The Value Of Future Receipts From An Asset

2. Inventories included in the balance sheet are present in the warehouse on the balance sheet date.

2. The knowledge is helpful to present potential investors, creditors and others in assessing the amounts, timings, and uncertainty of future cash flows,

2. For the most recent year, what is the amount of inventory in the balance sheet? What does this amount represent?

In the balance sheet we would have a different situation: The balance sheet would contain the barrels as an asset and the value of inventory would increase while the value of the barrels actually would decrease.

Moving onto the balance sheet, it is safe to assume that the cash position in the firm will increase the rate of the sales growth going forward. In actuality, cash has historically increased faster than the growth of revenue with 2004 being an exception. To calculate the assumption for accounts receivable, inventory, and accounts payable, we averaged the four years worth of data

c. to provide information about the quality of, and potential variability of, a company’s earnings and cash flow so that investors can ascertain the likelihood that past performance is indicative of future performance.

i. “Inventories, net.” – If a company purchases products to be resold, there is an adjustment on the balance sheet to reflect this net inventory.

3-2. Are the following balance sheet items (A) assets, (L) liabilities, or (E) stockholders’ equity?

For example, a tract of land which was purchased 50 years ago for $10,000 may be worth $1 million today, but it will be recorded on the balance sheet at its historical cost of $10,000. The historical cost principle is used because of its reliability and freedom from bias when compared to the fair market value principle.

This is beneficial for the investors as it means that they can be confident that their decisions are correct and that the finances of the business will not suddenly change.

113 - 131). In details, by having the sensitive-adaptation characteristic in cost-identifying, the cost-based basis is claimed to be superior than the others in case the users have to evaluate the indirectly contributed or having the insignificant variability in the contractual cash-inflow assets and the settle-term-payment liabilities; Meanwhile, the current-market-price basis (the direct-contributed future cash-inflow assets) and the cash-flow-based (the unstated-term liabilities) shows their effectiveness in generating relevant information (ibid.) Indeed, these preliminary views are generally accepted by the most of the users (The Line Group, 2014; MU, 2014; HKAB, 2014). For the partial agreed users, in common, most concerns are raised over the cost occurs (NUS, 2014; Kingston Smith, 2014), the assumption of the market scenario in DP (HoTARAC, 2014; Imamura, 2014 - and later be viewed in the over-simplified issue that mentioned by the disagreed users), and the lack of options in case specific information is needed (ESMA, 2014; HoTARAC, 2014). In specifics, the effectiveness of the cost-based technique is questioned by both HoTARAC and Imamura by giving an example of changing in market scenario as there appears a reliable market price for the same type of mentioned assets (HoTARAC) or pointing out the unrealistic assumption such as cash flow will not occur for many years in paragraph 6.85 of DP

Cash equivalents are very safe assets that can be readily converted into cash; NIKE is one such example. Accounts receivables consist of the short-term obligations owed to the company by its clients. Companies often sell products or services to customers on credit; these obligations are held in the current assets account until the clients pay them off. Lastly, inventory represents the raw materials, work-in-progress goods and the company’s finished goods. Depending on the company, the exact makeup of the inventory account will differ. For example, a manufacturing firm will carry a large amount of raw materials, while a retail firm caries none. The makeup of a retailer 's inventory typically consists of goods purchased from manufacturers and wholesalers. In my opinion balance sheet is in balance where the value of the assets equals the combined value of the liabilities and shareholders’ equity. The assets and liabilities sections of the balance sheet are organized by how current the account is. So for the asset side, the accounts are classified typically from most liquid to least liquid. For the liabilities side, the accounts are organized from short to long-term borrowings and other obligations. Therefore, can show you with a better idea of the company’s financial condition along with its operational efficiency. This can give investors an idea of how financially stable the company

The business world is considered full of risk and uncertainty. It is believed that in practise the business get promise of cash in future, it can never be certain until it is actually received.

3. The actual information needed by the management, investors, creditors etc. may be current values of assets therefore values based upon historical cost may not be useful for their purposes.

It is important to company because they can obtain useful information for their investment decision making purpose.