Question

What is the profit margin and how can it be used?

14.What are liquid assets and why are they important?

15.What are the advantages to a seller of being paid by credit card?

16.How does the aging of receivables facilitate cash management?

17.What is the advantage of just-in-time inventory when it works perfectly?

18.Why do some companies prefer accelerated depreciation?

19.Where does depreciation hit the financial reports, specifically income statement and Balance sheet?

20.What is the accounting term used to describe the cost expensed over time related to an intangible asset?

sorry about that no points required?

Answer 1

1. Proit margin is the margin or the gap between the selling price and the cost of certain product/ Goods etc, which is earned by the seller. it depicts the net income earned by the seller from the business.

profit margin is calculated as Profit/sales *100 ( in percentage %)

it can be used to asses the amount earned within different accounting periods, and actions can be taken to improve the profit margin time to time.

2.Liquid assets refer to the most cashable or the assets which can be converted easily into cash within very short time period, generally 3 months. for example: liquid cash and cash at bank, marketable securities, short term investments( not more than 3 MOnths) . etc

liquid assets are important to fulfill the working capital requirements i.e. the day to day cycl of the business, as it hepls in smooth working as business and can be easily converted into cash when needed.

3. Firstly, since our economy is moving towards being cashless promoting plastic ready money, most of the people have already started using credit cards and other cards, so when the seller has credit card facility it automatically attracts customer base, and his ultimate sales increase.

secondly, when cusomers pay using credit cards, the process of transfer of payment to seller from the buyer is quick and easy at just the swipe of the card, the seller has no feAr of the cheque getting bounced or rejected and all payment is transferred to him at one time by the registered bank also there is a recorded proof in the bank statement. also credit cards increase the purchasing power of the buyers and so even the customers will have to pay to bank on a later date they can shop now with the banks money and pay them later which ultimately increase the sales of seller.

4.aging of receivables means calculating the amount of receivables which is very difficult to be recieved in future, which means the amount cannot be recovered as called as bad debts.

this facilitates the cash management as when we would know the amounts which are not going be received in future and we are prepared for the same we would create a perovision for them and will find other options for liquid money and wont assume that we will be receiving the aid bad debt amount in futurre.

5.just in time inventory is a technique to control and monitor inventory as, when the stocks are about to end in the production process the inventories are restocked. The advantages of just- in- time inventory are:

firstly, maintenance costs are reduced as the when the stocks are held for a long period they need to be mainteained in the warehouse by manging proper temperature, packaging and so n so..this also means storage or warehousing costs are reduced.

secondly,the money or the capital required is not blocked inthe stocks and is freely available to be used elsewhere to keep the work going and create opportunity cost benefit also leading to better cash flow in business.

thirdly, production process and inventory storage work hand in hand that means are flexible towards each other i.e. if 1000 kg material was put in earlier lot out of which only 600kg has been sold and 400 kg is yet to be sold the new production process could be cut short or adjusted as per the requiremnets of the business and that is why it is called flexible.

6.accelerated depreciation is calculated with a specific method and one needs to qualify to use such method.

the major reason why some companies prefer this method of depreciation is that it it provides the companies to take a higher percentage of depreciation immediately which helps them in tax savings.

7. the depreciation is shown in the balance sheet as less from the value of the asset in the form of accumulated depreciation.

an in the income statement, it is seen as on the debit side as expense or under operating expenses heading as depreciation expense.

8. Accounting term used to describe the cost expensed over time related to an intangible asset is AMORTISATION which has a similar concept as depreciation for tangible assets.