CAPITAL Defination Methods of Obtaining Capital

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Presentation transcript:

CAPITAL Defination Methods of Obtaining Capital Equtiy financing and debti fincancing financial statements The calculation and use of financial ratios Profits and losses of a business Rate of stock turnover factors affecting stock turnover

Defination capital long-term capital short-term capital

Capital is one of the four factors of production Capital is one of the four factors of production. Without it no business can survive. CAPITAL Long-term capital Short-term capital

Methods of obtaining capital Eqyity financing methos self-financing additional partners issuing shares Debt financing methods borrowing from friends and relatives trade credit overdrafts and bank loans factoring accounts receivables issuing debentures

Financial Statements Balance sheet profit and loss account

The Calculation and use of financial ratios Liquidity Profitability

Liquidity Acid-test ratio Working capital Current ratio = current assets current liabilities Acid-test ratio = current assets - stock Working capital = current assets - current liabilities

Profitability = sale -cost of goods sold x 100% = net profit x 100% Gross profit percentage = sale -cost of goods sold x 100% sales Net profit percentage = net profit x 100% Rate of return on capital = net profit x 100% owners’ capital