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Terms of payment vary broadly in practice. At one conclusion, if the seller has financial resources, she or he may extend liberal credit to the buyers, conversely the buyer pays in advance and finances the whole trade cycle. The terms of credit differ for various industries and are dictated through prevailing trade practices. Generally, businesses operating in monopoly environment will require advance or cash payment while business operating in a competitive environment will expand credit to the buyers. The main terms of payment are as listed as given below:
Cash Terms
While goods are sold on cash terms, the sales consideration or say payment is received either before goods are sold as advance payment or while the goods are delivered as cash on delivery Cash term usually exist under the subsequent conditions:
(a) While goods are made to order
(b) While the buyer is perceived to be less credit worthy
(c) The seller is in strong bargaining position.
Deposits from the public are one of the important sources of finance mainly for fine established big companies along with a vast capital base. The period of public deposits is rest
Cash budget is a detailed budget of income and cash expenditure including both capital and revenue items. For control reasons the year's budget is usually phased in smaller periods
Interest coverage ratio (or debt service ratio) Meaning: this ratio establishes a relationship among net profits before interest and taxes and interest on long debt. Obj
Advance Factoring and Maturity Factoring: In both recourse and non-recourse factoring whether the factor advances cash against book debts to the client instantly on assignment
Assumption of break even analysis The break even analysis is based upon the following assumptions : 1) All elements of cost, i.e., production , administration and selling di
What is Activity ratio Funds are invested in several assets in business to make sales and earn profits. The efficiency with which assets are managed directly affects the volume
importance of ratio analysis
Cost Behavior A firm's cost position results from the cost behavior of its value activities. The cost behavior is based on a number of structural factors which influence cost
a certain company makes 3 products A,B and C and they use the same raw material zhong.details about each product is as follows.production units are 10 000 for A,8 000 for B,12 000
how to prepare master budget
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