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Essay / Research Paper Abstract
This 4 page paper is written in two parts. The first part considers if, in a profit making organization if profit is the only or best performance measure. The second part of the paper defines GAAP (Generally Accepted Accounting Principles) looking at the advantages and disadvantages from the perspective of a business owner. The bibliography cites 4 sources.
Page Count:
4 pages (~225 words per page)
File: TS14_TEprofit1.rtf
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Unformatted sample text from the term paper:
as shareholders. This is the bottom line for many companies. As Rover in the UK have discovered this week, a company cannot make losses and expect to survive. The way
a company is measured in terms of performance may start with the profit. However, we also need to remember that investors will want to maximise the rerun on their investment
as with each investment made there is always an opportunity cost (Nellis and Parker, 2000). It is due to the opportunity cost that the partial level of profit that is
made on the investment will also be important to the investor. If a company has only a low level of profit then the opportunity cost is high. If the same
level of investment could gain a better return in a different place, without any additional risk then any investor is likely to make the alternate investment. It is for
this reason that profit is measured as a percentage. However, the way a business is performing is more than simply the level, but also as a percentage of the turnover.,
This only indicates the final outcome, but to measure how efficient the company is and assess potential for improvement there are also other ratios that can be used. These allow
for comparison so that like companies can be measured against each other. Measures that can be used include the return on equity is the net profit before interest and
tax divided by the shareholders funds. This gives an indication of the amount of money the company is making compared to the investment within it (Elliott and Elliott, 2003). The
financial leverage multiplier which the capital employed divided by the shareholders funds. This is a measure of borrowing, and expresses how much bigger the capital used is than the shareholder
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