Assignment: Understanding the Concepts - Essay Example

Only on StudentShare

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). ...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
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

Related Essays

Biology Topic: Malaria: Why do so many people still die of Malaria
Malaria is an infectious disease caused by a parasite called Plasmodium that affects the red blood cells. Generally, chills, pain, fever, and sweating are the main symptoms of malaria. Parasites in human blood were firstly identified by C. Laveran in 1880 and subsequently in 1889; R.
8 pages (2000 words) Coursework
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
Finance Concepts Assignment
Hence to be on the safe side the financial analysis is imperative. In this case the concepts of NPV and Payback are the indicators to be used to assess whether the business will carry good returns or not. “Net Present Value (NPV) is the excess of the present value (PV) of future cash inflows to be generated by the project over the amount of initial investment.” On the other hand “Payback period is the length of time it will take the company to recover its initial investment.” In this scenario e.g., if the initial investment is $15,000 and the annual after tax cash saving are $3000, then the payback period would equal 5 years.
4 pages (1000 words) Assignment
Understanding the Concepts
Financial ratios serve to help a business monitor its progress, noticing all the trends and the factors inhibiting its desired performance. There are various financial ratios that are key to the running of a small business. These ratios include the current ratios, which are applied to measure the liquidity of a business, thus determining how well the business is placed to undertake business activities, such as investments, which may call for immediate liquid cash (Horcher, 2005).
4 pages (1000 words) Assignment
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 Concepts: Important financial ratios to a business
Therefore, the manager may evaluate the relative weaknesses and strengths of his or her business. This comparison of business ratios to those of other similar businesses will indicate the weaknesses or strengths within a business (Albrecht, 2011).
4 pages (1000 words) Essay
Assignment: Understanding the Concepts
The ratios can be divided into various categories such as profitability, gearing and liquidity, each focusing on a different area of the financial outlook of the organization and highlighting the company’s performance. These analysis form an integral part of the financial statement analysis, especially from the investors point of view, who always strive to invest in companies having strengthened and stabilized financial ratios representing an upward trend.
4 pages (1000 words) Research Paper
Find out how much would it cost
to get a custom paper written by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email