Mon, Jul 31 - Holy Catholic Mass from the National Shrine

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Training Vlog: Day 280 of Year 2 of Operation Great Reset - Build Back B...

“How will this expanded role of governments manifest itself? A significant element of new “bigger” government is already in place with the vastly increased and quasi-immediate government control of the economy. As detailed in Chapter 1, public economic intervention has happened very quickly and on an unprecedented scale. In April 2020, just as the pandemic began to engulf the world, governments across the globe had announced stimulus programmes amounting to several trillion dollars, as if eight or nine Marshall Plans had been put into place almost simultaneously to support the basic needs of the poorest people, preserve jobs whenever possible and help businesses to survive.” ― Klaus Schwab, COVID-19: The Great Reset

Holy Rosary from Lourdes || English Rosary || 30.07.2023

Sun, Jul 30 - Holy Catholic Mass from the National Shrine

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Sat, Jul 29 - Holy Catholic Mass from the National Shrine

Accounting: The Language of Business - Vol 2 (Intermediate: Part 89)

When you give up vengeance, make sure you are not giving up on justice. The line between the two is faint, unsteady, and fine...Vengeance is our own pleasure of seeing someone who hurt us getting it back and then some. Justice, on the other hand, is secure when someone pays a fair penalty for wronging another even if the injured person takes no pleasure in the transaction. Vengeance is personal satisfaction. Justice is moral accounting...Human forgiveness does not do away with human justice.

Lewis B. Smedes

Accounting and the Time Value of Money (Part B)

by

Charles Lamson

Simple Interest

The term simple interest means that interest is computed on only the principal (the initial amount) but is not computed on any interest earned and left on deposit. The simple interest is the initial investment multiplied by the stated interest rate for a single period and the amount of time (in terms of the number of periods) the investment is held.

Simple Interest = Principal * Interest Rate * Time           ( 7.1)

Compound Interest

 Interest computed on both the principal and the interest left on deposit is referred to as compound interest. Any interest earned is then immediately included in the computation of the next period's interest. The compounding period can be over any time. Such as a quarter or a day. 

Exhibit 7.2 provides a graphical depiction of compound interest. assume you invest $100 today for 10 years at an annual interest rate of 10%. Today (Year 0) you have $100. After the first year, you have the original $100 plus an additional $10 ($100 * 10%) of interest. So, you now leave $110 on deposit.

During the second year, that $110 also earns 10% interest or $11 ($110 * 10%). At the end of the second year, your deposit is valued at $121 ($100 + $10 plus $11). This pattern continues until the 10th year, when you have a total of $259, which consists of your original deposit or principal of $100 plus $100 of interest earned on the principal ($100 * 10% * 10 years) and $59 of interest earned on the interest left on deposit. If the interest earned only simple interest, your total value at the end of the 10th year would be $200. That is, interest would be earned only on the principal ($100 = $100 * 10% * 10 years), not on the interest left on deposit. Therefore, compounding increases your return by $59 and increases your effective interest rate. 

An illustration of compound interest with annual compounding is presented in Example 7.2.

EXAMPLE 7.2

Compound Interest with Annual Compounding

PROBLEM: Solitude Company borrowed $60,000 for 3 years at a 5% interest rate with interest compounded annually. Solitude will repay the entire amount (principal plus interest) at the end of the 3-year period. Thus, it is not paying any interest until the end of the three years. How much interest will it pay? Compare this amount of Interest to the amount computed in Example 7.1 using the simple interest computation.

SOLUTION: We begin by computing the interest incurred in the first year, which is $3,000 ($60,000 * 5%). We then add this amount to the principal to compute the next period's interest of $3,150 ($63,000 * 5%). We add this amount to the principal plus interest balance at the beginning of the period to get a principal plus interest balance of $66,150 at the end of the second period. Interest in the third period is then $3,308 ($66,150 * 5%), resulting in a principal plus interest balance at the end of 3 years of $69,458. 

Assuming annual compounding, the total interest is equal to $9,458 ($3,000 + $3,150 + $3,308). This total interest is $458 higher than the $9,000 simple interest incurred over the same 3-year period in Example 7.1.

As Example 7.2 shows, if interest is compounded, the total amount of interest earned or paid is higher than if simple interest is used. Likewise, the more frequently the interest is compounded, the more interest is earned. If, for example, interest is compounded monthly, then the computed interest is higher than if interest is compounded annually. 

*GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 317-318*

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Catholic Daily Mass - Daily TV Mass - June 28, 2023

Rosary from Lourdes - 28/07/2023

ROSARY NOVENA FROM LOURDES - 2023-07-27 - Rosary Novena from Lourdes - 2...

Training Vlog: Day 277 of Year 2 of Operation Great Reset - Build Back B...

“The fourth industrial revolution, however, is not only about smart and connected machines and systems. Its scope is much wider. Occurring simultaneously are waves of further breakthroughs in areas ranging from gene sequencing to nanotechnology, from renewables to quantum computing. It is the fusion of these technologies and their interaction across the physical, digital and biological domains that make the fourth industrial revolution fundamentally different from previous revolutions. In” ― Klaus Schwab, The Fourth Industrial Revolution

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Accounting: The Language of Business - Vol. 2 (Intermediate: Part 88)

There is no company - no corporation on earth that engages in accounting fraud to the extent the Imperial Federal Government of the United Sates does. Not many congressmen are willing to come forward with the details.

Neal Boortz

Accounting and the Time Value of Money (Part A) 

by

Charles Lamson

Introduction

To determine the value of money you have in the bank today, you simply check the account balance. Yet how would you determine the amount of money you need to save each year in order to purchase a new car in the future? You first need to determine when you want to buy the car. Then, you have to decide when you will start saving. You will also have to estimate how much interest your savings will earn based on the interest rate on your savings account. After you make these estimates, mathematical techniques involving the time value of money enable you to compute the total amount you must save to purchase the car. 

Companies use time value of money techniques in a variety of areas---from capital budgeting to assessing financing needs to determining pension obligations. Consider Adidas, the German sports footwear, apparel, and accessories company. In its 2016 annual report, Adidas stated that it used present value techniques to evaluate returns on planned capital expenditures. In its footnotes to the financial statements, Adidas disclosed that it used present values in accounting for receivables, leases, pensions, and asset impairments. For example, Adidas reports its receivables and other financial assets at fair value, estimating the fair value as the present value of future cash flows. In financial reporting, time value of money concepts are critical to understanding these areas and others such as long-term liabilities and the valuation of certain types of financial instruments.

The next several parts of this analysis discuss the fundamental concepts needed to work with the time value of money throughout the remainder of this analysis. We begin with the basics of the time value of money, including simple and compound interest. We then illustrate several problems involving the future and present values of a single sum. Next, we convert problems involving the future and present values of ordinary annuities and annuities due. Finally, we discuss more complex areas such as deferred annuities before a highlighting of the time value of money.

 

Time Value of Money Basic Concepts

The time value of money concept means that a dollar received today is worth more than a dollar received at some time in the future. This statement is true because a dollar received today can be invested to provide a return. For example, if you invest $1,000 in a savings account and the savings account is 2% annually, then you will have $1,020 one year from today. The $20 earned on the initial investment is your interest, the return on money over time. 

Time Value of Money in Accounting

The time value of money concept is critical in several areas of accounting, particularly when valuing many of the assets and liabilities reported in the financial statements. For example, measuring assets and liabilities at fair value may require time value of money computations. Time value of money concepts determine the asset's value today based on the future cash flows it will generate. To illustrate, consider a company that leases equipment to a customer. In return, the customer pays the company periodic cash payments in the future for the use of the leased equipment. The value of the net investment in the lease today can be measured using the future cash flows the company will receive and time value of money concepts.

The same approach applies to determining the fair value of a liability. For example, a pension liability today can be measured using time value of money concepts and the future cash outflows a company promises to make to its employees when they retire. The future cash flows depend on many estimates and assumptions, such as when the employee will retire, how long the employee employee will live after retirement, and the inflation rate.

The measurements of many financial statement items such as leases, pensions, and bonds payable are based on estimates of future cash flows and time value of money computations. Exhibit 7.1 illustrates several financial statement items and the type of future cash flows used to measure them. 

EXHIBIT 7.1 Examples of Financial Statement Items Measured at the Present Value of Future Cash Flows 

We begin our discussion of the time value of money in Part 89 by distinguishing between two types of Interest---simple and compound. 

*GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 315-317*

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Training Vlog: Day 274 of Year 2 of Operation Great Reset - Build Back B...

“Shared understanding is particularly critical if we are to shape a collective future that reflects common objectives and values.” ― Klaus Schwab, The Fourth Industrial Revolution In this video, my training performance is enhanced to seemingly miraculous levels, while I catch up with neighbors; and toward the end, I tell the story of my deathbed conversion to Catholicism in my last narrow escape from the icy, skeletal grip of the Grim Reaper, when I visited the hospital yet again.

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Rosary from Lourdes - 19/07/2023

Training Vlog: Day 269 of Year 2 of Operation Great Reset - Build Back B...

“Today, a middle-class job no longer guarantees a middle-class lifestyle, and over the past 20 years, the four traditional attributes of middle-class status (education, health, pensions and house ownership) have performed worse than inflation.” ― Klaus Schwab, The Fourth Industrial Revolution Goin' bougie. Training in the suburbs in Mom's neighborhood and my old stomping grounds, the beautiful Tanglewood subdivision. The weather was very warm and humid, but overcast. The sun was mostly hidden by cloud cover, so it wasn't too bad. I was rather shocked at how strong my training performance was. I was feeling fairly strong, despite all the medical drama I've been experiencing lately. I guess all the training and awesome supplements I've been taking lately helped me stay strong during this challenging health ordeal experience.

Rosary from Lourdes - 18/07/2023

Catholic Daily Mass - Daily TV Mass - July 18, 2023

It is not peace I have come to bring, but a sword

Gospel
Matthew 10:34-11:1 ©

It is not peace I have come to bring, but a sword

Jesus instructed the Twelve as follows: ‘Do not suppose that I have come to bring peace to the earth: it is not peace I have come to bring, but a sword. For I have come to set a man against his father, a daughter against her mother, a daughter-in-law against her mother-in-law. A man’s enemies will be those of his own household.

  ‘Anyone who prefers father or mother to me is not worthy of me. Anyone who prefers son or daughter to me is not worthy of me. Anyone who does not take his cross and follow in my footsteps is not worthy of me. Anyone who finds his life will lose it; anyone who loses his life for my sake will find it.

  ‘Anyone who welcomes you welcomes me; and those who welcome me welcome the one who sent me.

  ‘Anyone who welcomes a prophet will have a prophet’s reward; and anyone who welcomes a holy man will have a holy man’s reward.

  ‘If anyone gives so much as a cup of cold water to one of these little ones because he is a disciple, then I tell you solemnly, he will most certainly not lose his reward.’

  When Jesus had finished instructing his twelve disciples he moved on from there to teach and preach in their towns.

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Accounting: The Language of Business - Vol. 2 (Intermediate: Part 87)

Andre Tippett was an impact player who consistently played at a level that set him apart. Accounting for him limited what an offense could do. He made quarterbacks nervous.and rightly so.

Raymond Berry

Statements of Financial Position and Cash Flows and the Annual Report (Part X)

by

Charles Lamson

DuPont Analysis

Profitability enables a company to generate a return for its shareholders. Specifically, the return on equity (ROE) ratio measures the return on shareholders' investment in the company. This return is enhanced by effective use of available resources to increase revenue.

 Dupont Analysis is a financial statement analysis tool that separates ROE into components to analyze a company's sources of profitability. We focus on the form of the DuPont Analysis that indicates how a company uses debt financing to increase its return to shareholders. In subsequent parts, we will discuss other forms of the DuPont Analysis to further analyze additional aspects of profitability.

We begin with ROE, which is net income divided by average stockholders' equity:

ROE = Net Income / Average Stockholders' Equity (6B.5)

We expand the ratio by dividing net income by average total assets and multiplying by average total assets divided by average stockholders' equity:

(6B.6)

As noted in Part 62, net income divided by average total assets is return on assets (ROA). The second part, average total assets divided by average stockholders' equity, is another leverage ratio, called financial leverage. The lower the ratio, the lower the financing from debt. A higher ratio indicates more debt financing and higher leverage. ROE is also expressed as follows:

ROE = Return on Assets X Financial Leverage (6B.7)

From Equation 6B.7, observe that a company with a high ROA can generate a high ROE. High financial leverage also increases ROE. Exhibit 6B.2 illustrates the effect of financial leverage on return on equity. When ROA is constant, a company can increase its ROE by increasing its financial leverage. 

EXHIBIT 6B.2 Effect of Financial Leverage on Return on Equity

Therefore, shareholders can benefit from increased profitability when a company uses debt financing. However, too much debt can increase a company's risk of bankruptcy.

EXAMPLE 6B.3 DuPont Analysis of Johnson & Johnson Company, 2016 and 2015 

PROBLEM: In Part 62, we computed Johnson & Johnson's return on equity (ROE) as 23.6% and 21.9% in 2016 and 2015, respectively. Use the DuPont analysis to determine whether this increase in ROE is due to a change in return on assets or financial leverage. The following information is relevant:

SOLUTION: Using equation 6B.6 we compute ROE using the DuPont Analysis as follows:

Separating ROE into ROA and financial leverage indicates that Johnson & Johnson's ROA increased to 12.05% in 2016 from 11.68% in 2015 representing an approximate 3.2% increase from the prior year [(12.05% - 11.68%) / 11.68%]. The company's financial leverage also increased to 1.959 in 2016 from 1.872 in 2015. This is approximately a 4.6% increase from the prior year [{1.959 - 1.872) / 1.872]. The increase in financial leverage and increase in ROA suggest that Johnson & Johnson's increase in ROE is due both to the increasing ROA and financial leverage. 

*GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 311-313*

end

Lourdes United 2023 – 15h - Rosary at the Grotto

Catholic Daily Mass - Daily TV Mass - July 16, 2023

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Training Vlog? Day 267 of Year 2 of Operation Great Reset - Build Back B...

“As all these trends happen, the winners will be those who are able to participate fully in innovation-driven ecosystems by providing new ideas, business models, products and services, rather than those who can offer only low-skilled labour or ordinary capital.” ― Klaus Schwab, The Fourth Industrial Revolution Deathbed confessions.

July 2023 New Moon Guided Meditation | Manifest Your Dreams | Soul Nourish

Rosary from Lourdes - 15/07/2023

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Accounting: The Language of Business - Vol. 2 (Intermediate: Part 86)

You'll see all other mortal sinners, the ones who flout the honor owed to gods or guests, or loving parents--you'll see them get the justice they deserve. For Hades holds men mightily to a strict accounting down below the earth; he sees all things, inscribes them within the book of his remembering.

Aeschylus

Statements of Financial Position and Cash Flows and the Annual Report (Part W)

by

Charles Lamson

Solvency

Solvency measures a company's ability to meet it's long-term obligations as they come due. A company can finance its operations with debt or equity. When a company decides to use debt, it has to repay the amount borrowed and generally make periodic interest payments. Both creditors, and investors need to assess the company's ability to pay off its long-term obligations when due. Creditors are concerned about timely repayment, investors are interested in sharing profits and securing assets in liquidation as the residual claimants. Firms must pay principal and interest on debt before equity investors share in firm profits. If a company has too much debt, there is a risk that the firm will not be able to repay its debt and be forced to declare bankruptcy.

Two common measures of solvency:

1. Debt-to-equity ratio

2. Interest coverage 

Debt-to-Equity Ratio

Leverage is an indicator of the relative size of financing from creditors versus financing from owners. The debt-to-equity ratio is a measure of leverage computed as:

Debt-to-Equity Ratio = Total Liabilities / Total Stockholders' Equity      (6B.3)

A company with high debt must devote significant resources to making interest and principal payments. When operations are strong and the economy is growing, a company is generally able to make its debt payments. However, if sales decline or an economic recession occurs, the company may struggle to make debt payments. Generally, a high debt-to-equity ratio indicates lower solvency and a greater risk of default. 

Interest Coverage Ratio

The interest coverage ratio measures a company's ability to make payments on, or service, its debt by computing the amount of interest payments it can make from its operating earnings. This ratio is also called the times interest earned ratio. Operating earnings are earnings before interest expense and tax expense. Operating earnings are also known as earnings before interest and taxes or EBIT. Adding both interest expense and tax expense back to net income provides a measure of income that is available to service debt. The interest coverage ratio equation is:

The ratio indicates how many times a company can cover its interest charges before taxes. A high interest coverage ratio indicates that a company is able to service its debt---that is, the company has high solvency. 

EXAMPLE 6B.2 Solvency Analysis of Johnson & Johnson Company, 2016 and 2015

PROBLEM: Using the following information from Johnson & Johnson's 2016 annual report, compute the debt-to-equity ratio and interest coverage ratio for 2015 and 2016. What does each measure indicate about Johnson & Johnson’s solvency?

SOLUTION: The table below provides the computations of Johnson & Johnson's debt to equity ratio and interest coverage ratio for 2016 and 2015.

Johnson & Johnson's debt to equity ratio of 0.893 in 2015 is below 1, indicating that the company obtains more of its financing from shareholders than from creditors. In 2016, its debt-to-equity ratio is 1.005 indicating that the company obtains more of its financing from creditors than from the shareholders. The ratio has increased from 2015 to 2016, implying a decrease in solvency.

The interest coverage ratio, which is 32.006 in 2015 and 28.122 in 2016, is higher than 1, indicating that Johnson & Johnson is able to service its debt from current operations. However, the ratio has decreased from 2015 to 2016, also suggesting a decrease in solvency. 

Overall, this ratio analysis suggests that Johnson & Johnson is in a strong position to meet its long-term obligations.

EXHIBIT 6B.1 summarizes the liquidity and solvency ratios.

EXHIBIT 6B.1 Liquidity and Solvency Ratios

*GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 309-311*

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