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3 years ago

What criteria do accountants use to decide whether to use present or future values in accounting statements?

Business

1 answer:

Airida [17]3 years ago

5 0

Answer:

Present value is nothing but how much future sum of money worth today. It is one of the important concepts in finance and it is a basis for stock pricing, bond pricing, financial modeling, banking, and insurance, etc. Present value provides us with an estimated amount to be spent today to have an investment worth a certain amount of money at a specific point in the future. Present value is also called a discounted value. It is an indicator for investors that whatever money he will receive today can earn a return in the future. With the help of present value, method investors calculate the present value of a firm’s expected cash flow to decide if a stock is worth to invest today or not.

The formula for calculating PV is shown below

PV = CF/ (1+r)n

Here ‘CF’ is future cash flow, ‘r’ is a discounted rate of return and ‘n’ is the number of periods or year.

Example

Let’s say that you have been promised by someone that he will give you 10,000.00 Rs 5 year from today and interest rate is 8% so no we want to know what the present value of 10,000.00 Rs which you will receive in future so,

PV = 10,000/ (1+0.08)5

PV = 6805.83 (To the nearest Decimal)

So present-day value of Rs 10,000.00 is Rs 6805.83

Explanation:

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According to Aristotle’s three critical elements of good communication, what equates to logic?

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4 years ago

This year Burchard Company sold 40,000 units of its only product for $25 per unit. Manufacturing and selling the product require

Svetradugi [14.3K]

Answer:

Plan 2 is the best.

Explanation:

Giving the following information:

This year Burchard Company sold 40,000 units of its only product for $25 per unit.

Manufacturing and selling the product required $200,000 of fixed manufacturing costs and $325,000 of fixed selling and administrative costs.

Its per unit variable costs follow:

Material $ 8.00

Direct labor 5.00

Variable overhead costs 1.00

Variable selling and administrative costs 0.50

Next year the company will use a new material, which will reduce material costs by 50% and direct labor costs by 60% and will not affect product quality or marketability.

Direct material= 4

Direct labor= 2

Plan 1:

Sales= 40,000*25= 1,000,000

Variable costs= (4+2+1+0.5)*40,000= 300,000 (-)

Contribution margin= 700,000

Fixed costs= 525,000 (-)

Net operating income= 175,000

Plan 2:

Sales= 36,000*(25*1.2)= 1,080,000

Variable costs= 270,000

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Fixed costs= 525,000 (-)

Net operating income= 285,000

Plan 2 is the best.

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4 years ago

According to nutt and backoff's assessment of organizational contexts in terms of their abilities to produce visionary strategic

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<h3 /><h3>What is an organizational context?</h3>

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To learn more about organization, refer to:

brainly.com/question/19334871

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2 years ago

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Wewaii [24]

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This question needs to be fixed

Explanation:

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3 years ago

Mumz [18]

Answer:

The correct answer to this is type of advertisement is reminder advertising.

Explanation:

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3 years ago