14

The primary goal of most companies is to make money for its shareholders. They put money in, and they expect to either get dividends, or be able to resell their shares for a higher amount. It's the shareholders who own the company, and they are the ones deciding. And they want money. Otherwise they would give their money to charity. So when a company makes a ...


13

Specific case of EasyJet It is impossible to answer whether EasyJet in particular could do something different, without some detailed case study. Just stating that the firm was profitable in past is not enough information to say anything in this situation. Profits are routinely paid out as dividends to shareholders or reinvested in the company (we dont know ...


10

It might make sense to cut the jobs as it looks like they will be operating at reduced capacity. The article does not say that they could not keep on the workers and "smooth" their yearly losses and profits but merely that they choose not to do this. Government bailouts in similar situations have been critized for the reasons that you state: it ...


7

So, here goes: Gross Profit = Revenue - COGS (Cost of Goods Sold) If you bought an orange for a dollar and sold it for two, you have one dollar of Gross Profit Operating Profit = Gross Profit - Labor - SG&A If you're business paid someone \$100 to sell 200 oranges (like above), you would have \$200 in Gross profit, and \$100 in Operating Profit (assuming ...


6

Instead of currency symbols, some of which are used by more than one currency as @HotLicks suggests, you may want to consider the three-letter currency codes used in most currency exchanges. Here is a list: https://en.wikipedia.org/wiki/ISO_4217#Active_codes.


5

Not sure an economist can answer this particular question about Escobar's wealth and not only because all the given estimates are uncertain. A more interesting question for an economist (or at least for me) would be: What is Escobar's (a drug firm) mark-up? Or what is the economic size of the international market for cocaine? The most serious source of ...


4

All assets which have a finite useful life are depreciated. For example, your patents or copyright might hold for 5 or 10 years but no more. Thus, it is quite coherent to reflect the loss of value through depreciation and amortization. Same goes for a software for example: in 5 years time, a software might be obsolete, so we need to reflect this in the ...


4

Overall profits are irrelevant to layoffs. What matters are marginal profits from employees. If the marginal profit from retaining employees is negative, then employees should be laid off. Similarly, whether a loan should be taken depends only on the marginal profit from taking that loan. It's really not clear what you mean by "offsetting" losses ...


3

One possible circumstance relates to firms undertaking long term contracts (eg for building or engineering work). Where a contract is uncompleted at the end of a period, the firm may (depending on its accounting policies) include in its turnover an amount reflecting its assessment of the work in progress. Sometimes unforeseen difficulties in completing a ...


3

A December fiscal year end, which gives a first quarter of three months ending March 30, aligns the fiscal and the tax year. This can be very convenient and in the United States is sometimes required. In addition, some regulated firms like banks are required to prepare documents on calendar quarters regardless of the month of their fiscal year end, and it is ...


3

You are confusing your balance sheet with your income statement, and putting a few things in the wrong bins. The basic accounting identity is: $$ Assets=Liabilities+Owners' Equity$$ Assets are generally valued not at cost (or as you put it, "the price I have paid them on the first place"), but at either their hold-to-maturity value (i.e., the present ...


3

I think an important point of view for this question is also from financial side: The profit made in previous years may not necessarily accessible for the company in form of cash or other assets. In most likelihood it may have been distributed to shareholders as dividend. If it were accessible, the company would be cash rich and may very well would have not ...


3

"Stockholder's equity" is how we label Equity in corporations, so it should be identical to the general concept of "Equity", except if, by a confusing misuse of words, by "Stockholder's equity" the authors meant "Shareholder Capital", which sometimes it is used to mean only a part of Equity (the nominal (par) value of ...


2

I disregarded the information about imports and subsidies because I assumed that GDE was calculated using the equation Y=C+I+G+X-M. This is where I went wrong. GDE is calculated as C+I+G, but to get GDP at market prices, I need to add nett exports.


2

A firm's Output $Y$ (in value-added terms, i.e. over and above the value of purchases of third-party services and materials) is distributed as reward to the factors of production. Denote $K$ the book value of the company's assets. Use the standard notation $L$ for payments to the labor/human capital input to production. Denote $r$ the capital rate of ...


2

You mean 26 pay dates per year, right? Then no, because a year is 365 days long and a 26 biweeks are $26 \cdot 14 = 364$ days long. Therefore any year that starts with a Friday (which is usually a pay date) should have 27 pay dates. However if Jan 1 is a holiday (depends on where you live), the paydate is probably moved to Dec 31 so the preceding year would ...


2

Gross profit = revenue - cost of goods sold (COGS) Operating Profit (also known as EBIT or operating income) = Operating Revenue - COGS - Operating Expenses - Depreciation & Amortization Net income (also known as net profit) = EBIT - Interest - Taxes Operating expenses: include rent, equipment, inventory costs, marketing, payroll, insurance and funds ...


2

They are not the same. Basic accounting equation: Assets = Liability + Shareholder Equity Assets refers to what the company actually owns: cash, property, inventory, etc. Assets are paid for in two major ways: debt (liability) and stock (equity). Essentially, everything a company owns is paid for by a combination of (1) getting loans from other entities ...


2

There are several issues here, but the three most significant are: The National Accounts treatment of the public sector, which is set out in international standards and controlled by the Office for National Statistics. This is what you might naturally look to if you wanted to compare the size of the UK's public sector with those of other countries, or its ...


2

If you make a payment of \$X, then: loan balance (bank asset) goes down by \$X, and deposit balance (bank liability) goes down by \$X. I.e., the bank balance sheet shrinks (as do money aggregates that include bank deposits). The bank may have held a loan loss provision against the loan, and so the loan may have been carried on the balance sheet at less ...


2

Why can't they offset the loss (caused by special case) from their earlier profits rather than resort to drastic job cuts and government bailout? There are several reasons: History is already past, decisions are made to handle now and the future. The limiting factor is not really the profits but cash (generally called with a more fancy name as liquid ...


1

Suggestion of @herr-k led me to this Wikipedia article: https://en.wikipedia.org/wiki/List_of_circulating_currencies. It lists all current currencies and their symbols.


1

Suppose McDonald's has 2 franchisees. Franchisee A under its current franchise arrangement has to pay \$100 a year of minimum rent until the current arrangement expires in 2025. Franchisee B, on the other hand, has to pay \$75 a year but its arrangement expires in 2019. The future minimum rent due to McDonald's in 2018 is $\$100 + \$75 = \$175$. This ...


1

@ThisIsNoZaku is correct, but I thought I should explain the mechanism. When you have a tax asset, you were required to pay a tax by the taxing authority before GAAP says the income happened. A tax asset, in GAAP terms, is a prepaid liability. When the tax rates fell and the income was realized, the prepaid tax cannot be recovered. It is gone for good. ...


1

The lower tax rate means that they will gain less benefit when they apply their deferred tax assets against their income. They have large amounts of these assets recorded on their balance sheets and are adjusting them to reflect the new, lesser value.


1

The Interest Rate is a more general term, and can cover all shorts of financial transactions where one expects by a contractual clause to get their money back plus "a little something" (I am not referring to the expected profit from an investment, where the "little something" is not a contractual obligation). So you can talk about "the interest rate of a ...


1

By issuing credit notes in the period higher in value than the invoices of the period. Typically, such credit notes correct mistakes or award overall discounts related to past periods, so they mess data up.


1

I don't really see why you would price an ETF at fair value and not at last market price, given that those funds are very liquid. But in either cases you need to have two distinct securities in your portfolio, as the two classes of shares that you own in the ETF bear different risks, and will yield different performances, due to the xrate.


1

It appears that you mix up the timing of invoicing with the timing of accrual of an expense or a revenue. There exist special Balance Sheet accounts that do not affect the P&L (with names like "Next-period Expenses" in the Assets side or "Next-period Revenues" in the Libailites/Equity side, depending on the country of course) which you use in order to ...


1

The answer is in the text of IAS 12, and basically amounts to "it's unreasonable to require it, and if we allow firms discretion in doing it, they will only do it when it's in their favor": The reliable determination of deferred tax assets and liabilities on a discounted basis requires detailed scheduling of the timing of the reversal of each temporary ...


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