Asset Valuation Essay

1860 words - 7 pages

IntroductionAt the urging of a long time desire, Barbara Jones and Rachel Hoskins recently decided to open their very own purse store, which will be called Purse Bouquet and Fashion. Barbara and Rachel who both have a passion for fine purses and accessories, will sell luxury handbags, purses, backpacks, luggage and other exquisite items to the Greater Baltimore Maryland area via their luxury boutique store and the Internet. Upon the establishment of their newly start-up retail company, they have decided to sell the following brands; Samsonite, Jansport, Liz Claiborne, Fendi, Gucci, and Coach. The good thing about Barbara and Rachel is that they both have an incredible knowledge about their products and how to make a sale. However, their accounting experience is very limited. They have trained staff members in place that will provide them service based on their expertise, which will ensure that their financial office has full coverage. Our accounting firm, Value Builder Inc, has provide assistance in making sure that the Inventory, Capitalization and justification policies are created and instituted before the establishment of their retail store.PBF Inventory PolicyInventories can be defined as assets that are intended for sale, are in process of being produced for sale, or are to be used in producing goods. ( many companies inventory represents the largest portion of assets, because inventory is an important part of a company's balance sheet. A company's inventory is determined by the following equation, Beginning inventory + Net purchases - Cost of goods sold = Ending inventory. To simplify this equation, it means that you take what the company has in the beginning, add the new purchases, subtract what the company sold and the result is what is left.Purse Bouquet & Fashions has inventory that is intended for sale. The company's inventory includes a variety of items such as purses, wallets, backpacks, messenger bags and luggage, from popular brand names such as Samsonite, JanSport, North Face, Liz Claiborne, Fendi, Coach and Gucci.There are many types of inventories such as raw material, work in process and finished goods, but Purse Bouquet & Fashions uses only the finished goods inventory. According to Hadley (2004) effective inventory management is critical to overall corporate performance. The finish goods inventory system provides management with the tools necessary to manage the flow to order and stock items, with complete products that will be delivered to customers. Finished goods inventory is divided into three major areas. The first area provides a perpetual inventory, by maintaining inventory balances through processing of transactions, for example receipts and withdrawals. The second area provides the store manager with the dollar values and analysis requires for good inventory decisions. The final area allows purchase orders to be tracked effectively.The accounting method a...

Find Another Essay On Asset Valuation

How does forward contract valuation differ from futures contract valuation?

932 words - 4 pages A. How does forward contract valuation differ from futures contract valuation? Futures and forward contracts are viewed as derivative contracts because their values are derived from an underlying asset. The forward contract is an agreement between two parties, which are buyer and seller and they must fulfil their contractual obligations at a price established at the beginning upon the expiration date, the buyer must pay the agreed price to

Depreciation and sale of asset Essay

959 words - 4 pages to the entity. It is not a process of asset valuation. The cost of the asset less the accumulated depreciation is not intended to give the current market value of the asset as the asset purchased is not intended for re-sale but use in the business.There are two methods of depreciating an asset, the straight-line method, and the reducing balance method. The straight-line method of depreciation allocates the same amount of depreciation expense being


3413 words - 14 pages vans are openly traded. Income approach – This valuation technique takes into account the future cash flows and discounts them to value an asset/liability. For example, owning an office building which is rented out to another company. The present value of the building is based on the discounted cash flow amounts. Cost approach – The cost approach is used when you have an asset that has no market value but still needs to be valued. This

Evaluation of Various Numerical Methods for Option Pricing Model

719 words - 3 pages . Although the option valuation has been studied at least since nineteenth century, the contemporary approach is based on the Black-Scholes model which was first published in 1973. Fischer Black and Myron Scholes derived a partial differential equation, now called Black-Scholes equation, which governs the price of the option over time. The key idea was to hedge perfectly the option by buying and selling the underlying asset in just the way and

The Usefulness of Alternative Measures of Profit

1702 words - 7 pages measures internally for its operating, budgeting and financial planning purposes. It represents an example of a company that does use non-GAAP measures in a slightly manipulate manner. When analysing net income per share using GAAP figures the result of $ (0.62) describes an image dissimilar from the non-GAAP measure of $ 0.87 (Appendix 2). Valuation represents the process of determining the value of an asset

Capital Valuation : Apple Co

999 words - 4 pages process of determining the current worth of an asset or company. Valuations are needed for many different reasons including investment analysis, merger and acquisition transactions, capital budgeting, etc. In this paper our team will justify the current market price of Apple's debt and equity using valuation techniques such as Free Cash Flow to Equity (FCFE), Free Cash Flow to Firm (FCFF), and Dividend Discount Model (DCM).Free Cash Flows to

Client Understanding Paper

1229 words - 5 pages of why information is needed about adjusting lower cost of market inventory on valuation, capitalizing interest on building construction, recording gain or loss on asset disposal, and adjusting goodwill for impairment is presented here.Adjusting Lower Cost of Market Inventory on ValuationThe valuation of inventory is essential because it significantly impacts working capital and the reported amount of net profits. Inventory valuation is a

Property Investment Analysis Report

4200 words - 17 pages vice versa. Value is therefore often used to mean the current cost of replacing the asset—which may be the cost of a new replacement or that cost depreciated to reflect the age of the old asset or, indeed, the original cost with or without depreciation. 4.1 Properties with Trading PotentialThe shop in the prime location in City of Edinburgh is the property of trading potential in this valuation. Many valuers place greater confidence in size

Dividend Growth Model, Capital Asset Pricing Model, Modern Portfolio Theory, Estimation of Untraded Stocks

1248 words - 5 pages year.2. Capital Asset Pricing ModelThe assumptions used in the Capital Asset Pricing Model (CAPM) are similar in that they assume an almost "perfect world" scenario.Initially, CAPM assumes that all investors have the same rational expectations of returns, and that these returns are in line with the best prediction for future returns as based on the available information. It also makes the assumption that the dividends are paid normally, that assets

Valuation Approaches to Accounting

2015 words - 8 pages approaches remains the same. The company was formed on December 31, 2000 and has one asset costing $2,487. Since we do not have any information otherwise we will assume that this is indeed the only asset. Our starting point can be represented by the following balance sheet. Please note that our example is oversimplified to illustrate the different valuation approaches.Exhibit 1Historical CostingHistorical costing is the most familiar to users of

Q1. With examples where necessary, critically evaluate the lessons we can draw from derivative valuation from the China Aviation Oil debacle

984 words - 4 pages withhold information from the investors and public but also from the directors of CAO. (Hong, 2008) In addition to a lack of disclosure and insider trading the company failed to adopt an appropriate valuation method for its options. CAO had no margin calls to stop trading further when losses were incurred. The company claims to have adopted the Singapore Financial Reporting Standards however they failed to satisfy the prescribed industry standards as

Similar Essays

Asset Valuation Paper: Piggly Wiggly, Inc

2278 words - 9 pages to the following suggestions and recommendations. It is important to recognize the value of having the correct inventory system, along with the correct inventory cost-flow method, to allow for the efficient allocation of a true valuation of the merchandise available or sold. The current method involves the use of a computerized perpetual inventory system. This system works well for this business application due to the fact that the business is a

The South African Code For The Reporting Of Exploration Results

1154 words - 5 pages and to aid in decision making. A detailed outline of the criterion includes (SAMVAL, 2008) (SAMREC, 2007): • Executive summary An Executive Summary of the mineral asset valuation. • Introduction and scope These specify the commissioning instructions which include the reference to Valuation, date, purpose and intended use of the valuation. • Identity and tenure The identity, tenure and locations of the property interests, the physical, legal and

Most Not Be Evident Essay

878 words - 4 pages global investment markets together with the increasing knowledgeable investors and financial reporting users have gingered interest in asset measurement methods. Organizations assets such as investments and marketable securities, fixed assets, inventory, intangible assets, etc. require proper valuation for investment potentials, financial reporting, audit, proper tax liability computation, litigation, capital budgeting and company valuation, among

"The Principle Of Historical Cost Is Still Used In Accounting When There Is A Large Measure Of Agreement That It Is Inappropriate." Discuss

1225 words - 5 pages Synopsis.Historical Cost Accounting is a traditional valuation method as it reflects only on the past cost of the asset, however in the contemporary business environment companies must remain flexible and transparent. This belief has lead to the creation of several other valuation methods, due to word constraints I have focused primarily on Fair Value Accounting as an alternative to Historical Cost Accounting. Although Fair value accounting is a