Handling debt

burning-money-300x265Handling debt

Remember the purpose of going into business is to build assets over time. George borrowed $5,000 to buy his lawnmower.  On one hand he gained an asset worth $5,000 on the other hand he gained debt of $5,000. This debt appears on the liability section of George’s balance sheet.   As George pays off this debt, his liability for the lawn mower decreases. George will also be using cash to pay off the debt which will reduce the amount of cash he has in his business.  Simultaneously, George will use depreciation to reduce the value of the lawn mower asset on the balance sheet and reduce the profit in his business.

Word of wisdom about debt:

You should not be making payments on an asset that is no longer on your balance sheet.  Your debt should not be used to finance your business i.e. used to pay for working capital. A business that consistently borrows money to meet its operating expenses will not be around for very long. Debt should be limited to capital expenditures with positive returns.

About fkoutsource
Have you ever wondered how profitable your business really is? What is stopping you from meeting your business obligations on time? Why you consistently struggle with your cash flow. NO one understands your business as well as you but cash flow management can be a challenge. My mission is to help you keep more of your money in the bank. I will give take a look at your business and help you understand the ins and out of managing your cash. I’m committed to making you: • Understanding the impacts of the decisions you make • Price your products or services to become profitable Like anything else, your success in my program depends on you actively implementing my recommendations. What are my qualifications? a. Certified Public Accountant (CPA) b. Masters in Business (MBA) c. Masters in Accounting (MA) d. Masters in Educational Technology e. Bachelors in Computer- Science: f. Bachelors in Business k. Life/Health Insurance certified l. NASD Series 6 and 65 m. Leadership Springfield graduate With over 16 years of accounting and finance experience, I know what it takes to make your business profitable.

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