Depreciation value. None of these. Depreciation is necessary to calculate:. Net profit. Net financial position. Depreciation of plant is recorded in the:. Balance sheet. The difference between gross investment and net investment is:.
Capital investment. Currency depreciation occurs when:. The value of the currency falls. The value of the currency rises. Inflation falls. The balance of payment improves. Which of the following items provides the important function of shielding part of income from taxes?
The effect of inflation on the price competitiveness of a country's products may be offset by:. Appreciation of the currency. Revaluation of the currency. Depreciation of the currency. Lower inflation abroad. Depreciation decreases:.
Which of the following would not lead to an increase in net cash flow? Higher selling price. Reduced material costs. Larger sales volume. Lower depreciation charge. In a recession:. Unemployment is likely to be low. Prices are likely to increase. Growth is negative. Growth is slow. Which of the following is not a cash outflow? New equipment.
Cash drawings. List of Partners vendors. It is important to analyze how company's use depreciation , which can represent a significant portion of the expenses on a firm's income statement , and which can impact the value of an investment opportunity in the short term. While there are rules governing how to expense depreciation, there is still plenty of wiggle room for management to make creative accounting decisions that can mislead investors.
Companies tend to work hard to make sure their fundamentals look good to investors and analysts. So it's essential to exercise good judgment when examining numbers that appear on financial statements.
It's not enough to know simply whether a company has, say, great-looking earnings per share EPS or a low book value. Investors need to be aware of the assumptions and accounting methods that produce those figures. Depreciation is an accounting process by which a company allocates an asset's cost throughout its useful life. In other words, it records how the value of an asset declines over time.
Each time a company prepares its financial statements, it records a depreciation expense to allocate a portion of the cost of the buildings, machines or equipment it has purchased to the current fiscal year. The purpose of recording depreciation as an expense is to spread the initial price of the asset over its useful life.
For intangible assets —such as brands and intellectual property—this process of allocating costs over time is called amortization. For natural resources—such as minerals, timber, and oil reserves —it's called depletion.
Critical assumptions about expensing depreciation are up to the company's management. Management makes the call on the following things:. Depending on their preferences, companies are free to choose from several methods to calculate the depreciation expense. To keep things simple, we'll summarize just the two most common methods:.
As an investor, you need to know how the choice of depreciation method affects an income statement and balance sheet in the short term. Here's an example. According to the straight-line depreciation method, the calculation for Tricky's depreciation expense in the first year after buying the IT system is as follows:. According to the accelerated double-declining depreciation, Tricky's depreciation expense in the first year after buying the IT system would be this:.
That means there is an impact on earnings. If Tricky is looking to cut costs and boost earnings per share, it will choose the straight-line method, which will increase its bottom line. A lot of investors believe that book value, or net asset value NAV , offers a relatively precise and unbiased valuation metric.
But, again, be careful. Management's choice of depreciation method can also significantly impact book value: determining Tricky's net worth means deducting all external liabilities on the balance sheet from the total assets—after accounting for depreciation.
As a result, since the value of net assets doesn't shrink as quickly, straight-line depreciation gives Tricky a bigger book value than the value a faster rate would give. Generally, when an economy continues to suffer recession for two or more quarters, it is called depression. Description: The level of productivity in an economy falls significantly during a d. It is always measured in percentage terms. Description: With the consumption behavior being related, the change in the price of a related good leads to a change in the demand of another good.
Related goods are of two kinds, i. Description: Apart from Cash Reserve Ratio CRR , banks have to maintain a stipulated proportion of their net demand and time liabilities in the form of liquid assets like cash, gold and unencumbered securities. Treasury bills, dated securities issued under market borrowing programme. In the world of finance, comparison of economic data is of immense importance in order to ascertain the growth and performance of a compan. Description: Institutional investment is defined to be the investment done by institutions or organizations such as banks, insurance companies, mutual fund houses, etc in the financial or real assets of a country.
Simply state. Marginal standing facility MSF is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely. Description: Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under liquidity adjustment facility or LAF in short. The MSF rate is pegged basis points or a percentage. Description: If the prices of goods and services do not include the cost of negative externalities or the cost of harmful effects they have on the environment, people might misuse them and use them in large quantities without thinking about their ill effects on the env.
It is an indicator of the efficiency with which a company is deploying its assets to produce the revenue. Asset turnover ratio can be different fro. Choose your reason below and click on the Report button. This will alert our moderators to take action. Nifty 18, Market Watch. ET NOW.
0コメント