Accounting Principles and Fundamentals | Q&A

Running Head: ACCOUNTING FUNDAMENTALS
ACCOUNTING FUNDAMENTALS
NAME OF THE STUDENT
NAME OF THE UNIVERSITY
AUTHOR NOTE

Accounting Principles1
Answer to the question 1
When there is change in the costing method from LIFO to FIFO then the gross profit and
ultimately the net profit of the firm will increase (Phi et al, 2019). Since, initially in the LIFO
methods the goods that has been received very recently are counted first and therefore the very
recent cost are taken which is comparatively higher, which leads to the increasing cost and so the
gross profit and the net profit gets declined, however, it helps in producing the maximum profit
since it assume normal inflationary conditions (Yadav & Morya, 2019). In FIFO, the inventory
that are getting used for the valuation of COGS might be several years older, which therefore
increase the gross profit. However with more profit there also lies the provision to pay higher
taxes
Answer to the question 2
Dupont analysis or the Dupont model is based on the return on equity ratio. However it
contains three elements which are profit margin, asset turnover and financial leverage (Lado-
Sestayo, Vivel-Búa & Otero-González, 2020). This analysis is done in order to find out the least
productive area as well as the highest productive, the sum of which are creating ROE for the
company. For full sum refer to the excel sheet. As per the model it is clearly seen that the dupont
ratio seemed to be reducing each year. However among all profitability has seen to be reduced a
lot, rest both the asset turnover and financial leverage has shown a positive increase(Koh, 2019).
Therefore the problematic area is profitability and therefore there is extreme necessity for the
reduction of cost.
Dupont analysis=
net income/sales *net sales/total avearge assets*total
assets/total equity

Accounting Principles2
For the year 2015
net income=
183
0
sales=
550
0
total assets=
700
0
total equity=
465
0
profit margin 0.332727273
total asset
turnover 0.785714286
financial leverage 1.505376344
Therefore, Dupont
Model= 0.393548387
Answer to the question 3
Asset light model is an enterprise version wherein groups now instead of buying the land
enter into an agreement with the land owner, in which they share a certain percent of profit
bobbing up out of the enterprise carried out at the land, this allows in saving a large fee of land to
the commercial enterprise. Even though there are many asset-light models, some of the
maximum used are outsourcing, asset sharing, licensing in, and licensing out. Many hotel chains
around the world are using this strategy due to the following advantages
Asset-light models can supply a better return of investment on property, decrease
earnings volatility, provides more flexibility, and higher scale-driven cost savings than asset-