...company's balance sheet, income statement and cash flow statement. It will also have an impact on a company's financial ratios. Here is what the decision will have an impact on: Net income - Capitalizing costs and depreciating them over time will show a smoother pattern of reported incomes. Expensing firms have higher variability in reported income. In terms of profitability, in the early years, a company that capitalizes costs will have a higher profitability than it would have had if it expensed them. In later years, the company that expenses costs will have a higher profitability than it would have had if it capitalized them. Stockholders' equity - Over a long time frame, the choice of expensing a cost or capitalizing it will have little effect on a shareholders' total equity. That said, expensing firms will have a lower stockholders' equity at first (less profit, thus smaller retained earnings). Cash flow from operations - A company that capitalizes its costs will display higher net profits in the first years and will have to pay higher taxes than it would've had to pay if it expensed all of its costs. That said, over a long period of time, the tax implications would be the same. But the choice for capitalizing over expensing have a much larger effect on the reported cash flow...
Words: 1869 - Pages: 8
...Discuss theories on the maintenance of romantic relationships (24 marks) The social exchange theory was developed by Thibaut and Kelly, who suggested that social behaviour is due to the result of an exchange process, where people try to maximise rewards (Such as self-esteem and happiness) from a relationship and minimise costs (such as time, effort and emotional support). The exchange process changes when an individual receives rewards from others; they feel the need to return the favour. If the rewards outstrip the costs, this is seen as a positive sign in the maintenance of a relationship, but if the costs outweigh the rewards, the theory suggests that this could have a damaging effect on maintaining relationships. Thibaut and Kelly claimed that we create a comparison line (a standard against which all our relationships are judged). This referred to whether one person would offer something better or worse in accordance to what we expect from them. So if our current relationships exceed our comparison level, it’s a worthwhile relationship to stay in. However, if our current relationships fail to exceed our comparison level, this means we are dissatisfied with the relationship and may look for an alternative partner. Simpson et al conducted evidence supporting the social exchange theory. They found that participants in existing relationships rated people of the opposite sex as less attractive than participants not in relationships. This suggested that people judge prospects...
Words: 1023 - Pages: 5
...Theories Of Relationship Theories Of Relationship [Document Title] [Document Title] Elizabeth Wiwoloku Elizabeth Wiwoloku Introduction There are two main theories applied to relationships, Social Exchange Theory and Equity Theory underpin commonly used behavioural therapies such as Cognitive Behavioural Therapy, Enhanced Cognitive Behavioral Therapy and Integrative Cognitive Behavioural Therapy. More recent studies in neuroscience and behavior and the importance of language have led to the development of Relational Frame Theory and Acceptance and Commitment Therapy as an alternative approach. In this essay I will outline the relationship models comparing and contrasting them Social exchange theory Social exchange theory analyses interactions between two parties by examining the costs and benefits to each. The key point of the theory is that it assumes the two parties are both giving and receiving items of value from each other. Under this theory, interactions are only likely to continue if both parties feel they coming out of the exchange with more than they are giving up that is, if there is a positive amount of profit for both parties involved. The Social Exchange Theory by Thibaut and Kelly (1978) originates from economy sociology and psychology. It is also a well know theory in sociology that explains the variations and modifications of social relationships development between individuals. The social exchange theory assumes that all human relationships are a matter...
Words: 2516 - Pages: 11
...Hasnur Rabiain bin Ismail and Dato’ Chong Ket Pen started in the road construction business by setting up of HCM in 1991. In the start-up years, HCM was involved in sub-contracting works for clients like PROPEL and JKR. In 1994, the Group achieved a significant milestone when it was awarded a major road construction contract from PROPEL for RM 7.5 million for the pavement construction of the EastWest Link Expressway (Package 5) in Kuala Lumpur. Over the past 10 years, the Group has gradually built up an impressive track record in road construction and rehabilitation and has recently expanded its scope of services to include road maintenance works. Today, the Group prides itself as an integrated specialist in road construction, rehabilitation and maintenance works. PROTASCO BHD re-aligned its businesses into 6 core divisions – Maintenance, Construction, Property Development, Engineering &...
Words: 1443 - Pages: 6
...5 states that the concept of earnings is similar to the net income in the present practice. It includes almost all of what is in present net income for a period, and a statement of earnings based on it will be much like a present income statement. However, earnings are not exactly the same as net income. They do not include the cumulative effect of certain accounting adjustments of earlier periods that are recognized in the current period. In addition they do not include cumulative effect of a change in accounting principles, and items that belong primarily to other periods. c. Discuss the all-inclusive concept of income. The all-inclusive concept of income is a method of income reporting that includes the total non-owner changes in equity on a company's financial statements. It excludes distributions to owners and investments by owners. According to the all-inclusive income concept, all items, including extraordinary, nonrecurring gains and losses, and changes in accounting policies are included into the income statement. With this method, a more comprehensive picture of the firm in obtained. d. Explain how comprehensive income is consistent with the all-inclusive concept of...
Words: 783 - Pages: 4
...Outline and evaluate two theories of the maintenance of relationships Social Exchange Theory (SET) is one explanation of the maintenance of relationships. It assumes that all social behaviour is a series of exchanges where individuals attempt to maximise their rewards and minimise costs. Exchange refers to when an individual receives an award from others, they feel obliged to reciprocate. These rewards that we may receive from a relationship may include companionship, security and sex. Costs are those exchanges that result in a loss or punishment. These may include physical or psychological abuse and loss of other opportunities. The rewards minus the costs equal the outcomes or profits. Thibaut and Kelly developed a comparison level. They introduced two levels; comparison level and comparison level for alternatives. Our comparison level refers to our past and present and is the product of our experiences in other relationships together with other general views or expectations. If the current relationship exceeds our comparison level, we deem the relationship to be worthwhile and we are motivated to maintain the relationship. If however, the profit is less than our comparison level, we will be left dissatisfied and the other person will appear less attractive as a partner. The comparison level for alternatives, on the other hand, is concerned with the benefits of possible alternative relationships. It involves a person weighing up a potential increase in rewards from a different...
Words: 921 - Pages: 4
...when the specified price is reached 5-2. To realize a gross profit of $5000 on 200 shares sold short at $75, the investor must coverat (ignoring transaction costs) 200($75) = $15,000- X ─────── = $ 5000 profit X is $10,000, which must be divided by 200 shares ANSWER: $50 per share For a profit of $1000, the calculation is $15,000- X ─────── $ 1000 X is $14,000, which again must be divided by 200 shares ANSWER: $70 per share 5-3. 100 shares at $50 per share is a total cost of $5000. At 50% margin, the investor must put up $2500, resulting in a gross profit percentage relative to equity of $1000/$2500 = 40% At 40% margin, the investor must put up $2000, resulting in a gross profit percentage relative to equity of $1000/$2000 = 50% At 60% margin, the investor must put up $3000, resulting in a gross profit percentagerelative to equity of $1000/$3000 = 33.3% 5-4. The initial margin is 50% of $6000, or $3000. The other $3000 is borrowed from the broker .(a) market value of securities - amount borrowed actual margin = ─────────────────────────────── market value of securities $5000 - $3000 = ─────────────...
Words: 501 - Pages: 3
...purchase price is between 2,653 million and 3,243 million. The IRR of the project is 28% when exiting by the end of 5th year. Overall this project will generate steady growth with great upside potential and low company-wide or industry-wide risks. We will dive into the details of analyses in the sections followed. Method and Valuation Drivers Primarily, we used transaction multiple method of valuation. Given the very nature of LBO, these additional drivers need to be carefully considered when valuing equity return: 1. Purchase Price and exit price will directly affect the return generated. Exit price is calculated using exit multiple. A higher exit multiple will increase estimation for selling price and thus the underlying equity value. 2. Leverage Ratio: A higher leverage ratio will lead to higher return upon the sales at the end of 5th year, this is because debt financing is cheaper than equity financing equity. In our valuation, we used a capital structure of 70/30 debt/equity ratio. 3. IRR: Internal rate of return is a derived value that will determine the whether the project is worth undertaking. We are aiming to reach an IRR of 25%, which is...
Words: 1852 - Pages: 8
...American Finance Association Limited Arbitrage in Equity Markets Author(s): Mark Mitchell, Todd Pulvino, Erik Stafford Source: The Journal of Finance, Vol. 57, No. 2 (Apr., 2002), pp. 551-584 Published by: Blackwell Publishing for the American Finance Association Stable URL: http://www.jstor.org/stable/2697750 Accessed: 08/01/2010 15:26 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=black. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. Blackwell Publishing and American Finance Association...
Words: 15417 - Pages: 62
...Debt versus Equity Financing Brenda L. Rochelle ACC/400 November 7, 2011 Carl Mir Debt versus Equity Financing Introduction In this paper, the author will attempt to compare and contrast lease versus purchase options by providing definitions of debt financing and equity financing and providing examples of each. Additionally, the author will attempt to address which alternative capital structure is more advantageous and why. Business owners must decide whether to purchase outright, finance purchases, or through a long-term lease. Full rights of ownership are realized when purchasing outright. Financed purchases lessen control of the asset by the buyer. Restrictions may be placed on the buyer’s right to sell by the lien holder in an installment purchase. In a long-term lease, the lessee lacks the right to sell, except for any purchase options available. An alternative is short-term leasing. This alternative frees the lessee of most risks of ownership, specifically obsolescence and maintenance. Additionally, the rental rate reflects these advantages. Choosing between outright purchase, financed purchase, long-term lease, and short-term leasing, causes management to face operational considerations such as maintenance, obsolescence, and the degree of control. Decisions involving financial considerations are necessary when ownership is selected. Debt Financing Debt financing is borrowed money a company receives in return for a promise to repay the loan. This...
Words: 515 - Pages: 3
...Hello, A car purchase of lease is one that will be a depreciating cost no matter the choice. Buying a car is great but lets take a good look at the misconception and mistakes of buying versus leasing. When you buy a car one usually finances the contract for the car for at least sixty months. Yes I am buying the car but I must maintain the car with general maintenance ( which is not always included in the initial price of the car ). Then it usually takes at least forty eight months to gain equity for the depreciating asset. This is a rule of thumb used by the car dealers and the lenders. This is why using zero down payments always puts the buyer in a negative equity situation for the duration of a long period of time. One would ask what is the big deal? The big deal is that you are stuck with the car in the negative equity situation and can not trade or attempt to trade because of the negative equity situation. You can trade but once again the wallet will suffer as one will need a substantial down payment. There is also variables to consider of the depreciation of the car as the miles put on it and the overall shape of the car when trading. Leasing is a viable option for few as the credit rating for the consumer to lease must be outstanding and usually have a score of 750 as a rule. The irony of the market is that only eight percent according to the National Automobile Association qualify. You do not take the risk of depreciation and the bank is the owner and takes all the...
Words: 796 - Pages: 4
...consumer. Tony is also not sure how effective Vanish is as compared to its competing brands. Nevertheless, the Zesty Air brand continues to reap resounding success in St. Lucia, and recently in the Grenada market. STEP 1 - KEY BACKGROUND INFORMATION ( BE AS INSIGHTFUL AS POSSIBLE) - INSTEAD OF JUST REPEATING THE INFORMATION IN THE CASE FOR THE BACKGROUND OR SUMMARY YOU CAN BE ANALYTICAL AND CONSIDER KEY STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS AS PART OF THE SAYNOPSIS. Key Strengths An established product line which can be used as a cash cow to fund struggling product lines – dogs and question marks Synergy in production and the opportunity to reduce overall production costs A growing distribution network and brand equity- works well for the distribution of new product lines Key Weaknesses Let’s fill them in together Key Opportunities and Threats STEP 2- IDENTIFY THE CORE...
Words: 866 - Pages: 4
...Windsea Array Report 2015 Written by Chau Man Yick Patrick Content 1. Executive Summary P. 3 2. Industry overview P. 4-6 i) Renewable energy globally ii) UK offshore windfarm overview 3. Situation analysis P. 6 4. Our project P. 7-12 i) Description of location ii) Turbine models and foundation iii) Construction process iv) selling price v) Financing of project vi) Operation and maintenance 5. Financial analysis P. 13-18 6. Environmental issues P. 19 7. Conclusion P. 20 1. Executive summary Renewable energy has always been an issue in the world, when people are starting to realize the consequences of producing energy through the usage of fossil fuels such as pollution and global warming. In light of the situation, it is observed that there is a need to help shape a better world, a greener future so that our ancestors will not be living in a world that is full of pollution. In this report we proudly present our offshore wind farm – Windsea Array. We will first introduce the overview of the entire renewable energy industry, such that people all over the world are gaining stronger attention to the importance of developing renewable energy, due to the fact that our fossil fuels will be running out soon. Then we will narrow down our view specifically to the UK where our wind farm will be built, highlighting...
Words: 4561 - Pages: 19
...three years to buy the packaging equipment. 1. Key insights on Star River historical performance by considering the income statements of the last four years (1998 to 2001). * Interest coverage: as depicted in the graph 1.1L, the capacity of Star River to pay current interests with available earnings increased to 2.18 in the past fiscal year as a consequence of the increase of EBIT in about 18% and an interest expense decrease of 1.5% (see Annex 1). Even though, the ability of the company to meet its interest expenses may be questionable by the bank as generally, below 2.5 is considered as a warning sign of poor solvency. * Debt to equity and debt to total capital: As a consequence of a higher year-by-year increase of debt in comparison to equity and total capital (see graph below), the debt-to-equity and the debt-to-total capital ratios present a growing trend. This aggressive leveraging aimed at financing operations, endangers shareholders’ and total capital benefits. * Working capital cycle: A huge increase in inventory of 94.6% in the fiscal year 1999-2000 shows a big percentage of inventory held in terms of sales. This is, in average 74.8 SDG were held in inventory for each SDG in sales during 2000. This relation increased to 88.7 in 2001 (the Annex 3 shows the...
Words: 3235 - Pages: 13
...a) General Journal |Date | |Account Titles | |Debit | |Credit | |July 1 | |Cash | |12,000 | | | | | |Common Stock | | | |12,000 | | | | | | | | | | 1 | |Equipment | |8,000 | | | | | |Accounts Payable | | | |6,000 | | | |Cash | | | |2,000 | | | | | | | | | | 3 | |Supplies | | 900 | | | | | |Accounts Payable | | | ...
Words: 834 - Pages: 4
