finance Management

Explicit verses Implicit Cost

Depending upon the payment, costs are categorized into two categories; Explicit Costs and Implicit Costs. Explicit cost is actually sustained by the organization during production, whereas the implicit cost is not directly incurred by the organization, these cost are implied in nature which do not involve a cash payment. The explicit is also known as out of pocket cost, while the implicit cost is known as an opportunity cost.

The following are the key differences between explicit cost and implicit cost

Explicit cost is experienced when the unit has to pay for the utilization of factors of production. Implicit cost is opportunity cost, which is occurred when the entity uses the proprietor’s resources like capital inventory etc.
Explicit cost is known as out-of-pocket cost while Implicit cost is known as imputed cost.
Explicit cost can be simply determined, but it is just reverse in the case of Implicit cost as it does not have any paper track.
The amount of Explicit Cost is objective in nature for it is essentially incurred whereas Implicit cost follows indirectly and that is why its extent is subjective.
Explicit cost aids in the calculation both the accounting profit and economic profit. On the other hand, Implicit cost aids in the calculation of only economic profit.
Explicit cost is documented and reported to the management. On the other hand, the implicit cost is neither documented nor reported to the management.

Conclusion

An industry may acquire explicit costs from a variety of sources, whereas implicit costs are difficult to quantify. But, the company sustains both the cost and takes decisions keeping both the costs in consideration.

Way to Analyze and Improve Asset Turnover Ratio

The asset turnover ratio is an efficacy ratio that measures a company’s capability to produce sales from its assets by equating net sales with average total assets. In other words, this shows how professionally a company can use its assets to create sales. Analyzing is based on reaching the recent market trend and podcasting the future market with an examined data. The improvement of asset turnover includes various conditions or steps. Let’s check out the steps to improve the assets turnover ratio:

Advance Debtors Collection

If the collection of accounts receivables is at slow speed, there is chance of lowering the sales. This decreases asset turnover ratio. By formulating and firmly adhering to a debtor’s policy, the company can really improve the assets turnover ratio.

Increase Revenue

Increasing revenue is the easiest way to improve asset turnover ratio. The company essentials to move its stock efficiently and engage in advertising activities through advertisements.

Strategically liquidating of assets and Improve Efficiency

The company should have good asset plan which contracts with purchase and sale of assets tactically. Outdated assets should be sold speedily as they are of no use to the input to sales and only makes the balance sheet look underprivileged to the stakeholders. Assets regularly used should be regularly preserved in a scheduled. The management also makes effort to find numerous other ways to increase the competence of the asset.

Go to have assets on Lease

Well, this is not an examined way to progress assets turnover ratio but on technical grounds, this can be implemented. If the company uses the assets on lease, balance sheet does not have record to shown in Profit and Loss Account. The Average Assets in calculation of Assets Turnover Ratio is technically lesser, thus, resultant in higher assets turnover ratio.

Detailed meaning of a letter of credit ?

A letter of credit is basically a letter from the bank officials which guarantees that a buyer’s payment to the seller will be received on time and for the right amount. In case the buyer is not able to make payment for the purchase, the bank has to cover the full or the remaining amount of the purchase the buyer has made.

How does the Letter of Credit work?

Since the letter of credit is a negotiable tool, the bank issuing it will pay the beneficiary or any other bank which is nominated by the beneficiary. If the letter of credit has to be transferred, the beneficiary can assign another entity like corporate or a third party, the right to draw. Hence, letter of credit makes it possible to do business to any corner of the world.

The issuing bank, and the beneficiary. There are various types of letter of credit. Click here to read

How to Explanation for Credit Problems

It is possible for each and everyone to experience financial problems at some point in their life. Getting a loan with a bad credit history can be tough for certain people. Banks generally take a step back when it comes to giving loan to bad creditors. A loan can be provided to the applicant if and only if he is able to write a letter of explanation to the bank which explains the circumstances which have led him to the bank loan. It is completely normal for banks to request the applicant to get a letter of explanation if he/she has a bad credit score. Some of the banks and organizations which provide loan services will be able to provide you the loan even if you have a bad credit score, but they will evaluate your letter of explanation behind your current condition. hence, writing a letter which explains your case can take you a long way. The letter of explanation will be the deciding factor for your loan request.

What is a letter of explanation?

A letter of explanation explains all the reasons which have caused any kind of credit issues previously. Issues which have happened in the past, such as late payments which are more than 3 to 4 years old will not need a letter of explanation. Supporting documentation will always help your letter. Hence, they must accompany all the letters of explanation and the reason must be presented in the letter properly. A good letter of explanation will also spell out all the incidents which have occurred in the past which can be prevented in the future again.

Visit Here to read how to write and Why do you need to compose a letter to the bank which explains your bad credit?

Introduce Yourself (Example Post)

This is an example post, originally published as part of Blogging University. Enroll in one of our ten programs, and start your blog right.

You’re going to publish a post today. Don’t worry about how your blog looks. Don’t worry if you haven’t given it a name yet, or you’re feeling overwhelmed. Just click the “New Post” button, and tell us why you’re here.

Why do this?

Because it gives new readers context. What are you about? Why should they read your blog?
Because it will help you focus you own ideas about your blog and what you’d like to do with it.

The post can be short or long, a personal intro to your life or a bloggy mission statement, a manifesto for the future or a simple outline of your the types of things you hope to publish.

To help you get started, here are a few questions:

Why are you blogging publicly, rather than keeping a personal journal?
What topics do you think you’ll write about?
Who would you love to connect with via your blog?
If you blog successfully throughout the next year, what would you hope to have accomplished?

You’re not locked into any of this; one of the wonderful things about blogs is how they constantly evolve as we learn, grow, and interact with one another — but it’s good to know where and why you started, and articulating your goals may just give you a few other post ideas.

Can’t think how to get started? Just write the first thing that pops into your head. Anne Lamott, author of a book on writing we love, says that you need to give yourself permission to write a “crappy first draft”. Anne makes a great point — just start writing, and worry about editing it later.

When you’re ready to publish, give your post three to five tags that describe your blog’s focus — writing, photography, fiction, parenting, food, cars, movies, sports, whatever. These tags will help others who care about your topics find you in the Reader. Make sure one of the tags is “zerotohero,” so other new bloggers can find you, too.