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Examination of the Solvency of a Company in an International Accounting Environment
332-342Views:313It is highly important for every business to be solvent for both short and long term. Solvency is a prerequisite for the operation of a company, especially short term solvency, also known as liquidity. Liquidity plays a prominent role in the life of a given business. For this it is important for a business to strive to avoid liquidity problems. In the present article we examine the short term solvency of an American corporation, which prepares its financial statements according to the US GAAP (The United States Generally Accepted Accounting Principles). We present the fundamental short term solvency ratios, and the subsequent conclusions. Since for the calculation of the ratios the data of the examined company’s financial statement is needed, which shows differences from the yearly report of a Hungarian company, in the article we will also discuss the differences between the two accounting systems with regard to those items, which have an effect on the liquidity ratios, in particular current assets and short-term liabilities.
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Company Valuation of an Entity Operating in International Accounting Environment
320-331Views:539Company and asset valuation plays a major role nowadays. Determining the company’s value is a key factor for management in appropriate decision making, and it is a necessary step for individuals who wish to invest and for investors. There are numerous models which utilize different methods for company valuation. In our study we based our valuation on the McKinsey model for a company in an international accounting environment. In the study we present the main attributes of the McKinley model, its structure, which includes the main steps of valuation. We put a special emphasis on the calculation of free cash flow, future balance sheets and profit and loss accounts anticipation as well as future turnover, which highly influences the changes of data in the future reports thus in the company value. The McKinsey model is a discounted cash flow model, in which the company value and the consequent future cash flow can be determined as present value.
