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For example, suppose a company has Rs.2 million in current assets and Rs.1 million in current liabilities; its working capital ratio would be 2 (Rs.2 million / Rs.1 million). This indicates it has twice as many current assets than liabilities to cover its short-term debts. The price-to-earnings (P/E) ratio is a valuation measure used to

Evaluating leverage helps management eligible child assess the balance between debt financing and equity financing. Maintaining an optimal leverage structure promotes growth while avoiding excessive interest expenses that create financial distress. Tracking leverage over time provides a benchmark to inform financing decisions and evaluate financial health. One of the uses of ratio analysis is to

That’s because every transaction is recorded in real-time under a perpetual inventory system. If inventory is central to your business, it must be managed, and to do that it, must be measured. It also wouldn’t make sense for small businesses that sell their inventory as a side project to use perpetual inventory. An appliance repair

There are three contra asset accounts that commonly appear in an organization’s chart of accounts. However, that $1.4 billion is used to reduce the balance of gross accounts receivable. Therefore, contra accounts, though they represent a positive amount, are used to net reduce a gross amount. Equity Contra Account In order to keep the accounts