Effect Of Financial Factors On Your Business
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Taxes have always played a crucial role in shaping businesses in a particular way. Since ages, there have been examples of enterprises flourishing and being demolished due to the taxes imposed by the Government. Taxes are an extremely important financial factor that affects the working of a business organisation. Government taxes largely affect the organisations dealing in mergers and acquisitions.
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Depreciation is a factor that works better for businesses than it does in the case of individuals. When you hear about this term, you’d normally think about the value of your beloved car reduce over a period of time. This sure is painful. However, depreciation can actually be a helpful tax-saving measure when it comes to running a business organisation. It is important for an entrepreneur to learn how this factor works in order to take an advantage of the same. This is every businessman’s favourite financial factor. This is what you start a business for. Net profit is nothing but the amount left over after your business is done paying all the debts and operating costs for a given period, which could be a month, a financial quarter or fiscal year. Dwindling net profit is never the sign of a healthy business and can also indicate problems in a several areas, from managing the employees to their pay scales and methods of production. This can impact the financial welfare of every person that is involved with your business. Operating expense is simply an expense that a business organisation incurs through its normal business operations. Operating expense is often abbreviated as OPEX. Such expenses include rent, inventory costs, equipment, payroll, marketing, insurance and the funds allocated towards research and development. One of the most fundamental responsibilities that a management should be satisfied with is determining how lower they can pull the operating expenses, without affecting the stability of the firm and its ability to compete with its contemporaries. This is probably the most important cost to be recorded in your account book. Cost of goods sold (COGS) simply refers to the direct costs that can be attributed to the production of the goods sold in a company. This amount includes the cost of the materials used in creating the good along with the direct labour costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs. For example, the COGS for an automaker would include the material costs for the parts that go into making the car plus the labour costs used to put the car together. |
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