Пойгина Л.Б., Туринова Л.А. - English for Masters. Management Part 2 (1175657), страница 15
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Discussing exercise The text states that "whenever management decides to compete more aggressively by keepinginventory stock high, it takes the risk that the demand for the product will suddenly drop". Do youagree or disagree with this statement? Identify the major challenges facing management policy anddiscuss the problem. Discuss the ways in which "a lagging economy can result in slowed payments on accountsreceivable". The text proves the statement "the more liberal the credit terms offered the larger the accountsreceivable will be".
Discuss the disadvantages of liberal extension of credit policy.5. Summarizing exercisef) Sum up the main points presented in Text 4. Write the plan of the text in the form ofstatements.g) Develop your plan into the summary.6. Translation exerciseTranslate from Russian into English paying attention to special vocabulary. The following wordcombinations can be of use:To use to account for inventory; to be tracked by the accounting system; the choice of the accountingconvention; to determine the collateral value; basic methods of valuing inventory; last-in, first-out (LIFO);firstLin, first-out (FIFO); to replace the used inventory; at current values cost; actual physical inventory; a byproduct of a method; to account for the inventory on the balance sheet; at older prices; to expense the oldinventory cost first; the current value of inventory on the balance sheet; to value inventory; the differencebetween the FIFO and LIFO valuations; LIFO reserve; retained earnings; to balance the statement; to be madesomewhat complicated over time; inflation and growing inventories; average cost.Метод оценки товарных запасокПринятое правило учета товарных запасов не предполагает, что каждый предмет товарных запасовфактически прослеживается системой бухгалтерского учета.
Выбор правил бухгалтерского учетатакже важен для определения ценности имущественного залога. Имеются два основных метода оценкитоварных запасов: "последним поступил, первым выбыл" (LIFO) и "первым поступил, первым выбыл"(FIFO). LIFO относит к расходам текущую, наиболее позднюю стоимость товарных запасов потому,что фирма должна будет заменить используемые товарные запасы по текущей стоимости. (Напомним,что фактические физические товарные запасы не учитываются при выборе правила бухгалтерскогоучета.) К сожалению, побочным продуктом этого метода является то, что товарные запасы вбалансовом отчете учитываются по старым ценам.FIFO сначала списывает старые товарные запасы; этот метод отражаез текущую ценность товарныхзапасов в балансовом отчете. Если фирма использует LIFO при оценке товарных запасов,38аналигик должен найти сноску по товарным запасам, которая даст различие между оценками по LIFOи FIFO.
Добавьте эту разницу, известную как резерв LIFO. к балансовой стоимости LIFO вкрупноформатной таблице, а также добавьте различие между суммами FIFO и LIFO к нераспределенному доходу, чтобы сбалансировать отчет. Таким образом будет определена текущаяценность товарных запасов. С течением времени ситуация несколько осложняется инфляцией ивозрастающими товарными запасами. Средняя стоимость является альтернативой, определяющейстоимость запасов между LIFO и FIFO.Text 51. Skimming exerciseSkim through Text 5 and identify which logical part deals with each of the following topics:a)b)c)d)e)f)Due form Officers of PartnersDeferred ChangesFixed Assets' Cost BasisIntangiblesInvestments in AffiliatesDue from Affiliated ConcernsAnalysis of Noncurrent AssetsI_____________________The assets described up to this point are all classified as current assets.
Noncurrent assets, in contrast, arenot expected to convert to cash within 12 months. The principal category of noncurrent assets is fixed assets.plant and equipment. Other noncurrent assets are loans due from company officers and affiliates, investmentsin other companies, deferred charges, and intangible assets.Fixed assets include equipment, buildings, vehicles, tools, computers, office equipment, leaseholdimprovements, and furniture - that is, any items of a fairly permanent nature that are required for the normalconduct of a business. The fixed-asset account may be highly significant or small, depending on the type ofbusiness.
The valuation of fixed assets is an important consideration in analyzing this account.Financial statements prepared in accordance with GAAP report the value of fixed assets at book value.Book value is predicated on accounting conventions that carry assets' values based on their original historicalcost (the purchase price paid by the company) min-s allowable depreciation to date, Unfortunately, however,historically based book values may be of little worth to lenders. Lenders are concerned primarily withliquidation value - the amount that a company or creditor could realize if it had to disport of the assetsquickly. Most assets have substantially less value in liquidation than their market value, wind; is defined asthe price a company could reasonably expect to receive for an asset sold in the open market under normaleconomic conditions.
Thus the liquidation value of assets may be either more or less than their book value.A company's efficiency depends on the cost-effectiveness of the equipment it uses. More-efficientequipment may or may not reduce the cost of manufacturing products or providing services to a point thatreplacing existing equipment is cost-effective. However, as less-efficient equipment nears the end of its economic life, it may pay to replace it with state-of-the-art equipment.
Old equipment can becometechnologically obsolete because of new production methods or because more-advanced equipment comeson the market. A company with inefficient equipment and the resultant higher costs may become less competitive in its pricing, resulting in a decline in sales.Specialized equipment may have a lower resale value than more-commonly used equipment. Themarketability of a company's fixed assets, rather than their book value (cost minus depreciation), determinestheir value as collateral.
Thus multi-use fixed assets have-higher collateral value than single-purpose fixedassets, the actual value of which could be less than their cost or book value. For example, when a company39incurs a large cost preparing a building to accept a highly specialized piece of equipment, it increases the cost(book value) of the building. However, a prospective buyer who plans to use the building for a differentpurpose will not want to pay extra for these added featuresAny costs of improving a leased building-such as carpeting, special lighting, general renovations, anddecorating-are not expensed on the income statement, but are capitalized onto the balance sheet as fixedassets and depreciated.
However, these types of fixed assets, called leasehold improvements, usually staywith the building and become the property of the building's owner should the company ever move to a newlocation. For this reason, banks give leasehold improvements little or no value as collateral. It is not unusualfor leasehold improvements to constitute the major category of fixed assets for certain types of servicecompanies. One of the best solutions is for the analyst to sock to outside independent appraisers who haveachieved credibility in identifying the proper value range of an asset.
If the borrower has completed a recentappraisal of its physical assets, this can be an excellent starting point.II _____________________This noncurrent asset account represents a company loan to one of its officers or owners. Although theyare usually shown as accounts receivable on financial statements, such loans often do not represent a liquidasset convertible to cash and available for business opera-lions. Company officers normally pay the companylast because they control the company. Therefore, all such loans are spread in the noncurrent asset categoryand not in current accounts receivable.The credit analyst should also determine why the loan was made and the prospects for repayment. Forexample, an officer may haw-taken a loan from the company in lieu a salary or bonus. Tins loan is.
in effect,an expense not recognized by the company, thus improving its profitability. Moreover, the company officerneed not claim the loan as income, thus avoiding additional personal taxes, assuming the loan does not slayon the books too long. An officer may even purchase stock in the company through the use of a note; this is asham, creating an asset account as an offset to an equity account. Valid loans to company officers should beexamined closely by the lender to determine whether the officer has sufficient personal liquidity to repay thisreceivable.III ________________Affiliated companies arc those related by common ownership, either one owning the other or bothcompanies owned by the same individual or other company. Amounts due from affiliates, like those due fromofficers or partners, are usually disclosed as accounts receivable on the company's financial statements.However, this receivable is frequently nonliquid because of the nature of the affiliation and the absence ofpressure to pay such debts.
Therefore, an analyst should consider it as a noncurrent asset and also determineits purpose. For example, the analyst should find out if* normal sales exist between the companies, if* one company has lent money to die other one, and if* the affiliate has the ability to repay the receivable, regardless of the reason behind the accountIf a company wants to borrow money from the bank m order to lend it to an affiliated company, obtainfinancial statements on the affiliate as well as on the company in order to evaluate its ability to back uprepayment. Extensive intercompany borrowings or investments bear watching, particularly in a closely heldcompany where the distinction between the owner's and the company's finances may be blurred.IV_________________When one company owns less than 20 percent of another, the affiliate status of the two companies is notnecessarily recognized.
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