Question

1. Compare and contrast the financial reporting requirements for public and proprietary companies in Australia.

2. The stock market is generally able to distinguish between cash-flow effects from the impact on reported profit of accounting policies. That is, the market is not fooled by the bottom line.’ Do you agree? Provide examples to support your answers.

3. Explain how Du Pont analysis can assist evaluating shares as investments alternative.

Answer 1

1. The Public and Private business are mostly bound by the same accounting policies and rules and Principles for observing their profit and analysing and valualing their assets, Debts, liabilities, equity etc. value as the same concept like the Public company as well as private company whether these company are situated in Australia or any other place and publish or disclosure for their Financial statements as in better quality that are effective for the user of the same like creditors, debtors etc.

Private Companies are not generally allowed to raise capital through the issuing of shares, Debentures, Bonds and preference share whether they are redeemable or not. But the Public company are allowed to raise funds as well as capital through issuance of shares, Debentures, Bonds and preference share whether they are redeemable or not.

The Main Objective of private companies to earn huge profit whether customer are satisfird with them or not, they have no impact of satisfaction of customers but the main objective of public company is to satisfied their customer and not to earn huge profit and with intention of social welfare.

2. The stock market is generally able to distinguish between cash-flow effects from the impact on reported profit of accounting policies. That is, the market is not fooled by the bottom line that I am agree with the above line.

Because the cash flow are generally shows that how much cash are flowed while purchaseing the share and selling the shares that is called cash outflow or cash inflow.

cash flow are the main criteria to understand the liquidity position of the company. cash is the major part of the business for running the bussiness is in effective manner. So,The stock market is generally able to distinguish between cash-flow effects from the impact on reported profit of accounting policies. That is, the market is not fooled by the bottom line.

3. Share are the option of giving the higher return in future by investing in them so this is called investment. investment are the time of depositing money that gives higher return other than else. Investing in shares according to Du Pont analysis is better deal for those person who have proper knowledge of stock market. Stock market helps the prople to give higher return agter investing in stock market.