ACCOUNTING ANALYSIS



Accounting Analysis

[Name of the Institute]

Accounting Analysis

Question # 1

Answer.

Yes, if Fox and Company wants to enhance the owner's wealth by reducing the staff salaries than it can achieve the purpose of reducing the cost and generating the maximum profit, as reducing the cost leads to maximizing the profit. But if the salaries of the staff are reduced than there are many chances that staff working in the organization might resign from the organization. (Fraser et.al ,1998,pg.98-99) If it happened so, then the opportunity cost will be occurred because staff working in the organization resign because of reduction in their salaries then it means that organization have to bear the other costs for instance in hiring of the staff and many other cost due to which owners wealth decreases again. Hence it is not good approach that reduction in the salaries of the staff would maximize the wealth of the owner. If there is increase of the turnover rate in the organization because of the reduction in the salaries of the staff then the mission or the goal of the organization cannot be achieved (Schmidt,et.al,1997,p.29) because one aspect of achieving the organizations goal is employees loyalty and the hard work.  If there is reduction in the salaries of the employee then they do not work hard and there are certain other factors such as the chances of corruption, turnover rate and many more due to which the organization cannot achieve its goal.  Other stake holders feel unsecure because the owner is reducing the salaries of the staff it can misuse the share of the stake holders. As staff working in the organization are not treated well than they will switch their share off from the organization which results in the reduction the wealth of the owner hence it is not good that the staff working inside the organization should face the reduction in the salaries because it is not good sign in the future or the organization. In short, whenever the salary of the staff is decreased then it will create a negative impact other people and also the affects the staff and their life standard and will also create the questions for the stake holders.

Question #2

Answer.

Yes, the financial statement is useless in the decision making because these statement only informs the past and present data of the company. It gives details about the net income, net earnings, cash, assets ...