Friends and Readers: I am leaving About.com effective April 30. I've enjoyed my time here but it is time for me to move on. Please continue to read my articles on About.com as the information on finance will help you in your small businesses. I will also be writing about finance on my new blog. I hope I have interesting and helpful information for you as we move into the future.
There isn't much different in international accounting reporting standards (IFRS) and GAAP (US accounting reporting standards). In the interest of globalization and transparency between companies of different countries, the Securities and Exchange Commission in the U.S. has been trying for a number of years to come up with a convergence of the two that satisfies both accounting professional, the business community, and investors in the U.S. and in foreign countries.
By 2016, for all practical purposes,IFRS and FASB may be one and the same. The SEC and world leaders feel that this will allow investors across the world to compare U.S. and foreign companies with more transparency and standardization and with the opportunity for growing economic prosperity. There is one rather important (to US investors) difference between FASB rules and IFRS. IFRS does not allow LIFO inventory accounting procedures, which is not a favored change by accounting professionals. What do you think?
Are you considering filing bankruptcy for your small business? If you are, you need a business bankruptcy attorney. Don't just go out into your local community and hire the first attorney you find. Bankruptcy is an important and possibly expensive step. You need the best representative you can find.
Here is an article listing some steps you can follow in finding a qualified business bankruptcy attorney including sources you can tap. I hope this helps you!
If you want to look for a bankruptcy lawyer in a specific location, look here.
In this very aggressive and nervous financial market, investors are looking at the bottom line. They want to know a company's return on equity and return on investment and they don't want to fool around. Doing a complete profitability analysis and having it available for your investors is a smart thing for any publicly traded firm to do.
There are different types of ratios that tell you, as a business owner, and your investors different things. Margin ratios spit out one type of information and returns ratios another. Put everything together for your investors in the DuPont Model and you have a complete profitability analysis. Check out this latest article on the Business Finance website.
In your business, you always need to know what to pay for something - an asset, for example, like a monetary investment or plant and equipment. In order to know what to pay for it, you have to able to calculate its present value. You will accrue payments from many types of investments. If these payments are equal and consecutive, they are called annuities. As a business person, you need to be able to calculate the present value of two types of annuities - ordinary annuities, which pays you payments at the end of a time period and annuities due, which pays you at the beginning of the time period, in order to know what to pay for your investments now.
These articles help you learn to make these calculations in a variety of ways!
Accounting is the language of business and all businesses have to have some method of gathering and classifying their business transactions. That's where accounting information systems come in. If you own a very small business, possibly a home-based business, you may use a system like QuickBooks. If you own a large business, you may use a much more complex system that integrates modules such as inventory and payroll into the basic accounting package.
There are a number of types of accounting information systems you can use and each functions just a little bit differently. Read on.....
If you use both debt financing and funds from investors, you need to constantly watch how the level of debt you employ impacts your firm. Too little debt financing (which means too much investor financing) can lower your firm's return on equity to the investors. Too much debt, however, is even worse. Too much debt can lead a firm right into bankruptcy.
One very important issue for business owners is how much debt and equity they use for permanent financing. Not just for the occasional purchase of equipment or increases in working capital, but permanent financing to keep the doors open. One ratio that helps answer that question is the long-term debt to total capitalization ratio. When you calculate this ratio, you will get a percentage. The higher the percentage, the more debt financing you use. You should watch this ratio. If the percentage is on the rise, you may be depending too much on debt financing for permanent financing.
Do you want to do a simple financial analysis of your small business? If you do, then common size financial statement analysis is for you. It tells you a lot about your company and it couldn't be easier to do. You simply look at your income statement and state each line item as a percentage of sales. Then, look at your balance sheet and state each item as a percentage of total assets. Take a look at the link for an example.
Common size analysis, also called vertical analysis, is the perfect type of financial analysis for very small businesses or home business firms. For financial novices, this is a good place to start in analyzing your business firm.
What is cost in a business firm? Is it the same as the price you put on the products you sell? The answer to that is a resounding NO as you will discover when you read this article. In it, I discuss the difference between cost and price. I also discuss the cost of a product, breaking it down into direct and indirect costs.
Not all costs in a business firm refer to product costs. Some costs are period costs -- those relating to the whole business firm. Then, there are prime and conversion costs. Read this article as an introductory article to the discipline of cost accounting - something every business person needs to understand!
It's a good time to start a business. The uncertainties of the devastating recession of 2008 and the Presidential election of 2012 are behind us. There is a shortage of startups out there. Angel investors and venture capitalists have been sitting on the sidelines during the recession and they are ready to fund good startups. There is relatively high unemployment so you have a good pool of workers to choose from for your business. New technologies are being developed. Find a niche in which you have expertise and go for it!