Accounts Receivable Financing is a short-term financing arrangement where a company uses its accounts receivable as collateral to obtain working capital advances.
An essential element in the statement of changes in financial position, providing insights into how funds are utilized within a business.
Capital requirement refers to the amount of capital a business needs to sustain its operations, including both long-term and working capital necessary for maintaining day-to-day functionality and growth.
A detailed analysis of expected cash inflows and outflows over a specific period, crucial for managing liquidity and ensuring a business can meet its obligations.
Cash management involves the planning, monitoring, and execution of a firm's policy regarding liquidity to ensure adequate availability of cash for operational needs, investment opportunities, and unforeseen expenses.
A commercial loan is a short-term (typically 90-day) renewable loan designed to finance the seasonal working capital needs of a business, such as the purchase of inventory or the production and distribution of goods.
A constraining factor, also known as a limiting factor, is an element that restricts or limits the production or sale of a given product. Nearly all firms encounter one or more constraining factors, which could involve limited machine-hours and labor-hours, shortages of materials and skilled labor, or restrictions related to display space, warehouse space, and working capital.
Current assets, also known as circulating assets, circulating capital, or floating assets, are the assets of an organization that form part of the working capital and are constantly changing their form as they circulate from cash to goods and back to cash again.
In accounting, current liabilities are obligations of a company that are expected to be settled within one year or within the operating cycle, whichever is longer. Current liabilities are used to gauge a company’s short-term liquidity and are listed on the balance sheet.
Short-term notes issued by firms and denominated in currencies of countries other than the one in which they are sold. These instruments are used for funding working capital and are an integral part of the global money market.
Factoring is a financial transaction where a business sells its accounts receivable to a third party (factor) at a discount, providing the business with immediate working capital.
A financial statement is a written record of the financial status of an individual, association, or business organization. It includes a balance sheet, an income statement (or operating statement or profit and loss statement), and may also include a statement of changes in working capital, net worth, and cash flow.
An in-depth analysis of financial statements to assess a business's performance and position, using ratios to evaluate profitability, solvency, working capital management, liquidity, and capital structure.
Floating Assets, also known as Current Assets, are the assets in a company's possession that is expected to be converted into cash within a year.
Free Cash Flow (FCF) is a crucial financial metric that indicates the amount of cash generated or consumed by a company after accounting for capital expenditures. It is instrumental for assessing a company's ability to pay dividends, reduce debt, acquire other businesses, or invest in growth opportunities.
A funds flow statement provides a detailed analysis of the changes in a company's working capital during a specific period, detailing the sources and applications of funds.
In current-cost accounting, a gearing adjustment is a financial modification that reduces the charge to the owners for the effect of price changes on depreciation, stock, and working capital. This adjustment is rationalized by the fact that a part of the extra financing is provided by the loan capital of the business.
Small businesses designed for the purpose of achieving high growth and rapid profit increases, often leveraging innovative products and strategies alongside investor capital.
An indenture is a formal agreement, also known as a deed of trust, between an issuer of bonds and the bondholder which outlines key considerations such as the form of bond, amount of issue, property pledged, protective covenants, working capital requirements, and redemption rights.
The Liquidity Index measures a company's liquidity by calculating the number of days it would take for current assets to be converted into cash, providing insights into financial stability and operational efficiency.
Liquidity management refers to the combination of day-to-day operations carried out by the financial management of an organization with the objective of optimizing its liquidity so that it can make the best use of its liquid resources.
Monetary Working Capital Adjustment refers to the changes made to the working capital of a company to reflect its current operational needs and financial health. It involves adjusting the components of working capital to ensure that they are aligned with the company’s operational activities and financial strategies.
Net current assets, also known as working capital, refer to the excess of current assets over current liabilities and represent the capital available to run day-to-day operations within a business.
Outlay cost refers to the initial expenditure incurred for a project or activity, which can include both capital expenditures and working capital expenditures like raw material stocks.
Overtrading occurs when a business expands its operations too rapidly, straining its financial resources and potentially causing liquidity problems.
A payable is an amount that is owed by a company to its suppliers or creditors, typically from the purchase of supplies or inventory (accounts payable), but it can also include amounts owed for other purposes such as bank loans (bank loans payable).
An analysis of changes in the financial position of a firm from one accounting period to another; also known as the sources and uses of funds statement.
Sources of funds are various channels through which businesses obtain the capital required to operate and expand. They are detailed within the statement of changes in financial position, highlighting the increase in funds during an accounting period. Funds are typically defined as working capital or cash.
The SCFP is a financial statement that provides a detailed picture of a company's financial health over a specific period, highlighting the changes affecting working capital and non-working capital due to significant noncurrent transactions.
Trade credit refers to open-account arrangements with suppliers of goods and services, involving a firm's record of payment with the suppliers. It constitutes a company's accounts payable and is an essential external source of working capital despite potentially high costs.
Trade debtors, also known as trade receivables, represent amounts owed to a business by its customers for goods or services delivered or used but not yet paid for. It is a key component in the working capital of a business.
Working capital is essential for financing the day-to-day operations of a company, calculated as the difference between current assets and current liabilities.
Working Capital Adjustment, specifically the term 'monetary working-capital adjustment', refers to the modifications done to the working capital of a business under current-cost accounting. It accounts for fluctuations in bank balances, overdrafts, and cash required to support daily operations.
