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Short-term Creditors: Bankers and another short-term creditor have an interest same to those of the debenture holders and equity shareholders who are interested in the profitability and long-term stability of the business. Their main interest, though, is in the current position of the firm that is its capability to produce sufficient funds working capital to meet current operating requirements and to pay current debts promptly.
The amount of working capital is measured through the excess of current assets over current liabilities. What is significant to short-term creditors is not only the amount of working capital obtainable but more so-is its quality. The major factors affecting the quality of working capital are:
(i) the behaviour of the current assets comprising the working capital and
(ii) The length of time needed to convert these assets in cash. During this context we may compute the subsequent ratios:
a. Inventory turnover ratio
b. Account receivable turnover ratio
Most firms build and keep inventories in the course of doing business. Manufacturing firms hold raw material, finished goods and spares and work in process in inventories. Financia
Mark up Mark up is defined as the rate of gross profit to cost of sales: Mark up = Gross Profit Cost of sales Margin is defined as the rate of gros
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Form No special form is normally required for the creation of a trust except that a declaration of trust respecting land or any interest therein must be manifested and proved b
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Mr N. M. is lucky to have a lottery prize of Rs 20 million. He does not have any liability and does not have any claimant over this money. He has the following alternatives: (i)
Mojo Industries tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a
how does the concept of consistency aid in the analysis of financial system?
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