Question

'Profit is the maximum value a company can distribute during the year and still expect to...

'Profit is the maximum value a company can distribute during the year and still expect to be worth as much at the end of the year as it was at the beginning.' Discuss this statement, and comment on its value in measuring profit for decision-making

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer:
Profit is calculated by reducing direct costs like labor, and raw material and indirect costs (overheads) from sales value.
Hence, basic formula of annual profit is given by,

Hence, it is the extra amount which a company generates in a year apart from its proper functioning and external liabilities, so even if company distributes this money, it will come at the stage where it was in the beginning of current year. Because if it distributes current year profit it will be left with only last year profit which will make its valuation at the same level where it was at the beginning of the year as there is no gain in profit this year after distribution to increase its valuation.

(plz give me a thums up...if my answer helped you and if any suggestion plz comment, Yr thums up boost me)

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
'Profit is the maximum value a company can distribute during the year and still expect to...
'Profit is the maximum value a company can distribute during the year and still expect to be worth as much at the end of the year as it was at the beginning.' Discuss this statement, and comment on its value in measuring profit for decision-making. (answer 400-500 words)
Green Mountain Ltd., a private company, has reported increasing profit every year for the past five...
Green Mountain Ltd., a private company, has reported increasing profit every year for the past five years. Green Mountain would like to expand operations by adding three new retail stores within the next three years, and is seeking a loan from its bank to help fund the expansion. In Green Mountain’s most recent statement of financial position, the company reported a positive cash balance and a healthy current ratio of 2. Green Mountain’s controller believes that a statement of cash...
Nancy’s Notions pays a delivery firm to distribute its products in the metro area. Delivery costs...
Nancy’s Notions pays a delivery firm to distribute its products in the metro area. Delivery costs are $30,000 per year. Nancy can buy a used truck for $8,000 that will be adequate for the next 3 years. Operating and maintenance costs are estimated to be $20,000 per year. At the end of 3 years, the used truck will have an estimated salvage value of $3,000. Nancy’s MARR is 15%/year. a. What is the present worth of investment b. What is...
The Miller Company earned $190,000 of revenue on account during Year 1. There was no beginning...
The Miller Company earned $190,000 of revenue on account during Year 1. There was no beginning balance in the accounts receivable and allowance accounts. During Year 1, Miller collected $136,000 of cash from its receivables accounts. The company estimates that it will be unable to collect 3% of its sales on account. What is the net realizable value of Miller's receivables at the end of Year 1?
expect Tiger Company will pay a dividend of $60 million and repurchase $90 million of its...
expect Tiger Company will pay a dividend of $60 million and repurchase $90 million of its common shares next year (Year 1) with both expected to grow 6% in Year 2 and 7% in Year 3. If you expect the company to be sold for $15 billion at the end of Year 3, and you have calculated the cost of equity to be 7.6%, what do you estimate the true value of the company’s net worth to be now? First...
You expect Sterling Company will pay a dividend of $60 million and repurchase $90 million of...
You expect Sterling Company will pay a dividend of $60 million and repurchase $90 million of its common shares next year (Year 1) with both expected to grow 6% in Year 2 and 7% in Year 3. If you expect the company to be sold for $15 billion at the end of Year 3, and you have calculated the cost of equity to be 7.6%, what do you estimate the true value of the company’s net worth to be now?...
You have two investment options: Option A You can purchase $2,000 of stock in a company....
You have two investment options: Option A You can purchase $2,000 of stock in a company. You estimate that this company will earn a total of $10,000 during its life. You expect the company to pay all of these earnings to you as a dividend 10 years from today. Currently, the risk-free rate is 1% but this investment is really risky and you feel that a 14% discount rate is appropriate. Option B You can purchase $2,000 worth of bonds....
At the beginning of a fiscal year, a company has 2,000,000 in fixed assets. During that...
At the beginning of a fiscal year, a company has 2,000,000 in fixed assets. During that year, it makes $10,000,000 in net sales. At the end of the fiscal year it has $1,500,000 in fixed assets. What is its fixed-asset turnover ratio?
The following extracts are from the statements of profit or loss by Snow Co's and its...
The following extracts are from the statements of profit or loss by Snow Co's and its subsidiary Ice Co for the year ended 31 December 2018. Snow Co Ice Co € € Revenue 600,000 300,000 Cost of sales (400,000) (200,000) Gross profit 200,000 100,000 During the year Snow Co sold goods to Ice Co for €20,000, making a profit of €5,000. Fill in the blanks in the sentences below referring to the consolidated statement of profit or loss of Snow...
A small company purchased now for $25,424 will lose $1,142 each year for the first 4...
A small company purchased now for $25,424 will lose $1,142 each year for the first 4 years. An additional $9,148 invested in the company during the fourth year will result in a profit of $7,272 each year from the fifth to the fifteenth year. At the end of 15 years, the company can be sold for $30,290. Compute the future worth of the investment when MARR = 15%.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT