INTG 201 Lecture 11: INTG201 Profit Planning Lecture Notes (Autosaved)

• School: McGill University
• Department: Integrated Management
• Course: INTG 201
• Professor: Mary Maguire

Document Summary

Identify drivers of the returns: profitability, efficiency or leverage, enable company to understand the source of superior or inferior returns. Invest less, borrow more more roe (use less of own money: higher leverage leads to a lower roe. There is a variety of flexibility allowed in financial reporting: always keep in mind of industry differences. Need to ensure that financial statement are compared on a consistent basis: sometimes, need to adjust for some items before doing financial statement analysis, eg. earthquake loss. Earnings management remains a serious concern: need to ensure firms are not playing ga(cid:373)es or are (cid:862)(cid:272)ooki(cid:374)g the (cid:271)ooks(cid:863, cannot blindly look at numbers. Business transactions are recorded when they occur and not necessary when cash is paid or received: cannot book revenue until the job is done sometimes, cash occurs after the transaction. Eg. paying by credit card for the store: accounts receivable a increases, credit sales revenue, e increases.