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Michael was not your average college student. Since age 12, when he on- going his first business venture selling stamps, he realized that if you have a good idea, work hard, and treat customers with special care, you can make money-??and sometimes, a lot of money. After a series of small, successful business ventures through high school, at age 19 Michael came up with his next business idea. In 1 984, with an initial investment of only $1 ,OHO, he started a company that custom-built personal processors for sale directly to customers. The company enjoyed immediate success.
In 1 988, the company offered for sale to the public 3,500,000 shares of stock for $8. 50 per share and changed its name to Dell Incorporated By the age of 26, Michael Dell had become the youngest CEO of a company ever included on the prestigious Fortune 500 list. Better yet, Dell’s stock enjoyed greater development than any other stock during the 1 9905. By December 31, 1999, each share had increased in value nearly 60,000%. If you had invested just $1,000 in Dell at its initial public offering in 1988, your investment would have increased to closely $600,000 by the end Of 1999!
What if instead of investing $1 ,OHO in Dell in 988, you had invested $1 ,OHO in Polaroid Corporation , most famous for its instant-film cameras? You would have watched your $1 ,OHO shrink to $0 by 2001, when the company declared bankruptcy. How do investors decide where to invest their money? Thousands of stocks are available in the United States, and thousands more on stock exchanges around the world. How do savers separate the successful companies? From the unsuccessful companies? The key source of information investors use to identify successful and unsuccessful companies is financial accounting-??the subject of this book.
As oh read through the chapters, you’ll begin to understand the information that financial accounting provides to savers making business decisions. And as the contrast between Dell and Polaroid demonstrates, the payoffs for understanding (or failing to understand) the financial position of a company can be quite large. 1 . Owners or investors Stockholders of corporations need financial information to help them make decisions on what to do with their investments (shares Of stock), I. E. Hold, sell, or buy more. Prospective investors need info to assess the company’s potential for success and profitability.
In the same way, small business winners need financial information to determine if the business is lucrative and wither to continue or drop it. 2. Management In small businesses, management may include the owners. In huge organizations, however, management is usually made up of hired professionals who are entrusted with overall responsibility of operating the business or a part of the business. They act as agents of the owners. The managers, whether owner or hired, frequently face economic decisions – How much supplies will we purchase? Do we have enough cash?
How much did we make last year? Did we meet our targets? All those, and many other decisions, quire analysis of accounting information. 3. Lenders Lenders of funds such as banks and other financial institutions are interested in the company’s ability to pay liabilities upon maturity (solvency). 4. Trade creditors or suppliers Like lenders, trade creditors or suppliers are absorbed in the company’s ability to pay obligations when they become due. They are nonetheless especially interested in the company’s liquidity its ability to pay short-term obligations. . Government Governing bodies of the state, especially the tax authorities, are interested in an entity’s financial info for taxation and regulatory purposes. Taxes are computed based on the results of operations and other tax bases. In general, the state would like to know how much the taxpayer is making to determine the tax due thereon. 6. Employees Employees are interested in the company’s profitability and stability. They are after the ability of the company to pay salaries and provide employee benefits.
They may also be interested in the company’s financial position and performance to assess the possibility of company expansion and career opportunities. 7. Customers When there is a long-term involvement or contract between the company and TTS customers, the customers may be interested in the company’s ability to continue existence and its stability of operations. This need is also heightened in cases where the customers depend upon the entity. For example, a distributor (reseller), the customer in this case, is dependent upon the manufacturing company from which it purchases the items it resells. . General Public Anyone outside the company such as researchers, students, analysts and others are interested in the financial statements of a company for some valid reason. Internal and External Users The users may be classified into internal and external users. Internal users refer to managers who use accounting information in making decisions related to the company’s operations. External users, on the other hand, are not involved in the operations Of the company but hold some financial interest.
The external users may be classified further into users with direct financial interest – the owners, investors, lenders and creditors, and users with indirect financial interest -?? government, employees, customers and the others. Task 3 3. 1 Ratios and Proportions are a very important part of math for those just starting off. They describe the relationship between two amounts by a single umber. They are used everywhere in life; how many eggs to cups flour I Instructions How to compute ratios and proportions 1 Identify the amounts that are being compared.
If comparing apples to oranges, then the amount of apples and the amount of oranges must be known. Express each as a number. For example, let’s say I have 20 apples and 10 oranges. 2 Decide which will be the first quantity. Are apples going to be described first, or oranges? Sponsored Links Professional Tuition University Mathematics subjects – Calculus, Probability, Statistics 3 Divide the first quantity by the second quantity. If choose apples, then I would divide as follows: number of apples (20) divided by (I) number of oranges (10) equals (z) proportion of apples to oranges (2) 20/1 0 = 2 Describe the result in words.
From the result of step 3, would have 2 apples for every orange. Other examples 5 Lets say your car used 10 gallons to go 300 miles. Compute the miles per gallon for your car. 6 Amount of miles (300) divided by amount of gas (10) equals miles per gallon 300 / 10 = 30 miles per gallon. 7 You and your four friends won 700 dollars. If the five of you get equal shares, how much money does each person get? Amount of money (700) divided by number of people (5) is the money per person. 700 / 5 = 140 dollars per person. 9 If a batch of cookies needs 3 eggs, how many batches can you cook with 1 2 eggs? 0 In this problem, we use the ratio given. 12 eggs divided by 3 eggs per batch = 4 batches. How to Calculate Ratio To perform almost all mathematical and statistical calculations you need to know how to calculate ratios. They are the most important part of any statistical and mathematical calculations. Ratios describe the relationship between two values. When you are trying to compare any two numbers the easiest way is to find out the ratio of these numbers. In our day-to-day life many a times while preparing recipes, measuring distances, calculating mileage of car, etc we need to calculate the ratio.
This article will guide you in calculating ratio manually and using formula in Excel sheet. Calculating ratio manually The method which I will be explaining here follows the most basic calculations of mathematics. You must have learnt it in your school. If you don’t remember your mathematics lessons to calculate ratios from your school, here I am to explain them to you. All you need is a pencil and paper and if the impairing figures are bigger then you may need a calculator. Step 1 : Identify the numbers whose ratios are to be calculated. Step 2: You also need to identify which number must come first.
If you want to find the ratio of first number with second then write the first number overhead the line that divides two numbers or before the colon symbol and then the second number and vice versa. Step 3: Write the number in the ratio form. If the first number is “10” and the second one is “15” then we write it in the form of ratio as, 10:15 OR 10/15 Step 4: Divide the numbers such that you get a single number after the division. This is the result of the ratio. Example: Suppose you want to compute the miles per gallon of your car that uses 10 gallons to run over a distance of 300 miles.