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The current ratio is an essential financial matric that helps to understand the liquidity structure of the business. It’s especially helpful for the businesses lenders that assessability of the business to repay their dues. Retail is an industry that is expected to generate cash on a day-to-day basis, and it’s easy for lenders to get collateral over the future cash flow of the retail business. In the retail industry, the business satisfies the demand of a large number of the consumer base. Retail sales normally generate cash, which is considered the strongest attraction of the retail industry, and managers are least concerned about liquidity management. Further, the retail business operates throughout vast industrial sectors, from home-based grocery products to medicines and related equipment. The following chart helps to understand the average current ratio of the retail industry. The numbers have been obtained from the annual report for the year ending 2020 of the respective comp

Definition: The average payment period is the measure of days the business takes to pay off accounts payable. It’s a solvency ratio and indicates business practice to satisfy obligations that fall due. The length of the average payment period is dependent on multiple factors including business policies, liquidity, adequacy of financial planning, and pattern of negotiation with the suppliers. Detailed concept It’s a business norm to purchase and sell goods on credit, and the length of a credit period varies from supplier to supplier and product to product. However, some businesses believe in the maintenance of creditworthiness and look for discounts on the early payout. On the contrary, some businesses believe in payable balance as strong input in the working capital and practice to maintain average payment period as long as possible. So, there are two sides of the equation that include, Maintenance of creditworthiness (centered on maintaining working relations with suppliers) M

The current ratio is a widely used metric in financial analysis; it compares current assets with the current liability to assess if the business has sufficient liquid funds. If current assets of the business exceed current liability, the liquidity is assessed to be in good shape and vice versa. This article aims to study the current ratio of the industry in connection with related fluctuation and data analytics. Various factors impact the liquidity numbers of the business that include business model, industry practice, business-specific decisions, and the liability structure of the business. Efficient use of the assets and better financial planning has proved to be a milestone in managing liquidity. However, that might not be the case with all businesses. Let’s analyze the main aspects of the current ratio with regard to the global airline industry. Global airline industry with perspective to liquidity/current ratio The global airline industry is subject to seasonal variation and

A credit balance refund applies when you have a negative credit card balance. You may need to apply for a credit balance refund for several reasons. There are several methods to apply for a credit refund as well. As such, a negative credit card balance does not affect your credit score. As an alternative, you can utilize the negative balance instead of applying for a refund as well. Let us discuss what is a credit balance refund, reasons, and methods to apply for it. What is a Credit Balance Refund? A credit balance refund is a process to receive funds against the negative balance on your credit card account. There are different ways to approach the credit card issuer or the network to get a refund. The refund will only occur when the transaction has resolved all issues. The negative balance may occur due to several reasons as discussed below. If it is a temporary transaction or an error, you are unlikely to receive a refund. Once the transaction dispute is resolved and the bala

Overview Profit margins are the bottom line of any business. Investors and business managers compare profit margins with industry averages. Some industries have high average profit margins, for example, the accounting and finance industry has typically higher profit margins around 18-20%. However, it’s important to remember that profit margins vary by industry. Analysts must also consider other factors while evaluating profit margins for benchmarking. Profit margins have different variations, each with different implications. Let us discuss different types of profit margins, average profit margins by industry, and see what is a good profit margin ratio. What are the Different Types of Profit Margin? Profit margin ratios come with different variations. Each measure offers different results and information. Gross Profit Margin Gross profit is sales minus the cost of goods sold (COGS). The COGS include direct material, direct labor, and other direct product costs. Gross Profit M

Overview The quick ratio is one of the key liquidity ratios used by analysts. It is simple to understand and a widely used measure to analyze the liquidity of a company. Generally, any quick ratio above 1 will be considered reasonable. However, benchmarking is a great tool to analyze the liquidity of a company. Analysts can use the average quick ratio by industry to compare and benchmark the performance and liquidity of any company. Let us discuss the quick ratio, how to calculate it, and how we can perform the benchmarking against industry averages. What is the Quick Ratio? The quick ratio measures a company’s ability to pay its current liabilities through its current assets. It is the measure of the short-term liquidity of a company. Current assets include cash, cash equivalents, accounts receivable, and marketable securities. Only those marketable securities are included in the quick ratio calculation that can be converted to cash within 90 days. A company’s current liabilit

Overview Backward integration refers to gaining control of the supply-side of a company. It may come through acquisition and merger or arranging in-house production of raw material. Backward and forward integrations are essential parts of vertical integration. It offers several advantages to the company, including increased control over raw material supply, competitiveness, reduced costs, etc. Let us discuss the concept of backward integration with the help of a few real-world examples. What is Backward Integration? Backward integration is the process of taking control of the supply chain side of a business. It can be achieved by producing the input supplies for production internally or by acquiring the supplier company. One of the most common ways to achieve backward integration has been through a merger or acquisition. A manufacturing company often acquires or merges with another company, the supplier of raw material. Backward integration can also take the form of business exp

Definition of Accounts Receivable Turnover Accounts Receivable Turnover can be defined as the number of times on a yearly basis that a company collects its accounts receivables. This metric is used to measure the extent to which companies collect periods from their customers. Receivable Turnover is an accounting measure that is used to gauge the overall effectiveness of the company when it comes to collecting its accounts receivables, or money that is owed by customers or clients of the business. Therefore, this ratio is directed towards measuring how well an organization uses and manages credit that is given to customers and how quickly short-term debt is collected or paid by the company. Generally speaking, firms that have a better collection policy will have higher accounts receivable turnover ratios. Therefore, Accounts Receivable Turnover can be described as a metric that helps companies to devise their credit policies, in line with the type of industry, and their own liquidit

One man business has many merits, and it is the simplest form of business. What are the top 10 advantages of sole proprietorship you should know that will help you decide whether you should prefer it to the partnership or not? Here I have discussed all pros of sole trading in detail to help you know why you should prefer it to the partnership business. Let us start! What are the Top 10 Advantages of Sole Proprietorship you must Know? Following are the top 10 advantages of sole proprietorship you should know: they will motivate you to be a sole successful trader and earn a lot of money. 1. Easy to Establish It is straightforward to start a business alone as you do not have to follow any legal criteria. In partnership, different people are involved, and all of them have different mindsets. It is a bit difficult to convince them of a strategy. But sole trader has to follow only two steps. Firstly, they have to think about an exclusive idea and then its implementation by following a

Each person thinks differently about business and uses different methods for establishing it. What are the 10 types of entrepreneurs, and what kind of business are they running? Without wasting time, move ahead to learn about all types of businesspeople in details 10 Types of Entrepreneur The following points will help you know what are the 10 types of entrepreneurs in detail 1. Trading Entrepreneurs A person who buys the products from someone else then sells them directly to the customers is known as a trading entrepreneur. It plays the role of middle man as it does not manufacture anything, and he does not have his factory. He takes 100% of finished items from factories and sells them to the customer who comes to his shop. Such an entrepreneur is also known as the dealer, relater, middleman, and wholesaler between trader and manufacturers. 2. Manufacturing Entrepreneurs A person who prepares items from raw materials is known as a manufacturing entrepreneur. First, he goes t