Recent Articles

Long-Term Debt

Debt that is usually incurred to purchase long life types of assets. In general there is a matching principle of long term debt to fixed assets.

Bookkeeping – Loan Accounting (Lesson 54)

05/13/2017

Almost every small business borrows money.   The most common reason is to purchase a fixed asset of some sort.   The amount borrowed is most often a long-term liability.   There are several steps involved in recording the original loan and then [...]

Debt or Equity in Small Business – Fundamentals

01/30/2017

Small business books and manuals explain the formula used to determine whether additional debt increases the return for investors commonly known as return on investment (ROI).   I find this laughable in our modern economic times given the low cost [...]

Amortization of Financing Costs

01/11/2017

When a business acquires a loan there are typically closing costs involved.   Generally Accepted Accounting Principles (GAAP) require these costs to be amortized (allocated) over the life of the loan.  There are several principles the reader [...]

Debt to Equity Ratio

12/31/2016

Another leverage ratio used to evaluate the financial integrity of a business is the debt to equity ratio.   It is strictly a bottom half balance sheet ratio.   Its result explains the relationship of volume of debt and corresponding equity to [...]

Fixed Assets To Debt Relationship

12/08/2015

Every business owner, especially young entrepreneurs, must understand how long-term debt  is used to finance the purchase of fixed assets . It is a basic principle especially for start-ups. There is a relationship that exists between the two. If [...]

Long Term Debt – Financial Statement Presentation

01/07/2015

Long Term Debt is one of the multiple forms of capitalizing a business.  It includes bonds, secured notes and mortgage notes.  In the world of small business, the most common form of long term debt is secured notes, most likely with recourse.  As [...]

Long Term Debt – Explanation and General Understanding

01/06/2015

In the arsenal of capitalizing a business operation, long term debt serves as one of the primary sources of capital.  As an owner of a small business, you need to understand the relationship this source has to the overall financial status of the [...]

Insolvency and Bankruptcy – Know the Difference

02/01/2014

Every business owner needs to know the difference between insolvency and bankruptcy.  Often these two terms are misunderstood and improperly used in conversation.  You need to know their correct meaning because both are used in civil law and both [...]

Quick Ratio – Definition, Explanation and Proper Use

01/14/2014

The quick ratio is a formula used in business to identify the ability of a business to pay its current liabilities.  It is also known as the ‘Acid Test’ formula (ratio).  In the large markets this formula is one of the financial industry [...]

Current Liabilities Section of the Balance Sheet

12/10/2013

The current liabilities section of the balance sheet identifies those amounts due to third parties within the current year.  These include accounts payable, credit card accounts, accrued payroll, taxes, unearned revenue, deposits and those amounts [...]
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