Business Administration/ Management

Question One

Profit is computed by deducting the expenses from sales made, therefore distinguished as net income. On the other hand, cash implies the inflows and outflows of money in a business entity.

Question Two

Cash from operating activities result from standard functions of cash pay-outs to settle expenses, and cash income receipts from accrued revenues. Cash from investing activities is a unit of cash flow accounts that displays the cash disbursed or made associated with financing activities. Finally, money from financing activities illustrates the cash net flows that are utilized in business capital, and it is a part of the firm’s cash flow statement.

Question Three

Depreciation is the decrease in asset value that happens over some time as the asset ages or wears and tears. Depreciation implicitly affects cash flow by lessening the business cash outflows linked to income taxes, facilitating its essence of tax-deductibility.

Question Four

If adequately managed, working capital is crucial to a commercial entity’s essential operational prosperity and financial stability as a business. It is significant since it is a quota for a firm’s capability to settle short-term debts.

Question Five

A company’s cash flow statement ruminates the changes in working capital. With current liabilities remaining constant due to long-term debt and current assets decreasing, working capital also decreases.

Question Six

The working capital cycle is the time between purchasing commodities to make products and cash revenue-making upon selling particular products. It is computed in days. It is essential in that it enhances the short-term liquidity status hence boosts business efficiency.

Question Seven

The fixed and variable costs are separated by the contribution margin income statement, whether period or product. Hence, it computes a contribution margin.

Question Eight

A contribution margin represents a cumulative revenue amount obtainable after variable costs to conceal fixed expenditures and offers profit to the business.

Question Nine

Linked to the company’s chief operations, revenue is the full income made through the sale of goods and services. Net income in the income statement is the profits or cumulative earnings for the business.

Question Ten

A company’s financial strategy aligns with the corporate goals, measures its performance, and its crucial metrics include its creditworthiness, liquidity to service debts, and capability to pay suppliers and staff.

Question Eleven

Risk is defined by the extent of possible financial loss or improbability intrinsic in an investment decision. The higher then business risk, the higher the compensation is for the investors.

Question Twelve

Financing through loans involves borrowing loans directly, while financing through stock consists of selling a stake in your business with expectations of safeguarding financial backing.

Question Thirteen

Bonds are the liability tools issued by the firm for fundraising, which is tradable in the market. Loans are a contract between two parties where one borrows cash from another party that is not negotiable.

Question Fourteen

Quality is checked through the investment company profiles that the bond was bought through.

Question Fifteen

Common stocks have dividends that have more risk and are less assured in the event a business flops. Preferred stock is more of a bond having a defined bonus and recovery piece.

Question Sixteen

A company pays dividends to create more demand for their products and attract more investments.

Question Seventeen

The accounts that makeup Shareholder’s Equity on the Balance Sheet include treasury stock retained earnings, supplementary paid-in capital, common stock, and preferred stock.

Reference:

Drury, C. M. (2013). Management and Cost Accounting. Springer.