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An Organisation Owes £300000 Tax at 1.7.X4

Financial Statements: Revision Questions and Attempted Solutions

In business and accounting financial statements are important as they provide an overview of the organisation’s health and provide insight into the organisation’s cash flows, operations, and performance. The financial statements especially provide information on the organisation’s revenues, expenses, profits/losses, and debt. Based on this information, the business, through its managers or directors, can make financial, operational and other important decisions. The information may also help other parties including lenders, consumers, suppliers, and government agencies make decisions regarding whether and how to engage with the business. There are four main types of financial statements that are commonly used in accounting and business: cashflow statement, income statement, statement of financial position (balance sheet), and statement of retained earnings. Each of these financial statements has its purposes and complements the other statements in providing a more complete snapshot of the health of the business.

Owes £300000 Tax at 1.7.X4

Here are some revision questions relating to financial statements:

An organisation owes £300000 tax at 1.7.X4 and £450,000 at 30.6.X5. Its income statement for the year to 30.6.X5 includes a tax charge of £400,000. How much tax was actually paid in the year to 30.6.X5?
A company purchases a tangible non-current asset for £200,000. It has an estimated scrap value of £20,000 and an expected useful economic life of 10 years. What depreciation will be shown in the income statement for year 3? How would the non-current asset be shown in the statement of financial position at the end of year 3?
In case the asset is sold for £120,000 during the 4^th year, how will this affect: The income statement for year 4? The statement of financial position at the end of year 4?
What is the effect of sale of the tangible non-current asset on the company’s statement of cash flows?
Is it true that cash the lifeblood of the business?
What is the purpose of the statement of cash flows and how it supplements a statement of financial position and an income statement?
What are the controversies surrounding published statements of cash flows?

Find the attempted solutions here.

Event Study Market Model Calculator

Event Study and Market Model Calculator

Event studies find wide application in research in the fields of finance, economics and law. In finance and economics research, event studies are employed to investigate the effects of announcements of events such as changes in regulations, shocks in the macroeconomic environment, or company initiatives on stock prices or firm value. Event studies may, for example, be used to investigate the effects of board reforms, compensation, workplace safety, changes in taxation, pandemics, dividends and repurchases, equity and debt issuance, or mergers and acquisitions on stock prices. In the field of law, event studies have been used to determine damages in legal liability cases. Are you looking for event study help, market model help, event study help example, market model help example, or event study market model calculator? If so, you have every reason to read on.

Event studies in the field of finance and economics often involve calculating statistics such as stock or security returns, market returns, expected returns, Cumulative Abnormal Returns (CARs), Averaged Cumulative Abnormal Return (ACAR), Average Abnormal Returns (AAR) (alternatively called averaged abnormal returns), and Cumulative Average Abnormal Return (CAAR). Stock returns and market returns can be computed using the simple formula or with compounding (using natural log). Calculating the aforementioned characteristics or statistics can be made easier and faster with the help of an event study market model calculator.

Simple formula for calculating stock returns:

Event Study Market Model Calculator

Formula for calculating stock returns with compounding

Event Study Market Model Calculator

In event study theory, the market model among other models are applied towards determining the expected return based on the efficient market hypothesis. The other models that are commonly used to determine the expected return include the mean adjusted return model, the market adjusted returns model, the market model with Scholes-Williams beta estimation, the market model with GARCH(1, 1) and EGARCH(1, 1) error estimation, the Fama-French 3 Factor Model, and the Fama-French-Momentum 4 Factor Model. The market model, which apparently is the most commonly used model, is sometimes referred to as the Risk-Adjusted Returns Model (since it takes into account market risk), the Ordinary Least Squares (OLS) market model (Fama et al., 1969), the classic market model, the usual market model, or the basic market model.

The market model suggests that the return on stock i at time t is solely influenced by the market return at time t. When using the market model, expected returns are predicted through an OLS regression analysis that regresses stock returns on market returns (usually returns on a market index) over a predetermined estimation window. The relationship between the stock and the reference or benchmark index that has been used in the analysis is described by two parameters derived from the regression analysis: alpha (α) and beta (β). Alpha and beta are computed using data relating to the estimation period.

The expected return, E(R_it|Xt), is predicted using the model:

𝑬(𝑹_𝒊𝒕|_𝑿𝒕 ) = 𝜶_𝒊 + 𝜷_𝒊(𝑹_𝒎𝒕) +𝜺𝒊_𝒕

Where α and β are constants in the OLS regression model for i stock,

R_mt is the rate of return on the reference index (such as the FTSE 100, FTSE 250, FTSE All-Share, NYSE Composite (DJ), NYSE U.S. 100) on day t,

ε_itis the error term.

Calculate Expected returns, Abnormal returns, Cumulative Abnormal Returns Easily and Other Event Study Statistics

When performing an event study that applies the market model, you will most likely need to compute stock returns or securities returns, expected returns (ERs), abnormal returns (ARs), Cumulative Abnormal Returns (CARs), Averaged Cumulative Abnormal Return (ACAR), Average Abnormal Returns (AAR) (alternatively called averaged abnormal returns), and Cumulative Average Abnormal Return (CAAR). Additionally, you will likely need to determine descriptive statistics such as means, standard deviations, medians, modes, minimums, and maximums relating to different characteristics (such as abnormal returns and cumulative abnormal returns). Computing these statistics can be tedious, time consuming, and confusing especially when several firms/securities and long time periods are involved. However, an event study market model calculator makes computing these statistics easy, fast, and accurate. You can thus rely on an an event study market model calculator to compute expected returns, abnormal returns, cumulative abnormal returns and other event study statistics effortlessly, fast, and reliably.

A number of event study market model calculators or market model calculators, which are spreadsheet or excel files, have been developed to provide event study help and market model help to cater to different study situations. The event study market model calculators can be used to compute the different statistics for one or several companies/securities/stocks over several time periods (days/weeks/ months) at a time. These tools perform several functions and can thus provide you with invaluable event study help, market model help, and expected return help. The different market model calculators are designed to be:

Market model calculator
Market model excel calculator
Event study calculator
Event study excel calculator
Stock returns calculator
Benchmark market returns calculator
Market model alpha and beta calculator
Expected returns calculator
Abnormal returns calculator
Cumulative abnormal returns calculator
Averaged cumulative abnormal returns calculator
Average abnormal returns calculator (Averaged abnormal returns calculator)
Cumulative average abnormal return calculator

Specifically, the tools compute the following statistics:

Stock returns
Benchmark/reference/market returns
alpha and beta coefficients
Expected returns
Abnormal returns
Cumulative abnormal returns
Averaged cumulative abnormal returns
Average abnormal returns
Cumulative average abnormal return
Descriptive statistics such as standard deviations, medians, modes, minimums, maximums, and percentage of positive abnormal returns.

Different Market Model Calculators for Different Needs

Here are four event study market model calculators worth considering for use in your event study and that are sure to make your work easier. Each of the calculators comes with test data that can serve as an event study help example or market model help example.

Event Study Market Model Calculator – V1.1A – This tool can be used with specific event period-estimation window combinations. Maximum stocks/companies/securities: 30. Maximum event period: 61 [-30, +30], Maximum estimation period: 20 to 49 (depending on when the event period starts). This event study market model calculator computes returns using the simple formula (not using natural log). This calculator comes with test data that can serve as an event study help example.

Event Study Market Model Calculator – V1.1B – This tool can be used with specific event period-estimation window combinations. Maximum stocks/companies/securities: 30. Maximum event period: 61 [-30, +30], Maximum Estimation period: 20 to 49 (depending on when the event period starts). Stock and market returns are calculated using natural log (compounded returns). This tool is similar to version V1.1A except for the formula used to compute returns. This tool comes with test data that can serve as a market model help example.

Event Study Market Model Calculator – V2.1A – This tool accommodates a wide combination of estimation periods and event periods . Maximum stocks/companies/securities: 100. Maximum event period: 61 [-30, +30]. Maximum estimation period: 320 to 349 (depending on when the event period starts). Returns are calculated using the simple formula. This calculator comes with test data that can serve as an event study help example.

Event Study Market Model Calculator – V2.1B – This tool accommodates a wide combination of estimation periods and event periods. Maximum stocks/companies/securities: 100. Maximum event period: 61 [-30,+30]. Maximum estimation period: 320 to 349 (depending on when the event period starts). This tool is similar to V2.1A, the only difference being that returns are calculated with compounding (using natural log (LN). This tool comes with test data that can serve as a market model help example. Having difficulty deciding which calculator to go for? You probably want to go with this calculator since it offers great flexibility and takes returns compounding into account.

The Launch of a New Product Under Consideration

1. Solved: The launch of a new product is under consideration. Its unit variable costs will be £30 and it is estimated that incremental fixed costs of £250,000 will be incurred if production is commenced. Forecast sales are 50,000 units. At what level of price for the new product will the organisation break even? If the actual planned selling price is £48 per unit, what will be the organisation’s margin of safety? 2. The following information is about two organisations, A and B. Organisation A Organisation B £ £ Fixed costs 60,000 12,000 Variable costs per unit 0.20 0.50 Unit selling price 0.60 0.60 Expected sales levels (units) 160,000 160,000 Which firm has higher operating gearing? What is the expected net income of both firms? What would expected net income be for both firms if sales were a) 140,000 units and b) 180,000 units? Which firm is facing more risk in terms of its current sales predictions?

Launch of a new product

2. Solved: The following information is about two organisations, A and B.

	Organisation A	Organisation B
	£	£
Fixed costs	60,000	12,000
Variable costs per unit	0.2	0.5
Unit selling price	0.6	0.6
Expected sales levels (units)	160,000	160,000

Which firm has higher operating gearing? What is the expected net income of both firms?
What would expected net income be for both firms if sales were (a) 140,000 units and (b) 180,000 units?
Which firm is facing more risk in terms of its current sales predictions?
Be sure to demonstrate your numerical workings.

Launch of a new product …

Solutions

1 (a) At what level of price for the new product will the organisation break even?
Variable cost per unit = £30
Fixed costs = £250,000
b (in terms of price) = ?
Total sales revenue = fixed costs + total variable costs
50,000 units x b = £250,000 + (£30 x 50,000)
b = (250,000+ 1,500,000)/50,000
Break-even price = Read more …..

b) If the actual planned selling price is £48 per unit, what will be the organisation Read more ….

2 a) Which firm has higher operating gearing?
An activity with relatively high fixed costs compared with its variable costs has a high operating gearing (Atrill and McLaney 2006, p. 229). According to Cima Global (2006), one way of determining operational gearing is by evaluating the contribution-to-sales ratio (C/S ratio). A low C/S ratio indicates that a business has low proportion of fixed costs and vice versa (Cima Global, 2006).

The contribution per unit for organisation A is £0.4 (0.6-0.2) while that for organisation B is £0.1 (0.6-0.5).
Contribution‑to‑sales ratio = (Contribution per unit / Sales price per unit) as a percentage
Contribution-to-sale ratio for:
Organisation A = (0.4/0.6) x 100= 67%
Organisation B = (0.1/0.6) x 100= 17% Read more …

b) What is the expected net income of both firms? Read more ….