The two major elements of working capital of a company are current assets and current liabilities. The assets which are readily converted into cash are considered as Current Assets while Current liabilities are those debts which fall due for payment within a short duration. Account receivable is a current asset account, which represents the money to be received by the company, against the goods delivered or services rendered to the customers. On the other hand, accounts payable is a current … [Read more...]

Loan is referred to a sum of money borrowed from bank or financial institution for a particular period, that requires repayment along with interest. These days, loans are considered as the best means of availing finance for any purpose like education, construction of a house, purchasing the car or any other business requirement. There are two types of loan, namely, secured loan and unsecured loan. When a loan is secured the borrower pledges some asset as security against the loan. On the … [Read more...]

The economic position of a country can be monitored, controlled and regulated by the sound economic policies. The fiscal and monetary policies of the nation are the two measures, which can help in bringing stability and developing smoothly. Fiscal policy is the policy relating to government revenues from taxes and expenditure on various projects. Monetary Policy, on the other hand, is mainly concerned with the flow of money in the economy. Fiscal policy alludes to the government's scheme of … [Read more...]

Double entry system of bookkeeping says that every transaction affects two accounts. There is a proper procedure for recording each financial transaction in this system, called as accounting process.The process starts from journal followed by ledger, trial balance, and final accounts. Journal and Ledger are the two pillars which create the base for preparing final accounts. The Journal is a book where all the transactions are recorded immediately when they take place which is then classified and … [Read more...]

The balance of payment is the record of dealings in goods, services and assets, between the citizens of the nation and the rest of the world. It is divided into two parts, i.e. Current Account and Capital Account. Current Account is an account showing the trade of merchandise, whereas the Capital Account gives place to all capital transactions. While current account is used to keep a track on the movement of money in and out the economy, during a particular period. The capital account, on the … [Read more...]

After the implementation of globalization policy, world has become a small village and now every contry freely transacts with the other countries of the world. In this context, two statements are prepared to keep a record of the transactions made by the country internationally; they are Balance of Trade (BOT) and Balance of Payments (BOP). The balance of payment keeps a track of transaction in goods, services, and assets between the country's residents, with the rest of the world. On the … [Read more...]

The process of globalization is facilitated by three major organizations, i.e. World Bank, World Trade Organization (WTO) and International Monetary Fund (IMF). There is a little bit of bewilderment and confusion, in the mind of many people regarding the IMF and World Bank regarding their functions, objectives, structure, member nations, etc. The fundamental difference between IMF and World Bank is that the bank is established as a development organization whereas the fund is founded as a … [Read more...]

Consignment refers to a commercial arrangement in which goods are delivered to the agent by the seller, for the purpose of sale to the customers, on behalf of the seller. The term consignment is commonly juxtaposed with Sale. Typically, Sale is a transaction between two parties in which the ownership, title and possession goods are transferred from seller to buyer for the money consideration. The scope of sale is wider in comparison to a consignment, as consignment is also a type of sale. The … [Read more...]

Funds are the basic need of every firm to fulfill long term and working capital requirement. Enterprise raises these funds from long term and short term sources. In this context, capital structure and financial structure are often used. Capital Structure covers only the long term sources of funds, whereas financial structure implies the way assets of the company are financed, i.e. it represents the whole liabilities side of the Position statement, i.e. Balance Sheet, which includes both long … [Read more...]

In general, leverage means affect of one variable over another. In financial management, leverage is not much different, it means change in one element, results in change in profit. It implies, making use of such asset or source of funds like debentures for which the company has to pay fixed cost or financial charges, to get more return. There are three measures of Leverage i.e. operating leverage, financial leverage, and combined leverage. The operating leverage measures the effect of fixed … [Read more...]