An increase in quick ratio can be due to various reasons, including an increase in cash and cash equivalents, a reduction in current liabilities, or a decrease in inventory levels. For example, if a company sells off its inventory or improves its inventory management practices, it can increase its quick ratio by reducing the inventory […]
Profit margin is one of the simplest and most widely used financial ratios in corporate finance. A company’s profit is calculated at three levels on its income statement, each with corresponding profit margins calculated by dividing the profit figure by revenue and multiplying by 100. Gross profit measures a company’s total sales revenue minus the […]
Management prefers to maintain ending raw materialsinventory equal to 30 percent of next quarter’s materials needed inproduction. Assume raw materials inventory at the end of the fourthquarter budget period is estimated to be 41,000 pounds. Jerry’s will have materials in beginning rawmaterials inventory and prefers to maintain a certain level ofending raw materials inventory. Data […]
You determine your net worth by subtracting your liabilities from your assets. Liabilities play an important role in both personal and business finance. Here are the main ways that liabilities have an impact on your finances. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides […]
For depreciation expense, depreciation expense is debited, and the accumulated depreciation account is credited. In the case of payroll expenses, the wages expense, these accounts are debited, and the cash account is credited. For additional practice in preparing journal entries, here are some more examples of business transactions along with explanations on how their journal […]
One of the key components of financial reporting is the preparation of comprehensive financial statements, including the balance sheet, income statement, and cash flow statement. These documents provide insights into the dealership’s assets, liabilities, revenues, and expenses, offering a holistic view of its financial position. Regular audits, either internal or external, can further enhance the […]
Another popular calculation that potential investors or lenders might perform while figuring out the health of your business is the debt to capital ratio. No one likes debt, but it’s an unavoidable part of running a small business. Accountants call the debts you record in your books “liabilities,” and knowing how to find and record […]
