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What is Indirect method
Indirect method is what you would probably be familiar with. It requires a lot less information to produce it and hence can be argued to be easier method.
With indirect method, profit before taxation (or profit before interest and tax) is taken from income statement and adjusted for non-cash items (that is depreciation, provisions). It's also adjusted for loss or profit on disposal of assets. Other items which will be classified under financing or investing are also adjusted for. Lastly adjustments are made for changes during the period in inventories, trade and other receivables and payables. This requires looking at current and prior year's statement of financial position.
North Star Company, a U.S. based MNC, is considering to establish a subsidiary to capitalize on the removal of Eastern European border restrictions. The subsidiary would manufactur
Assets Allocation: The investment pattern above should be followed as under: Fresh accretions to the fund and redemption amounts of investments made earlier should be inv
How do we estimate expected incremental cash flows for a proposed capital budgeting project? We valuate expected incremental cash flows for a proposed project by valuating the
Q. Relative costs and benefits? Option 1- Factoring Reduction in receivables days = 15 days Reduction in receivables =15/365* £20m = £821916 Option 2 - The
A 10-year, 12% semi-yearly coupon bond with a par value of $1,000 may be called in 4 years at a call price of $1,050. The bond sells for $1,050. (Suppose that the bond has just bee
A procedure that invented in the 1980s for evaluating the processes of a business to find strengths and weaknesses. Specially, activity-based management finds out areas where a bus
Define the P/E valuation method. Under what circumstances should a stock be valued using this method? The P/E ratio points out how much investor are willing to pay for each dol
Q. Security offered - influence the rate of interest ? The rate of interest charged on the loan will be lesser if the debt is secured against an asset or assets of the company
How are financial trades made on an organized exchange? Every exchange-listed security is traded at a precise location on the trading floor called the post. The trading is mana
Q. Show the Advantages of IRR Method? Advantages of IRR Method:- (i) Similar to the other DCF methods IRR methods as well take into consideration the time value of money.
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