Financial Ratio Analysis

Assets: An asset may be defined as anything of use to future operations of the enterprise and belonging to the enterprise. For example, building, land, machinery, cash, debtors (amount due from customers) goodwill etc. Equity: In broad sense the term equity refers to total claims against the enterprise. It is further divided into two categories: (1) Owners claim-capital and (2) Outsiders’ claim-liability (3) Liability. Amounts owed by the enterprise to the outsiders i.e. to all others exce Read more

The Accounting Cycle: After taking decisions such as selecting a business, selecting the form of organization of business, making decision about the amount of, capital tote invested, selecting suitable site, acquiring equipment, supplies etc., selecting staff, getting customers and selling the goods etc., business man finally resorts to record keeping. For all types of business organizations, transactions such as purchases, sales, manufacturing and selling expenses, collections from customers an Read more

All businesses need  finance to establish and grow. Finance can be provided from debt, equity and internal sources. Ideas for improving your chances of accessing finance include the following : Disclose all necessary information required by the bank Start to seek finance as soon as possible and shop around Be sensible about the amount you actually need to borrow abd be able to justify it. Take your time preparing the application as a well prepared business proposition is a good sign of a borro Read more

A profitable business is generally a successful business. Therefore it is important that while you improve the cash position of the business, you also  aim to be profitable. Ideas to improve or return your business to profitability include the following: Prepare regular financial statements. Focus on sales that give you the highest margin. Don’t discount on low margin products or services. Don’t discount unless you can achieve the same or better gross profit through increased sales Read more

 In an economic downturn you should regularly analyze the financial position of your business because its financial position will determine whether the business remains viable and whether it is positioned for future growth. You can get a lot of information on the financial health of your business and hence about how your business is performing by analyzing your financial statements through financial ratios such as liquidity ratios, solvency ratios, management ratios and return on investment rat Read more