Initial Loss In Business Is Better Than Continuous Loss

By Scott Cole

Investing activities reflect ones company purchases or sales of capital assets. Financing activities reflect companies purchase or sale of stock and proceeds from or amounts given on debt financing. Without a positive cash operations, a company or a firm would have to borrow money from outside to run the business. And chances are that it can lead to losses and closure of business. Thus mentioned is a financial statement that shows the flow of money coming in and going out and so it should be prepared with utmost diligence. Hence, one must primarily know how to make a cash flow statement.

Businesses normally operate at loss in the initial stages of its formation. That is okay to an extend where we have surplus funds in bank accounts. But when the business is running at a loss frequently, a detailed study should be done to understand the fault in the business. If required, advice has to be taken from a good consultant.

Individuals who give loans to friends, families or people with close relations are pronounced as personal trustee and banks or financial institutions who have real contracts with their customers are called real creditors. Creditors charge interest for the loans given by them.

If those people doesn't like the performance of the company, steps shall be taken by them to remove the directors. Two types of stock holders are common stockholders and preferred stockholders. The first one purchases common stock is able to vote to elect board of directors. The second type receives steady dividend before a common stockholder.

Real tellers most often request for collateral such as homes, vehicles etc for providing loans. So that when the loan is not paid, the borrowers can be taken to court and the collateral can be recovered for the loans paid. Personal loan givers who are not able to recoup the amount, can claim short term gains over return on income tax filing.

Accountants are experts in preparing the financial statements. Their work involves recording of business transactions on behalf of the organization and generation of financial statements. Types of accountants are Tax Accountants, Cost Accountants, General Ledger Accountants etc. Experts like accountants reveal the real profit or loss of the enterprise to the outside public.

People like them have responsibilities towards stockholders and creditors. But at times management may approach these expert people to manipulate the figures to show more profits, so that investments made in the company by other institutions does not halt or go slow.

As people of certain stakeholders have access to very confidential information, their responsibility is not to leak out those stuffs to outside world. Accountant job is also risky as there is a possibility of individuals claiming negligence against them for any losses occurred, due to the wrong judgement by the Accountant.

Besides investors, those who are not willing to take risks will invest money in debt funds like bonds which gives less return. A person who invests for a longer period is called an investor. An individual who invests for a shorter period is called a trader. Every function has its own significance.

About the Author:

No comments:

Post a Comment