Working Capital vs Current Ratio Dont Calculate WC the Wrong Way!

A company’s poor current ratio may give prospective investors the impression that it occasionally leaves short-term debt unpaid. Understanding current ratios also provides the company with a comparison tool that can be used to benchmark progress against rival companies. The current ratio is a liquidity measure that identifies how many dollars of current assets are…

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What is accounts receivable management? + Tips to improve it?

You will thus avoid delays and see the favorable effect on your liquidity. Many entrepreneurs (especially younger ones, who tend to sanctify their clients a bit!) are reluctant to resort to follow-ups. Taking his phone when the payment deadline has been reached (always give preference to verbal reminders!) is part of the customer service and…

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Current Ratio Explained With Formula and Examples

However, if working capital remains negative over a long period, it could indicate a problem. If a company relies on loans or stock issuances to cover its current liabilities, it needs to review its business strategy. Continuous working capital issues leave companies unable to grow and develop since all current assets go toward operational costs.…

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Inventory Expense: Deducting the Cost of Goods Sold

Inventory would be considered a long-term asset, as it is something that a company expects to use for more than one year. CapEx is typically recorded on the balance sheet as opposed to the income statement. As soon as a customer gives you money in exchange for that item, it moves from the category of…

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What Is a Receivable Management Service?

Many businesses prefer to simply outsource the accounts receivable collection process. Sometimes, despite your best efforts, some customers may fail to pay their invoices on time or at all. In such cases, you may need to enlist the help of a reputable collection agency that can recover your outstanding debts in a professional and ethical…

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Outsourcing your accounting and bookkeeping

Outsourced accounting is when an organization hires a third party to accomplish its finance and accounting services. You should only hire an outsourcing firm if it complies with the security standards. This prevents the company from disclosing any business information without authorization. It would surely help if you verified that the company possesses the required…

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What is an Account? Definition Meaning Example

It is important for companies to establish credibility with these external users through relevant and reliable accounting information. The term account is also used in transactions where suppliers sell goods to customers and grant credit terms such as net 10 days. In those situations, a supplier is selling goods on account and the customer has…

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When It Comes to Taxes, Here Is How to Handle Inventory

This means that the remaining items in inventory will have a cost of goods sold of $3,000,000 and their average inventory cost will be $900,000. As a result, the majority of the items in inventory will have an average turnover ratio of 3.3 ($3,000,000 divided by $900,000). Items previously in inventory that are sold off…

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Accounting 101 for Beginners: Basic Terminology & Definitions

The financial statements used in accounting are a concise summary of financial transactions over an accounting period, summarizing a company’s operations, financial position, and cash flows. Accounting designed or meant for outsiders is known as financial accounting. It is concerned with the recording of business transactions and the periodic preparation of income statement, balance sheets…

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Systematic Investment Plan

SIP investment in Mutual Funds is the most convenient way to inculcate the habit of saving. Too often the youngest generation of earning people do not save much. To have a Systematic Investment Plan one does not require a massive amount of investing as the starting amount is as low as Rs 500. So, join…

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