According to Subramanyam (2014), each ratio listed above evaluates the capabilities of Campbell Soup’s property, plant, and equipment as it relates to their associated depreciation expenses. Campbell’s ratios can also be compared to each previous year’s value as well as their competitors in an effort to provide insight into their depreciation policy, useful life, and salvage value (Stock Analysis on Net, 2016; Subramanyam, 2014). Moreover, Campbell can utilize their average age ratio to improve operational efficiency if they determine their plant asset base is dated and in need of replacement (Stock Analysis on Net, 2016). More specifically, if Campbell’s average age starts to deteriorate, the company’s profit margins may not mirror the asset’s true expenses and prospective financing capabilities may be hindered (Subramanyam, 2014).
For analysis sake, the transition from LIFO to FIFO method helps one to evaluate the up-to-date costs of inventories and debt paying capabilities as well as portraying their uninflated inventory turnover values (Subramanyam, 2014). Additionally, since inventories often represent significant percentages of a company’s assets and inflation leads to price increases overtime, LIFO to FIFO restatements can allow analysts to compare companies with different inventory valuation methods (Investopedia, 2016c). More specifically, investors can assess each method’s short and long-term effects on values such as tax expense and net income (affecting earnings
These economic adjustments are justified. If the corporation were experiencing a decline in sales this would also mean that they were using machinery less. Therefore, causing much less wear and tear damages to the machinery, which would definitely justify why the increase in the useful life expectancy of the asset.
4. The depreciation accounting changes assume that Harnischfeger’s plant and machinery will last longer and will lose their value more slowly. Given the business conditions Harnischfeger was facing in its primary industries in 1984, are these economic assumptions justified?
The effect of LIFO inventory liquidation was an increase in 1984 net income by $2.4 million, as gains. The balance sheet also reflected an improvement in liquidity.
LIFO was the hardest for me to grasp because of the logic and that it could provide a tax break for the company. I had trouble understanding the concept of the LIFO because I kept thinking of the concept backwards. I also had a hard time understanding the tax break because I didn’t understand why it happened. After reading the material again I noticed that where costs of inventory become high over time the LIFO method created a condition in which the less expensive inventory was recorded. This showed that the more expensive items were recently purchased creating a lower profit and a smaller income that could be taxed.
You use a perpetual inventory system and value the inventory using FIFO. Prior to making adjusting year-end entries you valued the inventory at the lower-of-cost or-market. Justify why you valued the inventory at lower-of-cost or-market.
45. (LO1) ATW corporation currently uses the FIFO method of accounting for its inventory for book and tax
Boston Beer Company Mission statement is to “seek long-term profitable growth by offering the highest quality product to the U.S. beer drinker”
The decline of inventory turnover presents the incresed possibility of inventory obsolescence which is likely to be assessed as higher business risk. In debts to equity part, the ratio in current year is much higher than that of preceeding year, which means the extent of use of debt in financing company is much higher than before. Pinnacle has used most of its borrowing capacity and has little cushion for addional debt.This action brought high business risk to Pinnacle. In addition, Pinnacle puchase more inventory in current year that that of preceeding year, and net sales are increasing also compared previous year. However, the net income is decreased significantly. These changes show expenses (maybe direct or indirect) have increased dramaticly. The company uses more expensive materials and labors to manufacure and sell products.
(TCO 4) Inventory valuation methods determine the cost of goods sold and the inventory balance. (1) Explain how the First in First out (FIFO) method is applied (10 points) and (2) provide an example of the impact that this method of inventory valuation will have on Gross Profit. (15 points) (Points : 25)
Since the Walgreen Company sells products as the retailer or manufacturer it may find the cost of its products increases or rises high the company should use the LIFO method of inventory (Porter & Norton, 2013). According to Hughes and Schwartz (2014), the use of LIFO method of inventory helps a company buys or sells will less taxable income and less income tax payments than FIFO. Porter and Norton also found that when the prices are rising frequently, then a company should use the LIFO method. Therefore, the Walgreen Company uses the Last-In, First-Out (LIFO) Method. It is also equally important that the Walgreen Company should use the LIFO method of Inventory costing because the cost of last accrued items should be assigned firs tot sales
Introducing a new product to the market is a very risky operation. Not only is it risky but it takes time, effort and money. In order for a product to be successful, it had to fully undergo the product life cycle. Kellogg’s has an advantage when it comes to the breakfast market as it holds the biggest market share. After providing the British public with breakfast for years, it most certainly has a larger customer loyalty base. The strong brand makes it easy for product launching as the public are already familiar with the brand. However, introducing a new product comes with its challenges and risks. Looking at the ratios, Kellogg’s has a current ratio to date of 1:1.1 . This in financial terms rings alarm bells as it shows that the company will struggle to pay its short term obligations. Kellogg’s however can operate on a low current test ratio as it has a good long term revenues coming into the business. This means that it is possible to borrow on this basis to meet its current obligation. After calculating the net present value, which gave a positive NPV of £38450million, I move that we go ahead with the introduction of a new product. In traducing a new product is a sign of innovation and growth on the part of the competitors. In order for a new product to be introduced to the market, Kellogg’s will have to spend money on the actual product, the marketing side of
This paper focuses on global business strategy of The Coca-Cola Company, who is the leader in the beverage industry as well as, the world?s leading soft drink maker that operates in more than 200 countries and owns or licenses 400 brands of nonalcoholic beverages. The paper will concentrate on the PESTEL analysis of the organization focusing on the external factors of the business and the environment where it operates. All of the following environments will be discusses in the research; Political, Economic, Sociological, Technological, Legal, and Environmental as they the changes in the market segment. Within this paper it will discuss some of thr
Associated British Foods PLC is a British multinational food processing and retailing company which was founded in the year 1935 by a Canadian named Willard Garfield Weston and from that date the rest is history. (Grace’s Guide, 2016).
The only real vision statement Heinz offers is to have a bottle of ketchup on every table.' This vision statement reinforces the notion that Heinz only produces ketchup. It is unnecessary for Heinz to further identify themselves with ketchup. The ketchup market is not going to continue to expand much more than it has already. Since Heinz is synonymous with ketchup already, and customers are aware of this high quality product, they should make consumers aware of the other products they offer. Those who feel Heinz ketchup is of the highest quality would be eager to buy other products produced by Heinz believing they too would be of the highest quality. They do need a