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Respond to Justin------------Capitalism is an economic system in which a country’s trade and industry are controlled by private owners for profit rather than by the state. Capitalism is based on a simple process. Money is invested to generate more money. When a company uses its profits to hire more staff or build more factories in order to make more profit the money is functioning as capital. As this capital accumulates it is what collectively drives the economy. Those individuals that do not have anything to sell must exchange their labor for profit instead. This is what creates the class division. In order for an individual to move from the working class to the capitalist class they must create something that can compete in the market. If this individual does not already have capital to invest in themselves then they must attract outside investors or lenders.
This is when it becomes important to keep accurate financial statements, so the lenders and investors can make informed decisions on whether to provide funding. It is increasingly important for merchandising and manufacturing companies whose large inventories can account for a large portion of the balance sheet. So it is important to account for the value of the inventory. There are several different inventory valuation methods for businesses to choose from. The most common are First In First Out (FIFO), Last In First Out (LIFO) and a weighted average. When inventory items are purchased over the course of the period prices may have varied. During a period of inflation, the FIFO method can give the perception of increased revenue, which appear attractive to investors. In this way the method of inventory valuation does affect a company’s ability to compete in a capitalistic economy.--------- ----------------Respond to Clifton------------Hello class, I will be answering question #1 on describing a classified income statement income statement.
A classified income statement consists of separating both revenues and expenses into operating and non-operating items. This particular statement also separates operating expenses into selling and managerial expenses, some many consider this statement to be called a multiple-step income statement being that is uses previously detailed calculations for transactions and price of goods sold.
The classified income statement consists of four major sections; operating revenues, cost of goods sold, operating expenses, and non-operating revenues and expenses. The operating revenues are the revenues created by the main activities of the business whether it’s the normal sale of products or services or both. The cost of goods sold is the main expense in retail companies, merchandisers typically highlight the total by which sales revenues surpass the cost of goods sold in the top part of the income statement. When handling the operating expenses, it typically consists of the selling expenses such as advertising cost and retail purposes. Administrative expenses are to be included as well, this amount consists of calculating the overall managing of a business such as salaries, lease dues, utility costs, and depreciation on the workplace equipment. The non-operating or other revenues and expenses consists of anything not relative to the sale of products or services commonly presented for purchase by a business.
In presenting the relationships found within the statement, it helps by analyzing how well the company is performing and determines metrics for the business. It also helps in determining the cost of product if the cost of the product does not exceed the operating expenses per unit of a product. Profit is key when reviewing the classified income statement. If the information presented does not sit well with the business owner or the CEO of the company, it would behoove them to take action and see where improvements need to be made.
Respond to Justin------------Capitalism is an economic system in which a country’s trade and industry are controlled by private owners for profit rather than by the state. Capitalism is based on a simple process. Money is invested to generate more money. When a company uses its profits to hire more staff or build more factories in order to make more profit the money is functioning as capital.