Understanding Financial Accounting: Assets, Liabilities, and Equity
Return on Assets: A Key Profitability Metric
A crucial measure of profitability is the return on assets (ROA). It helps stakeholders determine if a company is using its assets effectively. Asset turnover indicates how efficiently a company utilizes its assets to generate sales—specifically, how many dollars of sales are generated for each dollar invested in assets. Profit margin reveals how effectively a company converts sales into income.
To increase its return on assets, a company can:
- Increase
Key Business Concepts and Terms for Professionals
What is Gross Income (Profit)?
Gross income (or gross profit) is the total revenue a company earns from sales minus the direct costs of producing the goods or services sold (Cost of Goods Sold).
Common Expense Accounts of a Company
- Salaries and wages
- Rent or lease expenses
- Utilities (electricity, water, etc.)
- Office supplies
- Insurance
Accounts Payable and Accounts Receivable
Accounts Payable (AP): The amount a company owes to suppliers for goods and services purchased with credit.
Accounts Receivable (AR)
Read MoreUnderstanding Market Dynamics and Their Impact
Market Control
Market control refers to the influence exerted on the market from both the production and demand sides:
- Supply Side: Sellers can adjust prices based on competitors’ prices.
- Demand Side: Buyers can negotiate prices with sellers, who may accept or decline.
Imperfect Information in the Market
Market failure can arise from a lack of necessary information for buyers. The more information one possesses, the greater their advantage. Information can be gathered from various sources, such as newspaper
Read MoreEconomic Crises, Integration, and Global Trends: Key Insights
Picture 1 Questions:
1. Origin of Economic Crises: Juglar Cycles or Monetary Theories
Juglar Cycles suggest economic crises follow patterns of expansion and contraction due to investment changes. These cycles usually last 7-11 years and reflect overconfidence or fear in markets. Monetary theories explain crises as failures in money supply management. For example, too much money can cause inflation, while too little causes recessions. Both theories highlight the importance of balance in investments
Read MoreLuxury Brand Building: DNA, Codes, Management, and Pricing
Lesson 5: DNA & Codes
A) Creating a Luxury Brand: Nine systematic and necessary elements of signature of a luxury brand:
- The figure of the brand’s creator
- The logotypes
- A visual symbol
- A repeated visual motif
- A brand color
- A favorite material
- The cult of detail
- Constant hymns to the manual work
- A typical way of doing things
B) Two Distinctive and Unique Elements to Create and Establish a Luxury Brand: DNA and Codes.
C) Country of Origin Effect (COO): It is a key element of distinction. Not necessarily all
Read MoreUnderstanding Standard Costs and Process Costing in Manufacturing
Standard Cost
Standard costs are those we hope to achieve in a particular production process under normal conditions. They represent the planned costs of a product and are often established before the start of production.
Standard Cost Benefits
- Measure and monitor the efficiency of the company’s operations because it reveals situations or abnormal operations, which allows setting responsibilities.
- Determine the unused capacity in production, causing losses periodically.
- Know the value of the item at