Download file to see previous pages...
If the current asset of the firm was less than the current liabilities, this will mean that the firm has a deficit working capital and the firm will not be in a position to convert its asset into cash even if the company is making profits. (Livingstone 2002)
It is defined as the company’s ability to meet its short term obligations. These means that the higher the ratio the more liquid is the firm. The current ratio of a firm is calculated as a current asset divided by the current liabilities, the interpretation on these is that if the current asset of a firm is twice the current liabilities, then the firm is considered to have a significant good short term financial strength. But if the firm’s current asset are less than the current liabilities of the firm, then the result will be a firm having a problem in meeting its short term financial problem.
Therefore, looking at the balance sheet of superior company the current ratio is as follows 1.97 in 2001, 1.95 in 2002, 1.83 in 2003 these shows that the company is in a position of meeting its short term financial obligation for the ratio is a positive figure and the current asset are approximately twice the current liabilities.
These are short term loan and have a short maturity usually one year or less, in the balance sheet these amounts are indicated along the current liabilities section. They are mainly due within a year, if a company has more short term debt than the cash or investment to cover the bed payment then the firm will be forced to apply for more debt and this will be disadvantageous for the firm financially. (Droms 1990)
Based on the presented balance sheet of superior company its short term debts are 1,200 in 2001, 1,300 2002 and 1,450 in 2003. Meaning therefore, the firms short term debt are less than the cash of the company and hence, the company has no intention of acquiring more debt for it is able to finance for the debt it has.
...Download file to see next pagesRead More
In addition, finance is important in the construction of financial statements, diversification in the value of money in an economy and management of capital. However, financial landscape keeps changing around the economy framework due to increase in innovation, growth of wealth accumulation, computing and networks advancement and the periodic onset of financial crises in the world.
Capital budgeting technique use to evaluate investment proposal with respect to their feasibility. Techniques like Net Present Value, Internal rate of return and / or Profitability index are applied to analyze from various perspectives with respect to cost and benefit if project undertaken.
1. LIFO vs. FIFO LIFO (last in, first out) and FIFO (first in, first out) are two different ways of accounting for the value of unsold inventory. The FIFO method considers unsold inventory to be that which has been acquired most recently, and the LIFO method uses the goods bought earliest as the unsold inventory.
The statements may be prepared in certain future period and enable the manager fund required. ?The funds required are determined: after drawing the projections in terms of marketing activities, sale of products and the production cost, finance manager draws up a plan of the required funds depending on the time factor.
Cash flows allow estimating the depreciated value of assets owned by a company and further requirements to contribute in effective budgeting. Capital Asset Budgeting is also practiced commonly by corporations, which is however often criticized owing to its complexities and needs for continuous record-keeping (Oracle, 2008).
Since this option involves Newton selling the patent rights to Faraday Electricals Ltd, Newton's revenue would be the amount generated from the selling off of the patent rights that would be received in two installments, one immediately and the other at the end of two years.
Every organization irrespective of its size and nature of the business in which it is operating requires necessary amount of working capital. Efficient maintenance of working capital is important for creating value for
decision making over capital items, the weighted cost of capital is usually the sum of the cost of equity as well as the total cost of debt and the cost of preferred stocks with respect to their proportions in the business.
Debt is an important constituent to the capital
clinic (Gapenski, 2012). The working capital of Syndicate Company can have either a positive effect or a negative feedback, depending on the amount of debt that the clinic owes its creditors. Generally, Syndicate Company has more working capital that is why it is successful.
2 Pages(500 words)Research Paper
GOT A TRICKY QUESTION? RECEIVE AN ANSWER FROM STUDENTS LIKE YOU!
Let us find you another Research Paper on topic Working Capital for FREE!