Liquidity means the firm’s ability to satisfy its short-term obligations as they come due. In my earlier article, we have discussed the Current Asset Ratio. Another common financial ratio to measure the liquidity of the company is : The QUICK (ACID-TEST) RATIO: FORMULA Current Assets minus Inventories/Current Liabilities MEASURE WHAT Measure the ability to pay … Read more
Various Type Of Organization Structure A business may be carried on in any one of the following form: Sole proprietorship Partnership Limited Company CHARACTERISTIC OF A SOLE PROPRIETORSHIP 1.The business is solely owned by one person; 2.Management rests on that one person, 3.If such a business fails or is declared bankrupt, the creditors can sue … Read more
Quite a number of us use the word provision and reserves interchangeably as if they are the same but actually there is a very great difference between them. SO LET’S LOOK AT WHAT IS CALLED A PROVISION: A Provision: Is an amount written off to provide for depreciation, or diminution in value of assets or retained … Read more
WHAT DO YOU THINK ARE THE LIMITATIONS OF FINANCIAL STATEMENTS? Some of the limitations of the financial statements are as follows: As the historical costs and money measurement concepts govern the preparation of the balance sheet and income statements, hence these financial statements are essentially statements reflecting historical facts. It ignore inflationary trend and does … Read more
FIRSTLY, LET US ASK OURSELVES WHAT ARE RESERVES? Reserves are appropriations of profit namely when profits have been ascertained after deducting all expenses which includes provision and others. Reserves are residual earnings after all expenses and taxation which belongs to the owners namely the shareholders. There are essentially two(2) types of Reserves: … Read more
WHAT IS A BALANCE SHEET? A Balance Sheet is a snapshot of the financial position of an entity. This snapshot is at a point of time. Say, as at 7 May 2006, you look at Company A’s balance sheet, it reflects the financial position as at that day. After that day, the financial position company … Read more
WHAT ARE LONG TERM LIABILITES? Long Term Liabilities: Is opposite of current liabilities which are more than 12 months from the date of the balance sheet. Examples are: Long term debts /fixed term loan Remember that we need to classify the total debts into two(2) parts: Current portion of long-term debts( amount owing … Read more
WHAT ARE CURRENT LIABILITIES? Current liabilities are obligations/liabilities: that is expected to be settled in the normal course of the enterprise’s operating cycle ; or Is due to be settled within twelve months of the balance sheet date Current Liabilities Description Accounts payable Claims of suppliers arising from their providing goods or services to the … Read more
WHAT IS A BALANCE SHEET? A Balance Sheet is a snapshot of the financial position of an entity. This snapshot is at a point of time. Say, as at 7 May 2007, you look at Company A’s balance sheet, it reflects the financial position as at that day. After that day, the financial position company … Read more
WHAT ARE FIXED ASSETS?   Fixed Assets are unlike current assets:  Which are NOT expected to be realised  or held for trading or sale  The costs of the fixed assets are allocated over the period of the useful lives to generate the income associate with it. This follows closely to the matching … Read more