Company Funds Flow

by Kate Gardens - Date: 2007-02-12 - Word Count: 267 Share This!

To purchase these assets it utilizes to some extent, the sources of funds borrowed in the form of loan and unsecured loans. The assets should not be purchased through short-term loan, but financing through equity capital indicates very sound position of the entity. But the debt-equity ratio is calculated 57% and thus the company shows a lower degree of leverage. If the company increases the debt content in the capital structure over a period of time, then it indicates risk to long-term finance providers & the profitability factor in an organization reduces.

The overall earning capacity of the business is studied by measuring the profitability or efficiency is studied by measuring the profitability or efficiency ratio of a business. the profitability factor of an organization can be studied in relation of sales which is defined as Gross Profit/ Net Sales. For the Rainbow chem. Industries it is 22.69% and therefore it is healthy. The company is able to cover fixed charges to be paid to creditors and profits for shareholders.

The creditors like debenture holders and share holders are much concerned about the firm's policy regarding payment of cash dividend. The shareholders should get stable dividends every year and the creditors should be paid along with the rate of interest on loans whether secured or unsecured or debenture holders. The employees in the business are concerned about the liquidity position, the composition of assets, dividend policy etc because they are working for the betterment of the organization. They depend upon the firm's prospect to enjoy a higher income benefits through the firm.

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Kate Gardens is a custom essay writing expert writer and UK customers support consultant at Customessays.co.uk. Get more details for education dissertation writing, history dissertation and find more tips for law dissertation writing. Your Article Search Directory : Find in Articles

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