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Ideally,the interests of directors and other stakeholders should be aligned andconsistent with each other. The primary interests of employees are their salary/wage and theirsecurity of employment. To an extent there is a direct conflict betweenemployees and shareholders as wages are a cost to the company and incometo employees.
Nonetheless, financialcriteria can be used to appraise the extent to which such organisationsoffer value for money, and hence make good use of the funds provided tothem. (a)Not-for-profit organisationsinclude public sector bodies such as the National Health Service orlocal councils, charitable bodies e.g. Oxfam, and other organisationswhose purpose is to serve the broader community interests, rather thanthe pursuit of profit.
Definition of a Financial Security or Any Other Equivalent
Both the environmental lobby and Sludgewater’s shareholders havedemanded that it clean up its operations. (d)Explain how uncertainty and risk could be considered in the investment process. (a)Calculate the net present value of the proposed investment in products Alpha and Beta as at 30 June 20X7. The factory is being depreciated anddepreciation for the duration of the project will be $10,000. (b)Discuss the objectives of a public sector organisation and how performance is measured and controlled. (a)Identify five stakeholder groups and briefly discuss their financial and other objectives.
(b)The number of properties soldeach month indicates that Thorne Co experiences seasonal trends in itsbusiness. There is an indication that property sales are at a low levelin winter and increase as spring approaches. A proportion of any cashsurplus is therefore likely to be short-term in nature, since some cashwill be required when sales are at a low level. Even though net cashflow is forecast to be positive in the January, the month with thelowest level of property sales, the negative opening cash balanceindicates that there may be months prior to December when sales are evenlower. The negative NPV on the investment in spray painting equipmentexceeds the present value of the fines which Sludgewater might expect topay. It therefore seems that the project is not viable in financialterms, and it would be cheaper to risk payment of the fines.
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The company wishes to minimise its global tax bill, andpart of its tax strategy is to try to take advantage of opportunitiesprovided by transfer pricing. (5) The non-current assets have no expected salvage value at the end of five years. (2) Material costs and labour costs are expected to increase by 10% per year.
To implement the new arrangements will require ‚one-off’reorganisation costs estimated at $4,000 which will be treated as arevenue item for tax purposes. The effective life span of the newsystem can be assumed to be eight years. The de-luxe machine has only recently https://grindsuccess.com/bookkeeping-for-startups/ been introduced to the marketand has not been fully tested in operating conditions. Because of thehigher risk involved, the appropriate discount rate for the de-luxemachine is believed to be 14% per year, 2% higher than the discount ratefor the standard machine.