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Current Liabilities are your generally debts that are due in less than 12 months. These include loans, creditors, etc. The short period within which the liability must be paid makes it a current expense, like here and now. The formula for Current Liabilities is
Fixed Assets + Current Assets - Net Worth (or Total Assets)
So if your Net Worth is $3,000, Current Assets is $1,600, and Fixed Assets is $1,900, then your Current Liabilities would be ($1,900+$1,600)-$3,000=$500.
Current Assets are your assets that are liquid, like cash in the bank, cash on hand, debtors, etc. The term “liquid” is used to represent the fact that these assets are easily accessible and are not tied up in any physical object or product. The formula for Current Assets is
Net Worth (or Total Assets) + Current Liabilities - Fixed Assets
So if your Net Worth is $3,000, Current Liabilities is $500, and Fixed Assets is $1,900, then your Current Assets would be ($3,000+$500)-$1,900=$1,600.
Credit Line is the maximum amount of money that is available for a loan. This means that any loan that is disbursed will not exceed the set amount. Everybody’s credit line will be different because there are a number of factors that affect exactly how much someone will be lent. Some of these include how good or bad your credit score is, how much money you are earning, what are your expenses on a monthly basis, if you have family, if you are the sole bread winner for your family, and so on. Taking all these factors, and more, into account when deciding how much to lend someone protects the bank or lending institutions interest by ensuring that will be able to recover their money and eases the pressure on the borrower in terms of what he has to repay.
For example, Man 1 and Man2 have two different circumstances. Man 1 works $4,000 a month and does not have family. Man 2 works $8,000 a month and has a wife and two kids plus mortgage on his house. When both men come in to apply for a loan, these factors will be taken into place. Let’s say they both want a $6,000 loan. Man 1 is more likely to get it since he really has no ties while Man 2 is likely to get a smaller loan due to his circumstances.
In the simplest of terms, Capital is the funds and assets invested in a business by the owners. This refers to any cash and fixed and current assets that the business partners pool together to get the business off the ground and keep it running. Capital is the main and first funding source that the business receives and profit is usually shared in the ratio that partners have shares in the business.
Other terms associated with Capital include accumulated assets, available money, investment, and startup capital (which is the money that was originally used to start the business). As an example, Max, Ted, and Luke decide to form a clothing business using whatever money and assets they have. Max has $40,000 and is a tailor. Ted has an empty 5,000 square foot building valued at $100,000 plus $10,000 cash. Luke has a car valued at $12,000 that he decides to use as the company vehicle plus $3,000 cash. The total startup Capital that the clothing business would have is the sum of all the monies plus the sum of the values of the assets, which gives a grand total of $165,000. In terms of shares and profit sharing, based on how they rank in terms of the amount of capital each brought into the business, Ted (with 67%) would be first followed by Max (with 24%) and then Luke (with 9%), which means Ted is the holder of the largest share in the business and has controlling interest.
Insurance is needed in order to help the insured recoup from losses. Suffice it to say, insurance has always been a part of life, it’s just that people did not recognize it. It is important to have insurance for one’s vehicle, house, contents of buildings, etc. so that in case of loss it can be replaced. People normally insure their stuff against theft, fire, burglary, water damage, natural disasters, and accidents. The insurance company will fully replace anything lost if it was comprehensively insured. Third party insurance only gives you back a small fraction of the cost. In either case, at least you would be getting something back.
A Certificate of Deposit, or CD, is a financial product that is commonly offered to consumers by banks and credit unions. They are similar to savings accounts in that they are insured and therefore virtually risk-free. Certificates of Deposit are different from savings accounts in that they have a specific term. The term can range from three months to six months, or one to five years, or more) and is usually at a fixed interest rate. Certificates of Deposit are normally held until maturity, at which time the money may be withdrawn together with the accrued interest.
Foreign Currency, also known as Foreign Exchange or ForEx, is the monetary unit of any country other than your own. This means that if you live in England, United States dollars are foreign currency since the money belongs to a foreign country. Foreign Currency is normally used by a country to purchase goods from the foreign country that the money originates. It is also sold to citizens who use it to shop abroad or make purchases online.
With the increased levels of competition on the world market, a lot of businesses are finding it quite hard to operate profitably. Many have had to close their doors and make their employees redundant. But there are still other businesses that are able to operate above board and consistently make a profit. Such companies are therefore said to be in a profitable position.
The term Profitable Position simply means that a business is able to make a profit from the sales of its products or from the services that if offers. As long as a business makes more money than they invested to purchase goods for resale, it is said to be profitable.
