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Accountancy & Finance

Question: Are UK Regulatory Authorities Justified in Supporting Troubled
Banks? An Evaluation of the Northern Rock Failure 2007-2008.

Answer: Using the multiple case study methodology, this study examines the post banking crisis cost of the Scandinavian and Japanese bank failures in order to ascertain the justification for lender of last (LLR) resort intervention by the UK regulatory authorities to the Northern Rock. The study further investigates the qualitative causal mechanisms of bank failure, authority and regulatory prescriptions......(short extract) to download the full answer, please Sign in or Register then make a payment or submit an essay

Question: First, from your reading of the articles, explain the terms: information asymmetries, first time lending, repeat lending and moral hazard.

Secondly, discuss the following statement in the context of the two prescribed readings below: “Lenders are wary of high-technology ventures because of their higher risk. Lenders can overcome this by developing close relationships with the business.”

Answer: In order to understand the concepts of asymmetric information, first-time lending, repeat lending, and moral hazard, it is important to appreciate the underpinning theoretical framework - the principal-agent relationship. This is the examination of incentive problems among contracting parties, particularly within the business environment (Brickley et al., 2004, p.659). Principal-agent theory con......(short extract) to download the full answer, please Sign in or Register then make a payment or submit an essay

Question: Examine the Accounts of two limited companies and outline two accounting policies from each. (10 Marks)

Answer: The Colefax Group outlines how depreciation is calculated using the straight line method, e.g. it states that the residual value – the amount that the item is deemed to be worth at is time of replacement – is subtracted from the price that it was bought for and this figure is then divided by the number of years that the company will use it for before it is replaced. A list is then provided sho......(short extract) to download the full answer, please Sign in or Register then make a payment or submit an essay

Question: Define and give two examples of accounting bases and accounting policies. (6 Marks)

Answer: Accounting bases are methods used for calculating information for financial statements. The two most commonly used bases are the straight line basis and the declining balance method. It generally depends on the item with regard to which basis is used. The purpose of using different bases is to allocate the cost of the asset over the agreed number of years applying it to each year independently.......(short extract) to download the full answer, please Sign in or Register then make a payment or submit an essay

Question: Discuss the differences, advantages and disadvantages between payback, IRR, ARR, and NPV.

Answer: Two particular methods of comparing the attractiveness of projects have become known as the “traditional techniques”. These are ARR (Accounting rate of return) and payback. I shall be discussing these first. Payback The payback period is the length of time (in years) it takes to recover the cash invested a project. A projects annual cash flows are used to determine the payback period.......(short extract) to download the full answer, please Sign in or Register then make a payment or submit an essay

Question: How does valuation in the Ohlson or Feltham-Ohlson framework differ from valuation in more traditional accounting-based frameworks?

Answer: The traditional accounting-based valuation methods predict the future from information in the current financial statements. These simple forecasts are based on the prediction that the current profitability and growth, as revealed in the financial statements, will continue in the future. In an SF1 forecast (where SF stands for simple forecast), earnings of the next period are forecast as the clo......(short extract) to download the full answer, please Sign in or Register then make a payment or submit an essay

Question: Is there a future for one global set of generally accepted accounting principles?

Answer: Why accounting regulation? This essay will discuss the opportunities and possibilities of global accounting standards, which will most likely take the form of regulations as in EU directives. Therefore we will give a basic outline why accounting regulation exists. Although there are authors in favour of the free – market perspective, arguing that there will be private incentives to provid......(short extract) to download the full answer, please Sign in or Register then make a payment or submit an essay

Question: At the Board meeting, an argument arises over the payment of dividend to shareholders. Mr. A argues that is not necessary to pay a dividend as shareholders see receiving dividends now or receiving capital gains in the future as equally attractive. You are to argue convincingly to the Board, by providing 4 reasons, that they support the payment of a dividend. Make references to the various theories on dividends.

Answer: Dividends are distributions made to shareholders from the firm’s earnings, whether those earnings were generated in the current period or in previous period. However, dividend policy involves the decision to pay out earnings to those shareholders or to retain the earnings for the reinvestment purpose in the firm. A company should pay out the retained earnings to the shareholders because of the f......(short extract) to download the full answer, please Sign in or Register then make a payment or submit an essay

Question: Explain the relationship between the fundamental accounting concepts, the four key objectives of FRS18 and the statement of principals for financial reporting (4 marks)

Answer: In 1990 the ASB set up a project to produce a document to help give an understanding of the Boards methods in defining the Accounting Standards and to give clarity to the type and function of information which is reported in general purpose financial statements. This document is called the Statement of Principles (SOP). (Black 2002) The fundamental accounting concepts as stated in SSAP2 and r......(short extract) to download the full answer, please Sign in or Register then make a payment or submit an essay

Question: How may information bearing upon performance evaluation help to explain why a firm’s market value differs from its book value?

Answer: The difference between the market value and book value of a firm is an issue with very important repercussions. Ideally, what the market determines is the value of a firms equity should coincide with what accounting determines. However, the fact that this in reality is not the case raises the issue of why these disparities occur. This essay will examine why the market value of a firm can differ fr......(short extract) to download the full answer, please Sign in or Register then make a payment or submit an essay

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Accountancy & Finance

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