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ACC/ACF5903 Critical Use of Accounting Information

   

Added on  2019-10-31

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Running head: CRITICAL USE OF ACCOUNTING INFORMATIONCritical Use of Accounting InformationName of the Student:Name of the University:Author’s Note:Course ID:
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1CRITICAL USE OF ACCOUNTING INFORMATIONTable of ContentsUse of return on assets (ROA) for the resources of an organisation used to generate wealthand two categories of assets and income statement items needing closer inspection:...............2Relevant financial information for three years for TPG Telecom Limited:...............................3Organisational choice of respective accounting policies and methods of making pertinentestimates:....................................................................................................................................7References:.................................................................................................................................9
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2CRITICAL USE OF ACCOUNTING INFORMATIONUse of return on assets (ROA) for the resources of an organisation used to generatewealth and two categories of assets and income statement items needing closerinspection:Return on assets (ROA) is an indicator of how profitable the organisation in relationto its total assets. Thus, it provides an idea as to how effective management is at utilising itsassets in generating earnings. This is computed by dividing an organisation’s yearly earningsby its overall assets, it is displayed as a percentage (Adenike & Michael, 2016). This is oftenreferred to as return on investment. Some investors include interest expense back into netincome at the time of performing this computation, as they would like to use operatingreturns before the overall borrowing cost. This measure helps in generating the earnings from invested capital (assets). In thiscontext, Demski (2013) stated that this measure for public organisations could varysubstantially and it would be highly reliant on the industry. This is the reason of utilisingROA as a comparative measure; it is effective to contrast the same against the previousnumbers of ROA or the ROA of an identical organisation. In this case, the organisation selected to fit the purpose of this assignment is TPGTelecom Limited, which is one of the popular telecommunications service providers inAustralia. It has been observed that the assets of an organisation are comprised of both debtand equity and both of these financing types are used to fund the operations of theorganisation (Hoque, Covaleski & Gooneratne, 2015). Thus, the ROA figure would providethe investors of TPG Telecom Limited with an idea of the effectiveness of the organisation inconverting its money needed to invest in net income.
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