The current ratio is an essential financial matric that helps to understand the liquidity structure of the business. It’s especially helpful for the businesses lenders that assessability of the business to repay their dues. Retail is an industry that is expected to generate cash on a day-to-day basis, and it’s easy for lenders to get …
Definition: The average payment period is the measure of days the business takes to pay off accounts payable. It’s a solvency ratio and indicates business practice to satisfy obligations that fall due. The length of the average payment period is dependent on multiple factors including business policies, liquidity, adequacy of financial planning, and pattern of …
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Overview Profit margins are the bottom line of any business. Investors and business managers compare profit margins with industry averages. Some industries have high average profit margins, for example, the accounting and finance industry has typically higher profit margins around 18-20%. However, it’s important to remember that profit margins vary by industry. Analysts must also …
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Overview The quick ratio is one of the key liquidity ratios used by analysts. It is simple to understand and a widely used measure to analyze the liquidity of a company. Generally, any quick ratio above 1 will be considered reasonable. However, benchmarking is a great tool to analyze the liquidity of a company. Analysts …
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Overview Backward integration refers to gaining control of the supply-side of a company. It may come through acquisition and merger or arranging in-house production of raw material. Backward and forward integrations are essential parts of vertical integration. It offers several advantages to the company, including increased control over raw material supply, competitiveness, reduced costs, etc. …
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Definition of Average Collection Period Average Collection Period is defined as the amount of time that is taken by the business to receive payments from its customers (or debtors) against the credit sales that have been made to these clients. This is a metric that is used by businesses to determine the number of days …
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Definition for Available for Sale Security Available for Sale Security, can be defined as debt or equity securities that are purchased with the intent of selling before they reach maturity. These financial instruments are mentioned at fair value on the Balance Sheet. In technical terms, it can be seen that an Available for Sale security …
When you make sales from your business or offer a service to someone on credit, your accounts receivable will record such a transaction. For example, when you make credit sales, you provide your customer a note called an invoice, and then you record the invoice details into your accounts receivable. Thus, the receivable in your …
Aging of Accounts Receivable: What is it and why is it Importance? Read More »
Overhead costs are those costs incurred by a business, be it directly or indirectly related to manufacturing a particular product or service offered. They are costs relevant for the consistent running of the business. It is a necessary cost for every business as it helps determine the price to be fixed for each good produced …
What is Actual and Applied Overhead? (Definition, Example, and Explanation) Read More »
Annuities are those series of payments made or received at regular intervals over time. It could be lump-sum or installment; such costs include rent payments, car payments, interest from bonds, retirement pension income, and the like. Say you want to buy a car worth $3,000,000 and you decide to pay a 6 payment interval of …
What Is The Future Value of An Annuity Due Table? Read More »
