If a company has a high demand for its product, the product has high margins, makes purchases and pays on time, shows an increasing trend in profits, the business is a hit, right? Well, not always. In most business’ cash is used to buy raw materials, produce value added goods, buy assets and turn it
Choosing between equity and debt is one of the most common decision made by business managers while raising capital. These are the two main sources of capital for any business. Equity is the form of capital raised from investors in change for a share in ownership of the business. Equity refers to a stock or
Cash Flow is indicative of a company’s financial health. Problems in cash flow may point to issues in product pricing, operating efficiency and credit policy. Statements of cash flow give an indication of what needs to be rectified and realigned. There are direct and indirect methods of reporting cash flows. In the direct method, it
A lot of things hinge on a company’s profit. Profits determine bonuses, dividends to share holders, timely repayments to banks and an important measure to attract investors. How is the income statement made? By sales we mean the revenue the company makes by selling its products or services in the market. Cost of Sales: This
Choco-Bloc Company makes chocolate for retail and takes custom orders. To understand a balance sheet better, let us take a look at the elements of their balance sheet. Current Assets: These are assets that are cash or cash like. They provide liquidity. Cash is the most liquid of assets. The company’s current account, cash reserves
Though it is said organisations have an indefinite life, in reality they do have a particular life cycle. These are birth, growth, plateau and finally no growth or decline. This is not unlike a product life cycle. In periods of slow growth, product extensions are introduced to increase its life span. Similarly, companies need to
A MBA in marketing later, I was still meandering about my financial ABC’s. Most of us are usually foxed by balance sheets, income statements and break even analysis. And yet if you want to be a store owner, or run a technology firm, it’s important to have basic skills in finance to survive business cycles.