs when average revenue is less than average variable cost (any output below Q shutdown ), which corresponds to point A in Exhibit 17. Shutdow
Flashcard 1644392221964
| status | not learned | measured difficulty | 37% [default] | last interval [days] | |||
|---|---|---|---|---|---|---|---|
| repetition number in this series | 0 | memorised on | scheduled repetition | ||||
| scheduled repetition interval | last repetition or drill |
Flashcard 1699038760204
| status | not learned | measured difficulty | 37% [default] | last interval [days] | |||
|---|---|---|---|---|---|---|---|
| repetition number in this series | 0 | memorised on | scheduled repetition | ||||
| scheduled repetition interval | last repetition or drill |
Parent (intermediate) annotation
Open itHipócrates se dispunha, de acordo com as fontes, a aceitar discípulos em troca de pagamento, como os sofistas mais famosos. Essa passagem corrobora, portanto, a infor- mação do Juramento hipocrático de que o ensino da medicina não era gratuito.
Original toplevel document (pdf)
cannot see any pdfsFlashcard 1699040333068
| status | not learned | measured difficulty | 37% [default] | last interval [days] | |||
|---|---|---|---|---|---|---|---|
| repetition number in this series | 0 | memorised on | scheduled repetition | ||||
| scheduled repetition interval | last repetition or drill |
Parent (intermediate) annotation
Open itHipócrates se dispunha, de acordo com as fontes, a aceitar discípulos em troca de pagamento, como os sofistas mais famosos. Essa passagem corrobora, portanto, a infor- mação do Juramento hipocrático de que o ensino da medicina não era gratuito.
Original toplevel document (pdf)
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| last reprioritisation on | suggested re-reading day | |||
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