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What is the Net Asset Value of a business?

The Net Asset Value (NAV) of a business is obtained by examining the business Balance Sheet carefully and deducting the ALL the Liabilities from ALL the Assets of the business. (see below for definitions) In many ways it shows the owner’s current stake in the business – particularly when assessing the worth of a private [...]

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Building Confidence in the Decision Making Process – Low or High?

How confident are you in explaining how the following terms relate to people within your organisation? Your personal understanding, combined with intellegent input from staff, who truly understand the critical issues, could be crucial to your on-going success. These issue include: On Finance … Balance sheet, gross margins, net margins, ROI, ratios, bank recs, cash [...]

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Understanding Terminology – Fixed and Variable Costs

Every decision that an organisation makes will have some impact on costing issues and eventually the bottom line. To make smart decisions it is vital to understand the relationship between fixed and variable costs and then be able to apply these concepts correctly to either Absorption or Marginal Costing techniques. Fixed Cost – a cost [...]

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ISA Nightmare

I’ve just had a run in with one UK ISA supplier – however most of them are pretty poor on communication  – the initial dispute was on interest rates – they said I’d signed up for 3.75% 3 year deal and I had to argue strongly that the rate agreed  in their office was 4.25% [...]

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12 Key Steps to Budgetary Control Success

Businesses don’t plan to fail – they often just fail to plan properly – if at all. The skill is knowing where to start and how to do it. Unfortunately – the devil is in the detail! For most companies, establishing a formal budgeting process within the organisation is key to its continued operations. It’s [...]

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Depreciation – learn how to use and ‘appreciate’ it ….

Introduction At year-end, company balance sheets should try to show the value of the ‘big ticket’ items i.e. the fixed assets at a prices which represents their value if they were to be sold on to another company  e.g. land, buildings, vehicles etc. The current values of the fixed assets shown on the balance sheet [...]

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Management Accounting compared with Financial Accounting

MANAGEMENT ACCOUNTING (CIMA) vs.  FINANCIAL ACCOUNTING (CA)  It is important that management accounting is clearly distinguished from financial accounting. The first piece of great news is that management accounts are not audited and not even required by law – that means you can ‘DIY’ if you want to and there are no large accounting bills [...]

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The current banking crisis explained (humour)

Young Stelios bought a donkey from a farmer for €100. The farmer agreed to deliver the donkey the next day. The next day he drove up and said, ‘Sorry son, but I have some bad news. The donkey’s died.’ Stelios replied, ‘Well then just give me my money back.’ The farmer said, ‘Can’t do that. [...]

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Explaining a Balance Sheet

Being able to explain balance sheets (convincingly), using easy to understand language, is an important starting point to be able to then go on to develop a deeper understanding at higher levels. Try commiting these definitions to memory – use them as a starting point. At my coaching sessions these simple definitions are developed and [...]

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Understanding the word CAPITAL

The word CAPITAL can be used in many different contexts in a financial discussion. You need to know exactly in which context it is used if you are to make any sound judgements. It can be used on its own e.g. the business ‘capital’ or in phrases such as ‘capital investment’ or ‘working capital’ and [...]

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