The Promise and Perils of High Frequency Trading or HFT
What is HFT or High Frequency Trading ? HFT or High Frequency Trading is a process where trading in equities, bonds, derivatives, and just about all financial instruments is done through computers driven by algorithms that determine the trading patterns rather than humans trading on the basis of information. In other words, HFT means that […]
Two Period Dividend Discount Model
The next step towards understanding the dividend discount model is to extend the conclusions derived from the single step dividend model. This brings us to the two period dividend discount model. In this model we will use the same logic. However, we will extend the assumption regarding the holding period. Instead of selling his stock […]
Valuing Preference Shares Using Dividend Discount Model
The dividend discount model is also used to measure the value of preference equity in addition to forecasting the value of ordinary equity. There are certain assumptions and clarifications that need to be made regarding the use of dividend discount model for valuing preference equity. The purpose of this article is to provide this information […]
Bankruptcy as a Strategy – Part 2
In the previous article, we have already studied that all bankruptcies are not involuntary. In many cases, the shareholders and/or the management of the company make a conscious decision to file for bankruptcy. This happens because the benefits that may accrue as a result of filing bankruptcy are greater than the loss of reputation and […]
External Causes of Organization Decline
Many theorists believe that organizational decay is caused by external factors. In fact, some have gone far enough to suggest the various stages in which this decline happens. However, the exact external causes are often difficult to understand. In this article, we will have a look at some of the most prominent causes of organizational […]
The job begins with a quotation given to a client. For the client, all that matters in the quotation are the costs involved. However, for the contractor, quotation is almost a research document. Giving out quotations requires estimation. Contractors usually have fixed methodologies for estimating these costs. A study of past quotations can tell if the contractor has been making the estimations correctly or have they over or under priced certain jobs.
Sales order is document which signifies that the client has accepted the quotation. Work on a job can only be started only after the sales order has been received by the concerned department. Without the sales order, resources will not be allocated to this job.
A job cost sheet tracks the costs as and when they are incurred throughout the job. The costs are updated regularly as and when they are incurred. Out of these, labor and material costs are actual costs whereas overheads are estimates. The company may have to correct its estimates of overhead allocation later.
Material requisition forms help track where the material is being used. Since the material requisition form specifies the exact job for which material is being used, material costs can be accurately recorded. In the absence of material requisition form there will be immense confusion over which material was used for which job and what was the cost of that material.
Companies also keep a track of the freight charges that they have incurred for a specific job. Each freight ticket needs to be authorized with a job code and the costs must be added to the job cost sheet. In the absence of these tickets allocation of these costs will be a problem.
Labor tickets track the time that different laborers with different skill level have spent on the job. Based on this information, the labor cost can easily be allocated to different jobs.
Invoice is the document which signifies the completion of a job as requested by the client. When the invoice is accepted by the client, the contractor can consider the job complete. It is here that the contractors are legally allowed to recognize the revenues as well as the costs that were incurred in the job. Based on when the customer is paying, the cash account or the accounts receivable amount needs to be debited.
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