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What Is Profit Before Tax (PBT)?Deducting Interest and Depreciation/Amortization from EBITDA and then adding to other income lets us know the company's total profit for the period after gathering all the payments. Taxes need to be paid on this profit, and consequently, it is called PBT In the above illustration, PBT is Rs. 45. Tax: This is the money that goes to the administration. Currently, the corporate tax rate in India is 30%, as per the last update. What is Profit After Tax (PAT)?:What Are The Basics Of the Balance Sheet (B/S)?A Balance Sheet has the sources of funds for a company and the application of those funds at any given time. As it is reasonable, the basis of funds and their application must match at the collective level; therefore, both sides of the balance sheet must match according to the name given. Find A Illustrative Balance Sheet:Sources (Liabilities)Application (Assets) Sources Of Funds:A company has two chief sources of funds, owners' funds or equity capital and borrowed funds or debt capital. Let us discuss each one mentioned below. Equity:This is the concluding residual sum that residues with the company after paying all its stakeholders other than shareholders. This is the shareholder's money and maybe paid out as a dividend or reserved in the company or entirely for additional expansion. This is the money the promoters bring into the business when it is launched, and consequently by further shareholders as and when necessary, who also become owners of the company to the point of their shareholding. This is the owners' investment in the business. A boost in the equity capital may weaken the balanced holding of existing shareholders and consequently their contribution to the company's profits. An intensity can happen as adding share capital is raised or converting debt into equity. What Are Reserves & Surplus?When the company makes profits, they are stimulated each year from the P/L statement into the balance sheet under 'Reserves & Surplus.' Consequently, this is also shareholder's money, which they decided to keep in the company and put into the business. What Is Net-Worth?Equity Capital and Reserves & Surplus jointly symbolize Shareholder's Funds, called Net-worth or owners' capital. In the above illustration, adding Equity Capital of Rs. 100 and R&S of Rs. 28, we get Net-worth (Shareholder's Funds) as Rs. 128. What Is Long-Term Debt?To be precise, whichever debt is taken for more than 1 year is measured to be a non-current liability or a long-term loan. This may be in the appearance of term loans taken from financial institutions, or debt securities issued such as debentures. Investors favor companies with low liabilities. On the other hand, the scenery of the business and the company's lifecycle may read aloud the level of debt in the balance sheet. Industries like Business Process Outsourcing (BPO), IT, education, etc. Do not require considerable investments in capital assets or acquire raw materials and other expenses. This is the concluding residual sum that residues with the company after paying all its stakeholders other than shareholders. This is the shareholder's money and may be paid out as a dividend or reserved in the company or entirely for additional expansion. Companies in the banking and non-banking sector cannot be evaluated on this parameter as their business necessitates them to acquire long-term deposits, which are then disbursed as loans. What Are Current Liabilities?These are liabilities or payments which have to be completed within a year. Salaries, Utility payments, Trade payables, working capital loans, short-term debt raised through the issue of commercial papers, unclaimed dividends, maturing long-term debt, and others are typical examples of current liabilities. Current liabilities are examined to determine the efficiency with which the working capital is managed. For instance, the Trade payables days calculated as trade payables/Cost of sales x 365 days is the time taken to pay the suppliers. High trade payable days should be investigated to see if the company is facing a fund crisis or even bankruptcy. What Is the Application Of Funds?This is the right side of the Balance Sheet, where particulars of assets are given. A company can have fixed long-term assets like plant and machinery or short-term assets like liquid funds or inventory investments. The Two Broad Beginning Of Application Side Of The Balance Sheet Is Mentioned Below: What Are Fixed Assets?These are assets that a company puts together to create goods and services. A manufacturing plant would require heavy machines; a software company would need computers, a real estate company would need land. These are all assets from which the company would produce revenues. This is the concluding residual sum that residues with the company after paying all its stakeholders other than shareholders. This is the shareholder's money and maybe paid out as a dividend or reserved in the company or entirely for additional expansion. Furniture and vehicles are assets that are essential by all companies. Even though these assets do not make revenue, they are necessary for the business. Some balance sheets may also own intangible assets such as patents, licenses, and brand value, and others with tangible assets such as plants, machines, cars, furniture, computers, etc. What Are Current Assets?Current Assets are those which can be transformed into cash within a year. Inventory, trade receivables, investments, short-term loans, advances, and money are all illustrations of current assets. Current assets analysis is significant to recognize the company's working capital situation. A high level of inventory or trade receivables may mean capital tied up, and the company may be paying a high cost for debt. Examining the current assets comparative to past trends and peer group companies will give a close into the company's working capital management. Lower inventory days and trade receivables days portend well for the company.
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