We get our information about what products our customers want by talking to existing customers. There seems to be an increasing demand for our product.
Assets represent the total resources of a company, which may shrink or increase depending on the results of operations. Assets are listed in liquidity order - ease of converting into cash. Liabilities include what a company owes: All businesses divide assets and liabilities into two groups: These are items that can be converted to cash within one year or in the normal operating cycle of a business.
Also included in this category are any assets held that can be readily turned into cash with little effort, such as government and marketable securities. CASH refers to cash on hand or in banks, checking account balances, and other instruments such as checks or money orders.
A rule of thumb is that cash position is generally strongest after the peak selling season. Marketable securities are usually listed at cost or market price, whichever is lower. When marketable securities appear on a statement, it frequently indicates investment of excess cash.
A retailer, such as a department store, may show its customer charge accounts billed and unpaid in this category.
In many businesses, accounts receivable are frequently the largest item on the balance sheet. Notes receivable may be used by a company to secure payments from past-due accounts, or for merchandise sold on installment terms.
Retailers and wholesalers will show goods that are sold "as is" with no further processing or supplies required in shipping.
On the other hand, many manufacturers will show three different classes of inventory: A sales decline could be accompanied by a decrease in inventory in order to maintain a healthy condition.
Some conservative analysts consider prepaid items as noncurrent because they cannot be converted to cash to pay obligations quickly, and therefore have no value to creditors NONCURRENT ASSETS are items a business cannot easily turn into cash and are not consumed within the business cycle activity.
Noncurrent assets are defined as assets that have a life exceeding a year. Examples include real estate, buildings, plant equipment, tools and machinery, furniture, fixtures, office or store equipment and transportation equipment. Land, equipment or buildings not used in the production of customer goods would be listed as other noncurrent assets or investments.
All fixed assets, except for land, are regularly depreciated since they eventually wear out. The reductions are considered a cost of doing business and are called depreciation expense.
Normally, the accounting procedure is to list the fixed asset cost on the balance sheet less accumulated depreciation. Not all companies are comparable on this item as some rent their equipment and premises. If a company rents, its fixed asset total will be smaller compared with other balance sheet items.
Analysts tend to discount these items or value them very conservatively. Generally they are obligations that are due by a specific date, usually within 30 to 90 days of fulfillment.
To maintain a good reputation and successful operations, most businesses find they must have sufficient funds available to pay these obligations on time. Most current liabilities of small companies generally fall into the accounts payable line. Suppliers dealing in good faith expect their invoices to be paid according to the terms of sale.
These can range from net 30 to 60 days after invoice date plus discount incentives of 1 percent or more if payments are made by a specified earlier time. Maturity dates when payment is due may run up to 20 or more years, e.
This figure is important as it is used to determine how much excess cash a business has to fund current expenses. Working capital is the difference between current assets and current liabilities.
How much working capital is enough depends on the proportion of current assets to current liabilities rather than on the dollar amount of working capital.Nov 26, · Used furniture store business plan. Used furniture store business plan.
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