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Understanding the Concepts
Trina Gray
Strayer University
Intro to Finance
Professor Michael Hamuicka
March13, 2013
Understanding the Concepts Understanding the concepts of business is to know how the world works as defined by mathematical formulas and other representations of cause and effect in the physical world. Using ratios to be able to observe the world reason and draw accurate and rational conclusions. To understand how small businesses differ than large businesses it’s based on the current situation and future possibilities using profit seeking activities to convert factors of production into goods and services for customers in the market to achieve the business objectives. Liquidity is the ability to meet obligations when they are due. To measure your liquidity or your company’s success by meeting its short term obligation current assets to current liabilities Current asset include inventory product you sell and accounts receivable are your credit accounts Converting balances to cash Inventory turnover ratios can tell you how fast or slow the inventory is selling. Accounts receivable ratios can tell you if your customers are paying you or not. You need more assets than liabilities on your balance sheet at all times. How much cash a business generates and how much cash from core operations. The company will struggle to succeed if it has less money. Finical ratios are tools used for internal and external evaluations of the business performance Its effectiveness in business management for both large and small businesses The value of financial ratios are means of comparing and predicting firm performance to investors efficiency and profitability of a firm In financial statement analysis the performance of the business is based on return of investment over time. When considering borrowing money to run a business careful planning is a must.

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