Question

write a short note on bad debt ratio ,Net asset value of mutual fund ,emergency fund, preferred stock

Answer 1

Bad Debt ratio

A bad debt ratio measures the expected uncollectable amount with regard to credit sales.A rise in bad debt is considered as bad for the business.This is due to the fact that an increase in bad debt actually implies a greater realization risk with regard to receivables.This might lead to future write offs in the future.They can be expressed as a percentage of sales and also as a percentage of accounts receivable .Formulas:Bad debt /Accounts receivable . Bad debt /Sales.

Net Asset Value of Mutual Fund.

Net Asset Value of a mutual fund refers to the per unit market value of the fund.It is calculated by deducting all the liabilities from the value of cash and other securities in the fund and then dividing it with the number of shares outstanding.The Net asset value is important to the investors as it shows how much one share of the fund is worth.The are often computed at the end of the trading day based on closing prices

Emergency fund

Emergency fund refers to assets that are readily available and can be used by individuals to weather financial difficulties.Emergency fund acts a safety net and provides the individual financial security.Emergency funds are often comprised of highly liquid assets that can be used to meet immediate expenses in times of an emergency.From a business perspective emergency funds are comprised of liquid assets and are used in times of financial difficulties.Every business regardless of the size is advised to have an emergency fund.

Preferred stock

Preferred stock refers to a type of ownership in a company with a higher claim to dividend than the common stock .Since preferred stock pays fixed dividend the features of preferred stock can be considered as the combination of features of debt and equity .Preferred stock dividends are often higher than the common stock dividends.The rights that preferred share entitles it's owner is limited relative to common stock holder rights.Preferred stock holders usually do not have voting rights.Preferred stock is intended for investors who require a level of stability with regard to the cash flows that arise in the future from their investment in the company.