How are long-lived assets analyzed?
PROPERTY, PLANT, AND EQUIPMENT
The financial statements and notes provide information for analyzing changes in property, plant, and equipment.
Fixed Asset Turnover
Fixed asset turnover is, a measure of the amount of sales generated from property, plant, and equipment.
Proportion of Depreciable Assets
When a firm uses the straight-line depreciation method, the amount in accumulated depreciation can be compared with the acquisition cost of depreciable assets to approximate the fraction of the useful life, or service capacity, of its assets that the firm has consumed.
Average Life of Depreciable Assets
The average total life of depreciable assets equals the average acquisition cost of depreciable assets divided by depreciation expense. Because depreciation expense is an amount for the year, the average amount of depreciable assets at acquisition cost during the year is used. Land is excluded because firms do not depreciate it.
Average Age of Depreciable Assets
The average age of depreciable assets equals the average amount of accumulated depreciation divided by depreciation expense each year.
INTANGIBLES
The analysis of intangible assets is more challenging than the analysis of tangible long-lived assets for the following reasons:
1 . Except for software development costs under U.S. GAAP and development costs under IFRS, firms generally do not recognize internally developed intangibles as assets on the
balance sheet. To value nonrecognized intangibles, an analyst must use information not reported in the financial statements.
2 . Firms that grow through corporate acquisitions will likely report intangible assets on the balance sheet. U.S. GAAP and IFRS require firms to measure the fair values of identifiable intangibles acquired in a business combination and assess whether they have finite lives or indefinite lives.
3 . Differences between U.S. GAAP and IFRS in the treatment of development costs mean that comparisons of firms that apply U.S. GAAP with firms that apply IFRS require consideration of and adjustment for those differences.
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Chisholm Associates uses the indirect method to prepare the operating activities section of the statement of cash flows. The following accounts and balances were drawn from the company's accounting records: Beg. Bal.End. Bal.Accounts receivable $31,100? $41,350? Prepaid insurance 5700? 2350? Accounts payable 25,100? 27,150? Unearned revenue 7500? 5150? Net income for the period was $53,500. What is the net cash flows from operating activities?
A. $51,450 B. $59,200 C. $51,000 D. $46,300
After the first flight, Gail would most likely build a long-term relationship with the new client by:
A) e-mailing a new flight schedule B) sending an online customer service survey C) calling the client to ensure satisfaction with the flight D) requesting referrals from the client to engage in upselling E) checking with the billing department to make sure the client was invoiced
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Whenever possible in business writing, substitute longer, less familiar words for shorter, simpler words
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