How to Determine Inventory Days

Inventory or stock as it is sometimes referred to, is the total of raw materials, work in process, and finished goods that a business holds for the purpose of resale.

If the value of the inventory is divided by the value of the average daily cost of sales, then the resulting figure is the average number of days sales which the business is holding. This number is referred to as inventory days, days inventory outstanding, inventory turnover days, or stock days.

Last modified January 29th, 2019 by Michael Brown
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How to Determine Days Payable Outstanding

A business which purchases on account from its suppliers will at any point in time have amounts outstanding to them for unpaid invoices. The amount outstanding is referred to as accounts payable or sometimes as trade creditors.

If the value of the accounts payable is divided by the value of the average daily cost of sales, then the resulting figure is the number of days of payable which are outstanding. This number is sometimes referred to as days payables outstanding, accounts payable days or trade creditor days.

Last modified January 29th, 2019 by Michael Brown
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How to Determine Days Sales Outstanding

A business which sells on account to its customers will at any point in time have amounts outstanding from them for unpaid invoices. The amount outstanding is referred to as accounts receivable or sometimes as trade debtors.

If the value of the accounts receivable is divided by the value of the average daily sale, then the resulting figure is the number of days of sales which are outstanding. This number is sometimes referred to as day sales outstanding, accounts receivable days or trade debtor days.

Last modified January 29th, 2019 by Michael Brown
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Enter Capital Opening Balance

The opening day capital balance forms part of the opening balance sheet of the business. Capital represents cash and cash equivalents introduced by the owners of the business.

The capital opening balance is recorded in the balance sheet of a business under its own heading of capital and together with retained earnings, forms part of the owners equity in the business.

Last modified January 29th, 2019 by Michael Brown
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Enter Debt Opening Balance

The opening day debt balance forms part of the opening balance sheet of the business. Debts are amounts which are owed by the business to providers of debt finance sometimes referred to as lenders.

Debts include many types of finance including loan, borrowings, mortgages, credit cards and generally any form of finance which involves the payment of interest.

Last modified January 29th, 2019 by Michael Brown
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Enter Inventory Opening Balance

The opening day accounts payable balance forms part of the opening balance sheet of the business. Accounts payable are amounts which are owed by the business to its suppliers, they are sometimes referred to as trade creditors.

If a supplier allows a business credit and invoices it for a product or service and payment is made at a later date 30 days 60 days etc, then while the business owes the supplier the money it are classified as an accounts payable in the accounts of the business.

Last modified January 29th, 2019 by Michael Brown
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Enter Accounts Payable Opening Balance

The opening day accounts payable balance forms part of the opening balance sheet of the business. Accounts payable are amounts which are owed by the business to its suppliers, they are sometimes referred to as trade creditors.

If a supplier allows a business credit and invoices it for a product or service and payment is made at a later date 30 days 60 days etc, then while the business owes the supplier the money it are classified as an accounts payable in the accounts of the business.

Last modified January 29th, 2019 by Michael Brown
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Enter Accounts Receivable Opening Balance

The opening day accounts receivable balance forms part of the opening balance sheet of the business. Accounts receivable are amounts which are owed to you by your customers, they are sometimes referred to as trade debtors.

When you allow your customer credit and invoice them for a product or service and receive payment at a later date 30 days 60 days etc, then while they owe you the money they are classified as an accounts receivable.

Last modified January 29th, 2019 by Michael Brown
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Altman Z Score Calculator Model

The Z score Altman model takes five key accounting ratios for a business, and using the Altman Z score formula weights them according to an industry type, and combines them into a single score (the Z score) to give an indication of the financial health of a business.

Last modified February 8th, 2019 by Michael Brown
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Enter Cash Opening Balance

The opening day cash balance forms part of the opening balance sheet of the business, and includes amounts which are held by a business in the form of notes and coins (e.g. petty cash) or which are held at a bank in the form of on demand deposits such as current accounts and savings accounts.

The cash opening balance comes under the heading of current assets in the balance sheet of the business.

Last modified January 29th, 2019 by Michael Brown
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Enter Fixed Assets Opening Balance

The opening day fixed assets form part of the opening balance sheet of the business, and include such items as, land, buildings, plant & machinery, fixtures & fittings, and motor vehicles.

Fixed assets are assets which have a long life and are for use within the business and not held for resale. They are not part of the trading stock, and are not involved in the day to day working capital cycle of the business so are not readily convertible into cash.

Fixed assets are sometimes referred to as long term assets or capital assets.

Last modified January 29th, 2019 by Michael Brown
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How to Calculate Startup Debt Finance

Startup costs need to be funded through a combination of capital injected by the owners and investors, supplier credit and debt finance. This can be seen from our start up costs calculator which shows startup expenses and assets on the left hand side matched by the startup funding on the right hand side.

It is unlikely in a startup business that suppliers will grant substantial credit terms before the business has started trading, so having estimated the amount of startup capital available, it is possible to calculate the balance that will need to be funded by debt finance, such as startup business loans.

Last modified January 29th, 2019 by Michael Brown
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