Professional Documents
Culture Documents
Disadvantages
1. Short-Termism of Firms.
1. The quality of the due diligence performed: did it highlight the key risks involved & support the
initial investment case for the transaction?
2. The complexity of the transaction: a more complex integration process often makes success
harder to achieve.
3 .The external environment: e.g. an adverse change in the economic environment can damage
the performance of the business taken over; competitor response is also difficult to anticipate
(they may see a takeover as a great opportunity)
EMPLOYERS
1. Saves time as management have only
to deal with trade union instead of all
workers.
2. Additional useful communication
channels on workers problems and
management plans.
Advantages of delayering
Disadvantages of delayering
organised in teams
5. Increasing workload.
DISADVANTAGES
i. Increased domestic competition. Non
competitive local firms may force to close
down.
Main Use
Main focus
Usefulness
Limitations
Marginal costing
(Contribution costing)
To help with short-term
decisionmaking in the
forms of:
-break-even analysis
-margin of safety
-target profit
-contribution sales ratio
-limiting factors
-special order pricing
costs are classified as
either fixed or variable
contribution to fixed
costs is calculated as
selling priceless variable
costs
marginal cost
contribution
concept of contribution
is easy to understand
useful for short-term
decisionmaking, but no
consideration of
overheads
costs have to be
identified as either fixed
or variable
all overheads have to be
recovered, otherwise a
loss will be made
calculation of selling
prices may be less
accurate than other
costing methods
Absorption costing
(Full costing)
-calculating profit
-calculating inventory
values valuation for
financial statements
A company's financial performance regulates its financial health. Performance and health are
linked through the net income account on the income statement and the equity account on the
statement of financial position.
The statement of financial position reports financial health of a company on a specific date in
time "as of Dec. 31, 2015," for example. The basic accounting equation informs that assets,
the resources employed to conduct business operations, are acquired through either borrowing
or through owner's equity Assets = Liabilities + Owner's Equity.
Change in the owner's equity account from the previous period is the principal marker of the
company's financial health. An increase in owner's equity is a sign of good health. It shows that
the company is relying less on debt to its fund operations. Conversely, a decrease in owner's
equity shows the opposite. The statement of financial position reports the financial health of a
company as of a specific date; the income statement reports income and expense activity for a
specific period of time. It shows how much money the company made after accounting for all
expenses. The bottom line figure represents its profit or its loss.
The company can either distribute the profit directly to the owner as an owner's draw, or it can
reinvest the profit in the business. In either case, the profit is reflected in the owner's equity
section of the statement of financial position by using the "expanded accounting equation." The
expanded accounting equation is an affirmation of the interrelationship between the income
statement and the statement of financial position.