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giáo trình Accounting and finance and introduction 8th by mclanlay atrill Accounting and finance and introduction 8th by mclanlay atrill Accounting and finance and introduction 8th by mclanlay atrill Accounting and finance and introduction 8th by mclanlay atrill Accounting and finance and introduction 8th by mclanlay atrill
Key features • Up-to-date coverage, including the latest IFRSs and corporate governance content, plus a discussion of financing and dividend policies • Accessible step-by-step approach helps you master the subject one step at a time • New real-world examples provide opportunities to apply and develop techniques • Progress checks, activities and exercises reinforce learning • Focus on decision-making prepares you for careers in business Join over 10 million students benefiting from Pearson MyLabs This title can be supported by MyAccountingLab, an online homework and tutorial system designed to test and build your understanding MyAccountingLab provides a personalised approach, with instant feedback and numerous additional resources to support your learning • A personalised study plan • Usable either following chapter-by-chapter structure or learning objectives • Worked solutions show you how to solve difficult problems • Limitless opportunities to practise • An eText for quick reference • Case studies to help you apply what you’ve learned Use the power of MyAccountingLab to accelerate your learning You need both an access card and a course ID to access MyAccountingLab: Is your lecturer using MyAccountingLab? Ask your lecturer for your course ID Has an access card been included with the book? Check the inside back cover of the book If you have a course ID, but no access card, go to: http://www.myaccountinglab.com/ to buy access to this interactive study programme Peter Atrill is a freelance academic and author working with leading institutions in the UK, Europe and SE Asia He was previously Head of Accounting and Law, and Head of Business and Management at the Plymouth University Business School www.pearson-books.com CVR_MCLA8297_08_SE_CVR.indd Eddie McLaney Peter Atrill Front cover image: © Getty Images Eddie McLaney is Visiting Fellow in Accounting and Finance at Plymouth University AN INTRODUCTION Accounting and Finance: An Introduction, now in its eighth edition, contains all the information you need to start your business career With its use of practical techniques and real-world examples, this best-selling text teaches you the basics of understanding and using financial information This comprehensive guide covers financial accounting, management accounting and financial management in a single text, and provides you with the tools to make informed, successful business decisions EIGHTH EDITION ACCOUNTING AND FINANCE EIGHTH EDITION ACCOUNTING AND FINANCE AN INTRODUCTION Eddie McLaney Peter Atrill AN INTRODUCTION McLaney and Atrill ACCOUNTING AND FINANCE EIGHTH EDITION 22/09/2015 10:16 www.downloadslide.com Accounting and Finance An Introduction A01_MCLA8297_08_SE_FM.indd 24/09/15 3:32 pm www.downloadslide.com A01_MCLA8297_08_SE_FM.indd 24/09/15 3:32 pm www.downloadslide.com Eighth edition Accounting and Finance An Introduction Eddie McLaney and Peter Atrill A01_MCLA8297_08_SE_FM.indd 24/09/15 3:32 pm www.downloadslide.com Pearson Education Limited Edinburgh Gate Harlow CM20 2JE United Kingdom Tel: +44 (0)1279 623623 Web: www.pearson.com/uk First published 1999 by Prentice Hill Europe (print) Second edition published 2002 by Pearson Education Limited (print) Third edition published 2005 (print) Fourth edition published 2008 (print) Fifth edition published 2010 (print) Sixth edition published 2012 (print) Seventh edition published 2014 (print and electronic) Eighth edition published 2016 (print and electronic) © Prentice Hall Europe 1999 (print) © Pearson Education Limited 2002, 2005, 2008, 2010, 2012 (print) © Pearson Education Limited 2014 (print and electronic) © Pearson Education Limited 2016 (print and electronic) The rights of Eddie McLaney and Peter Atrill to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988 The print publication is protected by copyright Prior to any prohibited reproduction, storage in a retrieval system, distribution or transmission in any form or by any means, electronic, mechanical, recording or otherwise, permission should be obtained from the publisher or, where applicable, a licence permitting restricted copying in the United Kingdom should be obtained from the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS The ePublication is protected by copyright and must not be copied, reproduced, transferred, distributed, leased, licensed or publicly performed or used in any way except as specifically permitted in writing by the publishers, as allowed under the terms and conditions under which it was purchased, or as strictly permitted by applicable copyright law Any unauthorised distribution or use of this text may be a direct infringement of the authors’ and the publisher’s rights and those responsible may be liable in law accordingly All trademarks used herein are the property of their respective owners The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners Pearson Education is not responsible for the content of third-party internet sites The Financial Times With a worldwide network of highly respected journalists, The Financial Times provides global business news, insightful opinion and expert analysis of business, finance and politics With over 500 journalists reporting from 50 countries worldwide, our in-depth coverage of international news is objectively reported and analysed from an independent, global perspective To find out more, visit www.ft.com/pearsonoffer ISBN: 978-1-292-08829-7 (print) 978-1-292-08890-7 (PDF) 978-1-292-08830-3 (eText) 978-1-292-12567-1 (ePub) British Library Cataloguing-in-Publication Data A catalogue record for the print edition is available from the British Library Library of Congress Cataloging-in-Publication Data McLaney, E J., author Accounting and finance : an introduction / Eddie McLaney and Peter Atrill – Eighth edition pages cm ISBN 978-1-292-08829-7 1. Accounting. I Atrill, Peter, author II Title HF5636.M44 2016 657–dc23 2015026652 10 16 15 14 13 12 Print edition typeset in 9.5/12.5pt Stone Serif ITC Pro by 71 Printed and bound by L.E.G.O S.p.A., Italy NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION A01_MCLA8297_08_SE_FM.indd 24/09/15 3:32 pm www.downloadslide.com Brief contents Prefacexxi How to use this book xxiii Acknowledgements xxv Introduction to accounting and finance1 Part 1 Financial accounting 37 Measuring and reporting financial position 39 Measuring and reporting financial performance77 Accounting for limited companies (1)121 Accounting for limited companies (2)159 Measuring and reporting cash flows201 Analysing and interpreting financial statements233 Part 2 Management accounting293 Making management decisions295 Cost–volume–profit analysis319 10 Full costing361 11 Costing and performance evaluation in a competitive environment408 12 Budgeting457 13 Accounting for control501 Part 3 Financial management545 14 Making capital investment decisions547 15 Financing a business596 16 Managing working capital653 ➔ A01_MCLA8297_08_SE_FM.indd 24/09/15 3:32 pm www.downloadslide.com vi Brief contents Part 4 Supplementary information 707 Appendix A Appendix B Appendix C Appendix D Appendix E Appendix F Recording financial transactions709 Glossary of key terms 728 Solutions to self-assessment questions745 Solutions to review questions766 Solutions to selected exercises781 Present value table830 Index833 A01_MCLA8297_08_SE_FM.indd 24/09/15 3:32 pm www.downloadslide.com Contents Prefacexxi How to use this book xxiii Acknowledgementsxxv Introduction to accounting and finance1 Introduction1 Learning outcomes What are accounting and finance? Who are the users of accounting information? The conflicting interests of users How useful is accounting information? Evidence on the usefulness of accounting Providing a service Further qualities Weighing up the costs and benefits Accounting as an information system 11 Management accounting and financial accounting 13 Scope of this book 15 The changing face of accounting 16 Why I need to know anything about accounting and finance? 17 Accounting for business 18 What is the purpose of a business? 18 What kinds of business ownership exist? 19 Sole proprietorship 19 Partnership20 21 Limited company A01_MCLA8297_08_SE_FM.indd How are businesses organised? How are businesses managed? The quest for wealth creation Meeting the needs of other stakeholders Balancing risk and return Reasons to be ethical Not-for-profit organisations 22 25 27 27 29 31 32 Summary Key terms References Further reading Review questions 33 35 35 35 36 24/09/15 3:32 pm www.downloadslide.com viii CONTENTS Part Financial accounting A01_MCLA8297_08_SE_FM.indd Measuring and reporting financial position 39 Introduction Learning outcomes 39 39 The major financial statements – an overview The statement of financial position Assets Claims 40 44 44 47 The effect of trading transactions Classifying assets Current assets Non-current assets 50 52 53 53 Classifying claims Current liabilities Non-current liabilities 55 55 55 Statement layouts Capturing a moment in time The role of accounting conventions Business entity convention Historic cost convention Prudence convention Going concern convention Dual aspect convention 56 58 58 58 59 60 60 61 Money measurement Goodwill and brands Human resources Monetary stability 62 62 63 64 Valuing assets Non-current assets Non-current assets with finite lives Non-current assets with indefinite useful lives Fair values The impairment of non-current assets Inventories 64 65 65 65 66 67 69 Meeting user needs 70 Self-assessment question 2.1 Summary Key terms Further reading Review questions Exercises 71 71 73 73 74 74 Measuring and reporting financial performance 77 Introduction Learning outcomes 77 77 24/09/15 3:32 pm www.downloadslide.com Contents A01_MCLA8297_08_SE_FM.indd The income statement Different roles Income statement layout Gross profit Operating profit Profit for the period 78 79 80 81 81 81 Further issues Cost of sales Classifying expenses 82 82 83 Recognising revenue Long-term contracts Continuous and non-continuous services 85 86 88 Recognising expenses When the expense for the period is more than the cash paid during the period When the amount paid during the period is more than the full expense for the period Profit, cash and accruals accounting 88 ix 89 91 93 Depreciation Calculating the depreciation expense Depreciation method Impairment and depreciation Depreciation and asset replacement Depreciation and judgement 94 94 96 100 101 101 Costing inventories Inventories – some further issues 103 107 Trade receivables problems Doubtful debts 108 110 Uses and usefulness of the income statement 112 Self-assessment question 3.1 Summary Key terms Further reading Review questions Exercises 113 114 115 116 117 117 Accounting for limited companies (1) 121 Introduction Learning outcomes 121 121 The main features of limited companies Legal nature Perpetual life Limited liability Legal safeguards Public and private companies Taxation The role of the Stock Exchange 122 122 122 124 125 125 127 128 24/09/15 3:32 pm www.downloadslide.com 838 INDEX costs (continued) see also direct costs; fixed costs; historic costs; indirect costs; opportunity costs; past costs; relevant costs; variable costs County Court Judgments 671 covenants, loans 605–6, 737 creative accounting 187–95, 732 credit 732 agencies 671–9 assessments 671 control, tightening 600 decisions 670–2, 674 insurance 676 periods 672–4 sales 53 terms, publicising 676 creditors, trade see trade payables credits 710–12, 732 critical path analysis 584 currency translation reserves 170 current assets 53, 732 see also cash; inventories; trade receivables current cost measurement 175 current liabilities 55, 732 see also trade payables current ratios 255, 273–6, 732 current realisable values 59 current replacement costs 59 current value accounting 59–60 customer driven businesses 18–19 customers 18–19 credit assessments 670–2 loyalty 434 objectives 435, 436, 437 queries 679 relationships 676 users of financial information dates, statements of financial position 58 DCF (discounted cash flow) methods see internal rate of return; net present values de-listing 638 Debenhams 692 debentures see loan notes debit cards 688 debits 710–12, 732 debt factoring 619–21, 640, 676, 732 debtors, trade see trade receivables debts bad 108–12, 729 doubtful 108–12 limited liability and 125 written off 109–10 decentralisation 487 decision-making 6–7 contribution, using 344–54 Z07_MCLA8297_07_SE_IDX.indd 838 financial 29–31 management 295–313 decisions capital investment see investment closing or continuation 351–3 credit 670–2, 674 investment see investment make or buy 349–51 making see decision-making output 391 pricing 362, 363, 391 deep discount bonds 610, 732 Dell 691 departmental costing basis 377–87 departmental structures 23–4 deposit accounts 205 depreciation 65, 94, 443, 732 asset replacement and 101 calculations 94–6, 101 double-entry bookkeeping 720 fair values and 66 impairment and 100 judgement and 101–3 methods 96–100 over-depreciation 102–3 under-depreciation 102–3 see also amortisation derivatives, financial 611, 735 detail, levels of 13, 14 direct costs 366–7, 732 fixed costs and, relationship between 369 indirect costs and relationship between 369 relative levels of 409, 410 total costs and, relationship between 369 variable costs and, relationship between 369 direct debits 688 direct labour budgets 466 efficiency variances 512–13, 519, 530, 733 intensive production 409 rate variances 513, 519, 733 direct materials price variances 511–12, 519, 733 usage variances 511–12, 519, 733 direct method, statements of cash flows 211, 733 directors 733 auditors and, relationships between 176 behaviour, rules to monitor and control 124 boards of 22–3, 128–9 corporate governance see corporate governance duties to account 161 22/09/15 7:32 pm www.downloadslide.com INDEX election 129 executive 183 non-executive 183 remuneration 165, 183 reports 184–5, 733 shareholders and, relationships between 176 stewardship 161 disasters 33 disclosures corporate governance 165, 181 inadequacies 192–3 segmental financial reports 178–9 statements of comprehensive income 169 discount factors 565, 569–70, 733 discount rates internal rate of return 568–70 net present values 566 discounted cash flow (DCF) methods see internal rate of return; net present values discounting 564, 733 discounts, cash 675–6, 692–3, 730 discretionary budgets 473–5, 733 discriminate function 275, 733 diseconomies of scale 339, 342 disposal values see residual values distributors, passing goods to 189 dividends 130, 139, 733 cover ratios 263, 733 declared but unpaid 146 final 146 interim 146 payment 145–6, 599–600 payout ratios 262–3, 733 per share 263, 733 policies 599–600 preference 131, 603–4 yield ratios 263, 733 divisional structures 24–5 double-entry bookkeeping 709–23, 733 doubtful debts 108–12 draft budgets 469–70 Drucker, Peter 18 drug prices in developing countries 347 dual aspect convention 61, 734 early-stage capital 639 earnings per share (EPS) 264–5, 734 price/earnings (P/E) ratios 266–70, 740 retained see retained earnings economic growth creative accounting and 194–5 economic lives 96 economic order quantity (EOQ) 665–7, 734 economic value added (EVA®) 443–8, 734 economic values 568 Z07_MCLA8297_07_SE_IDX.indd 839 839 economies of scale 339–40, 342, 734 effectiveness, boards of directors 182 efficiency direct labour, variances see direct labour ratios 235, 247–54 relative, assessing 362, 363, 391 efficient capital markets 634–5, 734 EFGS (Enterprise Finance Guarantee Scheme) 641 EFTPOS (electronic funds transfer at point of sale) 688 electronic funds transfer at point of sale (EFTPOS) 688 employees representatives sales revenue per employee ratios 251–2, 741 satisfaction 434 theft by 296 users of financial information 3, end-of-period adjustments 719–21 Enron 191 Enterprise Finance Guarantee Scheme (EFGS) 641 environmental costs 422 EOQ (economic order quantity) 665–7, 734 EPS (earnings per share) 264–5, 734 equities see ordinary shares equity 129, 734 basic division 129–30 layouts of statements of financial position 56–7 relationships with assets 47–50 statements of changes in see statements of changes in equity trading transactions effects 50–2 withdrawing 125, 139–42 see also reserves; share capital; shares error freedom from, accounting information 7, 11 full costing 389–91 estimates depreciation 102–3 errors, full costing 389–91 ethics, accounting and finance 31–2 eurobonds 609–10, 734 European Union 164–5 Eurotunnel 342 EVA® (economic value added) 443–8, 734 evidence on usefulness of accounting 6–7 ex-rights prices 630 exception, management by 462, 737 exchange differences 170 executive directors 183 exercise prices 610 expansion capital 639 expenditure, out-of-pocket 298 22/09/15 7:32 pm www.downloadslide.com 840 INDEX expenses 79, 734 accrued 89–91, 93, 728 capitalisation 190–1 classification 83–5 manipulation or massaging 190–1, 193 IAS requirements 169–70 prepaid 92, 740 recognition 88–94 explanatory notes 167 external failure costs 427 external finance sources see finance sources external measures 438 factoring see debt factoring failure costs 426–7 prediction using financial ratios 272–8 fair representation 167–8 fair values 66–7, 94–5, 148, 734 fairness 181 faithful representation 7–8, 11, 734 FASB (Financial Accounting Standards Board), USA 174 favourable variances see variances FCA (Financial Conduct Authority) 165 feedback control 503–4, 734 feedforward control 504–5, 734 FIFO (first in, first out) 103–8, 735 final accounts 43, 719–22, 734 final dividends 146 finance 1–2 ethics 31–2 knowledge of, needing 17–18 meaning 2, 734 finance leases 602–3, 612–15, 734 finance sources 596–7 external 597, 602 long-term 602–19, 623–4 short-term 619–24 internal 597–8 long-term 598–600 short-term 600–2 Islamic finance 642 long-term 597 Alternative Investment Market 638–9 borrowing, short-term borrowing versus 623–4 external 602–19, 623–4 gearing and 624–8 internal 598–600 raising finance 628–41 share issues 628–41 small businesses 639–43 Stock Exchange role 634–9 short-term 597 borrowing, long-term borrowing versus 623–4 external 619–24 Z07_MCLA8297_07_SE_IDX.indd 840 internal 600–2 financial accounting 35–6, 735 accounting for limited companies see limited companies cash flow statements see statements of cash flows financial statements analysis and interpretation 233–84 income statements see income statements knowledge, needing 17–18 management accounting and, differences 13–15 statements of financial position see statements of financial position Financial Accounting Standards Board (FASB), USA 174 financial analysts 636 Financial Conduct Authority (FCA) 165 financial decision-making 29–31 financial derivatives 611, 735 financial gearing 235, 257–62, 624–8, 735 financial journalists 636 financial management see finance sources; investment; working capital financial objectives 27, 435, 436, 437 financial performance measurement and reporting see income statements financial periods see reporting: periods financial position measurement 175 statements see statements of financial position financial ratios 233–4 calculations 237–40 classifications 234–5 comparisons basis for 280 need for 236–7 efficiency ratios 235, 247–54 failure prediction using 272–8 financial gearing see financial gearing investment ratios 235, 262–70 limitations 278–80 liquidity ratios 235, 255–7 over-reliance on 279 overtrading problem and 270–1 overview 240 profitability ratios 235, 241–7, 253–4 trend analysis 272 financial reporting objectives 174 financial reports segmental 176–80, 742 see also financial statements financial services in investment 28–9 financial statements 39 analysis and interpretation 233–84 annual 125, 165 22/09/15 7:32 pm www.downloadslide.com INDEX credit assessments 671 framework 160–1 group 147–50, 736 IAS requirements 167–9 interpretation and analysis 233–84 limited companies 142–5, 167–73 notes to see notes to financial statements preparation under double-entry bookkeeping 719–22 publication 160, 161 qualitative characteristics 174 quality of 278–9 relationships between 206–7 see also financial reports; income statements; statements of cash flows; statements of changes in equity; statements of comprehensive income; statements of financial position financial transactions, recording 709–23 financing activities, cash flows 208–9, 219 financing costs 309 inventories 659–60 financing limited companies 129–36 finished inventories budgets 465–6, 481 first in, first out (FIFO) 103–8, 735 FirstGroup 243 five Cs of credit 670, 735 fixed assets see non-current assets fixed charges 604, 735 fixed costs 735 activity levels 320–2 direct costs and, relationship between 369 indirect costs and, relationship between 369 irrelevance 344–5 stepped 322, 341, 742 time based 321 total costs and, relationship between 369 variable costs and, relationship between 369 see also semi-fixed (semi-variable) costs fixed interest rates 612, 735 fixed overhead spending variances 513–14, 519, 735 fixtures and fittings 46 Fleur-El Sauz mining project 568 flexibility borrowings 624 leasing 613, 614 flexible budgets 506, 517–18, 735 flexing the budget 506, 517–18, 735 floating charges 604–5, 735 floating interest rates 612, 735 football club players 63–4 Ford 245 forecasts 735 budgets and 463 Z07_MCLA8297_07_SE_IDX.indd 841 841 foreign exchange differences 170 Fortescue 331 forward thinking 461 full costing 361, 728 batch costing 387–8 behaviour of cost and 368–9 cost centre basis 377–87 criticisms 396 departmental basis 377–87 estimation errors 389–91 indirect costs as services renderers 370–91 information, using 391–2 job costing 365, 367–8, 370–3 meaning 362 multi-product businesses 365–70 single-product businesses 364–5 variable costing versus 396–9 full costs 362, 735 cost-plus pricing 393–6 managers’ needs to know 362–4 fully paid shares 136, 735 future events, prediction of 7, 11 future opportunity costs 299 future outlay costs 299 future performance indicators 438 gains statements of comprehensive income 170 Gap 27–8 gearing financial see financial gearing operating 336–8, 739 ratios 260, 262, 278, 735 general ledgers 723 general reserves 145 geographical sales regions 467 geographical structures 24 Gindalbie Metals 331 GlaxoSmithKline 572, 692 Go-Ahead Group plc 549, 659 going concern convention 59–60, 173, 175, 735 goodwill 62–3, 443, 735 on consolidation 147, 149–50 Google 179–80 government assistance to small businesses 641 users of financial information 3, Granada 124 Grange Resources 331 Greene King 471–2, 674 gross profits 81, 82, 736 margin ratios 245–7, 736 group financial statements 147–50, 736 groups 146–50 growth and learning objectives 435, 436, 437 22/09/15 7:32 pm www.downloadslide.com 842 INDEX Hammerson 633 hard financial measures 438 Harvey Nash 689–90 Helphire Group 31–2 high–low method 324, 736 Hilco 606 hire purchase (HP) 603, 616–17, 640, 736 historic costs 297, 365, 736 convention 59–60, 61, 64, 736 measurement 175 HMV 605–6 holding cash 680–3 holding companies see parent companies hollow swaps 189 Hopwood, A.G 533–5 Hornby 343 HP see hire purchase human resources 63–4 hurdle rate 571 IAG (International Airlines Group) 613 IAS see International Accounting Standards IASB see International Accounting Standards Board ideal standards 525, 736 IFRS see International Financial Reporting Standards impairment depreciation and 100 losses 68, 170, 736 non-current assets 67–9 in and out trading 189 inadequate disclosures 192–3 income statements 40, 41–4, 78–9, 736 cost of sales 82–3 depreciation 94–103 double-entry bookkeeping 719–21 expenses classification 83–5 recognition 88–94 IAS requirements 169–71 inventories costing 103–8 layout 80–2, 85, 144 limited companies 142–4 revenue recognition 85–8 statements of cash flows and, relationships between 206–7 statements of financial position and contrasted 79–80 relationships between 206–7 taxation 127–8 trade receivables problems 108–12 uses and usefulness 112–13 see also statements of comprehensive income incorporation 122 incremental budgeting 473–4, 736 indirect costs 366–7, 736 Z07_MCLA8297_07_SE_IDX.indd 842 attributing 413 basis for charging 373–6 budgets 466 cost centre basis 377–87 direct costs and relationship between 369 relative levels of 409, 410 fixed costs and, relationship between 369 fixed overhead spending variances 513–14, 519, 735 non-manufacturing 388–9 overhead absorption (recovery) rate 371, 739 problems 370, 411 segmenting 377 as services renderers 370–91 total costs and, relationship between 369 traditional approach to costing 409 variable costs and, relationship between 369 variances 513–14 indirect method, statements of cash flows 211–16, 736 inflation 64, 279, 561, 736 information accounting see accounting information comparative 167 full costing using 391–2 gathering for standard setting 525–6 inside 181 narrative 167 quality of 14 range 14 relevant, payback period 558 share price influences 636 sources 5–6 from statements of cash flows 219–20 systems, accounting as 11–13 initial outlay 309 initial public offerings (IPO) 632, 634 innovation, budgets and 536 inside information 181 insignificant variances 521 inspection costs 430 insurance, credit 676 intangible assets 47, 53, 62, 67, 443, 736 see also goodwill interest cover ratios 261–2, 736 lost, net present values 560 payments 574 rates 612, 624 statements of cash flows 214 interim dividends 146 internal business processes 435, 436, 437 internal failure costs 426–7 internal finance sources see finance sources 22/09/15 7:32 pm www.downloadslide.com INDEX internal measures 438 internal rate of return (IRR) 549–50, 568–72, 577, 736 cash flows 574 problems 572–3 use of 577–9 International Accounting Standards (IAS) 164 IAS Presentation of financial statements 167–9 IAS Inventories 388 IAS Cash flow statements 172, 205, 209, 219, 222–3 IAS 16 Property, Plant and Equipment 100 list 166 see also International Financial Reporting Standards International Accounting Standards Board (IASB) 164–5 Conceptual framework for financial reporting 2010 174–5 International Airlines Group (IAG) 613 international competitive markets 410 International Financial Reporting Standards (IFRS) 64, 164, 737 adopting 165 IFRS Business combinations 150 IFRS Operating segments 177, 179, 180 list 166 see also International Accounting Standards inventories 49–50, 654 average turnover periods see average inventories turnover period ratios budgeting future demand 661 budgets 465–6, 481–2 buffer levels 662 control levels 663–4 costing 103–8 economic order quantity (EOQ) 665–7 financing costs 659–60 just-in-time (JIT) 668–9 management models 665–9 managing 658–69 materials requirement planning (MRP) systems 668 recording and reordering systems 661–3 reductions in levels 600 reporting 69 revaluations 69 safety levels 662 trading transactions effects 50–2 investigating variances 520–4 investing activities see cash flows investment 46 analysts 3, appraisals methods 549–73 practical points 573–7 Z07_MCLA8297_07_SE_IDX.indd 843 843 in practice 577–9 strategic planning and 580–1 average, accounting rate of return use 554 decisions 547 credit decisions as 674 nature 548–9 funds availability determination 582 project management 581–2 approval 582, 584 evaluating proposals 582, 583 investment funds availability determination 582 monitoring and control 582, 584–6 post-completion audits 584 profitable opportunities identifying 582, 583 ratios 235, 262–70 risks 580–1 scale of 573 invoices discounting 621–3, 676, 737 prompt issue 676–7 IPO (initial public offerings) 632, 634 iron ore industry, Australia 331–2 IRR see internal rate of return irrelevant costs 298, 737 Islamic finance 642 issued share capital 136, 737 issues of shares see shares issuing houses 632 iteration 569 J D Wetherspoon 268, 549, 674 JIT (just-in-time) 668–9, 737 job costing 365, 367–8, 370–3, 737 job satisfaction 532 John Smedley 429 Johnston Press 68 judgement, depreciation and 101–3 just-in-time (JIT) 668–9, 737 kaizen costing 428–9, 737 Kaplan, Robert 434–40 key factors 347 Kingfisher 586, 674 knowledge of accounting and finance, needing 17–18 labour costs 320 labour-intensive production 409 variances 512–13, 519, 530 see also direct labour lag indicators 435, 438 last in, first out (LIFO) 103–8, 737 lead indicators 435, 438 lead times 661–2, 737 22/09/15 7:32 pm www.downloadslide.com 844 INDEX leadership, boards of directors 182 learning and growth objectives 435, 436, 437 learning-curves 526–7, 737 leases finance 602–3, 612–15, 734 operating 613, 739 least squares regression 325 ledgers 722–3, 737 legal identity, limited companies 122 legal nature of limited companies 122 legal safeguards, limited companies 125 lenders 3, confidence 136 leverage see gearing liabilities 737 classification 55–6 current see current liabilities from financing activities, reconciliation, statements of cash flows 219 layouts of statements of financial position 56–7 non-current 55–6, 738 relationships with assets 47–50 trade payables see trade payables trading transactions effects 50–2 licences 62 LIFO (last in, first out) 103–8, 737 limitations of financial ratios 278–80 limited companies 20–1, 121–2, 159–60, 737 accounting rules need for 161–3 sources 164–6 auditors’ roles 175–6 borrowings 137–8 conceptual framework 173–5 corporate governance see corporate governance creative accounting 187–95 directors see directors dividends 145–6 features legal nature 122 legal safeguards 125 limited liability 124–5 perpetual life 122–3 share ownership transfers 128 taxation 127–8 financial statements 142–5, 167–73 financing 129–36 groups 146–50 legal identity 122 listed companies 128, 165 management of 128–9 private 125–7, 638, 740 public 125–7, 740 segmental financial reports 176–80 withdrawing equity 139–42 limited liability 21, 124–5, 737 Z07_MCLA8297_07_SE_IDX.indd 844 limited liability companies see limited companies limited liability partnerships (LLP) 21–2 limiting factors 347, 737 budgets 464, 469 lines of best fit 325 liquidation, voluntary 123 liquidity ratios 235, 255–7 listed companies 128, 165 listing 634–8 listing authority 165 LLP (limited liability partnerships) 21–2 loan notes 137, 608–9, 737 convertible 610–12, 731 loan stock see loan notes loans covenants 605–6, 737 risks and returns 606–7 subordinated 606, 743 term 608, 743 logical investors, net present values 562–5 London Stock Exchange 128, 137, 182, 183, 634–9 long-term capital employed 253–4 long-term contracts 86–7 long-term finance 137–8 sources see finance sources losses 79–80 impairment 68, 170, 736 non-current assets disposals 103 recognition 60 statements of comprehensive income 170 unrealised 170 lower of cost and net realisable values 107 Ltd 125 see also private limited companies Luther, R 517–18 machine-paced production 410 make or buy decisions 349–51 management behaviour, budgets and 485 businesses 25–6 cash 683 commentary 184 decision-making 295–313 by exception 462, 737 of limited companies 128–9 models, inventories 665–9 strategic 25–6, 742 styles 533–5 see also managers management accounting 293–4, 737 budgets see budgetary control; budgets; variances cost–volume–profit analysis see cost– volume–profit analysis 22/09/15 7:32 pm www.downloadslide.com INDEX costing see costing; full costing financial accounting, differences 13–15 knowledge, needing 17–18 management decision-making 295–313 management buy-ins (MBI) 639–40 management buy-outs (MBO) 639–40 managers 22–3 budgets and 459, 461–3, 532–3 full costs, needs to know 362–4 users of financial information 3, see also management Manchester City FC 343 Manchester United 608 Mango 33 manipulation of expenses 190–1, 193 manufacturing businesses 430, 466, 481 Manulife 580 margin ratios 332–3 marginal analysis 344–5, 738 closing or continuation decisions 351–3 make or buy decisions 349–51 opportunities to enter contracts, pricing or assessing 345–7 scarce resources, determining most efficient use 347–9 marginal costs 345, 346–7, 738 margins of safety 333–5, 738 market values 66 marketable investments 445 marketing costs 444–5 Marks and Spencer 268, 549, 572, 659, 674 Mars UK 692 massaging expenses 190–1, 193 master budgets see budgets Matalan 691 matching borrowings 623 matching convention 89–92, 738 materiality 7, 11, 738 materiality convention 92, 738 materials inventories budgets 466 requirement planning (MRP) systems 668, 738 variances 511–12, 519 see also direct materials maturing obligations cash generated from operations ratios 256–7, 730 MBI (management buy-ins) 639–40 MBO (management buy-outs) 639–40 McLaren 343 MDA (multiple discriminate analysis) 275, 738 measurement assets 45 current cost 175 financial performance see income statements Z07_MCLA8297_07_SE_IDX.indd 845 845 financial position see statements of financial position historic cost 175 performance 175 profits 442–3 realisable value 175 members see shareholders memoranda of association 131 Microsoft 25 MicroTech 189 minority interests see non-controlling interests mission statements 458, 459, 460, 738 misstating assets 192, 193 misstating revenue 188–9, 193 monetary measurement, assets 45 monetary stability 64 money measurement, statements of financial position 62–4 monitoring budgets 470 investment project management 582, 584–6 trade receivables outstanding 677 Monotub Industries 123 Monsoon Accessorize 692 Morrison Supermarkets 127, 272, 549, 674 mortgages 612, 738 Mothercare 632 motivation 461–2, 463 MRP (materials requirement planning) systems 668, 738 multi-product businesses 342, 365–70 multiple discriminate analysis (MDA) 275, 738 Murdoch, Rupert 298–9 MySpace 298–9 narrative information 167 National Express 243, 268 National Health Service (NHS) 363, 372 NCI (non-controlling interests) 147, 150, 738 net book values see carrying amounts net operating profit after tax (NOPAT) 443–4, 446–8 net present values (NPV) 549–50, 559–60, 738 better approach than ARR or PP 567–8 cash flows 574 cost of capital 566 credit decisions 674 discount rates 566 inflation 561 interest lost 560 internal rate of return and 569–73 logical investors 562–5 present value tables use 565–6 risk 560–1 use of 577–9 wider application 568 net profits see profits: for the period 22/09/15 7:32 pm www.downloadslide.com 846 INDEX network management structures 488 neutrality of accounting information 7, 11 News Corp 298–9 Next plc 69, 501, 520, 559, 572, 656, 674 NGO (non-governmental organisations) 33 NHS see National Health Service Nike 27–8 Nissan 245, 669 nominal ledgers 723 nominal values, shares see shares non-accounting management styles 534 non-controlling interests (NCI) 147, 150, 738 non-current assets 53–4, 738 carrying amounts 97, 730 costs 94–5 economic lives 96 fair values 66–7, 94–5 with finite lives, valuations 65 impairment 67–9 with indefinite lives impairment testing 68 valuations 65 intangible see intangible assets losses on sales of 103 physical lives 96 profits on sales of 103 replacements, depreciation and 101 residual values 96, 741 revaluations 66–7 tangible see tangible assets useful lives 65, 96 valuations 65–9 non-current liabilities 55–6, 738 non-executive directors 183 non-financial measures budgets 485 performance 433–40 non-governmental organisations (NGO) 33 non-linear relationships 341 non-manufacturing overheads 388–9 non-operating profit variances 520, 738 non-payment, reducing risk of 680 non-recourse factoring 619 NOPAT (net operating profit after tax) 443–4, 446–8 Norton, David 434–40 not-for-profit organisations 32 notes to financial statements 167, 169, 173 NPV see net present values objectives businesses 27 establishing 458–60 customer 435, 436, 437 financial 27, 435, 436, 437 financial reporting 174 internal business processes 435, 436, 437 learning and growth 435, 436, 437 Z07_MCLA8297_07_SE_IDX.indd 846 obligations maturing, cash generated from operations ratios 256–7, 730 OCC (operating cash cycle) 683–8, 739 offers for sale 629, 632, 738 offsetting 173 operating activities see cash flows operating cash cycle (OCC) 683–8, 739 operating costs 309 operating cycles 53 operating gearing 336–8, 739 operating leases 613, 739 operating profits 81, 82, 253–4, 739 margin ratios 244–5, 739 operating segments see segmental financial reports operational gearing 336–8, 739 opportunities to enter contracts, pricing or assessing 345–7 opportunity costs 297, 299–304, 560, 574, 739 Orange 615–16 ordinary shareholders 131 funds, return on 241–2, 278, 741 ordinary shares 130–1, 205, 602, 603, 739 cash generated from operations per ordinary share ratios 266, 730 risks and returns 606–7 organisation of businesses 22–5 Osborne, George 306 out-of-pocket expenditure 298 outcomes 438 outlays costs 299–304, 739 initial 309 output decisions 391 outsourcing 350, 739 outstanding trade receivables, monitoring 677 overcollateralisation 618 over-depreciation 102–3 overdrafts see banks overhead absorption (recovery) rate 371, 739 overheads see indirect costs over-reliance on financial ratios 279 overstating revenue 188–9 overtrading 251, 270–1, 739 owners capital see equity separation from businesses 47 users of financial information 3, wealth enhancement 27 see also shareholders P/E (price/earnings) ratios 266–70, 740 paid-up share capital 136, 739 par values, shares see shares: nominal values parent companies 146, 739 partnerships 20, 21–2, 122, 124, 128, 739 22/09/15 7:32 pm www.downloadslide.com INDEX past costs 299, 573, 739 see also committed costs; sunk costs past events, confirmation of 7, 11 patents 46, 62 patterns of receipts of sales 678–9 payables, trade see trade payables payback period (PP) 549–50, 555–7, 739 cash flows 574 NPV better approach than 567–8 problems with 557–9 relevant information 558 required 559 risk 558 use of 577–9 wealth maximisation 559 performance assessing 70, 362, 363, 391 budgets 458, 460, 470 evaluation balanced scorecard 434–40 non-financial measures 433–40 see also costing managers budgets motivating to better performance 461–2 improvements 532–3 measurement 175 planned 237 periodic budgets 464–5, 739 perpetual life of limited companies 122–3 physical lives 96 placings see private placings planned performance 237 plans beyond budgeting models 487–91 development of 458, 460 formulation of 458, 460 materials requirement planning (MRP) systems 668, 738 time horizons 460–3 see also budgets; strategic planning plc 125 see also public limited companies ploughed-back earnings see retained earnings Plymouth Argyle FC 342 point-of-sale devices 82 position analyses 458, 460 post-completion audits 584, 739 post-production phases 422–4 PP see payback period practical standards 525, 739 pre-dispatching 188 pre-production phases 422, 426 prediction of future events 7, 11 preference shareholders 131 preference shares 131, 602, 603–4, 606–7, 740 Premier Foods 692 prepaid expenses 92, 740 Z07_MCLA8297_07_SE_IDX.indd 847 847 present values (PV) 563–7 see also net present values prevention costs 426–7 price/earnings (P/E) ratios 266–70, 740 prices direct materials, variances 511–12, 733 exercise, convertible loan notes 610 makers 394 sales 309 variances 509–10, 519, 741 shares see shares takers 394–6 pricing cost-plus 393–6, 732 decisions 362, 363, 391 new environment 410 opportunities to enter contracts 345–7 traditional way 409 transfer pricing 179–80, 743 primary markets 634 private limited companies 125–7, 638, 740 private placings 138, 629, 633, 740 process costing 365, 740 production budgets 466 capital-intensive 410 labour-intensive 409 machine-paced 410 phases 422–4 products brands 62–3 cost centres 380–7, 740 innovation 434 types, sales management 467–8 profit and loss accounts see income statements; statements of comprehensive income profit-conscious management styles 534 profit–volume (PV) charts 338–9, 740 profitability per share 264 profitability ratios 235, 241–7, 253–4 profitable investment opportunities, identifying 582, 583 profits 78, 79–80, 740 accounting see accounting profits accounting policies effects on 443 analysis see cost–volume–profit analysis costs of capital and 443 derivation of 113 flows 574 forecasts 487, 490 gross 81, 82, 245–7, 736 measurement 442–3 net see for the period below non-current assets disposals 103 non-operating, variances 520, 738 operating 81, 82, 244–5, 253–4, 739 operating gearing effects on 337–8 for the period 81–2, 143, 740 22/09/15 7:32 pm www.downloadslide.com 848 INDEX profits (continued) recognition 60 target achieving 335–6 before taxation 143, 740 understatement 444 project lives 309 break-even 581 project management, investment see investment promoters 122 prompt payment 691–2 property, plant and equipment 46, 53–4, 67, 740 prudence convention 60, 61, 107, 740 public limited companies 125–7, 740 see also listed companies public share issues see shares: issues publication of financial statements 160, 161 purchases ledgers 723 Pure Wafer plc 132 PV (profit–volume) charts 338–9, 740 qualitative characteristics of financial statements 174–5 qualities of accounting information 8–9 quality costs 426–7, 740 of information 14 procedures, costing 426–7 quantities, standard, and costs 524–5, 742 queries, customers 679 quick ratios see acid test ratios R&D see research and development raising finance 628–41 Rare Earth Minerals 568 ratios see financial ratios raw materials budgets 466, 481 RBS (Royal Bank of Scotland) 30–1, 305 realisable values 59, 175 receipts of sales, patterns of 678–9 receivables, trade see trade receivables Reckitt Benckiser 659 recognition expenses 88–94 losses 60 profits 60 revenue 85–8, 188 recording financial transactions 709–23 recording inventories 661–3 recourse factoring 619 reducing-balance depreciation method 97–100, 443, 740 references, credit assessments 671 refunding risks 624 Registrar of Companies 122, 125, 131, 161 registration of companies 122, 125 regression, least squares 325 Z07_MCLA8297_07_SE_IDX.indd 848 regulations 13, 14 reinvestment reserves 145 relationships, customers 676 relative efficiency, assessing 362, 363, 391 relevance 7, 11, 175, 527, 740 relevant costs 298, 299–304, 344, 365, 573, 741 relevant information, payback period 558 relevant ranges 341, 741 remuneration, directors 165, 183 Renault 245 rent 91–2, 322 Rentokil Initial 306–7, 572 reordering systems, inventories 661–3 replacement costs 59, 365 reporting corporate governance 183–4 directors’ reports 184–5 financial performance see income statements financial position see statements of financial position intervals 13, 14 nature of reports 13, 14 periods 50, 58, 87, 741 segmental financial reports 176–80, 742 strategic reports 185–7 variances 529 representation fair 167–8 faithful 175 rescue capital 640 research and development (R&D) 443, 444–5, 571–2 reserves 129, 130, 741 general 145 reinvestment reserves 145 share premium accounts 133–4, 742 statements of financial position 145 see also capital reserves; retained earnings; revenue: reserves residual values 96, 741 resources investment decisions 548 scarce 347–9 restructuring costs 445 retained earnings 132, 137, 145, 598–9 returns on capital employed (ROCE) 242–3, 253–4, 275–6, 278–9, 741 accounting rate of return and 552–3 on ordinary shareholders’ funds (ROSF) 241–2, 278, 741 risks and 29–31, 606–7 revaluations intangible assets 67 inventories 69 non-current assets 66–7 property, plant and equipment 67 22/09/15 7:32 pm www.downloadslide.com INDEX revenue 78, 741 misstating 188–9, 193 overstating 188–9 recognition 85–8, 188 reserves 131, 139, 146, 741 sales see sales reviews, budgets 458, 470 Rexam 243 rights issues 138, 629–32, 741 Rio Tinto 331–2 risks 741 ignored 443 investment 580–1 management decisions 307–10 net present values 560–1 non-payment, reducing 680 payback period 558 premiums 561, 741 refunding 624 returns and 29–31, 606–7 ROCE (return on capital employed) see returns rolling budgets see continual budgets Rolls-Royce 138, 424, 579 ROSF (return on ordinary shareholders’ funds) 241–2, 278, 741 round tripping 189 Royal Bank of Scotland (RBS) 30–1, 305 Royal Dutch Shell 216 Royal Mail 338, 419–20 RWE npower 350 Ryanair 134, 220, 247, 328–9, 333–5, 549, 599–600, 656 safety levels, inventories 662 safety margins 333–5, 738 Sainsbury’s 127, 272, 461, 659 sale and leasebacks 615–16, 741 sales budgets 465–7 commission 89 cost of 82–3, 732 credit 53 ledgers 723 price variances 509–10, 519, 741 receipts, patterns of 678–9 revenue 253–4 revenue per employee ratios 251–2, 741 revenue to capital employed ratios 251, 741 volume variances 507–9, 519, 741 scale economies see economies of scale scale of investment 573 scarce resources 347–9 scenario building 310, 741 scrip issues see bonus shares seasoned equity offerings (SEO) 632 second-hand markets 634 secondary markets 634–5 Z07_MCLA8297_07_SE_IDX.indd 849 849 secured borrowings 138 securitisation 602–3, 617–19, 741 security 604–6, 670, 742 segmental financial reports 176–80, 742 segmenting overheads 377 self-interests 441 selling prices 59 semi-fixed (semi-variable) costs 323–5, 742 sensitivity analysis 308–10, 580–1, 742 SEO (seasoned equity offerings) 632 service, accounting as 7–8 service cost centres 380–7, 742 services businesses 53 continuous 88 industries 414–19, 520 non-continuous 88 settlement periods 657 Severn Trent 549, 656, 674 share capital 130–2, 139 allotted see issued below called-up 136, 730 fully paid 136 issued 136, 737 jargon 136 paid-up 136, 739 see also shares share premium accounts 133–4, 742 shareholders 22, 122 auditors and, relationships between 175 boards of directors relationship with 183 confidence 136 directors, relationships between 175 limited liability 124–5 ordinary see ordinary shareholders preference 131 restrictions on withdrawing equity 125 safeguarding rules 181–2 value 409, 440–8 wealth enhancement 17 shares 6, 122, 742 bonus see bonus shares consolidating 131–2, 731 dividends per share 263, 733 earnings per share 264–5, 734 fully paid 136, 735 issues 136, 137 above nominal values 132–3 initial public offerings (IPO) 632, 634 offers for sale 629, 632, 738 private placings 138, 629, 633, 740 public 138, 629, 632, 740 rights 138, 629–32, 741 tender 633, 743 listing 634–8 nominal values 129, 131–2, 132–3, 738 ordinary see ordinary shares par values see nominal values above 22/09/15 7:32 pm www.downloadslide.com 850 INDEX shares (continued) preference see preference shares prices 135 ex-rights 630 influences on 636 setting 632–3 striking 633 private placings see issues above profitability per share 264 public issues see issues above rights issues see issues above setting prices 632–3 splitting 313, 742 striking prices 633 trading 128 transfers 128 see also share capital Sharia law 642 short-term finance sources see finance sources significant variances 521 slow payers 679–80 small businesses, long-term finance sources for 639–43 soft non-financial measures 438 sole proprietorships 19–20, 122, 124, 128, 129, 742 Sony 611 sources of finance see finance sources special purpose entities (SPE) 191 special purpose vehicles (SPV) 618 Specific Media 298–9 Spice plc 395 splitting shares 313, 742 SPV (special purpose vehicles) 618 stability, monetary 64 Stagecoach 617, 689 stakeholders 441 standard costing 524–5, 528, 530–2, 742 Standard Life 572, 580 standard quantities and costs 524–5, 742 standards maintaining 531 new business environment 530–2 problems 529–30 relevance 527 setting 525–7 standing orders 688 start-up capital 639 statements of cash flows 40–4, 167, 172, 201–3, 742 direct method 211, 733 features 205–11 importance of cash 203–4 income statements and, relationships between 206–7 indirect method 211–16, 736 information from 219–20 layout 207–9 Z07_MCLA8297_07_SE_IDX.indd 850 preparation 211–18 problems with IAS 222–3 reconciliation of liabilities from financing activities 219 statements of financial position and, relationships between 206–7 statements of changes in equity 167, 171–2, 742 statements of comprehensive income 167, 169–71, 742 statements of financial position 40, 41–4, 742 accounting conventions, roles of 58–61 assets 44–7 classifying 52–4 valuing 64–9 claims 47–50 classifying 55–6 dates 58 double-entry bookkeeping 719, 721–2 IAS requirements 167, 168–9 income statements and contrasted 79–80 relationships between 206–7 layouts 56–7 limited companies 143, 145 money measurement 62–4 ratios 280 reserves 145 statements of cash flows and, relationships between 206–7 taxation 127–8, 145 trading transactions 50–2 user needs 70 statements of income see income statements; statements of comprehensive income stepped fixed costs 322, 341, 742 Stern Stewart 443–4 stewardship 29, 161 stock see inventories stock exchanges 742 see also Alternative Investment Market; London Stock Exchange stocktaking 663 straight line depreciation method 96–7, 99, 100, 742 strategic management 25–6, 742 strategic options 458, 460 strategic planning budgets links with 458–60 investment appraisals and 580–1 strategic reports 185–7, 743 stretch targets 488 striking prices 633 student loans 503 Stuff U Sell 19 subcontracting 349–51 subordinated loans 606, 743 sub-prime loans 618–19 22/09/15 7:32 pm www.downloadslide.com INDEX subsidiary companies 146–50 sunk costs 304–7, 743 see also past costs suppliers credit assessments 671 users of financial information 3, systemic variances, cumulative effect of 521–2 takeovers 148–50, 743 tangible assets 47, 53, 743 see also property, plant and equipment target costing 427–8, 743 targets beyond budgeting 487–8 budgets 463, 502–3, 528, 532–3 profits, achieving 335–6 Tate and Lyle 517, 674 taxation corporation tax 127–8, 139, 731 income statements 127 investment decisions 574 limited companies 127 profits before 143, 740 statements of financial position 127, 145 Ted Baker 69 Telefonica 616 tender issues 633, 743 term loans 608, 743 Termite Resources 331 Tesco 127, 264–5, 268, 272, 438, 642, 656 theft by employees 296 time horizons, plans and budgets 460–3 investment decisions 548 orientation 13–14 time-based nature of fixed costs 321 timeliness 8, 11, 743 timing cash flows 567 continuous or non-continuous services 88 Timpson, John 204, 486–7, 490 top-down approach, budgeting 469 total costs 369 total direct labour variances 512–13, 743 total direct materials variances 511–12, 733 total life-cycle costing 421–4, 743 total quality management (TQM) 424–6, 669–70, 743 Tottenham Hotspur 64 Toyota 245, 487, 488–9, 490 TQM see total quality management trade creditors see trade payables trade debtors see trade receivables trade finance 640 trade loading 189 trade-off theory of financial gearing 627–8 trade payables 49–50, 55, 654, 690–2, 743 Z07_MCLA8297_07_SE_IDX.indd 851 851 average settlement period for trade payables ratios 249–50, 693, 729 budgets 466, 481, 482–3 cash discounts 692–3 controlling 693–5 delaying payments to 600–1 ledgers 723 settlement periods 657 trade receivables 46, 53–4, 654, 669–70, 743 ageing schedules of 677–8, 729 allowances for 108–12, 729 average settlement period for trade receivables ratios 248–9, 677, 729 budgets 466, 480–1, 482 cash discounts 675–6 collection policies 676–80 credit decisions 670–2, 674 credit periods 672–4 debt factoring 676 invoice discounting 676 ledgers 723 non-payment, reducing risk of 680 outstanding, monitoring 677 patterns of receipts, monitoring 678–9 problems 108–12 settlement periods 657 slow payers 679–80 trade references 671 trademarks 46, 62 trading shares 128 trading transactions 50–2, 712–15 transactions recording under double-entry bookkeeping 709–23 trading 50–2, 712–15 transfer pricing 179–80, 743 transfers of shares 128 transmission of cash 688 trend analysis 272 trial balances 718, 743 TUI Travel 12–13, 268 turnover inventories 247–8, 657 UK Corporate Governance Code 182–4, 743 uncompetitive markets 409 under-depreciation 102–3 understandability 8, 11, 744 Unilever 268 univariate analysis 273, 744 university degrees 304 unrealised gains and losses 170 usage variances, direct materials 511–12, 733 useful lives 65, 96 usefulness 5–7, 11 22/09/15 7:32 pm www.downloadslide.com 852 INDEX users 2–5 conflicting interests of 4–5 management accounting and financial accounting 13–15 needs from statements of financial position 70 valuations businesses 70 inventories 69 non-current assets 65 value chain analysis 429–31, 744 value drivers 433–4, 744 value of accounting information 9–11 values market 66 realisable 59, 175 residual 96, 741 see also carrying amounts; fair values; net present values; present values variable costs 744 cost–volume–profit analysis 320–2 direct costs and, relationship between 369 fixed costs and, relationship between 369 indirect costs and, relationship between 369 total costs and, relationship between 369 see also semi-fixed (semi-variable) costs variable (marginal) costing 744 full costing versus 396–9 variances 505–6 adverse 507–19, 521, 728 analysis 523, 530 compensating 523–4, 731 favourable 507–18, 521, 734 fixed overhead 513–14, 519, 735 insignificant 521 investigating 520–4 labour 512–13, 519, 530 materials 511–12, 519 meaning 507, 744 non-operating profit 520, 738 problems 529–30 reports 529 sales price 509–10, 519, 741 sales volume 507–9, 519, 741 service industries 520 Z07_MCLA8297_07_SE_IDX.indd 852 significant 521 systemic, cumulative effect of 521–2 venture capital 639–41, 744 verifiability 8, 11, 744 Vodafone 549, 616 volume analysis see cost–volume–profit analysis voluntary liquidation 123 Volvo 245, 341 W H Smith 674 WACC (weighted average cost of capital) 627–8 Wal-Mart 660 WDV (written-down values) see carrying amounts wealth creation 27, 28–9 enhancement 27 generation, effectiveness 112–13 maximisation 559 net present values and 567 see also profits weighted average cost of capital (WACC) 627–8 weighted average cost (AVCO) 104, 105–8, 744 Weinstock, Lord 280 Western Desert Resources 331 Whole Foods Market 447–8 whole life-cycle costing see total life-cycle costing working capital 653 cycle 654–5 definition 654–5, 744 managing 655 scale of 655–8 statements of cash flows 213 see also cash; inventories; trade payables; trade receivables WorldCom 191 written-down values (WDV) see carrying amounts Yagil, J 578 year-end assumptions 574 Z-score models 276–8 zero activity 326 zero-base budgeting (ZBB) 474–6, 744 zero-coupon convertible bonds 611 Zmijewski, M.E 273 22/09/15 7:32 pm ... business and describe how businesses are organised and structured 24/09/15 3:37 pm www.downloadslide.com Chapter InTroducTIon To accounTIng and fInance What are accounting and finance? Let us start by. .. www.downloadslide.com Chapter Introduction to accounting and finance Introduction I n this opening chapter, we begin by considering the roles of accounting and finance We then go on to identify... book xxiii Acknowledgementsxxv Introduction to accounting and finance 1 Introduction 1 Learning outcomes What are accounting and finance? Who are the users of accounting information? The conflicting