Inventory and costs

The stock is usually the biggest assets of a company that sells products. If the account storage at the end of the period than at the beginning of the reporting period is larger, the amount that the company actually paid cash for this more than the company stock is registered as the cost of good sold burdens. When that happens, the auditor draws inventory increase of net income to determine the cash flow from profit.

asset account prepayments works much the same way as the change in inventory and accounts receivable accounts. Changes in prepaid expenses, however, is usually much smaller than changes in the other two access accounts.

Opening balance of deferred expenses borne by costs in the current year, but the money was paid last year. This period does the company pay cash for the next period, prepaid expenses, which will affect cash flow for the period, but does not affect the net profit until the next period. Simple, right?

When a company grows, it must have deferred charges for such things as fire-insurance premiums, which must be paid in advance concerning insurance and inventory of office equipment. Increase in accounts receivable, inventory and prepaid expenses is the price of the cash flow as a company have to pay for growth. Rarely is a company that can increase sales income without an increase in these assets.

Lagging behind the effect of cash flow is the price of growth. Executives and investors need to understand that the increasing sales without an increase in accounts receivable is not a realistic scenario for growth. In real business, you typically do not enjoy increased revenues at no extra cost.

http://weddingartpro.blogspot.com
http://stevenwang78.blogspot.com
http://technologicalarticles.blogspot.com
http://designertube11.blogspot.com
http://softwarezone11blogspot.com
http://melodyworld07.blogspot.com
http://itworld7.blogspot.com
http://itstore1.blogspot.com
http://supertube1.blogspot.com