StudentShare solutions
Triangle menu

Assignment: Understanding the Concepts - Essay Example

Nobody downloaded yet

Extract of sample
Assignment: Understanding the Concepts

Solvency ratios help small business owners to determine ability of their business to pay long term liabilities (New South Wales Government, 2012). Debt ratios help compare the total liabilities to the total assets. Debt Ratio= Total Liabilities ? Total Assets For example if total liabilities=$150, 000, while total assets=$300,000 Therefore, Debt ratio=150,000? $300,000= 0.5 On the other hand, profitability ratios help small business owners to determine ability of their business to generate earnings based on the expenses incurred (New South Wales Government, 2012). Some of the profitability ratios include; Net profit margin and return on assets. Net profit margin may be determined as follows. Net Profit Margin= Earnings before income and tax (EBIT) ? Sales while on the other hand, Return On Assets= Earnings before income and tax EBIT) ? Total Assets. For example if EBIT=$800,000, Sales=$1,000,000 while total assets=$300,000 Return on Assets=800,000?$1,000,000=0.8 Return On Assets=$800,000?$300,000=2.6666 Connectively, liquidity ratios are important tools used by small business owners to determine the ability of their business to pay the outstanding debts (Charantimath, 2006). ...
Current Liabilities Current Ratio=$750,000?$350,000=2.1429 Inventory Turn over Ratio= Cost of goods sold (C.O.S) ? Inventories in the Current period Inventory Turn over Ratio=$600,000?$240,000=2.5 Receivable Turnover Ratio = Net Credit Sales? a average Account Receivable Receivable Turnover Ratio=$400,000?$380,000=1.0526 The financial ratios above are commonly applied in much small business; however, those ratios remain to be very important to managers of large corporations (Longenecker, 2006). This is because the above ratios help managers to make the best decision that may increase wealth and profitability of their corporations as well detects the impending risk that may face their organizations (Charantimath, 2006).The most important ratios that managers of large corporation use are liquidity ratios, solvency and profitability ratios. Those ratios are essential tools for corporate decision making. Advantages and Disadvantages of Debt Financing and Why an Organization Would Choose to Issue Stocks rather than Bonds to Generate Funds Debt financing has numerous advantages which include: debt financing allows business owners to have full control of the business unlike equity financing where ownership is shared among shareholder (Seidman, 2005). Debt finance is easier to control and administer because business owners do not have to adhere to strict financial reporting as compared to equity financing (Whittington & Delaney, 2010). Debt financing provides business owners with an opportunity to raise large amount of capital. Debt finance allows small business owners to be exempted from tax liabilities on the income from loan borrowed. This is because interest on loan is not tax ...Show more


Understanding the Concepts in Finance and Accounting Name: Institution: Course: Tutor: Date: Imagine you are a small business owner. Thoroughly determine the financial ratios that are important to the business. Compare your ratios with those that are important to a manager of a larger corporation…
Author : devonteoconner
Assignment: Understanding the Concepts essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Assignment: Understanding the Concepts"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Understanding the Concepts
Hence without understanding the different concepts of financing and their results, it would become difficult to realize and come to proper financial decisions. The present study focuses on the understanding of different concepts of finance that a small business owner would require in his/her decisions and include topics like NPV, debt financing, risk-return relationships, concept of beta, and systematic and unsystematic risk.
4 pages (1000 words) Essay
Understanding the concepts
This ratio will be compared between the two firms to check the liquidity position or short term solvency of firm. The ideal current ratio is 2:1. Debt equity ratio = long term debt/shareholders fund. It will be compared to check the claim of outsiders and owners in assets of firm which reflects the financial soundness of firm.
4 pages (1000 words) Essay
Understanding the Concepts
The present study focuses on the understanding of different concepts of finance that a small business owner would require in his/her decisions and
4 pages (1000 words) Essay
Understanding the concepts
As compared to concepts like time value of the money, present and future value, inflation and other financing factors the NPV method is more suitable for making good financial decisions since the payback method does not take those aspects into account.
2 pages (500 words) Essay
Understanding the Concepts
Hence financial ratios that are the basic to the need of an understanding of the financial status are applied in smaller organizations that present an analysis of the profits and
1 pages (250 words) Essay
Understanding the Concepts
Discounted cash flows minus the investment cost are equivalent to the NPV. It is worth noting that when NPV is equal to zero the project has enough cash to pay its debts and equity, which was invested in the project. On the other hand, if the NPV is positive, it
4 pages (1000 words) Essay
Understanding the Concepts
Some of its objectives include making maximum profits while offering quality products and services to its consumers. Due to the stiff competition in the market, the company was forced to offer cheap products at relatively
6 pages (1500 words) Essay
Understanding Concepts
The most effective way for owners of small businesses to utilize financial ratios is by conducting a ratio analysis on regular intervals. Ratios
5 pages (1250 words) Essay
Understanding Business Research Terms and Concepts
Further research unveils that the few minorities working in these tech star-up industries are not in the managerial positions and this further leads to the lack of diversity when it comes to decision making in these industry.
2 pages (500 words) Essay
Understanding HR concepts
One major reason for employee training is the rapid changes in the work environment that limits performance within the organization. Each day, the working conditions change and the employees have to adjust to these changes if they have to
4 pages (1000 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
Comments (0)
Click to create a comment
Let us find you another Essay on topic Assignment: Understanding the Concepts for FREE!
Contact us:
Contact Us Now
  • About StudentShare

  • Testimonials

  • FAQ

  • Blog

  • Free Essays
  • New Essays
  • Essays

  • The Newest Essay Topics
Join us:
Contact Us