I need a response to these discussion they don’t have to be a certain length. Each number tells the type of response they should receive.
1.Let at least two of your peers posts know what you changes you would recommend to improve the net margin of the company.
Week 5 discussion 2
A.
Year Ending Dec-2012 / Year Ending Dec-2011 / Year Ending Dec-2010Gross Profit Margin / Gross Profit Margin / Gross Profit Margin
$40,000 / $35,000 / $33,000
-$6,000 / -$4,000 / -$3,000
÷$2,000 / ÷$2,000 / ÷$3,000
17% / 15.5% / 10%
Net Profit Margin / Net Profit Margin / Net Profit Margin
$2,000 / $2,000 / $3,000
÷$40,000 / ÷$35,000 / ÷$33,00
20% / 17.5% / 11%
Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors.
B.There are many ways to perform profit analysis. To begin, two key ratios are the gross-profit-margin ratio and net-profit-margin ratio:
Gross-Profit-Margin Ratio = Gross Profit / Net Sales
Net-Profit-Margin Ratio = Net Income / Net Sales
Year ending December 2012
Sales revenues 40,000.00
Sales & exp. - 6,000.00
=34,000.00 dived by 40,000 sales = 85% (gross profit margin ratio)
Year ending December 2011
Sales revenue 35,000.00
Sales & exp. -4,000.00
= 31,000.00 dived by sales 35,000.00 = 88.5% (gross profit margin ratio)
Year ending December 2010
Sales revenue 33,000.00
Sales & exp. - 3,000.00
= 30,000.00 dived by sales 33,000.00 =90.9% (gross profit margin ratio)
Net profit margin ratio (net income dived into net sales)
Year ending December 2012
Net income 2,000 dived
Net sales 40,000
= 5% net profit margin ratio
Year ending December 2011
Net income 2,000 dived
Net sales 35,000
= 5.7% net profit margin ratio
Year Ending December 2010
Net income 3,000 dived
Net sales 33,000
= 9% net profit margin ratio
2. Let at least two of your peers know how debt service ratios can be used by a lender in determining whether or not to lend money to a company.
WEEK 5 DISCUSSION 1
A.Form all the things that I’ve learned about accounting, I don’t believe that ratios tell the whole story. They’re what I consider cliff notes to a company or just a good over view of a company. “The current and quick ratios provide insight on immediate liquidity issues. There is another set of issues related to a company's broader solvency, or the ability to satisfy long-term structural debt” (Walther, 2012).
“Investors and creditors must be vigilant to monitor a company's liquidity, or ability to meet near-term obligations as they mature. A company with a strong balance sheet and robust sales can still find itself in deep trouble by running out of cash”(Walther, 2012). With that being said it just a quick way to get and over view of the company and it can encourage or discourage investors form looking into you company.
Walther. (2012). Principles of Accounting: Volume I (1st ed.). San Diego, CA: Bridgepoint Education, Inc.
B.Ratios provide the users of financial statements with a great deal of information about the entity. Do ratios tell the whole story?
The ratios do not tell the whole story because there are many things to be considered when looking at the assets of a company. For instance, the company’s inventory may be outdated and /or obsolete and would have to be sold at a reduced price which would make that asset a lower amount than would be reported when they bought the inventory. This would cause a reduction in the total amount of assets. Which would make the current ratio = current assets/ current liabilities untrue unless the inventory is taken out of the picture altogether.
How could liquidity ratios be used by investors to determine whether or not to invest in a company? Two ratios, the current and quick ratios, are particularly intended to signal the potential for liquidity challenges.
A quick ratio is calculated as Quick Ratio = (Cash + Accounts Receivable) / Current Liabilities
Which shows the cash on hand plus accounts receivable divided by current liabilities. This will give a ratio that an investor can look at and see if the company has enough liquidity in the company to pay their current liabilities and if the company is able to get cash quickly enough to pay its debts off in a hurry if need be. The time it takes to collect the monies that is owed the company is also considered in the process of evaluating a company.
Principles of Accounting: Volume 1
3.Review several of your peers’ posts and identify the core components of a current liability. Respond to at least two of your peers and provide recommendations to extend their thinking. Challenge your peers by asking a question that may cause them to reevaluate if their example is a current liability.
WEEK 4 DISCUSSION 1
A. Current liabilities are defined as obligations that must be settled within 1 year or the operating cycle, whichever is longer. They are usually satisfied by transferring a current asset. Accounts payable, salaries payable, utilities payable, taxes payable and short term loans are all examples of current liabilities, but also included would be related to collections for other, accrued liabilities, warranty obligations, unearned revenue, and the current portion of long term debt. Long term liabilities are obligations that extend beyond one year. Often business owners sign a contract to repay a note or mortgage over several years. The portion of the note or mortgage payable within one year will be a current liability, but the remaining balance would be a long term liability. Long term liabilities would probably be separated from current liabilities because they have not been paid yet. There is a possibility that they would not be paid. Other examples would be if a company signs a long term note payable to another company for the purchase of equipment to be used in its childcare business, and $10,000 of the note is due within its next fiscal year, the company may record the entry.
B.A current liability is a liability that can be paid off quickly and it is separated from a long term liability because the long term liability takes longer to be paid off such as a loan for a building or equipment whereas, a short term liability such as payroll or monthly incurances as utilities are paid monthly and can be paid off quickly.
An employer collects money from the payroll deductions of the employee to pay liabiities such as insurance, taxes and any other deductions from their payroll and reports them as a liability. They also collect money from customers that have prepaid for services and until the services have been provided it will be labeled as a current liability as unearned revenue. When the services have been provided revenue will be credited.
- Let at least two of your peers posts know if an alternative choice of entity would be possible. What would be the benefits of this new entity choice? Would there be any disadvantages associated with this new entity selection.
WEEK 4 DISCUSSION 2
A. Sole proprietorship is a single owner, called the proprietor, often the manager. Sole proprietorships tend to be a small merchandising store or the professional business of a physician, monk, or a computer company. Partnership joins two or more individuals are co-owners. Partnerships can be a business such as a retail store or professional organization of physicians, attorneys, and accountants. A corporation is owned by stockholders, who purchase shares to buy ownership in the company. Can be small, with as few as one stockholder, but are usually quite large because they can get funds from many owners or stockholders. It is a legal entity separate from its owners that conducts business in its own name. Based on its advantages and disadvantages, I would recommend the client to become a corporation, because of the benefits he or she can get from having a separate entity from personal finances which would provide protection in the event of litigation.
B. A client comes to you thinking about starting a consulting business. Your client is specifically interested in what type of entity should be created for this new business. Based on your readings or any additional research you may have done, discuss the advantages and disadvantages of the following: sole proprietorship, partnership, and corporation. Based on these advantages and disadvantages provide a clear recommendation to your client.
A sole partner is a single business owner; a sole proprietor is not a taxable entity in the IRS’s eyes. All your business assets and liabilities belong to you and re reported to the IRA as part of your individual tax return on schedule C. Although running your business as a sole proprietor is the simplest form of organizational structure, there is a big downside, all debits and claims are made against your individual property. The good thing is that you are your own boss, but with that come lots of responsibilities. Many sole proprietorships are one-owner businesses. An individual owns and operates the business and is responsible for all business transactions
When more than one person starts a business, it is usually started as a partnership. The main disadvantage of sole proprietorships is the owner's personal liability for all debts incurred by the business. Creditors may come after an owner's personal assets if a small business is unable to cover debts. Sole proprietors may have difficulty obtaining business loans.
A company does not have to be large to become a corporation. A corporation is a separate business entity that gives its shareholders several tax and legal advantages. The shareholders' personal assets are protected from the business debts of the company. Depending on the corporation type, shareholders may be able to avoid double taxation by choosing to pay taxes at his tax rate. A corporation can raise capital by selling stock.