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Economics & Finance
Finance Management Articles
Page 9 of 96
Gross Operating Cycle Vs Net Operating Cycle
An operating cycle is the time needed to convert sales into cash after converting the resources into inventories. In fact, no company generates sales after the production of a good instantly. It has to wait for some time to sell the goods in the market after purchasing raw materials and other necessary items and producing the finished goods.An operating cycle is divided into two types as follows −Gross Operating Cycle (GOC).Net Operating Cycle (NOC).Here’s more about GOC and NOC and their differences.Gross Operating CycleThe gross operating cycle of a firm can be expressed as the Inventory conversion period (ICP) plus ...
Read MoreSustainable Growth Model for a Multiproduct Company
What is Sustainable Growth?Sustainable growth is a percentage measure of yearly growth in sales that is in sync with the firm’s financial policies meaning no fresh equity is issued. For a multiproduct company, sustainable growth can be calculated by the company’s growth at the corporate level in terms of growth of assets. Usually, companies set their target growth in terms of sales. To grow sales, the company needs to invest funds in assets. This investment can either be sourced from external sources or provided by the internal resources of a company.Therefore, the assets of a company will grow by an ...
Read MoreWhat is Operating Cycle in Finance?
What is Operating Cycle?All companies need working capital to run its day-to-day activities. There is no business that does not need working capital. In order to reach its financial goals, however, different companies need different amounts of working capital. An operating cycle is the time needed to convert sales into cash after converting the resources into inventories. In fact, no company generates sales after the production of a good instantly. It has to wait for some time to sell the goods in the market after purchasing raw materials and other necessary items and producing the finished goods.To understand about operating ...
Read MoreWhat is Sustainable Growth?
What is Sustainable Growth?The main aim of financial planning is to get a balanced relationship between financial goals. It is based on the sustainable growth of a company given its established financial policies. As it is known, financial planning involves growth, investment, and financing. Therefore, to achieve sustainable growth, the firms need to create policies that augment the growth potential of a company to sustain in a long-term period.Sustainable growth is a percentage measure of yearly growth in sales that is in sync with the company’s financial policies meaning no fresh equity is issued.The following relationship may be used to ...
Read MoreWhat is Net Concept of Working Capital?
Definition: Net Concept of Working CapitalThe net concept of working capital is a qualitative concept that focuses on the liquidity of funds that must be maintained in order to meet short-term liabilities. It is obvious that a company would need enough funds to meet the day-to-day needs of its operation, so that it can survive and meet its long-term goals. The net concept of working capital management should be applied to organizations individually as there is no precise measure to which the net concept of working capital management should be applied to a company.Like the gross concept of working capital ...
Read MoreGross Working Capital vs. Net Working Capital
There are mainly two types of working capital–gross working capital and net working capital. Although many people tend to use the two alternatively, there are some stark differences between the concepts of working capital. Therefore, it is important to know the differences so that no confusion arises while considering the two concepts of working capital.Following are the differences between Gross Working Capital and Net Working Capital −Investment in current assets vs. liabilities to be paidGross working capital is the investment of a company in its current assets. Current assets are the items that can be converted to cash within a ...
Read MoreHow to Assess a Company's Growth Potential?
To measure a company’s success is to measure the growth of the company. There are a host of manners in which a company’s growth potential can be assessed.Assessment of Company’s Growth PotentialFollowing methods are the most significant ones to calculate the growth potential of a company −Revenues and EarningsRevenues and earnings that are obtained via sales are good indicators of a company’s growth potential. The money that a company makes via sales is a factor that determines whether the company is strong and if so how much its potential to grow.The money left after paying for all expenditures is the ...
Read MoreHow to Create a Long-Term Financial Plan?
What is a Long-Term Financial Plan?A long-term financial plan is a projection of the business’s doable things to reach the financial goal of the organization. The business, therefore, must create the plan so that it acts as a warning, showing the pitfalls of cash flow dips, pinpointing the best time to execute tasks, and identifying financial needs for the future.A long-term plan is usually longer than a single-year plan as a short-term plan is usually of a year or less, whereas long-term plans have tenures of more than one year. Long-term planning is more static; it may include the facets, ...
Read MoreLong-Term Financial Plan vs. Short-Term Financial Plan
Businesses often make short- and long-term goals that are defined by financial plans. Financial plans may be both short- and long-term depending on their tenure. Short-term plans are usually of a year or less while long-term plans have tenures of more than one year.Both short- and long-term plans are inevitable for businesses. The businesses that make short- and long-term goals need to measure their performance by measuring the Key Performance Indicators (KPIs). Keeping track of the KPIs and successfully completing them is the key to success for firms.Here, we define short and long-term financial planning, show their differences and express ...
Read MoreFinancial Forecasting vs. Financial Planning
Both financial forecasting and financial planning can be applied to businesses and individuals, depending on the needs of the companies and the people, respectively. While financial forecast is made on a future date, financial planning is used to reach the goal on the set date in a step-by-step manner.Financial Forecasting vs. Financial PlanningAlthough Financial Forecasting and Financial Planning are related in terms of future endeavours, however, there are stark differences between the two. These differences are as follows −Estimation vs. ForecastingFinancial forecasting is an estimation or a projection, whereas financial planning is a process that should be followed to reach ...
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