The Independent CPA Corporate Auditor is like a referee in the field of financial reporting. CPA comes in, audits business accounting systems and methods, and gives a report to attach to the company's financial statements. Public enterprises are audited by an independent Certified Public Accountant Office and they know that the audit report adds credibility to financial reporting, so any individuals
The auditor will decide whether the accounting method of the company complies with generally accepted accounting principles (GAAP). Generally everything is in place and the financial report is a reliable document. However, sometimes the corporate auditor swings the flags of yellow and red. Because some indicators of potential troubles are business ability to continue normal business, low cash balance, unpaid delinquent liability, or business covered
The auditor objected to the client's accounting methods and reporting practices to ensure that the financial statements conform to accounting standards and not misleading In fact, the word "fairly presented" It is the exact word used in the auditor's report.
A good auditor needs to know not only the technical know-how but also how to make the client's accounting methods tighter. His job is to become a representative of shareholders and other users of business finance reports. It strictly maintains GAAP and is current to Corporate Auditor to not slide any irregularities.
Recently, there are a number of well-known companies engaged in accounting fraud, whose fraud was not discovered by CPA's auditor. Enron is one of these companies. Because it destroyed the audit evidence, in this case, the audit corporation, Arthur - Anderson, was convicted of jurisdiction.
What is the acid test ratio and the ratio of ROA?
Investors also calculate acid test ratios known as quick ratios or pounce ratios. This ratio excludes inventory and prepaid costs, which includes the current ratio, it allows business to quickly convert to cash, cash and items into assets into items that are known as assets in this category fast or liquid We assume. The acid text ratio is calculated by dividing current assets by total current liabilities.
This ratio allows you to claim business creditors rushing to the business and demand quick payment of business debt and calculated due to the worst case scenario Short term creditors, with the exception of unusual circumstances, I do not have the right to request. This ratio is a conservative way of looking at the business's ability to pay its short-term debt.
One factor that affects the profitability of the bottom line of a business is whether it uses debts for its benefits or not. Business realizes financial leverage gain, meaning earning more profit with the money borrowed it, than the interest it paid for the use of borrowed money A good part of this year's business net income is finance It may be due to leverage. The ratio of ROA is determined by dividing the profit before interest and income tax (EBIT) by net operating assets.
Investors compare interest rates and ROAs when companies borrow money. Business ROA is 14% and its debt interest rate is 8%, the net profit of the business of the capital is 6 than that it is interested
ROA is a useful ratio for interpreting performance performance, in addition to determining financial gain or loss. The ROA is called a capital-use test that measures how interest and income tax profit for the total capital adopted by the business.
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