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Category: Accounting

What is breakeven analysis? What are the common cost volume profit formula?

Breakeven Concept:  Break-even analysis relates to the calculation of the necessary levels of activity required in order to break even in a given period Break-even occurs when total revenue and total costs are equal resulting in zero profit Breakeven can be calculated by units (breakeven point – BEP) or dollars (breakeven in dollars – BE$)  …

What are the different types of cost?

Costs can be classified as fixed, variable or mixed   The nature of fixed and variable costs relates to whether such costs are likely to alter in total with changes in activity Fixed costs are those costs which remain the same in total (within a given range of activity and timeframe) irrespective of the level …

What is cash budget?

The cash budget is a statement of expected future cash receipts and payments It assists decision making by: documenting timing of all cash receipts and payments helping to identify periods of expected cash shortages and surpluses  identifying suitable times for purchase of non-current assets assisting with planning and use of borrowed funds providing a framework …

What are rights and options?

Rights issue — issue of new shares to existing shareholders They are either: Renounceable (i.e. investors are free to sell their rights to subscribe on the market) or  Non-renounceable (cannot sell their rights) Options confer the right to subscribe to shares in the future at a price and time which are pre-determined Having issues with …

What is hybrid debt securities?

Hybrid debt securities are securities that have characteristics of both debt and equity  The principal hybrid securities are convertible notes (pay interest) convertible preference shares (pay dividends) Both convert to ordinary shares at maturity Having issues with your accounting module? SMS us at +65 9758-7925 or email: enquiry@starcresto.com

What is preference shares?

Hybrid form of capital, but lean more towards equity than debt  Usually have a fixed dividend  Rank ahead of ordinary shares in the event that company winds up  Owners cannot buy them partly paid (like ordinary shares) and owners have no voting rights Having issues with your accounting module? SMS us at +65 9758-7925 or …

What is ordinary shares?

No fixed maturity date – but they can be consolidated or split  Payments attached to ordinary shares are called dividends – decided by directors out of profits  Ranked last in the event of the company winding up Having issues with your accounting module? SMS us at +65 9758-7925 or email: enquiry@starcresto.com

What are the different sources of funds raising and finance?

What are the sources of short term finance? The most common sources of short-term finance for entities are: accrued wages and taxes  trade credit  bank overdrafts  commercial bills and promissory notes  factoring or debtor/invoice/trade finance  stock/inventory loans or floor-plan finance  What are the sources of long term finance? Long-term debt finance is supplied to borrowers …

What are the benefits and cost of granting credit to debtors?

Benefits Increasing sales:  new customers from cash-only suppliers bring planned purchases forward  impulsive purchases  customers who would not otherwise have purchased  Reducing the cost of making sales (eg., counter staff) Costs Opportunity cost of funds being tied up Cost of slow payers, bad debts, specialist collection services Cost of administering the system Having issues with …

Why do you need to manage inventory?

Inventories or stock are normally a component of current assets for most entities involved in manufacturing or the sale of goods Types of inventories Raw materials Work in progress (WIP) Finished goods Benefits of holding inventories Sales are made and profits gained Cross-sales are made and profits gained e.g lotto and card sales in a …