Month: December 2016

Return on Assets

One of the performance ratios used in business identifies the overall ability of management to efficiently utilize resources to generate a profit.   Corporate resources include human knowledge/skills and the balance sheet assets of the business.   The labor component is unquantifiable in terms of dollars, but assets with a dollar value associated with them are reflected …

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Corporate Documents – Introduction

‘The job isn’t done until the paperwork is complete’, a popular axiom used especially in business.   It identifies with the requirement that every corporate entity maintain its legal status and understanding between all investors and the management team.  These understandings are the essence of the “formation” of the corporate entity.  Failure to do the paperwork …

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Breakeven Analysis – Fundamentals

Breakeven analysis is a managerial (cost) accounting tool used to examine the relationship of price to cost of a product.   It also considers various sales volumes and the effect on profit given the different relationships of price to cost.   The breakeven analysis is an essential tool in maximizing profit with the least amount of resources.   It …

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Economic Substance Principle

The Internal Revenue Service uses an economic substance test to identify sham transactions that exist solely to reduce or eliminate taxes.    In addition,  the courts use this same doctrine to rule on the legitimacy of activity between two or more parties. This term ‘economic substance doctrine’ has other names including: *Substance over Form Doctrine * Sham …

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Business Trusts

The common law definition of a business is an investment of capital or property by individuals which creates the means to carry on towards the goal of generating a profit.   Every state recognizes different legal formats to conduct business.   The simplest and most common is the sole proprietorship .   Other forms include partnerships, limited liability …

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