Impairment in Sporting Franchises and Player Contracts
In the previous two articles, we have already established that the sporting industry has this unique practice of recognizing human players as intangible assets on their balance sheet. We also know that the value of these intangible assets is also routinely amortized just like other intangible assets. In short, the player contracts are treated exactly […]
The Impact of Bankruptcy on Shareholders
Companies that file for bankruptcy also have a capital structure just like normal companies. This means that their capital structure is comprised of debt as well as equity. In the past few articles, we have been continuously talking about the interests of the debt holders i.e., how they will get paid in the event of […]
The Economic Impact of Facebook Outage
Facebook is one of the largest social media firms in the world. The Facebook family of apps, i.e. Facebook, WhatsApp, Instagram, and Messenger are used by over a billion people from all across the world. Most of these services have been in operation for over a decade. All these services seem to function seamlessly almost […]
Importance of Different Ratios to Different User Groups
As we have seen earlier that there is a wide variety of financial ratios available. They fall into many categories and if variations are included there are hundreds of types of ratios that are common in practice. However, all the ratios are not used by everyone on a regular basis. There are some ratios which […]
Pension Obligation Bonds
Pension funds across the world are facing a significant financial crisis. This is because, for a very long time, they have been investing heavily in equities since the interest rates offered by debt funds were quite low. However, in the recent past, the equity markets have sharply declined. As a result, the asset values of […]
Every activity that a business firm does must be done for a reason and accounting is no exception. Accounting helps the company achieve a myriad of objectives. Here is the list of objectives that accounting helps the company to obtain.
Any business firm needs a permanent record of the transactions that it indulges in. These records could be required for internal purpose, for taxation purpose or for any other purpose. Accounting serves this function.
Whenever the organization commits any resource of monetary value either within the firm or outside the firm, a record is made. This permanent record is held on for years and can be retrieved as and when need be.
A business firm may indulge in numerous transactions every day. It may make profit in some of these transactions while it may make losses in some other transactions. However, the effect of all these transactions needs to be aggregated over a period of time.
There must be daily, weekly and monthly reports which provides information to the organization about how well it is performing its activities. Accounting serves this purpose by providing periodic financial statements which help the firm adjust their operations accordingly.
Firms need resources for their functioning. They do not have any capital stock at hand and need to obtain them from investors. Investors will give money to the firm only if they have reasonable assurance that the firm will be able to generate enough profit. Past accounting records help a great deal in proving this. All kinds of investors from banks to shareholders ask for past accounting details before they trust the management with their money.
Firms can also conduct useful internal analysis with the help of accounting data. Accounting records tell the firm what resources were committed to what activity and what time. These records also summarize the return that was obtained from these activities. Management can then analyze past behavior and draw lessons about how they could have performed better and used resources more efficiently.
Accounting helps management and investors look forward. Costs and revenue growths can be projected after substantial data has been accumulated. The assumption made is that the company is likely to behave exactly as it has done in the past. Thus, analysts can make reasonable assumptions about the future based on the past record.
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An Overview of Contracts and Why They are Important to Business and Society
February 12, 2025
