How will you recognise revenue in case sale is made on FOB basis and in case of CIF basis? Explain.
A. The recognition of revenue in case of FOB (Free on Board) and CIF (Cost, Insurance and Freight) basis is determined by the point at which the ownership of the goods is transferred to the buyer. In case of FOB (Free on Board) basis, the ownership of the goods is transferred to the buyer once...
What is Operating/Financial Leverage?
A. Operating leverage and financial leverage are two types of leverage that refer to how a company uses debt to amplify the returns on its operations or investments. Operating leverage is the extent to which a company’s operations are financed with fixed costs, such as salaries and rent, as opposed to variable costs, such as...
All Financial Ratios and profitability ratios.
A. Financial ratios are used to evaluate a company’s financial performance and health by comparing different financial metrics. There are many different financial ratios that can be used, but some of the most common ratios include: Liquidity Ratios: 1. Current Ratio: Current Assets/Current Liabilities 2. Quick Ratio or Acid Test Ratio: (Current Assets – Inventory)/Current...
What is negative working capital?
A. Working capital is a measure of a company’s short-term liquidity and is calculated as the difference between a company’s current assets and its current liabilities. Negative working capital occurs when a company’s current liabilities exceed its current assets. This means that a company’s short-term obligations are greater than its short-term resources. When a company...
How to calculate free cash flows?
A. Free cash flow (FCF) is a measure of a company’s cash flow that is available for distribution after accounting for capital expenditures. It is the cash that a company generates after accounting for the funds necessary for maintaining and growing its business operations. The formula for calculating free cash flow is: Free Cash Flow...
What is the most important thing you would look for in annual report while performing due diligence?
A. The most important thing to look for in an annual report while performing financial due diligence is the financial statements, including the income statement, balance sheet, and cash flow statement. These statements provide a detailed picture of the company’s financial performance over the past year and can be used to analyze trends and key...