Thursday, July 25, 2019

Overview of Accounting Analysis Assignment Example | Topics and Well Written Essays - 500 words

Overview of Accounting Analysis - Assignment Example 52). Hence, admission of SEC and FASB standards will help in reducing corporate managers from providing unrealistic information and transaction within and outside the firm. Therefore, elimination of FASB standards and SEC will only increase the chances of corporate managers to provide unrealistic information about the firms; hence, I disagree with Bill’s idea. 2- Many firms recognize revenues at the point of shipment. This provides an incentive to accelerate revenues by shipping goods at the end of the quarter. Consider two companies, one of which ships its product evenly throughout the quarter, and the second of which ships all its products in the last two weeks of the quarter. Each company’s customers pay thirty days after receiving shipment. Using accounting ratios, how can you distinguish these companies? It should be noted that these two companies have no difference in their income statements; hence, they are all considered to have the same expense and revenue amounts. Nonetheless, they have different balance sheets. However, assuming that all other factors are the same, the company with even sales of products will have higher cash and receivable balance accounts at the end of the quarter compared to company that ships all its products within the last two weeks. Nonetheless, below accounting ratios will be appropriate in differentiating the two companies (Palepu and Healy Pg. 167): This will increase the estimated depreciable life of assets. In this case, the corporate managers may decide to increase the depreciable estimated life of the assets especially when they realize that their assets are likely to last in the market than was predicted initially. It may lead to a decrease in uncollectible allowances with the gross receivable percentages. The changes in the customer focus to the firm may make the managers to reduce

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