FREE IRS Webinar on Tax Provisions of the Affordable Care Act (ACA) on September 9, 2010
Learn about the tax provisions of the Affordable Care Act (ACA recent health care legislation) at a FREE IRS Webinar on September 9, 2010 at 2 p.m. Eastern.
The IRS’s Small Business/Self-Employed Division is presenting this FREE webinar especially for small business owners and the self-employed. Learn about Affordable Care Act’s current tax provisions and where to find future updates.
Current Ratios and Quick Ratios
Current ratios help evaluate a company’s ability to pay short-term obligations.
Current ratio = current assets / current liabilities
The current ratio includes all current assets, but since inventory is not always quickly liquidated, many analysts remove it from the equation and use the Quick ratio.
Quick ratio = (current assets – inventory) / current liabilities
The quick ratio emphasizes assets that are easily converted to cash. The higher the ratio, the better off the company. Analysts like to see ratios greater than 2:1 for current ratios and 1:1 for quick ratios.
There are three basic reports important to your business.
- Income or Profit and Loss Statement
- Cash Flow Statement
- Balance Sheet
An income or Profit and Loss Statement shows where and how money goes in and out of a company for a period of time. Monthly, quarterly and annual Profit and Loss Statements show the financial strength of a company.
The Cash Flow Statement is one of the most useful financial management tools because it shows you exactly how cash is flowing in and out of a business.
The Cash Flow Statement is a guide for business making business decisions such as adding employees or planning major purchases.
Regardless of where you seek funding - from a bank, a local development corporation or a relative - a prospective lender will review your creditworthiness. A complete and thoroughly documented loan request (including a business plan) will help the lender understand you and your business. The "Five C's" are the basic components of credit analysis. They are described here to help you understand what the lender looks for.
Capacity to repay is the most critical of the five factors, it is the primary source of repayment - cash. The prospective lender will want to know exactly how you intend to repay the loan. The lender will consider the cash flow from the business, the timing of the repayment, and the probability of successful repayment of the loan. Payment history on existing credit relationships - personal or commercial- is considered an indicator of future payment performance. Potential lenders also will want to know about other possible sources of repayment.