A firm has economic exposure (also known as forecast risk) to the degree that its market value is influenced by unexpected exchange rate fluctuations. Such exchange rate adjustments can severely affect the firm’s market share position with regards to its competitors, the firm’s future cash flows, and ultimately the firm’s value. Economic exposure can affect the present value of future
Continue reading A firm has transaction exposure whenever it has contractual cash flows (receivables and payables) whose values are subject to unanticipated changes in exchange rates due to a contract being denominated in a foreign currency. To realize the domestic value of its foreign-denominated cash flows, the firm must exchange foreign currency for domestic currency. As firms negotiate contracts with set prices
Continue reading Foreign exchange risk (also known as FX risk, exchange rate risk or currency risk) is a financial risk that exists when a financial transaction is denominated in a currency other than that of the base currency of the company. Foreign exchange risk also exists when the foreign subsidiary of a firm maintains financial statements in a currency other than the
Continue reading Financial management can be defined as the management of the finances of an organisation in order to achieve the financial objectives of the organisation. The usual assumption in financial management for the private sector is that the objective of the company is to maximise shareholders’ wealth. Financial targets may include targets for: earnings; earnings per share; dividend per share; gearing
Continue reading CAPITAL STRUCTURE AND FINANCE COSTS (F3): LEARNING OBJECTIVES I.THE CAPITAL STRUCTURE OF A LIMITED LIABILITY COMPANY II.ORDINARY SHARE CAPITAL III.RIGHTS ISSUES IV.BONUS ISSUES V. DIVIDENDS VI. LOAN NOTES ( LOAN STOCK) VII. PREFERENCE SHARES VIII. OTHER RESERVES IX. INCOME TAX ……………………………………………… I. THE CAPITAL STRUCTURE OF A LIMITED LIABILITY COMPANY Finance is provided by the capital invested in the business.
Continue reading IAS 37 – PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS (F3): LEARNING OBJECTIVES I.DEFINITIONS II.PROVISION RECOGNITION III.THRESHOLD of IAS 37 IV.EXAMPLE FOR IAS 37 ……………………………………………………… I. DEFINITIONS A provision is a liability where the timing or the amount is uncertain. A contingent liability is a liability that may result, but depends (or is contingent) on the outcome of uncertain events. For
Continue reading IAS 16 PROPERTY, PLANT AND EQUIPMENT (F3): LEARNING OBJECTIVES 1.Definition 2.Recognition 3.Initial Measurement 4.Subsequent Expenditure 5.Subsequent Measurement 6.Depreciation ……………………………………. 1. IAS 16 Property, plant and equipment Definition: Property, plant and equipment are tangible assets held by an entity for more than one accounting period for use in the production or supply of goods or services, for rental to others, or
Continue reading IAS 2 INVENTORY (F3) LEARNING OBJECTIVE I.INVENTORY IN THE FINANCIAL STATEMENTS II.YEAR-END INVNETORY ADJUSTMENTS III.TYPES OF INVENTORY IV.IAS 2 INVENTORIES V.METHODS OF CALCULATING THE COST OF INVENTORY I. INVENTORY IN THE FINANCIAL STATEMENTS $ $ Revenue x Opening Inventory X Purchases X Less: Closing Inventory (x) Cost of Sales/cost of goods sold (x) Gross Profit x At the beginning of
Continue reading HOW TO PREPARE PRACTICAL FINANCIAL STATEMENTS To prepare practical financial statements, accountant should understand the following issues: Make chart of account- what kind of business that company runs. Material or immaterial types of transactions or events in company. Accounting policy for company Which transaction use accrual or cash basis In practice, financial statement formats, chart of account for financial statements
Continue reading Financial Statement Format and Accounting Policy In practice, financial statement format, chart of account for financial statements and accounting policy are different from companies to other companies. Cost of service for Service Company may not be identified for accounting purpose because it may be difficult and spend time to separate between cost of service and operating expense. Let practice with
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