Below article describes the meaning of operating leverage, some of the ratios to measure operating leverage, its application and users and an illustrated example on how to compute operating leverage.
(a) Meaning of Operating Leverage:
Refers to the existence of fixed costs in a company’s cost structure
Is used to measure operating risk
(b) Following ratios being used to [...]
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In interpretating financial statements, whether financial or non-financial managers normally and frequently use the standard traditional business accounting ratio like profitability, liquidity, market based, assets utilization and others.
However, one ratio commonly neglected is the Z-score model which is actually a quantitative model developed in 1968 by an eminent economist, Edward Atlman. So what is this [...]
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About MBA:
The Master of Business Administration (MBA) is an internationally-recognized degree Currently, this course is the most popular professional degree program in the world. Today there are over 2,500 MBA programs offered worldwide. First introduced at American universities around the turn of the 20th century, MBA programs have evolved in order to keep up with [...]
As accounting has it primary objective of providing information useful to decision makers, the understanding of the role play by Accounting Information Systems is critical to many accountants.
It’s important to understand how the accounting systems work: how to collect data about an organization’s activities and transactions; how to transform that data into information that management [...]
For non financial manager, it is important to know what your accounting personnel meant by an Accounting Cycle.
Append below is a flowchart from my other blog for a clearer understanding of the Accounting Cycle:
An Accounting Cycle:
Is a series of accounting process which begins with the identification of an economic activity or transaction, recording of the [...]
For non financial managers who are pursuing MBA accounting who have just read earlier article on the fundamental accounting concepts, below is a worked out example of the dual aspect concept or what usually your accounting colleagues call the double entry system or the debit and credit system
DUAL ASPECT CONCEPT
This dual aspect concept is also [...]
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Similar to pursuing any course say Accountancy, the selection of the “right” MBA School or programme is indeed a very challenging process.
Many prospects would cite factors like cost, reputation, location and type of MBA.However please do not forget one critical factor during the selection of the right MBA which is the ACCREDITATION of the MBA [...]
Introduction:
Economic value-added (EVA) has increasingly gain acceptance amongst many top-notched organization. This performance metric for creating shareholders wealth is closely tied with the Value Based Management as they share the same principle of realigning business practices towards increasing shareholder value.
Formula:
In simple term, EVA is:
In earlier Part1, we understand the importance of Cash Flow Statement. This Part 2 explains what’s in a Cash flow Statement:-
Basically The Cash Flow Statement comprises the following:
Closing Cash Balance (a)
Opening Cash Balance (b)
Net Change of Cash Balance ( c ) = (a-b)
( Cash balance also includes cash equivalent(refer to my earlier article on this)
This [...]
To understand the true creation of shareholder value, we should not solely rely on accounting earnings/profits as it can be manipulated by overzealous aggressive top management. We need to be vigilant about accounting earnings vs cash.
The basic essential is that we need to appreciate Cash Flow Statement.
This article is of 2 parts- this Part 1 [...]
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