Assets are things of value owned by a person or a business. Examples of assets are cash, securities, property, accounts receivable etc. Assest can be both tangible and intangible. Examples of tangible assets are current assets like cash and fixed assets like real estate and equipment. Goodwill is an intangible asset. Other examples of intangible assets are trademarks and patents.
It is important for businesses to be able to cost their products and services. Through costing they are able to determine the full cost of a product or service by attaching cost to each component and process which goes into making that particular product or service.
Most assets deteriorate over time due to wear and tear. This leads to a loss in value of the asset. Depreciation is a non-cash expense which is equal to the amount of loss of value of the product over a particular period. By using depreciation companies are able to keep a track of the real value of their assets.
Capital is the wealth of an individual or a company in terms of cash, property and other valuables.
By analysis of the financial statements of a company we can get an insight into its health. Typically during such an analysis we will look at the sales revenue, the operating and production costs, the profit/earning ratios, the retained earnings, the assets and liabilities, the equity income, the capital expenditure, the cost of goods sold, the depreciation and amortization, the accounts payable and the net income.
At a given point of time we can understand the financial status of a company by looking at its cash flow statement. Cash inflow takes place due to operations like sales of products and services, and finance like raising of funds through sales of bonds and shares. Cash outflow is due to expenses and investment.
Once we are aware of the expected conditions in the near future we can make a forecast of the probable financial status of a company in terms of cash flow and operations. This is called financial forecasting.
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