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2) There are a number of factors for management to consider when deciding whether to switch from LIFO to FIFO. The change in accounting process will have an impact on the immediate year's profits, because it will adjust the cost of inventories. A LIFO reserve will need to be created to account for this change. So management must consider the impact of the transaction on the comparability of their income statements year-over-year. In addition, management must consider if FIFO is a better fit for their organization and the economic circumstances. LIFO, for example, will result in the highest estimate of COGS and the lowest net income during periods of inflation; FIFO will result in the lowest COGS and highest net income (Damodar, n.d.)
3) As an investor evaluating an investment in a company, there are a number of ratios with which I would be concerned, depending on the nature of the investments. As a debt investor, I would be most concerned with liquidity and solvency measures such as the current ratio, the debt-to-equity ratio and the interest coverage. I would also be concerned with these measures as an equity investor, along with several others. One is the return on equity and the return on investment. The price/earnings ratio is important for buying equity at the right price level. Also important is to analyze trends in...
They are short-term costs. Companies total their known and expected current costs when making cash-flow estimates and decisions for the coming year. Opportunity costs are the cost of not choosing to do something. That is, the benefits/costs that an opportunity could have generated, but will not because the company chose a different action or decision. Opportunity costs contribute to the decision making process when decisions are mutually exclusive -- then the opportunity cost is a way for management to weigh different options against each other, to choose the best one. Sunk costs are costs that have already been realized. The money is already spent. Sunk costs should not impact on decision-making. The money is already gone -- no matter what the company decides it cannot get that money back. Therefore, sunk costs are irrelevant in rational decision making. For many companies, however, sunk costs are still incorporated in the decision-making process.
Works Cited:
Damodar, A. (no date). Inventory. Stern School of Business. Retrieved April 13, 2010 from http://pages.stern.nyu.edu/~adamodar/New_Home_Page/AccPrimer/inventory.htm
Works Cited:
Damodar, A. (no date). Inventory. Stern School of Business. Retrieved April 13, 2010 from http://pages.stern.nyu.edu/~adamodar/New_Home_Page/AccPrimer/inventory.htm
Labor and Union Studies in Washington and Oregon States The United States labor movement has its roots in the complex trappings of the industrial revolution. Laborers were just starting to come to the United States from foreign countries because they had learned that there were many jobs available for even the most unskilled worker. People were also moving from rural areas in America to the cities in an attempt ti have
During this penultimate period of violence under Rojas, the violence that wracked Colombia assumed a number of different characteristics that included an economic quality as well as a political one with numerous assassinations taking place. These were literally contract killings there were sponsored by opposition forms. There were also horrendous genocidal acts that were carried out by gangs combined with authentic revolutionary fighting in some regions of the country. The fourth
Down These Mean Streets believe that every child is born a poet, and every poet is a child. Poetry to me was always a very sacred form of expression. (qtd. In Fisher 2003) Introduction / Background History Born Juan Pedro Tomas, of Puerto Rican and Cuban parents in New York City's Spanish Harlem in 1928, Piri Thomas began his struggle for survival, identity, and recognition at an early age. The vicious street