Financial Terms and Ratios: Definitions and Applications
Liquidity Definition
Liquidity refers to the immediate provision of financial and monetary funds to deal with all types of commitments. In credits, securities, or banking, liquidity means the property of being readily convertible into cash.
Profitability
A more precise definition of profitability is that it is an index that measures the relationship between earnings or profits and the investment or resources that were used to obtain them.
1. What is a Budget?
It is a plan to meet a target, expressed
Read MoreUnderstanding Annual Accounts: Balance Sheet, Profit & Loss
Understanding Annual Accounts
Accounting documents are mandatory for enterprises (except the cash flow statement in the case of SMEs). The documents that comprise the annual accounts are:
- A. The balance sheet
- B. The profit and loss account
- C. The statement of changes in equity
- D. The cash flow statement
- E. Notes
These documents form a unit and should be drafted in accordance with the law. Their purpose is to present fairly the assets, financial condition, and results of the company.
Formulation of Annual
Read MoreMarket Dynamics, Labor, Macroeconomics, and Public Sector
Market Rates and Competition Levels
Perfect competition: A large number of suppliers and demand, no company influences the price, the consumer benefits more.
Imperfect competition: Bidders have some pricing power.
- Oligopoly: The number of bidders is small for a large number of applicants.
- Monopoly: There is only one bidder and it has control over prices. It’s worse for consumers.
Features
Perfect competition: There are very few barriers to entry and exit. Each producer has a negligible portion of the
Read MoreInternational Trade: Advantages, Barriers, and Policies
International Commerce
International commerce fundamentally rests on the fact that nations have very different resources and diverse technological capabilities.
Advantages
Free trade is associated with the following points:
- Fostering competition
- Promoting specialization and technological advancements
- Increasing productivity and well-being
- Favoring quality improvement and cost reduction
Trade Policy
Barriers
- Duties: Taxes on imports.
- Quotas or import limits
- Export subsidies
- Dumping: When the national industry
Understanding Balance of Payments and Exchange Rates
Balance of Payments: Definition and Components
Many countries maintain economic relations with other countries in the world. These are foreign or international transactions. The balance of payments statistics is a measure of the exchange of goods, services, and financial assets of a country with other countries.
- Income transactions record the exchange provided to countries producing the balance: exports of goods, capital inputs, etc.
- Payment transactions record involving foreign exchange out of the
Unemployment Benefits: Eligibility, Duration, and Amount
Protection for Unemployment
The purpose of this provision is to protect those who, being able and willing to work, have lost their jobs or have seen their normal working hours reduced. Thus, unemployment can be total (when workers temporarily or permanently cease their work, failing to receive wages) or partial (when their working hours and pay are reduced by at least a third). The provision of unemployment has two levels: tax and welfare, both mandatory. The first is to provide benefits as an alternative
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