Introduction - Management Duniya

Introduction

     The term career planning is frequently used in relation young boys and girls studying at the college level. College students are expected to consider their qualities (physical and mental), psychological make-up, likes and dislikes, inclinations, etc. and decide what they want to be in their life. In other words, they should decide what they want to achieve in their life and adjust their education and other activities accordingly. This means they have to plan their career. In such career planning, parents, family members and college teachers offer helping hand and guide young boys and girls in selecting the most suitable career. Lot of literature, psychological tests etc. are also available on career planning. Even lectures, workshops and TV programmers are arranged for guiding students on career selection (particularly after the declaration of HSC results). Career planning enables them to use their abilities/qualities fully and make their life happy, prosperous and rich in quality. At present, even experts are available to help youth in their career planning. IQ and other tests are also conducted for this purpose.

     The term career planning and development is used extensively in relation to business organizations. It is argued that if the organizations want to get the best out of their employees, they must plan the career development programmes in their organization effectively. Such programmers offer benefits to employees and also to the organizations. The employees will develop new skills will be available to the organization. This type of career planning can be described as organizational career planning.

MEANING OF CAREER (WHAT IS CAREER?):-

     A career is a sequence of positions/jobs held by a person during the course of his working life. According to Edwin B. Flippo “a career is a sequence of separate but related work activities that provide continuity, order and meaning to a person’s life”. Career of an employee represents various jobs performed by him during the course of his working life. This is described as career path. In the case of an ordinary worker, the career path includes the following job positions:

Unskilled worker – Semi-skilled worker – Skilled worker – Highly skilled worker – Assistant foreman – Foreman.

     Employees (of all categories) want to grow in their careers as this provides more salary, higher status and opportunity to use knowledge, education and skills effectively. An individual with potentials joins a firm not for job but for career development. An organization has to provide better opportunities to its employees in their career development and also use their efficient services for the benefit of the organization.

Tags: Career, Development, Planning
By: Management Duniya

Role of ECGC in Export Credit - Management Duniya

Role of ECGC in Export Credit

Insurance Policies for Exporters 

SCR or Standard Policy

Shipments (Comprehensive Risks) Policy, commonly known as the Standard Policy, is the one ideally suited to cover risks in respect of goods exported on short-term credit, i.e. credit not exceeding 180 days. This policy covers both commercial and political risks from the date of shipment. It is issued to exporters whose anticipated export turnover for the next 12 months is more than Rs.50 laces.

Under the Standard Policy, ECGC covers, from the date of shipment, the following risks:

a. Commercial Risks

• Insolvency of the buyer.


• Failure of the buyer to make the payment due within a specified period, normally four months from the due date.


• Buyer’s failure to accept the goods, subject to certain conditions.

b. Political Risks

• Imposition of restriction by the Government of the buyer’s country or any Government action, which may block or delay the transfer of payment made by the buyer.


• War, civil war, revolution or civil disturbances in the buyer’s country. New import restrictions or cancellation of a valid import license in the buyer’s country.


• Interruption or diversion of voyage outside India resulting in payment of additional freight or insurance charges which cannot be recovered from the buyer.

 

2. Export Turnover Policy (Sourced from www.ecgc.in)

Turnover policy is a variation of the standard policy for the benefit of large exporters who contribute not less than Rs. 10 lacs per annum towards premium. Therefore all the exporters who will pay a premium of Rs. 10 lacs in a year are entitled to avail of it.

The turnover policy envisages projection of the export turnover of the exporter for a year and the initial determination of the premium payable on that basis, subject to adjustment at the end of the year based on the actual. The policy provides additional discount in premium with an added incentive for increasing the exports beyond the projected turnover and also offers simplified procedure for premium remittance and filing of shipment information.

3. Buyer Exposure Policy (Sourced from www.ecgc.in)

Presently, in the policies offered to exporters premium is charged on the export turnover, though the Corporation’s exposure on each buyer is controlled through a system of approval of credit limits on the buyer for covering commercial risks. While this suits the small and medium exporters, many large exporters having large number of shipments have been complaining about the volume of returns to be filed under the policy necessitating the deployment of their resources for this purpose and also resulting in possible unintentional omissions or commissions in such reporting, which have an impact on the settlement of claims. There has been a demand for simplification of the procedures as well as for rationalization of the premium structure. Considering the requirements of such exporters, the Corporation has decided to introduce policies on which premium would be charged on the basis of the expected level of exposure.

4. Consignment Exports Policy (Sourced from www.ecgc.in)

One of the methods being increasingly adopted by Indian exporters is consignment exports where the goods are shipped and held in stock overseas ready for sale to overseas buyers, as and when orders are received. To protect the Indian Exporters from possible losses when selling goods to ultimate buyers, it was decided to introduce Consignment Policy Cover.

A consignment Exports (Stock-holding Agent) Policy will be appropriate for each exporter – stock holding agent combination provided the following criteria are satisfied:

• Merchandise are shipped to an overseas entity in pursuance of an agency agreement;


• The overseas agent would be an independent and separate legal entity with no associate/sister concern relationship with the exporter;


• The agent’s responsibilities could be any or all of the following, viz., receiving the shipment, holding the goods in stock, identifying ultimate buyers and selling the goods to them in accordance with the directions, if any, of his principal (exporter); and


• The sales being made by the agent would be at the risk and on behalf of the exporter (whether or not such sales are in the agent’s own name or otherwise) in consideration of a commission or some similar reward or compensation on sales completed.

 

 

 

 

 

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By: Management Duniya

Role of Banks in Import Finance - Management Duniya

Role of Banks in Import Finance

The importers import different agricultural products which form more than 50% of the total expenditure and are imported from countries like South Africa and Belgium. Banks provide financial credit for these companies in order to execute the purchase of raw materials.

The seller of goods in a foreign country who exports to the Indian company has to ensure that he gets payment from the Indian importer. The seller’s bank would deliver the documents such as Invoice, Bill of Exchange, Bill of Lading, Marine Policy etc. to the Indian importer against acceptance (D/A) if the seller has confidence in the importer’s financial standing and integrity or against payment (D/P). To finance the credit needs of the Indian importer, banks provide the following:

• Irrevocable Import Letter of Credit

The Bank in India would establish through its foreign branch or through a correspondent bank an irrevocable letter of credit favoring the seller who is the beneficiary of the credit. The beneficiary ships the goods and presents the required documents to his banker and the payment is received by him only if the terms of credit are fulfilled. The seller’s bank would get all the reimbursements for the payments made to the seller from the bank in India which has established the credit. The transaction is completed when the importing Indian company makes the payment for the purchases to its bank.

• Loan against goods

The importer of agricultural goods would need finance to meet the bill obligations. If the bank agrees to grant the credit facility, the amount of the bill (fewer margin) is debited to his Loan against Goods (LG) Account. The goods would be cleared by the bank and kept in its possession in the form of a pledge or the facility can be extended on the basis of hypothecation.

Tags: Credit, Export, finance, Financing, goods, Import, import finance, loan, ROle
By: Management Duniya

Role of Banks in Export Financing-Post-Shipment Finance - Management Duniya

Role of Banks in Export Financing-Post-Shipment Finance

This is provided by the bank to the exporter of goods from India from the date of shipment of goods to the date of realization of export proceeds. The advance that is made against shipping documents is called Post-Shipment Finance. The following are the ways of availing Post-shipment finance:

• Advances against Bills discounted/purchased/ negotiated and bills for collection

Banks meet exchange control requirements of seeing that all documents relating to export of goods from India must be passed through the medium of a bank authorized to deal in foreign exchange.

When banks handle export bills on collection basis, they simply act as agents. When the bank decides to extend accommodation against bills for collection, a certain percentage of the bill amount would be granted as an advance depending on the bank’s assessment of the exporter and the drawee . The bank can also purchase export bills drawn in Indian Rupees or in foreign currencies (Post Shipment Foreign Loan – PSFL) after verifying the confirmed export order.

• Advance against claims for Export Incentives

Export incentives are provided by the Govt. of India and other government agencies in order to promote export trade as it helps to earn foreign exchange. The following are some of the incentives which the exporters can claim:

• Refund of Excise and Customs duty


• Cash Subsidy


• Reimbursement of the difference in prices of international and domestic commodities such as steel

Claims are to be registered after the goods are shipped.  As the claim verification process is time consuming, a considerable portion of working capital gets locked for the exporter concerned. Banks therefore advance post-shipment finance to these exporters against such claims and would secure these advances in the form of hypothecation of goods, receivables outstanding etc. These claims are, as is the general practice, routed through the financing bank for registering with the concerned authorities, so that payments are received directly by the bank.

Tags: Banks, Export, finance, Financing, Industry, Post, Postshipment, ROle, shipment
By: Management Duniya

Role of Banks in Export Financing- Pre-Shipment Finance - Management Duniya

Role of Banks in Export Financing- Pre-Shipment Finance

In order to boost export trade, the following forms of credit facilities are granted to Export Oriented Units (EOUs) in the agriculture Industry. Agriculture exports constitute 13% of India’s merchandise export basket, and thus arises the need for this industry to be given monetary support in the following form:

3.1(a)Pre-Shipment Finance

This is the credit given to the exporter before he ships the consignment in accordance with the order given by the importer, for the purchase of raw materials and for processing them into exportable goods, packaging, transportation and warehousing of goods. There are two ways to obtain finance at the pre-shipment stage:

• Anticipatory Letter of Credit:

The exporter can get the importer to provide him with pre-shipment finance, by establishing an Anticipatory Letter of Credit also known as Red Clause Letter of Credit through the importer’s banker in his favor. Such a Letter of Credit provides for either an immediate payment to exporter of full or part amount of the credit against the delivery of specified documents. It stipulates the conditions which the exporter must fulfill before he is entitled to receive any advance payment, such as:

• Credit to be utilized only for the purchase of necessary raw materials


• Shipping documents to be presented to the bank for negotiation before a specified date.

• Export Packing Credit (EPC):

It is the credit provided by a bank to an exporter on the basis of a Letter of Credit opened in his favor or against an irrevocable order for the export of goods from India by the importer. Working capital requirements are appraised on the basis of the Holding Period Ratios, Activity and Turnover Ratios. Margins are set on a low scale (10-15%). Exporters must ensure that the pre-shipment credit is to be adjusted by submission of export documents within 360 days from the date of advance, failing which concessive credit facility would not be available ab initio.

 Packing credit should be maintained as a separate account so as to facilitate proper monitoring of the end-usage of funds. Any outstanding balance in such accounts must be backed by bona fide export documents. In case of exporters of repute, banks would grant advances without lodging of LCs or copies of confirmed contracts against minimum information:

• Importer’s name


• Contract Value


• Particulars and Quantity of goods


• Shipment date


• Terms of Contract

RBI has prescribed these steps in the Running Account facility introduced in the context of export trade.

 Pre-shipment Credit in Foreign Currency (PCFC)

Where Packing Credit is granted in foreign currency at interest rates prevailing in the international markets (generally linked to the 6 months LIBOR), it is popularly known as PCFC. This is ideally meant to meet the procurement requirements of both domestic and imported inputs. Exporters resort to this mode of finance when the Rupee does not show a depreciating trend in comparison to the currency in which the credit is denominated. The rationality being that the exporter would have to shell out more in Rupee terms at the time of repayment of the PCFC loan which hampers profitability. Ideally, this is availed by units located in SEZs. The Conditions regarding the eligibility of exporters for running account EPC facility is applicable to PCFC.

Exporters availing PCFC have to discount their export bills under Export Bills Re-discounting Abroad Scheme (EBR) to repay the outstanding amount in foreign currency.

Tags: Banks, bills, contract, Credit, EBR, Export, Export Financing, Financing, goods, Letter of Credit, LIBOR, PCFC, Preshipment, quantity, rbi, ROle, Role of Banks, SEZ, shipment
By: Management Duniya

Classification of Cash Flows - Management Duniya

Classification of Cash Flows

As discussed earlier, the Cash, Flow Statement shows the cash inflows (sources) and cash outflows (uses or applications) of cash and cash equivalents during an accounting period. Hence, it is essential to know about the various items of sources (or inflows of cash) and uses (outflows of cash) of cash. As per the Accounting Standard-3 (AS-3) the changes resulting in inflows and outflows cash and cash equivalents arise on account of three types of activities, i.e., operating, investing and financing as discussed below:

 1.8.1   (i)          Operating Activities :

Operating Activities are the principal revenue producing activities of the enterprise and other activities that are not related to investing or financing activities. The examples are :

(a)                Cash receipts from the sale of goods and rendering of services.

(b)               Cash receipts from royalties, fees, commission and other revenue.

(c)                Cash payments to suppliers of goods and services.

(d)               Cash payments to and on behalf of employees for wages, etc.

(e)                Cash receipts and payments of an insurance enterprise for premiums and claims, annuities and other policy benefits.

(f)                Cash payments or refunds of income taxes unless they can be specifically identified with financing and investing activities.

(g)               Cash receipts and payments relating to future contracts, forward contracts, option contracts, and swap contracts, when the contracts are held for  dealing or trading purposes.

The principal revenue producing activity of an enterprise is the main activity (business) carried on by it to earn profits. Examples of a financial enterprise; giving loans and dealing in securities is the principal revenue producing activity. Similarly, for an insurance company accepting premium and payments of claims is the principal revenue producing activity.

The net effect of the operating activities on the flow of cash is reported as cash flow from or cash used in Operating Activities in the Cash Flow Statement.

 1.8.2  (ii)          Investing Activities

Investing activities are the acquisition and disposal of the long-term assets and other investments, not included in cash equivalents, These activities include transactions involving purchase and sale of the long-term productive assets like machinery, land and buildings, etc., which are not held for resale. The cash flow from investing activities are:

(a)          Cash payments to acquire fixed assets (including intangibles) and also payments for capitalized research and development costs and self constructed fixed assets.

(b)         Cash receipts from the disposal of fixed assets (including intangibles).

(c)          Cash payments to purchase (acquire) shares, warrants, or debt instruments of other enterprises and interests in joint ventures (other than payments for those instruments considered to be cash equivalents and those held for trading or dealing purposes).

(d)         Cash receipts from sale (disposal) of shares, warrants, or debt instruments of other enterprises and interest in joint ventures (other than receipts from those instruments considered to be cash equivalents and those held for dealing or trading purposes).

(e)          Cash receipts from sale (disposal) of shares, warrants, or debt instruments of other enterprises and interest in joint ventures (other than receipts from those instruments considered to be cash equivalents and those held for dealing or trading purposes).

(f)          Cash receipts from repayments of advances and loans made to third parties (other than advances and loans of financial enterprises).

(g)         Cash receipts relating to future contracts, forward contracts, option contracts and swap contracts except when the contracts are held for trading purposes, or the receipts are classified as financing activities.

(h)         Cash payments relating to future contracts, forward contracts, option contracts and swap contracts except when the contracts are held for trading purposes, or the payments are classified as financing activities.

  

1.8.3 (iii)  Financing Activities

 Financing activities are the activities which result in changes in the size and composition of the owner’s capital (including preference share capital in the case of a company) and borrowings of the enterprise from other sources. The cash flow from financing activities are :

(a)          Cash proceeds from the issue of shares or other similar instruments.

(b)         Cash proceeds from the issue of debentures, loan notes, bonds and other short term borrowings.

(c)          Buy-back of equity shares.

(d)         Cash repayments of the amounts borrowed including redemption of debentures.

(e)          Payments of dividends both equity and preference dividends.

(f)          Payments for interest on debentures and loans.

Tags: Accounting standards, Assets, Cash, Cash Flow, debt, Fixed Assets, flow, inflow, intangible, intangibles, investments, outflow, revenue, royalties, wages
By: Management Duniya

Limitations of Cash Flow Statement - Management Duniya

Limitations of Cash Flow Statement

Though the Cash Flow Statement is a very useful tool of financial analysis, it has its limitations which must be kept in mind at the time of its use. These limitations are :

(i)           Non-cash Transaction are ignored : The Cash Flow Statement shows only inflows and outflows of cash. It does not show non-cash transactions like the purchase of buildings by the issue of shares or debentures to the vendors or issue of bonus shares.

(ii)         Not a substitute for an Income Statement :  An income statement shows both cash and non-cash items. The income statement shows the net income of the firm whereas the Cash Flow Statement shows only the net cash inflows or outflows which do not represent the net profits or losses of the enterprise.

(iii)       Historical in Nature :  It rearranges the existing information available in the income statement and the balance sheet. It will become more useful if it is accompanied by the projected Cash Flow Statement.

(iv)       Ignorance: – It ignores basic accounting concept, i.e., accrual concept.

Tags: analysis, Cash, financial, financial analysis, flow, income, limitations, Statement
By: Management Duniya

Uses of Cash Flow Statement - Management Duniya

Uses of Cash Flow Statement

(i)           Short-Term Planning : The Cash Flow Statement gives information regarding sources and application of cash and cash equivalents for a specific period so that it becomes easier to plan investments, operating and financing needs of an enterprise.

(ii)         The Cash Flow helps understand Liquidity and Solvency : Solvency is the ability of the business to meet its current liabilities. Quarterly or monthly Cash Flow Statements help ascertain liquidity in a better way. Financial institutions, like banks prefer the Cash Flow Statement to analyse liquidity.

(iii)       Efficient Cash Management :  The Cash Flow Statement provides information relating to surplus or deficit of cash. An enterprise, therefore, can decide about the short-term investments of the surplus and can arrange the short-term credit in case of deficit.

(iv)       Comparative Study : A comparison of the Cash Flows for the previous year with the budgeted figures of the same year will indicate as to what extent the cash resources of the business were generated and applied according to the plan. It is, therefore, useful for the management to prepare cash budgets.

(v)         Reasons for Cash Position : The Cash Flow Statement explains the reasons for lower and higher cash balances with the enterprise. Sometimes, a lower cash balance is found in spite of higher profits or a higher cash balance is found in spite of lower profits. Reasons for such situations can be analysed with the help of the Cash Flow Statement. Sometimes in spite of high profits gone? Answers to such questions can be found from the Cash Flow Statement.

(vi)       Test for the Management Decisions : It is a general rule that fixed assets are purchased from the funds raised from long-term sources, and the best way to repay the long-term debt is out of profits. The Cash Flow Statement shows clearly whether the cash inflows from operations have been used for the purchase of fixed assets or whether these assets have been purchased from cash inflows from long-term debts. Similarly, it also explains whether the debentures have been redeemed out of profits or not. Thus, the Cash Flow Statement fan be used to test the credibility of the management decisions.

Tags: Cash, Cash Flow, decisions, flow, Liquidity, Management, Planning, Statement
By: Management Duniya

Balance Sheet in vertical form - Management Duniya

Balance Sheet in vertical form

Format of the Balance Sheet in vertical form

 Balance Sheet of …. As on ……

 

Particulars	Schedule Number	Figures as at the end of current financial year	Figures as at the end of previous financial year
I. Source of Funds:    1. Shareholder’s Funds:       (a) Share Capital       (b) Reserves and Surplus    2. Loan Funds:       (a) Secured loans       (b) Unsecured loans             Total(Capital Employed) II. Application of Funds    1. Fixed Assets:       (a) Gross block       (b) Less : depreciation       (c) Net block       (d) Capital work-in-progress    2. Investments:    3. Current Assets, Loans and Advances:       (a) Inventories       (b) Sundry Debtors       (c) Cash and Bank Balances       (d) Other Current Assets       (e) Loans and Advances      Less: Current Liabilities and Provisions: (a)  Current liabilities (b)  Provisions     Net Current Assets     4. (a) Miscellaneous expenditure to the extent not written-off or adjusted.        (b) Profit and Loss account             (debit balance, if any) TOTAL

Note: A footnote to the Balance Sheet may be added to show the contingent liabilities.

Tags: Balance, Balance sheet, Bank Balance, Creditors, Debtors, Fixed Assets, Loan Funds, Loans, Loss, Profit, Profit & Loss, Sheet, Source of Funds, vertical form
By: Management Duniya

Contents Of Balance Sheet-Horizontal Form of Balance Sheet - Management Duniya

Contents Of Balance Sheet-Horizontal Form of Balance Sheet

The prescribed form of the Balance Sheet is given in Part I of Schedule VI of the Companies Act, 1956.

The Companies Act has laid down two forms of the Balance Sheet known as :

(i)   Horizontal form

(ii)  Vertical form

FORMAT OF THE DETAILED BALANCE SHEET IN A HORIZONTAL FORM

Horizontal Form of Balance Sheet

Balance Sheet of ….(Name of the Company) as on …..

Figures for the previous year  Rs.	Liabilities	Figures for the current year Rs.	Figures for the previous year Rs.	Assets	Figures for the current year Rs.
	Share Capital Authorised …shares of Rs…. Each Preference Equity Issued: Preference Equity Less: Calls Unpaid: Add: Forfeited Shares Reserves and Surplus: Capital Reserve Capital Redemption Reserve Securities Premium Other Reserves Profit and Loss Account Secured Loans: Debentures Loans and Advance from Banks Loans and Advance from Subsidiary Companies Other Loans and Advances Unsecured Loans: Fixed Deposits Loans and Advances from Subsidiaries Companies Short Term Loans and Advances Other Loans and Advances Current Liabilities and Provisions: A. Current Liabilities      Acceptances      Debentures      Sundry Creditors     Outstanding Expenses B. Provisions: For Taxation For Dividends For Contingencies For Provident Fund Schemes For Insurance, Pension and Other similar benefits			Fixed Assets: Land Building Leasehold Premises Railway Sidings Plant and Machinery Furniture Live Stock Vehicles Goodwill Patents and Trademarks Investments: Government or Trust Securities, Shares, Debentures, Bonds Current Assets, Loans and Advances: (A) Current Assets: Interest Accrued Stores and Spare parts Loose Tools Stock in Trade Work in Progress Sundry Debtors Cash and Bank balances (B) Loans and Advances: Advances and Loans to Subsidiary Bills Receivable Advance Payments Miscellaneous-Expenditure: Preliminary Expenses Discount on Issue of Shares and other Deferred Expenses Profit and Loss Account (debit Balance: if any)

Tags: Balance, Horizontal, Horizontal Form, Horizontal Spreads, Sheet
By: Management Duniya

Meaning of Cash Flow Statement - Management Duniya

Meaning of Cash Flow Statement

Cash flow is made up of two words i.e. Cash and Flow, whereas Cash means cash balance in hand including cash at bank balance, and Flow means changes (which may be + or – increase or decrease) in the cash movements of the business.

Cash Flow Statement deals with only such items, which are connected with cash i.e., items relating to inflow and outflow of cash. In other words, it is prepared to study the changes in cash, or to show impact of various transactions on the cash. In short, it is a statement, which is prepared to show the flow of cash in the business during a particular period. It thus, tells about the changes in cash position of a business. The changes may be related either with the cash receipts or cash payments or disbursements of cash. Thus, Cash Flow Statement is a summary of cash receipts and payments whereby reconciling the opening cash balance with the closing cash including bank balances in done. It also explains the reasons for the changes in the cash position of the business on account of the Decrease in the cash position is termed as outflow of cash and increase is termed in flow. Cash flow statement also tells about various sources in cash such as cash from operations, sale of current and fixed Assets, issue of shares/debentures, also termed as inflow of cash whereas loss from operations, purchase of current and fixed assets, redemption of preference shares/debentures and other long term loans etc are also termed as outflow of cash.

The Cash Flow Statement is prepared because of number of merits, which are offered by it. Such merits are also termed as its objectives. The important objectives are as follows :

To Help the Management in Making Future Financial Policies – Cash Flow statement is very helpful to the management. The management can make its future financial policies and is in a position to know about surplus or deficit of cash. Accordingly, management can think of investing surplus funds, if nay, in either short term or long term investments. Thus, cash is the center of all financial decisions.

Helpful in Declaring Dividends etc. – Cash Flow Statement is very helpful in declaring dividends etc. This statement can supply information regarding to understand the liquidity. It must be paid within 42 da­ys.

 Cash Flow Statement is Different than Cash Budget :- Cash budget is prepared with the help of inflow and outflow of cash. If there is any variation, the same can be corrected.

Helpful in devising the cash requirement :-  Cash flow statement is helpful in devising the cash requirement for repayment of liabilities and replacement of fixed assets

Helpful in finding reasons for the difference -  Cash Flow Statement is also helpful in finding reasons for the difference between profits/losses earned during the period and the availability of cash whether cash is in surplus or deficit.

 As per AS-3, Cash Flow Statement :-  Cash Flow Statement is prepared  with a view to highlight the cash generated from recurring activities or cash loss if any where as net profit is calculated after making adjustments on account of non cash items in the profit and loss account.

Helpful in predicting sickness of the business:- Cash flow is helpful in predicting sickness of the business with the help of different ratios.

Tags: Budget, Cash, Cash Flow, Cash flow Statement, Dividends, inflow, Statement
By: Management Duniya

Balance Sheet- Meaning and Purpose - Management Duniya

Balance Sheet- Meaning and Purpose

Balance Sheet is a financial statement that summarizes a company’s assets, liabilities and shareholders’ equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

The balance sheet show: Assets = Liabilities + Shareholders’ Equity

A balance sheet thus, provides detailed information about a company’s assets, liabilities and shareholders’ equity.

Assets are things that a company owns that have value. This typically means they can either be sold or used by the company to make products or provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. It also includes things that can’t be touched but nevertheless exist and have value, such as trademarks, Goodwill and patents. And cash itself is an asset. So are investments a company makes.

Liabilities are amounts of money that a company owes to others. This can include all kinds of obligations, like money borrowed from a bank to launch a new product, money owed to suppliers for materials, payroll a company owes to its employees, taxes owed to the government.  Liabilities also include obligations to provide goods or services to customers in the future.

Shareholders’ equity is sometimes called capital or net worth. It’s the money that would be left if a company sold all of its assets and paid off all of its liabilities. This leftover money belongs to the shareholders, or the owners, of the company.

A company has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it from shareholders (shareholders’ equity).

The purpose of a Balance Sheet is to report the financial position of a company at a certain point in time. It is divided into two columns. The first column shows what the company owes (liabilities and net worth). The second shows what the company owns (assets) on the right. At the bottom of each list is the total of that column. As the name implies, the bottom line of the balance sheet must always “balance.” In other words, the total assets are equal to the total liabilities plus the net worth.

The balance sheet is one of the most important pieces of financial information issued by a company. It is a snapshot of what a company owns and owes at the point in time. The income statement, on the other hand, shows how much revenue and profit a company has generated over a certain period.

Neither statement is better than the other-rather, the financial statements are built to be used together to present a complete picture of a company’s finances.

Tags: Assets, Balance, Balance sheet, Equity, finance, liabilities, Meaning, Purpose, Share Holders, Sheet
By: Management Duniya

Balance Sheet - Meaning and Purpose - Management Duniya

Balance Sheet - Meaning and Purpose

Balance Sheet is a financial statement that summarizes a company’s assets, liabilities and shareholders’ equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

The balance sheet show: Assets = Liabilities + Shareholders’ Equitya

A balance sheet thus, provides detailed information about a company’s assets, liabilities and shareholders’ equity.

Assets are things that a company owns that have value. This typically means they can either be sold or used by the company to make products or provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. It also includes things that can’t be touched but nevertheless exist and have value, such as trademarks, Goodwill and patents. And cash itself is an asset. So are investments a company makes.

Liabilities are amounts of money that a company owes to others. This can include all kinds of obligations, like money borrowed from a bank to launch a new product, money owed to suppliers for materials, payroll a company owes to its employees, taxes owed to the government.  Liabilities also include obligations to provide goods or services to customers in the future.

Shareholders’ equity is sometimes called capital or net worth. It’s the money that would be left if a company sold all of its assets and paid off all of its liabilities. This leftover money belongs to the shareholders, or the owners, of the company.

A company has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it from shareholders (shareholders’ equity).

The purpose of a Balance Sheet is to report the financial position of a company at a certain point in time. It is divided into two columns. The first column shows what the company owes (liabilities and net worth). The second shows what the company owns (assets) on the right. At the bottom of each list is the total of that column. As the name implies, the bottom line of the balance sheet must always “balance.” In other words, the total assets are equal to the total liabilities plus the net worth.

The balance sheet is one of the most important pieces of financial information issued by a company. It is a snapshot of what a company owns and owes at the point in time. The income statement, on the other hand, shows how much revenue and profit a company has generated over a certain period.

Neither statement is better than the other-rather, the financial statements are built to be used together to present a complete picture of a company’s finances.

Tags: Assets, Balance, Balance sheet, Equities, liabilities, Share Holders, Sheet
By: Management Duniya

Balance Sheet- Meaning and Purpose - Management Duniya

Balance Sheet- Meaning and Purpose

Balance Sheet is a financial statement that summarizes a company’s assets, liabilities and shareholders’ equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

The balance sheet show: Assets = Liabilities + Shareholders’ Equity

A balance sheet thus, provides detailed information about a company’s assets, liabilities and shareholders’ equity.

Assets are things that a company owns that have value. This typically means they can either be sold or used by the company to make products or provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. It also includes things that can’t be touched but nevertheless exist and have value, such as trademarks, Goodwill and patents. And cash itself is an asset. So are investments a company makes.

 Liabilities are amounts of money that a company owes to others. This can include all kinds of obligations, like money borrowed from a bank to launch a new product, money owed to suppliers for materials, payroll a company owes to its employees, taxes owed to the government.  Liabilities also include obligations to provide goods or services to customers in the future.

 Shareholders’ equity is sometimes called capital or net worth. It’s the money that would be left if a company sold all of its assets and paid off all of its liabilities. This leftover money belongs to the shareholders, or the owners, of the company.

 A company has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it from shareholders (shareholders’ equity).

 The purpose of a Balance Sheet is to report the financial position of a company at a certain point in time. It is divided into two columns. The first column shows what the company owes (liabilities and net worth). The second shows what the company owns (assets) on the right. At the bottom of each list is the total of that column. As the name implies, the bottom line of the balance sheet must always “balance.” In other words, the total assets are equal to the total liabilities plus the net worth.

 The balance sheet is one of the most important pieces of financial information issued by a company. It is a snapshot of what a company owns and owes at the point in time. The income statement, on the other hand, shows how much revenue and profit a company has generated over a certain period.

 Neither statement is better than the other-rather, the financial statements are built to be used together to present a complete picture of a company’s finances.

Tags: Assets, Balance sheet, investments, liabilities, Meaning, net worth, Purpose, shareholders, Shareholders’ Equity
By: managementduniya