Ebit earnings before interest and taxes equity

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Unformatted text preview: ’s balance plus this month’s depreciation. Acid test Short-term assets minus accounts receivable and inventory, divided by short-term liabilities. This is a test of a company’s ability to meet its immediate cash requirements. Assets Property that a business owns, including cash and receivables, inventory, etc. Assets are any possessions that have value in an exchange. The more formal definition is the entire property of a person, association, corporation, or estate applicable or subject to the payment of debts. What most people understand as business assets are cash and investments, accounts receivable, inventory, office equipment, plant and equipment, etc. Assets can be long-term or short-term, and the distinction between these two categories might be whether they last three years, five years, 10 years, or whatever; normally the accountants decide for each company and what's important is consistency. The government also has a say in defining assets, because it has to do with tax treatment; when you buy a piece of equipment, if you call that purchase an expense then you can deduct it from taxable income. If you call it an asset you can't deduct it, but you can list it on your financial statement among the assets. The tax code controls how businesses decide to categorize spending into assets or expenses. Asset turnover Sales divided by total assets. Important for comparison over time and to other companies of the same industry. B Break-even point The unit sales volumes or actual sales amounts that a company needs to equal its running expense rate and not lose or make money in a given month. The formula for break-even point in units is: =Regular running costs/(Unit Price-Unit Variable Cost) The formula for break-even point in sales amount is: =Regular running costs/(1-(Unit Variable Cost/Unit Price)) Burden rate Refers to personnel burden, the sum of employer costs over and above salaries (including employer taxes, benefits, etc.). HURDLE: THE BOOK G.2 ON BUSINESS PLANNING C Capital...
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