March 2009 Archive

This chapter identifies and explains the various assets and liabilities used by a business in making profit. A business invests in a portfolio of operating assets and takes on certain operating liabilities in the process of making sales and incurring expenses. The main theme of the chapter is that the profitmaking activities of a business (revenue and expenses) drive the assets and liabilities that make up its balance sheet (more…)

I had problem studied statistics while I was at second semester on university. I hated statistic and I feel like never understand how and what it was. I could not avoid it because it is in the package for that semester. I tried to like and understand it by read many text books available in the library. I also tried to pay attention while the lecturer explained it in the class. I still did not get it and even worse I started to give up and accept what ever happened. (more…)

This ratio reveals that the business made $1.50 in sales for every $1.00 of total assets. Conversely, the business needed $1.00 of assets to make $1.50 of sales during the year. The ratio tells us that business is relatively asset heavy. The asset turnover ratio is compared with the averages for the industry and with previous years of the business. (more…)

In the business example, the company sells products. Virtually every company that sells products carries an inventory, or stockpile of products, for a period of time before the products are sold and delivered to customers. The holding period depends on the nature of business. Supermarkets have short holding periods; retail furniture stores have fairly long inventory holding periods. Products should not be held in inventory longer than necessary. Holding inventory is subject to several risks and accrues several costs. (more…)

Accounts receivable should be collected on time and not allowed to accumulate beyond the normal credit term offered to customers. To get a sense of how well the business is controlling its accounts receivable, the accounts receivable turnover ratio is calculated as follows. (more…)