Intel Corp. (INTC). The world largest microprocessor company ran multiple plants around the world with significant investment dollars. Therefore, it is worth knowing how long it took to depreciate its assets. For fiscal year 2005, Intel incurred depreciation cost of $ 4.59 Billion while depreciable long term assets stood at $ 21.49 Billion. This implies that Intel will account all of its long term assets within ( $ 21.49 Billion / $ 4.59 Billion ) 4.68 years, a better ratio than the rest of the companies so far.
Being able to track your inventory can tell you whether business is increasing or slowing down. It also tells you how much money is tied up in this unproductive asset.
I like to compare my financial situation to making a journey. The cash flow examples is a way of indicating how fast I am are going, but the net Worth statement tells me where I am on the map – how close I am to my destination. So, what is this journey? It is the financial journey of life. It is pretty obvious that most of us start our adult life with little or no money at all. In fact, many of us start our adult life saddled with student loan debt. But we all need to save money for our retirement. Each dollar we add to our Net Worth is a mile-marker along the financial journey of life.
The “plus” side of your Net Worth is found in things of real value to the marketplace; things like your 401-k and IRA accounts, certificates of deposit (CDs), cash in the bank, equity in your home, cars you own, collectibles you could sell, and debts other people owe you.
INCOME STATEMENT: also called the Profit and Loss Statement, or P&L, or Statement of Operations. This is a report that shows the changes in the equity of the company as a result of business operations. It lists the income (or revenues, or sales), subtracts the expenses and shows you the profit J! (Or loss L.) This report covers a period of time and summarizes the money in and the money out.
The formula is based on two centuries worth of returns in the stock market and the real rate of return (5% annually) you can expect to earn after taxes, expenses and inflation.
DIRECT COSTS: Also called cost of goods sold, cost of sales or job site expenses. These are expenses that include labor costs and materials. These expenses can be directly tracked to a specific job. If the job didn’t happen, the direct costs wouldn’t have been incurred. (Compare direct cost with indirect costs to get a better understanding of the term.) Direct costs are found on the income Statement, right below the income accounts.
Establish clear payment terms and expectations with your customers and have a formal receivable collection process in place. Consider discounts for prepayment or require a deposit for large purchases.