Zeo based budgeting stands on the concept of zero-base. Every business plans out a budget plan for every year and never go for a recheck on all activities those included in the budget.
Average collection period is the total time a business undertakes to collect its payments for the goods or services sold in terms of credit. Collection period is different from companies to companies.
The margin of safety is the safety level before a company reaches its breakeven point. Margin of safety shows a company’s sales level after which the sales value will decrease. A margin of safety is the most needed factor for an investor to analyze the company’s current situation.
The payback period is the time needed to recover the total cash invested. Payback period is an important factor for taking up any investment or project or not. Projects with shorter time payback period are most preferable than ones with longer payback period.
Reorder point is the level where the stock needs to fill again. Usually, what happens a company always set a minimum amount level of a stock and the stock needs to record for reordering when it reaches that level.
Operating cycle can be defined as the total time starting from buying inventory and selling the inventory in order to generate cash to fulfill rest operational expenses. Defining the length of an operating cycle is very crucial for a business in order to be always ready to meet future expenses.
Income statement shows a company’s income during a particular period. It also involves profit & loss statement. Usually, Income statement used by business owners to find out how much profit they earn in a particular financial year or a period.
Joint cost is the cost incurred during a manufacturing process. When a manufacturer produces different products with same raw material inputs, then the cost consumed during this whole production process is called joint cost. For example, Dairy firms use milk as the raw material an produces curd, cream, ghee etc.
Retained earnings is the net amount retained by the entity or corporation over a period of time until the reporting time or fiscal year end. This total amount excludes any dividends that need to pay out to investors.
Appreciation is the increase in the value of assets over a period of time, unlike depreciation. Appreciation occurred due to certain factors like increase in demand, change in inflation rates etc. It’s totally opposite of depreciation. Appreciation is of two types, capital appreciation & currency appreciation.