Accounting reference lists…

I just wandering around, browsing for some songs and some accounting information while finishing on something that I really need to do. Sigh! BUT I came across some good sites for students to do some researching or knowledge seeking. Websites, videos, slides etc…So I will post some first and maybe if I have time, I will continue to contribute here…

http://www.futureaccountant.com

http://www.accountingdetails.com

later…

Week 5 – Valuing Shares and Bonds

Bonds are an investment ‘asset’ and their price (or value or worth) is the present value of their future cash flows. The bond contract is a special kind of business agreement. The deed of trust (bond indenture) states the explicit terms of the agreement such as the (fixed) coupon rate and the face value to be paid on the bond. The legal effect of having the agreement enshrined in a deed of trust rather than a contract of sale, means that the bond carries a stronger security of claim and lower probability of default risk. The economic effect of the trust deed means that the bond purchaser gains greater certainty over the cash flows the bond will generate. The bond must be held to maturity for it to generate the quoted yield.  The bond price remains subject to interest rate changes in the market.

The inverse relationship between interest rates and values is particularly relevant to bond markets.  If interest rates surge because of unexpected rises in inflation for example, bond prices fall analogously.  Bondholders then face the double stress of a lower bond value and lower interest income on their fixed-rate investment. Conversely, if there is a surge in demand for bonds, their yields may fall. This phenomenon has been recently reported in the US Junk bond market (BBB credit rating and below). Investors who were reportedly unhappy with the low returns being paid on secure bonds, increased their demand for riskier securities. They reportedly spent $US4.6 billion in the first six weeks of 2011 in the BBB-rated and below bond markets. This sent the high-risk class of bond yields down to extremely low levels.

(http://www.theaustralian.com.au/business/markets/junk-bond-yields-fall-to-all-time-lows/).

Essentially, the market pricing mechanism ensures that everyone gets the same deal no matter what coupon interest rate the issuer is paying. If the bond coupon rate is above the market average, you have to pay more for the bond; if the bond coupon rate is below the market average, you pay less for the bond; and if the bond coupon rate is equal to the market average, you pay the same as the face value of the bond.

Here are some slides and notes for bonds.

 

Ross7e_PPT_Ch06

Week 5a

Week 5 (Ch 6) Tutorial Questions

So another alternative for a company to raise funds is issuing stocks (shares). Take alook at this video…

 

Try to understand that first and we shall discuss later when we meet. Next, maybe I will touch a bit regarding the type of bonds…

 

Later…

BUACC3701 – Fisher’s separation theorem and The “Market Value Rule”

Hi guys, here are some notes just for you to read. I took them from the internet as I think they are quite important. You might find something in the YouTube if you want to avoid getting sleepy reading this. Hahaha

What is Fisher’s separation theorem?

By Richard Wilson

Fisher’s separation theorem stipulates that the goal of any firm is to increase its value to the fullest extent, regardless of the preferences of the firm’s owners. The theorem is named after American economist Irving Fisher, who first proposed this idea.

The theorem can be broken down into three key assertions. First, a firm’s investment decisions are separate from the preferences of the firm’s owners. Second, a firm’s investment decisions are separate from a firm’s financing decisions. And, third, the value of a firm’s investments is separate from the mix of methods used to finance the investments.

Thus, the attitudes of a firm’s owners are not taken into consideration during the process of selecting investments, and the goal of maximizing the firm’s value is the primary consideration for making investment decisions. Fisher’s separation theorem concludes that a firm’s value is not determined by the way it is financed or the dividends paid to the firm’s owners.

For related articles, check out Ten Books Every Investor Should Read and Profiting From Panic Selling.

This question was answered by Richard C. Wilson.

Read more: What is Fisher’s separation theorem? http://www.investopedia.com/ask/answers/09/fisher-separation-theory.asp#ixzz4pYu458bo
Follow us: Investopedia on Facebook

 

 

The “Market Value Rule”

If you have ever lived in a property and then began to rent it out to produce income, then the application of the “market value rule” is something you need to be aware of.

If you first commenced to rent out your main residence after 20 August 1996, you have the option of obtaining a valuation of the value of the property as at that date which then becomes the “deemed purchase price” for any future capital gains tax calculations. This will ensure that any capital gain that as accrued up until the time the property was first used to produce income is effectively disregarded.

Although not clear from a literal reading of the Tax Act, based on the advice from the Tax Office, it appears that where the market value rule applies, the property’s entire purchase price including legal fees, etc, is replaced with the property’s market value.

This means that all expenditure incurred in relation to the property before it first became income producing, is replaced with the property’s market value at the first income time.

However, any cost base expenditure incurred after the first income time, will be included in the property’s cost base in addition to the property’s market value  at the first income time.

For example, let’s say a property was valued at $350,000 at the first income producing time. A number of improvements were made to the property after it commenced producing income. The cost of these improvements would be added to the $350,000 to form the cost base for any future capital gains tax calculations.

If you initially purchased your property, lived in it, then commenced renting it after 20 August 1996, the market value could be extremely valuable in your endeavours to reduce any capital gains tax payable.

 If you have any questions regarding the market value rule and how you might take advantage of it, please contact Ellingsen Partners.

BUACC 3701 – Week 3 Long Term Financial Planning and Corporate Growth

Oh! It’s you again…. hehe.

Looking at the topic that is Long Term Financial Planning and Corporate Growth, I just break it down to some general areas to get your brains working. Long term means for a very lengthy duration. It could be more than a year (if you consider one year is long enough), or it can be 5 years, 10 years, 15 years. For example, the plan formulated by our Prime Minister (hmmm…) TN50 (Transformasi Nasional 2050) a plan which heading to the year 2050 with much development we are going to do and many things we going to achieve. Talking about numbers… a lot! A lot of effort, sweat, ideas to achieve the desired TN50 (and a lot they can make too!) Hahaha.

So, what is the long term is for? It is about financial planning. The same thing you plan what you gonna be in 5 years from now. Simple, what you want to eat tomorrow, you have to start thinking from today, If you want to eat a nice succulent steak at super duper expensive restaurant, you have to start finding some money for it. Of course, you need to plan your finance, how much to have, how to save, how to spend and most importantly, how to start. So now, you have Long Term Financial Planning… It is a plan to finance you for your future. Simple, kan, kan, kan?

Lastly is Corporate Growth..Why are you studying this for? Of course, if it is not for you, then it will be for those companies you gonna serve. By having good financial planning, you can build the organization, the empire and your life, stay there for a long long time. There is nothing gonna stop you. Speaking about nothing gonna stop us from planning, Then I will treat you with an old song, Nothing’s Gonna Stop Us Now. After that, we will continue with the topic….see ya later!

Financial planning (business)

From Wikipedia, the free encyclopedia

Financial planning is the task of determining how a business will afford to achieve its strategic goals and objectives. Usually, a company creates a Financial Plan immediately after the vision and objectives have been set. The Financial Plan describes each of the activities, resources, equipment and materials that are needed to achieve these objectives, as well as the time frames involved.

The Financial Planning activity involves the following tasks;—-

  • Assess the business environment
  • Confirm the business vision and objectives
  • Identify the types of resources needed to achieve these objectives
  • Quantify the amount of resource (labor, equipment, materials)
  • Calculate the total cost of each type of resource
  • Summarize the costs to create a budget
  • Identify any risks and issues with the budget set

Performing Financial Planning is critical to the success of any organization. It provides the Business Plan with rigor, by confirming that the objectives set are achievable from a financial point of view. It also helps the CEO to set financial targets for the organization, and reward staff for meeting objectives within the budget set.

The role of financial planning includes three categories:

  1. Strategic role of financial management
  2. Objectives of financial management
  3. The planning cycle

When drafting a financial plan, the company should establish the planning horizon,[1] which is the time period of the plan, whether it be on a short-term (usually 12 months) or long-term (2–5 years) basis. Also, the individual projects and investment proposals of each operational unit within the company should be totaled and treated as one large project. This process is called aggregation.[2]

 

CORPORATE GROWTH

Corporate growth can be defined in numerous ways and be achieved in several strategic forms. In general, the matter of whether—and at what rate—a company is growing can be highly ambiguous. A company can experience strong sales growth, but simultaneously be losing market share and experiencing financial losses. In such a case, the company’s volume is rising, but that of its competitors is rising even faster. And, on the bottom line, sales growth means little when the company cannot turn a profit.

The same company may be gaining market share, but losing sales volume and money. This suggests that volume is falling throughout the industry, but only less so for this company. In any case, it still loses money on its operations.

Consider a third case, where a company’s earnings are rising, but it’s losing sales volume and market share. This is quite possibly the only favorable scenario, because it suggests that the company is cutting marginal operations to concentrate on what it does best—in effect, becoming smaller but more profitable.

While these criteria can provide some insight into the true nature of the firm—whether it really is growing or not—they also can provide some indication of what type of firm the company is: a dog, a question mark, a cash cow, or a star.

A dog is a company with low or declining market share and low or declining market growth, typically a description of a dying firm. A company with low or declining market share but a high rate of sales growth is a question mark, because its success depends on whether it can outperform competitors in terms of sales growth and eventually gain market share.

Alternatively, a company with low or declining sales growth but high or increasing market share is a cash cow because its position in the market is secure even though the industry in which it operates has matured. Such a company is typically overrun by successful question marks and becomes a dog. In the meantime, however, it generates a healthy income.

A company with high or growing market share and high or growing sales volume is called a star because it is outperforming its competitors. Dogs typically lose—or will lose—money, while stars typically make—or will make—money.

Whether in terms of market share or sales volume, growth may be pursued in one of three ways. In a high-growth company, either or both market share and sales volume growth are pursued vigorously, even at the expense of short-term profitability. This is a risky strategy because the company risks going bankrupt before it can achieve commanding positions in terms of market share and/or sales volume.

A slow-growth company concentrates on maintaining profitability while pursuing incremental gains in market share and/or sales volume. The slow-growth strategy emphasizes financial longevity.

The third growth strategy is based on negative growth, or retrenchment. A company in retrenchment is purposely sacrificing market share and sales growth with the singular goal of emphasizing short-term profitability. In other words, the company is abandoning operations in markets where it has the fewest advantages, vis-à-vis competitors.

When the retrenchment has run its course, the company is left with a core business in which it enjoys solid advantages over competitors, and may take advantage of its superior profitability to pursue either a high- or slow-growth strategy. In effect, retrenchment strategies establish bases for the other growth strategies.

OTHER ASPECTS OF CORPORATE
GROWTH

Whether a company is in a growth industry or a mature market, corporate growth is necessary for a company to remain healthy. Companies that compete in a growing market must grow in order to maintain market share. Without such growth, they fail to realize benefits of growth such as economies of scale and the ability to attract talented managers and employees. Especially in global markets, economies of scale allow growing companies to make significant investments in research and development and worldwide marketing.

Similarly, companies competing in mature markets must find ways to grow. Otherwise, they are forced to compete on the basis of price and face declining margins. In order to achieve growth such companies typically exit slow-growth products or market segments that aren’t very profitable and enter those markets or related markets that are growing more quickly. They may develop and nurture new businesses that will replace or complement their maturing core business. Other growth strategies for companies competing in mature markets include acquiring smaller competitors or consolidating fragmented industries into a single-source operation. Growth companies in mature industries may include electric utilities, large retailers, and railroad companies.

As desirable as corporate growth may be, a study, conducted by the Corporate Strategy Board, of 3,700 U.S. and international companies for the period from 1990 to 1997 found that only 3.3 percent of those companies had consistent profitable growth in revenues, net income, and shareholder returns for the period. Of the companies studied, only 21, or less than I percent, achieved consistent growth over the past 20 years.

John Simley ,

updated by David P. Bianco ]

Read more: http://www.referenceforbusiness.com/encyclopedia/Con-Cos/Corporate-Growth.html#ixzz4oNWEsfvB

Here are some notes that can help…

The slides…  Ross_7e_PPT_Ch04

The notes… Week 3 Additional Notes

And lastly…the questions…. hahahaha   Week 3 (Ch 4)- Tutorial Questions

And some presents for you… Look what I found!

Questions for this chapter, same like those in the outlines and ANSWERS!!!!!

rossfund_ch04 and chapter4 answers

BUACC 3701 – Week 2 Time Value of Money

What do we know about time value of money? Of course it is not a song title, but I remembered there was a song by Michael Bolton ‘Time, Love and Tenderness’ and it was my favourite. It was during the 90s. Hahahaha. So take a look at this video first before we go to our main discussion regarding the Time Value of Money.

 

I took this from a website called AccountingCoach

What is the time value of money?

The time value of money tells us that receiving cash today is more valuable than receiving cash in the future. The reason is that the cash received today can be invested immediately and will begin growing in value. For instance, if a company receives $1,000 today and it is invested at 8% per year, the company will have $1,080 after 365 days.A time value of money of 8% per year also tells us that receiving $1,080 one year from now is comparable to receiving $1,000 today. With a time value of money of 8% per year, accountants will state that receiving $1,080 in one year has a present value of $1,000.

In accounting, a time value of money of 8% means that a company performing services today in exchange for cash of $1,080 in one year has earned $1,000 of service revenues today. The $80 difference will become interest income as the company waits 365 days for the money.

The time value of money is important in accounting because of the cost principle and the revenue recognition principle. However, materiality and cost/benefit allow the accountants to ignore the time value of money for its routine accounts receivable and accounts payable having credit terms of 30 or 60 days.

Here are some video regarding time value of money. I took it from Khan Academy. Maybe it helps… It is a link and there will some illustration video on the topic.