Accounting Summary

APA format: 350- to 700-word summary on one or two of the following. These are video transcripts.

Assessments of Financial Performance:

FINANCIAL RATIOS ARE SHORTHAND SIMPLE EQUATIONS, WHICH WE USE TO EXPRESS THE DIFFERENT ASPECTS OF OUR BUSINESS. SO THEY CAN TELL US THREE THINGS; HOW PROFITABLE THE BUSINESS IS, HOW EFFICIENT IT IS, AND HOW MUCH LIQUID CAPITAL IS AVAILABLE FOR US TO USE. SO LET'S PRETEND THAT THESE ARE MY ASSETS OVER HERE, AND THIS IS MY PROFIT FOR THE YEAR. THERE ARE SEVERAL RATIOS THAT CAN BE USED. SO ONE OF THOSE IS CALLED THE RETURN ON ASSETS RATIO. WE SIMPLY DIVIDE THE NET PROFIT BY THE AVERAGE TOTAL ASSETS AND EXPRESS THIS AS A PERCENTAGE. SO NEXT, OTHER PROFITABILITY RATIOS YOU CAN RESEARCH ARE THE RETURN ON OWNER'S INVESTMENT RATIO. YOU CAN ALSO LOOK AT THE NET PROFIT MARGIN AND THE GROSS PROFIT MARGIN. LET'S LOOK AT THE POSSIBLE EFFICIENCY OF BUSINESSES. SO LET'S SAY THAT I'M SELLING PAPERCLIPS. ONE THING I'D LIKE TO KNOW IS HOW LONG IT TAKES FOR MY STOCK TO TURN OVER. SO IT IS FOUND BY DIVIDING THE AVERAGE INVENTORY HELD AND THE COST OF SALES AND EXPRESSING THIS AS A NUMBER OF DAYS. SO ANOTHER MEASUREMENT OF EFFICIENCY IS THE DEBTOR'S TURNOVER RATIO, WHICH EXPRESSES HOW LONG THE CUSTOMERS TAKE TO PAY ME FROM THE DATE OF THE INVOICE. SO IT'S EXPRESSED AS AN AVERAGE DEBTORS DIVIDED BY CREDIT SALES. AND THEN WE HAVE MEASURES FOR LIQUIDITY. THIS IS HOW WELL THE BUSINESS CAN MEET SHORT TERM EXPENSES WITH CASH OR ASSETS THAT CAN BE TURNED INTO CASH. SO AND THEN WE HAVE THE WORKING CAPITAL RATIO OR A CURRENT RATIO. IT'S SIMPLY THE CURRENT ASSETS DIVIDED BY THE CURRENT LIABILITIES. YOU CAN ALSO RESEARCH THE QUICK ASSETS RATIO, THE CASH FLOW RATIO, AND THE INTEREST COVER RATIO TO LEARN A LITTLE BIT MORE ABOUT LIQUIDITY.

Cash Control:

CASH CONTROL CAN EASILY SLIP OUT OF A MANAGER'S HANDS IF CERTAIN PROCESSES AREN'T FOLLOWED. CASH SHOULD BE SAFEGUARDED AND ONLY KEPTIN SMALL QUANTITIES ON THE PREMISES.STAFF SHOULD BE PROPERLY TRAINED TO HANDLE CASH. AND IT'S WISE TO SEPARATE THE DUTIES TO AVOID ERROR OR THEFT.CASH SHOULD BE BANKED REGULARLY, AND TAKING SHOULD BE VERIFIED BY A CASH REGISTER ROLL IF ONE IS USED. CASH SHOULD ALSO BE RECONCILED WITH BANK STATEMENTS. CASH FLOW STATEMENTS ARE A RECORD OF THE CASH THAT FLOWS IN AND OUT OF THE BUSINESS. FROM THESE STATEMENTS, WE CAN ASCERTAIN THE BUSINESS'S OPERATIONAL CASH CYCLE.THIS IS THE AVERAGE TIME LAPSE BETWEEN THE OUTLAY OF CASH FOR PURCHASES AND THE RECEIPT OF CASH FOR SALES IF BUSINESSES KNOW THEIR OPERATIONAL CASH CYCLE, AND THEY CAN PLAN FOR PERIODS WHEN DEFICITS ARE EXPECTED.