Posted by admin on May 13th, 2017

Effective Management Skills – Investment Evaluation Criteria

Three steps are involved in the evaluation of an investment:

• Estimation of cash flows

• Estimation of the required rate of return (the cast of capital)

• Application of a decision rule for decision rule for making the choice

Investment decision rule

The investment decision rules may be referred to as capital budgeting techniques, or investment criteria. A sound appraisal technique should be used to measure the economic worth of an investment project. The essential property of a sound technique is that is should maximize the shareholders wealth. The following other characteristics should also be possessed by a sound investment evaluation criterion:

• It should consider all cash flows to determine the true profitability of then project.

• It should provide for an objective and unambiguous way of separate good projects from bad projects.

• It should help ranking of projects according to their true profitability.

• It should recognize the fact that bigger cash flows are preferable to smaller ones and early cash flows are preferable to later ones.

• It should help to choose among mutually exclusive projects that project which maximizes the shareholders wealth.

• It should be a criterion which is applicable to any conceivable investment project independent of others.

These conditions will be clarified as we discuss the features of various investment criteria in the following posts.

Investment Appraisal Criteria

A number of investment appraisal criteria or capital budgeting techniques are in use of practice. They may be grouped in the following two categories:

1. Discounted cash flow criteria

• Net present value

• Internal rate of return

• Profitability index (PI)

2. Not discounted cash flow criteria

• Payback period

• Accounting rate of return

• Discounted payback period

Discounted payback is a variation of the payback method. It involves discounted method, but it is not a true measure of investment profitability. We will show in our following posts the net present value criterion is the most valid technique of evaluating an investment project. It is consistent with the objective of maximizing the shareholders wealth.

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Posted by admin on May 13th, 2017

Project Management Techniques * The Capital Budgeting

A number of factors combine to make capital budgeting decisions perhaps the most important ones financial managers and their staff must make. There are a huge number of variables that must be considered although many can be defined as legible due to their probability of occurrence. However the cost of failure is great with companies facing bankruptcy if their market judgment is vastly incorrect. This report then focuses on evaluating the major risks that effect capital budgeting decisions and how that information can aid the techniques used to analyze fixed asset investments.

First, since the result of capital budgeting decisions have an impact for many years, the firm will lose some of its flexibility. For example, the purchase of an asset with an economic life of ten years locks the firm in for a ten year period. Further because asset expansion is fundamentally related to expect future sales a decision to buy an asset that is expected to last ten years requires a ten year sales forecast. If the firm invests too much in assets, it will incur unnecessarily high depreciation and other expenses. On the other hand, if it does not spend enough on fixed assets, two problems may arise. ‘First, its equipment may not be efficient enough for least-cost production and second, if it has inadequate capacity it may lose a portion of its market share to rival firms, and regaining lost customers will involve heavy selling expenses and price reductions, both of which are costly’. If a firm forecasts its needs for capital assets in advance, it will have an opportunity to purchase and install the assets before they are needed. Unfortunately, many firms do not order capital goods until existing assets are approaching full-capacity usage. If sales grow because of an increase in general market demand, all firms in the industry will tend to order capital goods at about the same time. This results in ‘backlogs, long waiting times for machinery, and an increase in their prices’. The firm which foresees its needs and purchases capital assets during slack periods can avoid these problems. Capital budgeting typically involves substantial expenditures, and before a firm can spend a large amount of money, it must have the funds available – large amounts of money are not available automatically. Therefore, a firm contemplating a major capital expenditure program should plan its financing far enough in advance to be sure funds are available.

A key area concerned with the capital budgeting decisions made by firm’s lies within the capital structure policy as this sets the tone for all future financial decisions.

Incorporating the tax deductibility of interest but not dividends and bankruptcy costs leads to the trade-off theory of capital structure. Some debt is desirable because of the tax shield arising from interest deductibility but the costs of bankruptcy and financial distress limit the amount that should be used. This is because when companies are highly levered the threat of default risks is great. Therefore an optimal range of debt finance needs to be incorporated into capital structure policy.

This is an extremely important concept for companies to consider when undertaking in capital budget decisions as their capital structure will have a large influence in determining which investment options to pursue. For example if the company decides to follow an investment proposal where the discounted payback period is great during the later stages of the project although the initial cash outlays are large. If the company is heavily financed through debt then the risk placed on that project will be high due to the probable default risk occurring if the short term future produces an uncertain event that throws the investment into doubt. A recent example of this case is described below:

The recent crisis in the football industry has demonstrated the importance of keeping a tight control of a company’s finances. As the industry became increasingly profitable throughout the 1990’s many clubs operated under the trade off theory principles. To incorporate increased spending in parallel with exponential transfer and wage increases clubs borrowed excessively to a point where the industry could not sustain itself any longer. This reached a head during May 2002 when the sudden collapse of ITV Digital resulted in the threat of bankruptcy for many smaller clubs. This situation was due to fact that smaller clubs had gambled their future on the excessive amounts of capital they were receiving from ITV Digital. Capital budget decisions had been based around spending for short term gains thus allowing football clubs to neglect their long term survival and as a result over six hundred footballers were made redundant during the summer in order to cut costs.

For example the highly profitable semi-conductor companies of the mid 1990’s like Samsung, did not shift their capital budgeting decisions policy towards higher levels of debt as the trade off theory suggests. This can be explained through the fact that in high-tech growth industries current assets are best described as risky and intangible. Therefore borrowing heavily would appear foolish as in times of crisis the company’s current assets would be rendered worthless resulting in nothing tangible to safeguard against spiraling default payments. This does appear slightly pessimistic considering during times of prosperity one would expect expansion and growth however there are many other risk factors that need to be taken into account when forming capital budgeting decisions.

Sales Stability: Companies with a stable source of income can feel more comfortable about supporting higher levels of debt because they are able to service the debt.

Asset Structure: When fixed assets are at a higher percentage relative to current assets, higher levels of debt can be supported due to the security factor. The lender is aware that if the interest can not be paid, fixed assets can be sold off.

Operating Leverage: The relationship between fixed and variable costs suggests that a high level of operating leverage will result in a high level of fixed costs. Therefore a company that is highly levered in operating leverage should have low levels of financial leverage to prevent the increase of costs.

Management Attitudes: These attitudes change regarding the current financial climate and whether personal styles tend to be more conservative or aggressive.

Lender and Rating Agency Attitudes: The credit rating of a firm has implications regarding the entire capital structure policy of a firm.

It is essential that top management is aware of the information gained from producing the capital budgeting decisions and it is not just limited to the financial management department. Often within companies there is a capping of the capital budget made by top management which can extinguish any investments projects no matter how profitable they might be. Therefore there needs to be a good two way communication process between senior management and financial management to prevent conflict occurring.

One way of achieving this is through SWOT analysis. Before developing strategies to accomplish the firm’s objectives, a manager needs to access the internal strengths and weaknesses of the firm. This evaluation should include the firm’s financial health, physical capital, human resources, production efficiency, and product demand. External threats and opportunities that impact the firm’s ability to accomplish its objectives also need to be considered. An external threat and opportunity analysis might include evaluating the behavior of close competitors or assessing the impacts of the business cycle on clientele incomes and the resulting product demand. The SWOT analysis helps the firm understand the current constraints placed on it by both internal and external forces and enables the firm to take corrective action, when possible to better position itself to accomplish its objectives.

Through implementing SWOT analysis correctly a greater amount of information is available to make informed capital budgeting decisions. The technique can then be implemented with in standard investment appraisal techniques such as NPV, discounted payback period and IRR. By providing SWOT analysis to aid capital budgeting decisions the threat of failure deceases. However reviewing or post-auditing is a final step to review the performance of investment projects after they have been implemented. While projected cash flows are uncertain and one should not expect actual values to agree with predicted values, the analysis should attempt to find systematic biases or errors by individuals, departments, or divisions and attempt to identify reasons for these errors. Another reason to audit project performance is to decide whether to abandon or continue projects that have done poorly. Therefore in order to eliminate poor performance the various risks associated with capital budgeting decisions need to be applied as strictly in the auditing process to aid in the decision making process for future capital budgeting decisions.

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Posted by admin on May 12th, 2017

What Can I Claim on Tax? Home Office Deductions – Tax Deduction Information



What Can I Claim on Tax? Home Office Deductions – Tax Deduction Information |A&C



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Home Office Deductions – Tax Deduction Information 

When you work from home, you can get benefits from the home office deduction. Some people may think that the home office deduction will significantly increase their chance of being audited by the IRS or it’s very difficult to qualify for the home office deduction guidelines. But as long as you follow the requirements and keep good records of all business-related expenses, you shouldn’t be worried about being audited too much.

Regular and exclusive use
To get the home office deduction, you must regularly use a portion of your home exclusively for your business. The IRS doesn’t specify what “regular use” means, but the guideline is that you must use the space for business on a continuing basis, not occasionally or frequently. You also use that portion of your home “exclusively” for business, which is a more difficult requirement to follow. The space must be used only for business. If you use the space for personal purposes as well as business purposes, you won’t be qualified for the home office deductions.

Here are some practical ways to qualify these requirements:

  • Use furniture such as a room divider if you want to deduct a portion of a room for business.
  • Get a separate phone line for the business and keep it in your home office.
  • Have regular meetings with your clients at your home office and keep logs of the meetings.
  • Use your home office address for your business mailing.

Administrative and management work
When your work is mainly performed outside of the home office, i.e. you’re a contractor or gardener, you can still deduct home office as long as you meet these requirements:

  • You use the home office for administrative and management activities.
  • There is no other fixed location to do such activities.

Amount of the home office deduction
The amount of the deduction should be accurately calculated from the portion of the home office to the whole residence. If your home is 1000 square feet, and your home office is 200 square feet, the portion of your home office is 20% of your entire place, and you can deduct 20% of the money that you spend to maintain your residence.

Main expenses that you can deduct are rent if you rent, or mortgage interest, property taxes and any association fees if you own. You can also claim deductions for utilities, home-owner’s or renter’s insurance, general maintenance or repair fees that affect your home office, etc. 

 

 

 

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Posted by admin on May 11th, 2017

Red Flags, Taxes: Your “Bill of Rights”

 

Did you know that you have a bill of rights? Probably, but not a “bill of rights” for taxes.
Well, there is a “bill of rights” for taxes and as a tax payer, you should be aware of them.

 

There is an article on the wires today that talks about red flags and why not to do something. If you have read the taxpayers bill of rights “you have the right to pay the correct amount of taxes”. Having the right and knowing how to exercise that right are two different things.

Red flags exist because historically the deduction is not taken properly which is with documentation ergo be prepared. The first of the CNN red flags was charitable contributions, for most of us this is not an issue, but for the 300K or higher earners and business owners this is the number one best deduction you can have to lower you AGI. Through conservation easements and historical building easements you can lower your AGI by 50% when approved by congress this year. It is a savvy tool, you will need help but that brings us back to the other tax payer right, the right to representation.

Home office- Red flag, don’t take no for an answer, we teach you how to document this for a proper deduction, the IRS was having such a hard time they put in an option to take the home office for $5 a sq. ft. this year to make it easy. If you take the later you probably will leave money on the table.

Bizarre deductions – is also noted, again there may be a good reason for such things. There are many things under health care that are allowed and may be bizarre, like a swimming pool. For some, this is a quality of life thing as it is a form of rehabilitation with a prescription from a doctor. Tax Saving Professionals is not in the business to justify all deductions, but all of us have a way to get a Private letter ruling which is an approval before taking a deduction from the IRS if you think it is bizarre. What we do is consult and provide the best possible interpretation of the tax code to your benefit as it is 73,954 pages long.

If all of this is new or news to you, then you might be overpaying your taxes. We service high net worth clients in excess of $300K per year and business owners with revenues of $1M and above.

by Ray Phair, COO, Tax Saving Professionals

 

 

CNN Money : IRS Red Flags

 

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Posted by admin on February 7th, 2017

Payroll service near me – Simple Supervisor Human Resource Training



Payroll service near me – Top Human Resource Training |A&C



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Payroll service near me – Simple Supervisor Human Resource Training for Paychex Time and Attendance

 

 

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Posted by admin on January 25th, 2017

Accounting For Fund To Invest Easily With Working Capital Management



bookkeeping companies in usa – Working Capital Management |A&C



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Accounting For Fund To Invest Easily With Working Capital Management

 

 

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Posted by admin on January 11th, 2017

Best way to reduce taxes? Transferring-money-to-my-wife-and-child





Untitled Document

I, as US non-resident, transferred some money from my US bank account into my wife’s and son’s US bank accounts. Some people say that it is classified as a gift and obligated for taxation, because we are aliens, not citizens. Well, citizens also pay gift taxes, but if the amount of gift is very huge (around 5 million dollars) I would like to know how to optimize this expense. Maybe I should file this transfer as a “family loan”?
Thank you in advance.

1 Answer

Assuming United States; rules may be wildly different elsewhere…

The "family loan" trick essentially lets you amortize a gift over multiple years of gift allowance and hopefully dodge gift tax, at the cost of having to pay income tax on the interest you must charge on the loan. The main advantage is that it lets you transfer all the money up front, rather than in $17,000-a-year-per-person-per-person chunks.

Let’s take the normal case first. Any one person can give any one person up to a specified amount (currently $17k, I believe,) without incurring gift tax. Note that this is counted per person, not per household; you and your spouse could each give $17k per year to each of your son and his spouse under this rule, adding up to $68k per year total.

The family loan dodge consists of making them a loan of the money at the mandated minimum interest rate to make it a legal loan (something like 0.3% APR last time I looked), setting the repayment schedule so their payments each year including interest come out to less than you can gift them with tax-free, and then making that gift by paying (yourself) those payments on their behalf. You do need to pay income tax on the portion of those payments that represents interest income, but at that low rate this is a minor cost for the convenience.

You’d also want to set up your will to cover what happens if you die with them still owing money on the loan. And this, I believe, is where you will really need expert advice if you go this route, to minimize the government’s cut at that time.

There may be better answers. If you are talking about this much money, you owe it to yourself to purchase expert advice from someone who has training and experience n this area, rather than taking free advice from the Internet that is likely to cost you much more in the long run. This is a situation where you can’t afford not to hire a pro. (For example, I have no idea how trusts might or might not fit your needs.)

Research & References:

http://money.stackexchange.com/questions/74590/how-do-i-minimize-taxes-when-transferring-money-to-my-wife-and-child

– See more at: http://acallresources.com/blog/how-do-i-minimize-taxes-when-transferring-money-to-my-wife-and-child/#sthash.OtQR8SfX.dpuf



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Posted by admin on January 10th, 2017

Money investment opportunities – Find Fund To Invest Easily With Financial Ratios



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Money investment opportunities – Find Fund To Invest Easily With Financial Ratios

 

 

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Posted by admin on January 8th, 2017

Average cost of bookkeeping services for small business By Vish K S

Outsourcing the bookkeeping or accounting functions offers noteworthy benefits and advantages to the Company that outsource the task. Businesses require a long list of duties to be completed in real time to make the operations running smooth. If the business happens to be of a small scale nature, one can surmise that the owner of the business is directly involved in all the operations including the different processes of hiring and firing, taking stock of the inventory and maintaining the Company books. When it comes to bookkeeping tasks, even the smaller Companies take the course of outsourcing their bookkeeping work to third-party bookkeepers. Numerous advantages accrue by taking to outsourcing, and there are multiple reasons for doing it as well. But, some important aspects need to be taken into consideration if you’re thinking of outsourcing the bookkeeping functions.

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One has to go for the reputation of the bookkeeping firm. Check out details like ‘How long has it been operating in the financial business field’, How many satisfied clients do they have under their belt’, Are they in a position to give some notable references for public review’ and things like that. Word of mouth referrals from other business owners that are operating in a field similar to yours is really important. The experience and reliability of the bookkeeping firm can be a deciding factor in choosing a particular Company for your bookkeeping needs. Also, check whether they have been associated with Companies such as yours and that operating in similar industries. This is because, small or large, every business demands specific domain knowledge. When the question regarding the credentials of the bookkeepers at the service provider Company arises, one needs to ask different questions of the sorts including the persons who will be working with them on a particular assignment and their bookkeeping staffs’ credentials and qualifications. One should check out these bookkeepers’ background information in order to confirm their trustworthiness in their past dealings.

Also consider the rates they charge for different bookkeeping services, the assortment of services that are on offer, whether the services include payroll processing, state and federal taxes, its preparation and payments, financial reports and forecast reports. Go through the finer details, specifically the kind of services offered in each of their bookkeeping packages and whether they will complete the tasks online whenever needed.

Some other questions are the following. Are their finance people familiar with the taxation aspects in the country? Will the bookkeeping Company represent you in case of a quick financial audit? Regarding the tax auditing part of the business, will they carry out the whole paperwork and prepare documents that you require? Does the bookkeeping Company possess the know-how to supply you with enough support if necessary? Sometimes, each of the states in a country may have a different set of laws related to taxation. So, make it a point to choose a bookkeeping company that possess high familiarity with the tasks and substantial expertise with the tax rules and regulations of a particular state.

Article Source: http://EzineArticles.com/expert/Vish_K_S/344758
Article Source: http://EzineArticles.com/3445553

– See more at: http://acallresources.com/blog/average-cost-of-bookkeeping-services-for-small-business-by-vish-k-s/#sthash.neZmqvLh.dpuf


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Posted by admin on January 4th, 2017

Bookkeeping Services Near Me – How To Choose Right Services By Loretta V Smith

Many businesses want to hire bookkeepers to perform regular tasks. Budgets are stretched for some businesses and they are unable to hire full time workers for certain positions. These are businesses without accountants or bookkeepers. Fortunately, there are companies that offer these services.

The price ranges for these services vary. This is one of the important considerations for businesses to pay. Most often it is cheaper to hire for these services than to take on another permanent employee. This draws many businesses to these types of services. The economic benefits of this work will help you to save money.

You have more options with a bookkeeping company. These companies provide customers with a selection of services. Many of the work provided is specific to the type of business that you do. It doesn’t matter, whether you have a clothing store or a medical supply store. You can benefit from these services. They offer you a hassle-free way to conduct business. The time and money that you save can be reapplied to your business.

Cities around the country have a range of bookkeeping services. These companies perform a list of critical services. AWS Bookkeeping is an example of the companies in this category. Depending on the size of your businesses, your needs may be specific. It is important to consider which services are paramount to your business. Here are some of the typical services

Prepare business taxes

Throughout the year it is important to keep track of business taxes. Businesses often hire accountants to perform these tasks. It is possible find a more economic method of tracking business taxes. Bookkeeping services include tax maintenance and preparation. The most qualified companies also offer these services. Instead of hiring an accountant one time per year, bookkeepers are convenient. They will be more familiar with your tax scenario.

Employee payrolls

The payroll responsibilities of a business can require a lot of time. Studies have shown that business spend a significant amount of their time each week just preparing paperwork. There are individual components that factor into payroll. Having experienced workers prepare payroll work can save a lot of time. The amount of employees that you have will factor into this work. Small businesses may not find bookkeepers worth the cost. Larger businesses will quickly realize how beneficial these companies are to your productivity.


Homeowners’ association needs

Communities around the country have homeowners’ associations. There are many different financial responsibilities that factor into this work. Large communities are sometimes able to hire accountants for this work. Small and medium subdivisions look for more economic ways to get these tasks done. Bookkeepers are great alternatives in this category.

Large bookkeeping companies provide customers with many choice selections. It is possible to select more than one of these services and still save money. This is a benefit to your bottom line over time. You can hire these professionals on a weekly, monthly, or a yearly basis. Here is another way that your budget is considered.


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