What is the ratios based on historic cost accounts, Financial Management

Assignment Help:

What is the Ratios based on historic cost accounts

Ratios based on historic cost accounts don't give a true picture of trends, due to the effects of inflation and different accounting policies. Investors 'ratios specifically have a disadvantage, as investment means looking into the future and past may not always be indicative of the future.Comparing the financial statements of similar businesses can be misleading:

1 Use of different accounting policies (depreciation, non-current asset valuation, inventory valuation, capitalisation of borrowing costs etc.)

2 Companies may not be of similar size. One may be part of a large group and hence have access to economies of scale, which result in lower costs.

3 Companies may be operating in the same industry though they may have different markets, and thus different product ranges and sales mix. Segmental accounts are useful in this respect

 


Related Discussions:- What is the ratios based on historic cost accounts

Eps, a. Calculate expected earnings per share (EPS) if the firm is perfectl...

a. Calculate expected earnings per share (EPS) if the firm is perfectly hedged. EPS $

Interest rate parity, QUESTION 1 (a) What are the differences between f...

QUESTION 1 (a) What are the differences between futures and forwards? (b) Clearly explain the following position on options i) Going long on a call option ii) Going lo

Foreign exchange market equilibrium, Foreign Exchange Market Equilibrium: ...

Foreign Exchange Market Equilibrium: We say that the foreign exchange market is in equilibrium when deposits of all currencies o er the same expected rate of return (when retu

Explain the incremental cash flows of a capital project, Explain what is me...

Explain what is meant by the incremental cash flows of a capital project. Incremental cash flows are defined by the change in total firm cash inflows and cash outflows which ca

How do we calculate the payback period, How do we calculate the payback per...

How do we calculate the payback period for a proposed capital budgeting project? What are the major criticisms of the payback method? We compute the payback period for a proposed

Explain about opportunity cost of capital, Explain about opportunity cost o...

Explain about opportunity cost of capital Risk free rate compensates for opportunity lost and risk premium compensates for risk. It can also be known as the 'opportunity cost o

gaaps that are mandatory, a) Talk about in brief the various GAAPs that ar...

a) Talk about in brief the various GAAPs that are mandatory to be followed. b) What are the several components of total cost.

What are the main criticisms of the payback method, How do we calculate the...

How do we calculate the payback period for a proposed capital budgeting project?  What are the main criticisms of the payback method? We calculate the reimbursement period for

Pension fund system - uk, The UK Pension Fund System The UK Pension sys...

The UK Pension Fund System The UK Pension system is a three pillar pension system. A flat-rate first-tier pension is provided by the state and is known as the Basic State Pensi

Rationale for corporate governance, Rationale for corporate governance ...

Rationale for corporate governance The organization of the world economy (particularly in present years) has seen corporate governance gain prominence mostly since: Insti

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd