Definition: The Turnover Ratios measure the efficiency of investments made by the firm in the form of revenues and the cost of sale generated during a period of time. These ratios show the relationship between the revenues or cost of sales generated due to the investment activities undertaken. Some important Turnover Ratios are: Inventory Turnover Ratio Debtors … [Read more...] about Turnover Ratios
Accounting
Liquidity Ratios
Definition: Liquidity Ratios are calculated to determine the capacity of a firm to pay off its short-term obligations when they become due. In other words, firm’s cash balance or the readiness to convert its asset into cash, to pay off its current debt is called as liquidity and the ratios that compute it are called as liquidity ratios. Following are the Important liquidity … [Read more...] about Liquidity Ratios
Sunk Cost
Definition: A Sunk Cost is the cost already incurred by the firm and cannot be recovered or refunded. The cost which was incurred in the past and is now permanently lost is called as a Sunk Cost. Suppose, a firm has spent Rs 50,000 in the construction of a building, but due to some government law the construction has to be stopped, then the amount spent till date is a sunk … [Read more...] about Sunk Cost
Capitalized Cost
Definition: A Capitalized Cost is the cost incurred in the purchase and financing of fixed assets. It includes not only the price paid for an asset but also the expenses incurred on its installation and transportation. A capitalized cost is added to the fixed assets and is shown on the assets side of the balance sheet. These costs are not deducted from revenues during the … [Read more...] about Capitalized Cost
Vote on Account
Definition: The Vote on Account is the special provision given to the government to obtain the vote of Parliament to withdraw money when the budget for the new financial year is not released or the elections are underway, and the caretaker government is in place. Simply, the approval given by the parliament to withdraw a certain sum of money from the consolidated funds of … [Read more...] about Vote on Account