How does operating leverage affect business risk?

July 9, 2024 No Comments

A: In finance, companies assess their business risk by capturing a variety of factors that may result in lower-than-anticipated profits or losses. One of the most important factors that affect a company’s business risk is operating leverage; it occurs when a company must incur fixed

How does proration affect asset depreciation?

June 30, 2024 No Comments

A: Accountants calculate an asset’s pro-rata depreciation during the first and final year of its service. The IRS established applicable convention for pro-rata asset depreciation, which represents an assumption about the date when the property is placed into service or retired. While the half-year convention

How does proration affect asset depreciation?

July 7, 2024 No Comments

How does ratio analysis make it easier to compare different companies?

June 30, 2024 No Comments

A: Ratio analysis provides an investor with tools to analyze a company’s financial statements. Investors use ratios to evaluate one stock in a sector in comparison to another company in the same industry. Using ratio analysis simplifies comparing financial statements of multiple companies. Some key

How does ratio analysis make it easier to compare different companies?

July 7, 2024 No Comments

How does ratio analysis make it easier to compare different companies?

July 9, 2024 No Comments

How does transfer pricing affect managerial accounting?

June 30, 2024 No Comments

A: In managerial accounting, the transfer price represents a price at which one subsidiary, or upstream division, of the company sells goods and services to the other subsidiary, or downstream division. Goods and services can include labor, components and parts used in production and general

How does transfer pricing affect managerial accounting?

July 7, 2024 No Comments

How does transfer pricing affect managerial accounting?

July 9, 2024 No Comments

How is absorption costing treated under GAAP?

July 9, 2024 No Comments

A: Under generally accepted accounting principles (GAAP), absorption costing is required for external reporting. All normal manufacturing costs must be treated as product costs and subsequently included as inventory in the financial statements. Inventory costs are reflected in the income statement and the balance sheet.

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