Introduction to profitability ratios Profitability ratios are essential financial ratios that provide valuable insights into a company’s ability to generate profits and effectively manage its resources. These ratios are fundamental for investors, analysts, and business leaders to assess a company’s…
What is working capital? Working capital management is a fundamental financial concept that fuels the daily operations of a business like the lifeblood that sustains it. In essence, it represents the difference between a company’s current assets and its current…
What is the Inventory turnover ratio? The Inventory Turnover Ratio is a fundamental financial ratio used by businesses to assess their efficiency in managing inventory. It measures how many times a company’s inventory is sold and replaced during a specific…
What is the current ratio? The ratio is a financial metric used to evaluate a company’s short-term liquidity and ability to meet its immediate financial obligations. It is calculated by dividing a company’s current assets by its current liabilities. Current…
Variable costing explained Variable costing is a widely used managerial accounting technique that focuses on the behavior of costs within a business. Unlike traditional costing methods, which allocate fixed and variable costs to products or services, variable costing considers only…
What is absorption costing? Absorption costing is a method used in managerial accounting to allocate all production costs, both variable and fixed, to the units of a product. It is also known as full costing. The underlying principle of absorption…
Procurement planning Procurement planning plays a vital role in the success of any organization’s operations. To meet organizational needs, goods, services, and resources are identified, assessed, and acquired systematically. Effective procurement planning enables businesses to optimize their purchasing activities, mitigate…
What is the quick ratio? A quick ratio, or acid-test ratio, identifies a company’s short-term liquidity position. It measures its ability to meet its immediate financial obligations, excluding inventory, using its most liquid assets. The formula for the quick ratio…
What is Production planning? Production planning is the process of determining the most efficient way to produce goods or services. It involves analyzing various factors such as demand, available resources, and production capabilities to create a plan that optimizes productivity…
What is ABC analysis? ABC analysis is a widely used inventory management technique that classifies items into three categories based on their relative importance and value. This analysis considers the Pareto principle, which states that a small percentage of items…