ENGINEERING ECONOMIC AND FINANCE AUTUMN 2020
Engineering Economics and Finance Autumn 2020
Question 1
What is the difference between current assets and total assets?
Assets are economic resources that are legally owned or controlled by an entity and can be used to generate revenue. Assets are broken down into two major categories: current and non-current assets
Current assets are any type of asset owned by an entity that has high liquidity or they are estimated to be consumed and exhausted through the normal business activities within a business operating cycle or the current financial year whereas, total assets constitutes of all the resources owned by an entity that has value and can generate income. This includes all the current and non-current assets.
Question 2
Describe the reason why you would use a company (ACN) over an ABN
ACN is a unique code that is solely issued to companies. It is a requirement for every company in Australia to have this number that acts as a company identity. ABN is not required for a company, ABN is only useful in a business entity
Question 3
What are the three core documents within a financial accounting?
The three vital documents in financial accounting are: Balance sheet, Cash flow statement and Income statement
Question 4
Describe the relationship between revenue and profits, how are they different?
Revenue is the total income received from the company’s sales and services charge rendered to clients, whereas profit is the amount of money that is retained by the company after all the expenses cost have been deducted from the revenue.
Question 5
How do loans affect a company’s leverage ratios?
Loans tend to increase the leverage ratio of a company which sets the company in more business risk. It also leads such companies to be operationally leveraged