Short Essay -Chapter 14 Please upload or write your short essay here. Content, g
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Question
Short Essay -Chapter 14 Please upload or write your short essay here. Content, grammar, punctuation, and citation will be graded. Short essays must be at least 500 words. Answer in multiple paragraphs. 1) Explain the difference between a Horizontal and Vertical analysis. 2) What nformation does a ratio provide? Give examplos of at least two ratios and their meaning 3 Why is it important to report discontinued operations soparafely trom income from continuing operations? 4) What has been a key tem that you have learned in Managerial Account ing that you can use in your everyday life?Explanation / Answer
Q 1.
In vertical anlysis of any financial statements the figures will be represented as a percentages compared to total sales amount. Let the sales be $1,000,000 they would be restated to be 100 ($1,000,000 divided by $1,000,000). If the cost of goods sold is $780,000 it will be presented as 78 ($780,000 divided by sales of $1,000,000). If interest expense is $50,000 it will be presented as 5 ($50,000 divided by $1,000,000). The restated amounts are known as a common-size income statement. It refers the gross profit , operating incomes and expenses etc as compared to total sales .
Horizontal analysis means comapring a financial statement the previous record of the organisation. This can be compared by assuming a base year as 100% and comparing the other year infoemations . This will let us decide the growth or decline of a particular segment of any income or expenses over the base year.
Q 2.
A ratio is a quatitative anlysis of the financial performance of any organisation . It provides a detailed analysis on liquidity, profiability and solvency of the organisation. These can be utilised by the management to take decissions on the basis of identifying the strength and weak points of the operation.
Examples :
Debt equity ratio : It makes us understand the the capital formation of the organisation with the compared figures of the ratio of toatal debt to equity invested in the company.
Current ratio : Current assets/ Current liability
Its an example of soveny ratio of the organisation. A 2: 1 is considered as a stanard figures.
Q 3.
Generaly a discounted operation is said as any paricular segment i.e a line of business or a branch that discontinues due to loss incured or may be similar reasons . When operation is discontinued but stil it generates some income or gain the operation .This need to be reported separately . this will help for the stake holders to understand better .
A discontinued operation will be reported as per the guidelines of GAAP ( Generaly accepted accounting principles ) on the ground of satisfying two condition 1. there should be a flow of cash to the discontinued section . 2nd Once its discontinued there should be no significant relation to the regular entity.
Q 4.
Unlike financial accounting managerial accounting can be used for the day to do life . The budget planning , decission making on the basis of marginal cost, etc can be applied to daily flow of human life.
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