http://veterinarynews.dvm360.com/dvm/Expenses/Theft-prevention-Are-you-internally-controlled/ArticleStandard/Article/detail/666570?contextCategoryId=45464&ref=25
Summary
The article teaches business owners to prevent theft by doing clever internal control of assets in the company. The article lists 6 ways of internal control that can be used in many small and medium businesses. The first one is one to maintain, one to record. In any given situation, the more record-keeping duties that can be segregated, the better. If only one person is responsible for both maintaining the record and the asset, there are more opportunities for procrastination, abdication of the task or outright theft. Business owners or managers should determine the practice's acceptable level of risk. It is also management's responsibility to review practice operations contemporaneously and ensure that assets are used for the right purpose. Occasionally, discrepancies will occur, and they should be analyzed and reconciled. Other ways including Seeing is believing, Hold the line, and Ask away are useful, too.
Connection
If a business, especially a small business, doesn't have a proper internal control to protect its assets, it is the owner and the manager's responsibility to set up a strict policy to control its assets, especially cash and checks. In Chapter 6, we learned many useful methods including deposit cash daily, assigning different employees, and other methods. Out of all assets a business has, cash has the most problems. A business shouldn't keep a large amount of cash in the store because checks are almost the same as cash. You can pay you employees with checks, pay your bills with checks, and pay your tax with checks. Even though issuing checks could be costly, it safe and secure.
Inflection
Theft happens. We can't expect to catch them in the act every time. However, we can scare them away almost all the time. Outside theft are easy to deal with: couple of cameras, alarm system, and some securities can easily scare them away. Insiders are hard to deal with because you know them and they know you, plus they are hard to catch. Internal control helps us to prevent theft from our employees. Assigning different people for doing and checking reduces the possibility of a theft, and even the theft does happen, we can catch the guy sooner.
Thursday, May 6, 2010
Monday, April 12, 2010
Chapter 5 Hefty Cash Flow: Earthlink Inc. (ELNK)
http://www.gurufocus.com/news.php?id=89879
Summary
The article offers opinions regarding high amounts of free cash flow. The company, Earthlink Inc., is a Internet service provider, providing nationwide Internet access and related value-added services to individual and business customers. The writter did a comparision between operating net income and cash from operating activites. We can get a conclusion--the company has ballooned with very little capital reinvestment into the business, which means the business wasn't expanding.
Connection
Cash flow statment is very useful in terms of investments, cash inflow/outflow, and other things. It cannot replace and be replace by income statment. It is possible that a company suffers a net loss but has a cash inflow from operating activities. Another important difference between net income and cash from operating is amorization. I personally think that amorization has little effect on a company's financial position unless long-term assets need to be updated or renovation. The company in the article, Earthlink Inc, has more cash inflow than its net income because of deprecitions.
Inflection
If a business uses cash base accounting system, a income statment would not be needed. Since we can't predict likely results from a cash base company, I think reccured base is more acceptable. Cash is always more important than any other assets in a company because without cash, a company couldn't not work. We need cash to pay taxes, pay employees, buy inventory, and pay other bills. A successful company should have many qualities, and having enough cash is one of them.
Summary
The article offers opinions regarding high amounts of free cash flow. The company, Earthlink Inc., is a Internet service provider, providing nationwide Internet access and related value-added services to individual and business customers. The writter did a comparision between operating net income and cash from operating activites. We can get a conclusion--the company has ballooned with very little capital reinvestment into the business, which means the business wasn't expanding.
Connection
Cash flow statment is very useful in terms of investments, cash inflow/outflow, and other things. It cannot replace and be replace by income statment. It is possible that a company suffers a net loss but has a cash inflow from operating activities. Another important difference between net income and cash from operating is amorization. I personally think that amorization has little effect on a company's financial position unless long-term assets need to be updated or renovation. The company in the article, Earthlink Inc, has more cash inflow than its net income because of deprecitions.
Inflection
If a business uses cash base accounting system, a income statment would not be needed. Since we can't predict likely results from a cash base company, I think reccured base is more acceptable. Cash is always more important than any other assets in a company because without cash, a company couldn't not work. We need cash to pay taxes, pay employees, buy inventory, and pay other bills. A successful company should have many qualities, and having enough cash is one of them.
Friday, February 26, 2010
Chapter 4 Breakwater Resources Ltd. Annouced Financial and Operating Results
http://www.marketwatch.com/story/breakwater-resources-ltds-2009-year-end-and-fourth-quarter-financial-and-operating-results-2010-02-25-183500?reflink=MW_news_stmp
Summary
The article is the financial and operating results of Breakwater Resources Ltd. Breakwater Resources Ltd. is a a mining, exploration and development company which produces zinc, copper, lead and gold concentrates. They have a very conservative revenue recognition policy and the recognition of sales can be as much as six months after the date of concentrate production. For the year of 2009, the company recognized $0.8 million compared with a net loss of $88.3 million in 2008.
Connection
Although their revenue recognition is much more conservative than the method most of businesses use, it is also safer than most of revenue recogniting method. Management can also make sure that the company will collect what is owed to them. Because the GAAPs are not laws, businesses get lots of ways and chances to cheat. For example, a corporiation can make something up to recognize revenue even before the actual revenue is produced. The GAAPs should become laws as soon as possible.
Reflection
For junior accoutants, sometimes they are just told what to do, not why to do it. Number one reason is that they don't want to lose their jobs. As long as there is profit, ethnics and principles can never be completely obeyed by people. If someday we are asked to make something up in the accounting book, I'm sure lots of people would do it. Due to the recession, many companys are on the edge of bankruptcy. That is the second reason why they lie in their book. There is really no way to solve the lying problem, we can only hope that we can be smarter and more careful about what we do.
Summary
The article is the financial and operating results of Breakwater Resources Ltd. Breakwater Resources Ltd. is a a mining, exploration and development company which produces zinc, copper, lead and gold concentrates. They have a very conservative revenue recognition policy and the recognition of sales can be as much as six months after the date of concentrate production. For the year of 2009, the company recognized $0.8 million compared with a net loss of $88.3 million in 2008.
Connection
Although their revenue recognition is much more conservative than the method most of businesses use, it is also safer than most of revenue recogniting method. Management can also make sure that the company will collect what is owed to them. Because the GAAPs are not laws, businesses get lots of ways and chances to cheat. For example, a corporiation can make something up to recognize revenue even before the actual revenue is produced. The GAAPs should become laws as soon as possible.
Reflection
For junior accoutants, sometimes they are just told what to do, not why to do it. Number one reason is that they don't want to lose their jobs. As long as there is profit, ethnics and principles can never be completely obeyed by people. If someday we are asked to make something up in the accounting book, I'm sure lots of people would do it. Due to the recession, many companys are on the edge of bankruptcy. That is the second reason why they lie in their book. There is really no way to solve the lying problem, we can only hope that we can be smarter and more careful about what we do.
Wednesday, January 20, 2010
Chapter 3 iGATE Reports Results
http://money.cnn.com/news/newsfeeds/articles/globenewswire/182266.htm
Summary
This article talks about an integrated technology and operations (iTOPS) company, today announced its financial results for the fourth quarter and year ended December 31, 2009. The operating revenue increased $0.9 million. Its retained earning per share increased $0.03 and its diluted earnings from its continuing operations per share increased 25% comparing to the last quarter. However, its revenue from continuing operations dropped $25.7 million comparing to the previous year. There was also a 4% decrease in the diluted earnings from continuing operations. The Board of Directors recommended an annual dividend of $ 0.11 per share, based on the healthy performance in 2009.
Connection
We learned the multi-step income statement. The multi-step income statement has 6 sections. The most important one is income from continuing operations. This section takes up about 65% of the performance of the business. In the article, all the highlights are about income from continuing income. Because it is continuing, shareholders can expect about the same amout of revenue from the next fiscal period. Multi-step income statement gives us a clear opinion about every part of the company. It it a great way to measure a business.
Reflection
I learn a great lesson from this chapter. A successful company needs not only hard-working and talented employees, but also luck. If you just set up a company in Haiti, then you pretty much broke by now. We can see the company's "luck" by reading income from infrequent or unusual sources and income from extraordinary items. The only difference is that we can take the risk from income from infrequent or unusual sources. Extraordinary items usually mean bad luck. Luck is more important than anything, but that is something you cannot get on your own.
Summary
This article talks about an integrated technology and operations (iTOPS) company, today announced its financial results for the fourth quarter and year ended December 31, 2009. The operating revenue increased $0.9 million. Its retained earning per share increased $0.03 and its diluted earnings from its continuing operations per share increased 25% comparing to the last quarter. However, its revenue from continuing operations dropped $25.7 million comparing to the previous year. There was also a 4% decrease in the diluted earnings from continuing operations. The Board of Directors recommended an annual dividend of $ 0.11 per share, based on the healthy performance in 2009.
Connection
We learned the multi-step income statement. The multi-step income statement has 6 sections. The most important one is income from continuing operations. This section takes up about 65% of the performance of the business. In the article, all the highlights are about income from continuing income. Because it is continuing, shareholders can expect about the same amout of revenue from the next fiscal period. Multi-step income statement gives us a clear opinion about every part of the company. It it a great way to measure a business.
Reflection
I learn a great lesson from this chapter. A successful company needs not only hard-working and talented employees, but also luck. If you just set up a company in Haiti, then you pretty much broke by now. We can see the company's "luck" by reading income from infrequent or unusual sources and income from extraordinary items. The only difference is that we can take the risk from income from infrequent or unusual sources. Extraordinary items usually mean bad luck. Luck is more important than anything, but that is something you cannot get on your own.
Tuesday, September 15, 2009
Chapter 1-Reforming through the tough times
http://www.economist.com/businessfinance/displaystory.cfm?story_id=14413372
Summary
The article talks about a World Bank report. This World Bank’s latest progress report is optimistic about the economy. It tracks changes to the regulations that affect business, and suggests that governments have handled the storm well. Since June 2008, 131 countries introduced 287 pro-business reforms—20% more than in the previous 12 months. The reform helps reducing in the cost of doing business, which leads to higher rates of growth and entrepreneurship. At the end of the article, it reminds us how far there is still to go in getting business regulations right.
Connection
Chapter one tales about overview of corporate financial reporting. Reports like this one helps stimulating economy. They will give investors confidence towards the market. Investors can use these reports to understand what the market will be or change into so they can make responsible decisions . The economy finally starts to recover from the crisis. We should have the right attitude about the economy. And the reports are useful for shareholders in corporations as well. Shareholders can guide big corporations onto the right truck. In capitalism countries, big corporations are significantly important to the enconomy.
Reflection
It is important for us to know how to read and gather information from these reports. Those reports are the results of analysis and research by many professionals, and reading them right can make great efforts. If we want to develop more in this area, our ability of analyzing reports could decide our future accomplishments. Economy environment is also important for us to understand. As now the economy is recovering, we need to "see through" it to practise our vision as an accountant or a manager in the future.
Summary
The article talks about a World Bank report. This World Bank’s latest progress report is optimistic about the economy. It tracks changes to the regulations that affect business, and suggests that governments have handled the storm well. Since June 2008, 131 countries introduced 287 pro-business reforms—20% more than in the previous 12 months. The reform helps reducing in the cost of doing business, which leads to higher rates of growth and entrepreneurship. At the end of the article, it reminds us how far there is still to go in getting business regulations right.
Connection
Chapter one tales about overview of corporate financial reporting. Reports like this one helps stimulating economy. They will give investors confidence towards the market. Investors can use these reports to understand what the market will be or change into so they can make responsible decisions . The economy finally starts to recover from the crisis. We should have the right attitude about the economy. And the reports are useful for shareholders in corporations as well. Shareholders can guide big corporations onto the right truck. In capitalism countries, big corporations are significantly important to the enconomy.
Reflection
It is important for us to know how to read and gather information from these reports. Those reports are the results of analysis and research by many professionals, and reading them right can make great efforts. If we want to develop more in this area, our ability of analyzing reports could decide our future accomplishments. Economy environment is also important for us to understand. As now the economy is recovering, we need to "see through" it to practise our vision as an accountant or a manager in the future.
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