Archive for category incentive
Measure for mortgage profitability
Posted by admin in Financial Advice, Global Markets, bonds, budget, business, expenditures, finances, fixed costs, incentive on October 26th, 2009
A common measure for profitability is the ratio of retained earnings to total assets. We defined retained earnings as undistributed profits, that is, after-tax profits minus dividend payments. Like the working capital ratio, the profitability measure is on a downtrend in the longer term. During recessions the profitability of the companies usually declines. It is worth noting that the latest recession in 2001 marks an exception with respect to the ratio of internal funds to total assets. Whereas the profitability declined like in any other recession before, the cash flows of the companies on average improved in this period due to rigorous cost cutting in the corporate sector.
Basics of accounting – part 1
Posted by admin in communication, financial information, incentive, liability, market demand, ownership, paperwork, understanding finances on August 3rd, 2009
Credits and debits come into play in double-entry or dual-entry accounting, a method by which each transaction is entered twice—once as a credit and once as a debit—on the balance sheet and/or the income statement. That’s how the financial statement stays in balance.
Credits always appear on the right-hand side of T accounts. They represent an increase in items such as business liability, owners’ equity, and revenue accounts, or a decrease in assets.
Debits are always listed on the left-hand side of T accounts. They represent an increase in asset and expense accounts, or a decrease in liabilities.
What’s So Important About Accounting? – part 2
Posted by admin in communication, incentive, management skills, paperwork, performance objectives, production cycles on August 2nd, 2009
In the dark recesses of their numerical souls, even some accountants may worry that their function is only a necessary evil, an overhead expense that in some organizations is no more than a glorified bookkeeping function. Not so. Sales, manufacturing, research and development, and management all generate raw financial data through their various activities. It’s up to accountants to turn that data into useful information.
A good accounting function—whether in a large company headed by a highly trained chief financial officer (CFO) or a small company with a bookkeeper—produces and communicates information. This information shows department heads how they’re spending the company’s money and whether they’re getting the results they want. Sure, accountants are still number-crunchers and bean-counters, but the true value of what they do is in how they interpret and present the results of all that crunching and counting.
Plain and simple, a company’s accountants, whoever they may be, are guides to its finances. The way this group or this individual organizes figures and turns it into meaningful information provides the measures that help determine the success or failure of the company. Understanding those measures may make all the difference between the manager who’s a well-rounded professional and the manager who’s just another specialist with little sense of the larger financial implications of his or her decisions.
What’s So Important About Accounting? – part 1
Posted by admin in Global Markets, effective budgeting, incentive, material costs, paperwork on August 2nd, 2009
For accountants, the i proof is in the y paperwork. Accurate, well-organized records are a must. Sloppy bookkeeping is the road to financial failure—or at least to slowing down success, perhaps a lot. As a first step in becoming “accounting literate,” take the time to write down all business activities, and make sure your records are accurate.
Good salespeople know all about the items they’re selling. Really good salespeople know the engineering calibrations, size, velocity coefficients, or other technical data about their product.
Why do salespeople need to know these things? Here are some reasons:
Extensive product knowledge impresses the customer.
Product knowledge gives customers faith in the salesperson’s claims that the product is exactly what they’re looking for.
It gives the salesperson better insight into the product and its uses, which makes him or her better able to help customers believe this product is the solution to their problems.
It makes the salesperson more successful. That means higher income, greater job security, and better opportunities for promotion, besides the obvious benefits for the company.
The same argument holds true when it comes to accounting knowledge for nonfinancial managers. The more a manager knows about how the people who deal in numbers handle department finances and the methodologies they use, the more that manager will be able to intelligently work with them, making everyone’s job a little easier. So, let’s take a few steps into that world of accounting.
The Management Function in Budgeting – part 2
Posted by admin in incentive, market demand, material costs, performance objectives, profit projections on August 2nd, 2009
Shipping/Delivery seems to have climbed precipitously in the last year. Why? Clearly, this is a case where vendor price had exceeded market value. It may be a case of a long-term supplier who has gotten used to raising its prices a certain percentage each year with little incentive to remain competitive. Management should review any contracted relationship with the vendor and check the last three years’ delivery and shipping charges to note the percentage increase. Chances are it’s time to put the service out for competitive bid.
There are dozens of questions that can and should be raised, but the preceding three make the point: Setting up the budget is only half the task. The document must then be put through management scrutiny, not only to check the accuracy of its numbers and suppositions, but also to raise those issues that will enable the company to be more efficient and cost-effective.
If these questions aren’t part of the budget creation, then management is doing only half its job.