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Capital employed: The term capital employed has been given different meanings a.sum total of all assets Whether fixed or current b.sum total of fixed assets, c.sum total of long-term funds employed In the business, i.e., share capital + reserves &surplus +long term loans – (non business assets + fictitious assets). Operating profit means ‘profit before interest and tax’.
Fixed Interest Cover ratio: The ratio is very important from the lender’s point of view. It indicates whether the business would earn sufficient profits to pay periodically the interest charges.
Formula: Income before interest
and Tax
Interest Charges
Fixed Dividend Cover ratio: This ratio is important for preference shareholders entitled to get dividend at a fixed rate in priority to other shareholders.
Formula: Net Profit after Interest and
Preference Dividend
Debt Service Coverage ratio: This ratio is explained ability of a company to make payment of principal amounts also on time.
Formula: Net profit before interest and
1-Tax rate
Interest + Principal payment
Proprietary ratio: It is a variant of debt-equity ratio . It establishes relationship between the proprietor’s funds and the total tangible assets.
Formula: Shareholders funds
Total tangible assets
Difference between joint venture and
Partnership: In joint venture the business is carried on without using a firm name, In the partnership, the business is carried on under a firm name. In the joint venture, the business transactions are recorded under cash system In the partnership, the business transactions are recorded under mercantile system. In the joint venture, profit and loss is ascertained on completion of the venture In the partnership, profit and loss is ascertained at the end of each year. In the joint venture, it is confined to a particular operation and it is temporary. In the partnership, it is confined to a particular operation and it is permanent.
Meaning of Working capital: The funds available for conducting day to day operations of an enterprise. Also represented by the excess of current assets over current liabilities.
Concepts of accounting:
Business entity concepts:  According to this concept, the business is treated as a separate entity distinct from its owners and others.
Going concern concept: According to this concept, it is assumed that a business has a reasonable expectation of continuing business at a profit for an indefinite period of time.
Money measurement concept: This concept says that the accounting records only those transactions which can be expressed in terms of money only.
Cost concept:  According to this concept, an asset is recorded in the books at the price paid to acquire it and that this cost is the basis for all subsequent accounting for the asset.
Dual aspect concept:  In every transaction, there will be two aspects – the receiving aspect and the giving aspect; both are recorded by debiting one accounts and crediting another account. This is called double entry.
Accounting period concept:  It means the final accounts must be prepared on a periodic basis. Normally accounting period adopted is one year, more than this period reduces the utility of accounting data.

Realization concept:  According to this concepts, revenue is considered as being earned on the data which it is realized, i.e., the date when the property in goods passes the buyer and he become legally liable to pay.
Materiality concepts:   It is a one of the accounting principle, as per only important information will be taken, and UN important information will be ignored in the preparation of the financial statement.
Matching concepts:  The cost or expenses of a business of a particular period are compared with the revenue of the period in order to ascertain the net profit and loss.
Accrual concept:  The profit arises only when there is an increase in owners capital, which is a result of excess of revenue over expenses and loss.
Financial analysis: The process of interpreting the past, present, and future financial condition of a company.
Income statement: An accounting statement which shows the level of revenues, expenses and profit occurring for a given accounting period.
Annual report: The report issued annually by a company, to its share holders. it containing financial statement like, trading and profit & lose account and balance sheet.
Bankrupt: A statement in which a firm is unable to meets its obligations and hence, it is assets are surrendered to court for administration
Lease: Lease is a contract between to parties under the contract, the owner of the asset gives the right to use the asset to the user over an agreed period of the time for a consideration.
Opportunity cost: The cost associated with not doing something.
Budgeting: The term budgeting is used for preparing budgets and other producer for planning,co- ordination, and control of business enterprise.

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