Liabilities of the company - Essay Example

The use of insurance is a great way to protect assets. The three most important items that must be protected by insurance are property, income, and liabilities. Most large corporations have billions of dollars in physical assets. These assets such as buildings and machinery should have insurance against fire and natural disasters. On March 11, 2011 Japan was struck by the 4th largest earthquake in the history of mankind. A natural disaster can occur at any time since these are natural events that occur at random.

Some of the natural disasters coverage that companies should seek includes earthquakes, hurricanes, tornados, tsunamis, fire, and floods. The liabilities of a company are an important aspect of the capital structure of a company. Normally liabilities of corporate debt are hard to protect against. A method that can be use to create a certain level of protection for debt is to use a portfolio approach to protect the debt by formulating a strong portfolio of financial instruments that serve as a safe haven in case the company is not able to pay for its debt due bad operating results.

The liquid portfolio can be partially liquidated to create cash that the firm can use to pay its current debt and other operating expenses such as payroll. Another important asset that must be protected is inventory. . Insurance can also be used by corporations to protect against workers claims and lawsuits by internal and external stakeholders. When a lawsuit is filed it is often better to settle out of court to lower legal costs and to reduce the impact of bad publicity to the company. The corporate image of the company is sacred.

Back in 1998 Nike Corporation lost half its customers instantly due to the revelation of a sweetshop scandal. The use of an internal control system is extremely beneficial to a company. It can be used in order to increase the efficiency and productivity of the entire staff of employees. One of the benefits of the use of internal controls is that it safeguards the assets of the company. The most valuable asset of a company which must be protected at all times is the cash. Cash is the most liquid asset in existence.

In the international arena the currency of most countries is different. Three of the most valued currencies in the world are the U.S. dollar, the Euro, and the British Pound. The U.S. dollar is used as the reserve currency in the majority of the countries in the world. Internal controls can also be used to minimize the theft of inventory in a company. A way to protect the inventory is by placing hidden cameras across the entire warehouse where the inventory is being kept. In the retail environment cashiers must count the money when the cash register is cash out and the manager must verify the amount.

Both employees must sign a document regarding the cash. The cash should then be taken to a safe prior to the money being deposited in the bank account of the company. The use of internal controls can prevent the managers and the accounting staff from colluding