This is the amount of money that is owed for the purchase of either goods or services from any organization or any entity at a particular date. This is a kind of current liabilities. This term is showed in the Balance Sheet as part of the Total Liability of the organization. Importance of Account Payable:
Accounts Payable is one of the major liabilities for an organization. An organization must clearly and precisely identify the amount of Accounts Payable to compare the liability of the firm with the amount of assets it owns and also to compare its ability to pay that Account payable from the amount of cash or other assets it possesses. The amount of Accounts Payable is also used to identify different financial ratios that indicate the overall position of the firm compared with other years and with even other firms in its industry.
This is the amount of money that a firm or an organization gets to other firms or parties for any sales of goods and services provided on account. Accounts Receivable is an asset to that organization and this is presented in the Balance Sheet as part of the Total Assets of that firm. This is one kind of current assets. This is also known as Debtors too. Importance of Accounts Receivable:
Accounts Receivable is one of the major Assets for an organization. The organization must identify exact amount of money that the firm gets to other firms to know about the exact position of the firm. Identifying Accounts Receivable helps to compare overall position of the firm and compare the performance with performance of other years and with other firms in the same industry.
Avg Annual Current Maturities:
Average Annual current Maturities refers to the amount of money actually paid during the upcoming year on the principle amount of all outstanding long term debt. Current maturities refer to the time it takes before a debt needs to be paid back. Importance of Avg Annual Current Maturities:
For an organization it is important to identity Avg Annual Current Maturities to know the amount of loan principle the organization has to pay off in the current year. It has different indications. If the value is in an increasing order, it means that organization is having more debt. Low Avg Annual Current Maturities means reduction of debt obligation. This value along with some other debt ratios helps the management of the firm to get a better knowledge of current position of the company and to make vital decisions. Example:
Average Shares Outstanding:
This is simply the number of shares of a company that has been issued or sold in the market. This is sometimes mentioned in the owner’s equity section of the company’s Balance Sheet. The number of shares outstanding varies time to time as company issues bonus and right shares to public and also buy back some shares from the market. Importance of Average Shares Outstanding:
The number of outstanding shares is required to identify two very important financial ratios: Earnings Per Share and Price Earnings Ratio. Again, there should have a balance between the performance of the company and number of shares outstanding in the market. Even if the company does very well, selling too much shares to public may not be the right decision. So, this is important to issue a reasonable number of shares in the market.
For an organization Cash is the amount of money in hand that can be spent in any business purpose. This includes both banknotes and coins. Cash is a kind of current asset that is totally liquid in form and it is mentioned in the Balance Sheet. Importance of Cash:
The amount of money in hand or cash is so much important for an organization because an organization must maintain an appropriate amount of money in hand. If more cash is in hand it indicates the inefficiency of management to use money/assets. Again if there is less cash in hand, the firm will not be able to maintain its operation effectively....