However, if the additional cost of debt financing outweighs the additional income that it generates, then the share price may drop. The cost of debt and a company’s ability to service it can vary with market conditions. As a result, borrowing that seemed prudent at first can prove unprofitable later under different circumstances. The …
The debt to asset ratio is a leverage ratio that measures the amount of total assets that are financed by creditors instead of investors. In other words, it shows what percentage of assets is funded by borrowing compared with the percentage of resources that are funded by the investors. The term ‘debt ratio,’ ‘debt …
To decrease an account you do the opposite of what was done to increase the account. Perhaps you need help balancing your credits and debits on your income statement. For example, when paying rent for your firm’s office each month, you would enter a credit in your liability account. The credit entry typically goes on […]
These 5 account types are like the drawers in a filing cabinet. Within each, you can have multiple accounts (like Petty Cash, Accounts Receivable, and Inventory within Assets). Each sheet of paper in the folder is a transaction, which is entered as either a debit or credit. Liabilities are obligations that the company is required […]
Older, more obsolete inventory is always worth less than current, fresh inventory. The days sales in inventory shows how fast the company is moving its inventory. DSI is also known as the average age of inventory, days inventory outstanding (DIO), days in inventory (DII), days sales in inventory, or days inventory and is interpreted in […]
The unsold 430 items would remain on the balance sheet as inventory for $1,520. The COGS is identified with the last purchased inventories and moves upwards to the beginning inventories until the required number of items sold is fulfilled. Additionally, the ending inventory is inflated because the latest inventory was purchased at higher …