Thursday, March 27, 2008


Days' Inventory:

It shows the average lengths of time items are in inventory.


It is a corporate IOU that is not backed by the company's assets and is much riskier than a bond.


A debit is one component of every accounting transaction showing what the company received as a result of that transaction. Debits increase assets of a company and decrease liabilities and equity of a company. Furthermore, debits decrease sales, and increase cost and expenses on the Profit and Loss Report.

Debt To Equity:

Debt to equity measures the risk of the company's capital structure in terms of amounts of capital contributed by creditors and that contributed by owners. The debt to equity expresses the protection provided by owners for the creditors. A low debt to equity ratio implies ability to borrow.


A method of recovering the cost of an asset over the assets useful life or recovery period.

Discounted Cash Flow:

Discounted cash flow is a method of computing the rate of return of a project. Under this method, the actual net cash flowback (after-tax earnings plus depreciation) is discounted annually until the present worth of the discounted cash flowback over the life of the project is equal to the cost of the project.

Double-Entry Accounting:

It is a system of recording transactions in a way that maintains the equality of the accounting equation which is assets=liabilities+owner's equity. The double-entry system records each transaction as both a debit and a credit.

Drawing Account:
A drawing account is the amount of cash drawn out by a sole proprietorship and by partners of a partnership,. The drawing amount reduces capital in a sole proprietorship and a partnership. It is nontaxable for income tax purposes

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