Southern New Hampshire University
Module Four Homework
Please answer the following questions in paragraph form. Create in a Word document and upload.
1)What is receivables float?
Receivable float description is the time that takes place between when there is an issue of a payment to when it is received the company. An example of this is a wire transfer
2)What is payables float? Like receivable floats, payable's is the time between when the customer makes payment to when the customer receives the payment. Example of this is once again wire transfer and credit card.
3) Name three ways to shorten the receivables cycle. Cash on Delivery or C.O.D for short. Asking for deposits to be made Asking for payment to made up front
4)Give one example of receivables fraud. Skimming. This is the action of stealing or embezzling funds in very small increments over time from a business.
5) Name at least two different types of inventory valuation methods. Discuss the advantages and disadvantages of each method. FIFO -- Advantages Disadvantages -Easy to use and maintain -the gross margin can easily be overstated LIFO -- Advantages Disadvantages
Tax liability with this method Is smaller
- It is more difficult to use and maintain
6) A controller must consider many factors to assist in the determination of capital asset expenditures. Why is this planning important? Name two different accounting methods that might be used in the valuation of the expenditure. Discuss the advantages and disadvantages of both methods. Business analysts seemed to favor the payback method. This method is very simple to use. Employees at different levels and backgrounds can be used in projects that used this method for capital. The method uses simple year evaluations. Companies with limited cash can identify the fastest, easiest way to receive return on their investment.
Southern New Hampshire University
Payback method does have its setbacks. It does not recognize the importance of inflows of cash to the project. This leads to returns in some cases not to be seen till a future time. Payback methods fixates on the short-term profitability leading to missed opportunities for other long- term profitability in other projects.
Accounting rate of return method uses the increase in accounting profits versus increased investments. Like payback method, accounting rate of return ignores time value of money. There are advantages to this method. Accounting rate of return is based on the accounting information. There is no need or use for special reports. It is very easy to use, it contains simplified calculations which are easy to follow and understand. Besides ignoring time value of money disadvantages are accounting rate of return does not recognized or use the cash flow of investments or acknowledge terminal value of any project.