By Henry E. Riggs
Monetary statements and data drawn from them confront us day-by-day: within the media, in company annual stories, within the treasurer’s reviews for golf equipment or spiritual teams, in records supplied to staff and bosses, as one considers replacement investments, in records supplied via householders’ organization and govt enterprises. numerous readers of a company’s “financial ranking” make judgements in keeping with monetary details: the company’s managers devise activities to enhance operations; traders purchase or promote the corporation’s securities; collectors come to a decision how a lot to lend; buyers pass judgement on the reliability of this provider; power staff come to a decision no matter if to take a position their careers within the corporation. while you are education to be an accountant, locate one other ebook. This book’s goal is to extend your skill to attract necessary info from monetary statements, and hence to make higher decisions—in either your individual lifestyles and your specialist lifestyles. learning this ebook will help you be a greater supervisor. that's either its aim and its viewpoint. The booklet begins at sq. one; it assumes no past wisdom in your half. to extend your monetary literacy, you'll examine the typical nomenclature (but no longer esoteric jargon) utilized by accountants and monetary specialists. you can be outfitted to invite insightful questions of specialists, to interact them and your colleagues in considerate debates approximately monetary and accounting concerns, and to make higher judgements.
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Safety stock of cash) because its business is not seasonal (as the department store’s is) and cash purchases by its customers are both steady and highly predictable. Think about a manufacturer of commercial aircraft like Boeing. The in-process manufacturing time for large aircraft is necessarily long, and thus Boeing has high inventory values (but minimum finished goods inventories, as completed aircraft are immediately delivered to the customer). Given the sorry financial position of most large airlines, at least in this country in the early years of the twenty-first century, the aircraft manufacturers may have to provide generous financing terms to its airline purchasers, with resulting high values of accounts and notes receivable.
R The cost of subcontracted work for which the invoice has not yet been received must be matched against the revenue on the completed maintenance job. And, if the maintenance job was completed during this accounting period, the associated revenue should be reported in this period. Thus, the estimated subcontractor charges must be included in this period’s cost of goods sold (here more appropriately called cost of services delivered). r The liability of frequent flyer miles must be accrued (accumulated or built up) accounting period by accounting period as passengers earn the miles.
Compared to Federated, CE has huge investments in fixed assets: generating plants and distribution facilities. Its inventory is relatively small: just fuel for its generating plants. Its long-term debt is high both because it needs the funds to invest in fixed assets and because the steady and predictable nature of its business (a regulated public utility) permits it to service this high debt with relatively little risk of default. CE’s investment in accounts receivable (that is, the total owed to it by its customers) is modest because its customers pay their bills in a timely manner; you can imagine that CE has an effective way to assure prompt payment by its customers!