Business modelling Essay Example | Topics and Well Written Essays - 2000 words - 1

Business modelling - Essay Example It also helps in reducing clustered and excessive data in a given setting to a manageable amount. It helps one to select on the precise variables that can be used in the study of managing a business. Therefore, it will help in making decisions of the business (Yao and Li 2013). The variables in this technique helps in correcting certain mistakes that would otherwise been made in a normal business setting. For example, a business owner who thinks that extending business hours would certainly increase profits may re-think on this when they use the technique. This will go a long way in improving the business. Linear regression is normally used with variables that are represented linearly. This will limit this technique to only data that are linear and cannot work with non-linear problems. The variables that are dependent are normally in a continuous form or they are close to being continuous, that is, they are able to be represented by any value. This linearity between dependent and independent variables will not always be true since some relationships have a curved kind of representation. For example, the relationship between age and income is not linear, but curved. Income increases during early years of a person and slows down as the age of the person proceeds (Fearn 2011). Linear regression analyses the average in the relationship between independent and dependent variables. For example, when representing the relationship between the eating behavior of people and increase in their weight, this technique will represent the average weight of the food eaten with the change in their weight over time. This will not give a complete and clear description of the exact data that there is in a given situation hence there may be a misrepresentation of the data (Huang 2013). Linear regression is normally affected with variables that are on the extreme. These variables are known as outliers. They are

Fair Values in the Preparation of Financial Statements Essay

Fair Values in the Preparation of Financial Statements - Essay Example Relevant Information Information needs to be relevant to the needs of users in order to serve its purpose. However, there are also other fundamental qualities that financial statements need to have. These qualities include comparability, faithful representation, consistency, completeness, understandability, and reliability (BPP 2009a). Information is useless if it is not reliable and in a number of cases, the values described as fair values in the accounts do not provide a reliable estimate of the value of assets and liabilities. According to Bath (n.d.) concerns also focus on this matter. It should also be noted the more reliable the information is the less relevant it will be. Relevant information has predictive value, feedback value, and timeliness. Reliable information is verifiable Comparability of financial statements Financial statements need to be comparable from one year to the next and between one company and another. However, even though fair values may be said to be curre nt and therefore more comparable, the fact that judgment needs to be exercised brings subjectivity into play. In addition to that, those judgments on which investors and other stakeholders depend have their own agenda. In some cases, they may exercise their judgment in such a way as to manipulate the accounts. This, therefore, brings us back to the reliability of the figures in the financial statements. ... Â  the International Financial Reporting Standards (IFRS) requires that the classification of financial instruments be recorded at fair value in a hierarchy consisting of three (3) levels. The first level (level 1) relates to quoted prices that have not been adjusted for identical assets and liabilities in active markets. The second level (level 2) relates to input prices but excludes quoted prices which are included in the first level and which can be observed directly for assets and liabilities, in the form of prices or in the form of derived prices indirectly. The third level relates to both assets and liabilities that are not based on market data that can be observed. IASB concluded that this would result in improvement for comparability purposes as well as assist in the convergence process of the IFRSs to the United States generally accepted accounting principles (GAAP). The basis that was given for that conclusion relates to the disclosures required by IFRS 7 and ASC having no differences in terms of their application. Khalik (2008) in his paper entitled ‘The case against fair value accounting’ indicated that its critics have suggested that in times of poor economic conditions fair value (FV) accounting leads to the generation of pessimistic assumptions that further result in significant reductions in asset values as well as major reductions in earnings because of the fact that unrealised losses are taken into account in the income statement.