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To analyse stocks a little further it is possible to use ratio analysis. The STOCK TURNOVER RATIO shows how many times over the business has sold the value of its stocks during the year. It is calculated by:- STOCK TURNOVER RATIO = Cost of goods sold Stocks The higher the stock turnover the better, because money is then tied up for less time in stocks. A quicker stock turnover also means that the firm gets to make its profit on the stock quicker, and so the firm should be more competitive. However, it will vary between industries and so it is important to compare within an industry. It is also possible to express the ratio as a number of days, which is sometimes an easier way to understand it. To do this use the following formula:- STOCK TURNOVER RATIO (in days) = Average Stocks ...

To analyse stocks a little further it is possible to use ratio analysis. The STOCK TURNOVER RATIO shows how many times over the business has sold the value of its stocks during the year. It is calculated by:- STOCK TURNOVER RATIO = Cost of goods sold Stocks The higher the stock turnover the better, because money is then tied up for less time in stocks. A quicker stock turnover also means that the firm gets to make its profit on the stock quicker, and so the firm should be more competitive. However, it will vary between industries and so it is important to compare within an industry. It is also possible to express the ratio as a number of days, which is sometimes an easier way to understand it. To do this use the following formula:- STOCK TURNOVER RATIO (in days) = Average Stocks ...

Assets are anything which the firm owns or has title to (in other words ownership of). Firms may have fixed assets which are long-term assets - plant, machinery and equipment, but they will also have assets which can be realised (cashed-in) in the short-term. This is generally taken in accounting terms to be less than a year. The current assets are therefore ones that can be quickly realised and change frequently. The main current assets are stock , debtors and cash . CURRENT ASSETS = Stock + Debtors + Cash They are usually shown on the top half of the balance sheet , and the current liabilities are subtracted from them to show net current assets. Source: http://www.bized.co.uk

Stocks may be held for a variety of reasons. They may be stocks of raw materials ready for production, they may be work-in-progress (production part way through the production process) or they may be stocks of finished goods. Whichever they are it is vital for the firm to control the level of stocks very carefully. Too little and they may run into production problems, but too much and they have tied up money unnecessarily. The main theories about stocks then are to do with stock control . There are various different ways to approach stock control:- Fixed re-order stock level Fixed time re-ordering Economic order quantity Just-in-time FIXED RE-ORDER STOCK LEVEL This method of stock control is where a business decides the minimum level of stocks it can tolerate, and then re-orders before the stocks reach this level. The exact timing will depend how long the stocks take to arrive. This can be illustrated as follows:- ...

Stocks are often also known as inventories. They are anything which a firm has which is not currently being used for one of the firm's functions. Most departments in the company will have stocks of something. The factory may have stocks of raw materials ready to produce, the office may have stocks of stationery and the warehouse may have stocks of finished goods. Stocks are vital to a company to help it function smoothly. If production had to be stopped every time the firm ran out of raw materials, the time wasted would cost the firm a fortune. If a shop had no stock on the shelves, customers would soon desert them. The same is true of most areas the firm operates in - I am sure you can appreciate the importance of planning ahead and having suitable levels of stocks. Stocks are considered to be current assets because many types of stocks can be converted into cash reasonably readily - particularly stocks of finished goods. However, they are generally the lea...

The Stock Exchange acts on two levels - one as a primary market and the other as a secondary market . As a primary market, the Stock Exchange will liaise with investment banks and businesses that are looking to raise capital by selling shares. This process involves the business being 'listed' on the Stock Exchange or 'floating'. In this case, the business will effectively get its capital through the initial sale of its shares. Much of the Stock Exchange's work, however, is as a secondary market. People buying shares may wish to do so for a variety of reasons - to secure dividends or to see the price of the shares rise, for example. If people wish to sell shares then it would be very inconvenient for the business itself to take the shares back and then sell them on to someone else. Such a process would be extremely disruptive and not help planning. The Stock Exchange, therefore, acts as a market that puts those wanting to sell shares in touch with those seeking ...

The Stock Exchange acts on two levels - one as a primary market and the other as a secondary market . As a primary market, the Stock Exchange will liaise with investment banks and businesses that are looking to raise capital by selling shares. This process involves the business being 'listed' on the Stock Exchange or 'floating'. In this case, the business will effectively get its capital through the initial sale of its shares. Much of the Stock Exchange's work, however, is as a secondary market. People buying shares may wish to do so for a variety of reasons - to secure dividends or to see the price of the shares rise, for example. If people wish to sell shares then it would be very inconvenient for the business itself to take the shares back and then sell them on to someone else. Such a process would be extremely disruptive and not help planning. The Stock Exchange, therefore, acts as a market that puts those wanting to sell shares in touch with those seeking ...

What does a Board of Directors do? They are appointed to act on behalf of the shareholders - the owners of the business. They run the day-to-day affairs of the business but they must always remember (and this does not always happen) that their decisions must be in the best interests of the shareholders. The shareholders may have invested in the business for two main reasons. Some will be looking to get a regular return on their investment in the form of a dividend. A dividend is the proportion of the profits made by the company each year that is returned to the shareholders. A dividend is normally represented as x pence per share. If the dividend was set by the Board at 6.9 pence per share our 1,000 shareholders in the example above would get 6.9 pence x the amount of shares they owned paid to them. A person owning 50,000 shares would get £3,450 in dividend. Shareholders often have the choice of having the money paid to them in the form of a cheque or directly into a bank account ...

What does a Board of Directors do? They are appointed to act on behalf of the shareholders - the owners of the business. They run the day-to-day affairs of the business but they must always remember (and this does not always happen) that their decisions must be in the best interests of the shareholders. The shareholders may have invested in the business for two main reasons. Some will be looking to get a regular return on their investment in the form of a dividend. A dividend is the proportion of the profits made by the company each year that is returned to the shareholders. A dividend is normally represented as x pence per share. If the dividend was set by the Board at 6.9 pence per share our 1,000 shareholders in the example above would get 6.9 pence x the amount of shares they owned paid to them. A person owning 50,000 shares would get £3,450 in dividend. Shareholders often have the choice of having the money paid to them in the form of a cheque or directly into a bank account ...

The London Stock Exchange (LSE) tends to deal with firms that are relatively large in size. A sole trader for example is likely to have little or nothing to do with the LSE so this example is based on a firm that is relatively large in size. The work of the LSE involves dealing with firms who are already very big in some cases and who already have many thousands of shares being traded everyday but who want to raise funds to expand further to other firms that may have outgrown their existing scale and are looking to take that leap to being a public limited company (plc). Imagine you have a business idea, you think it will be a winner but are at a loss of what to do to get set up. The idea might be the easiest part, getting the practicalities of a business organised is much more daunting. You are likely to need premises, equipment, you have to hire staff, buy raw materials and stock and so on. In many cases all these things have to be done many months before you are able to start sel...

The Stock Exchange The Stock Exchange is one of the major financial institutions in the UK. It is one of many such institutions around the world that are part of what are called capital markets . Capital markets play a vital part in helping businesses to raise funds for research and development, expansion and for starting up. Image: The London Stock Exchange in Paternoster Square This resource is based around the working of the London Stock Exchange (LSE). The LSE moved to a new building not far from its former home of 200 years in 2004. The new building is in Paternoster Square right opposite St Paul's Cathedral in the heart of the financial district in London known as The City. What does the Stock Exchange do? There are two primary roles for the Stock Exchange - the first is to help new firms sell shares to raise capital (finance to get a business up and running) which is referred to as the Primary Market , and the second is to act as an intermediary to bring together tho...

A new business requires resources such as funds for R&D, equipment, marketing, and inventory. These funds are obtained by attracting stakeholders. Financial stakeholders are most at risk - these include banks, bond holders, investors, and venture capital firms. However, employees, customers, and suppliers of a business also are at risk. Employees may not receive some of their pay if the business fails, and they may have given up lucrative positions to which they no longer can return. Customers may find that they are stuck with a non-supported product, and suppliers may lose the opportunity to recoup their development costs or to receive their accounts receivable. Because of the risk of failure, attracting stakeholders is more difficult for a new venture than for an established, successful company. Minimizing Downside Exposure One way to make a new venture more attractive to potential stakeholders is to minimize their downside exposure to the fullest extent possible. For example, ...