Financial Accounting Concepts Essay Example | Topics and Well Written Essays - 500 words - 1

Financial Accounting Concepts - Essay Example As the paper declares after analyzing and comparing the Working Capital of both the companies, the result clearly indicates that L.L. Sams Company’s current condition is much superior to that of Garcia Career Services. Hence, the bank’s decision should be to give loan to L.L. Sams Company as this company seems to be the most appropriate for the loan and has the greatest assurance that its liabilities can be paid out of the current assets. This essay discusses that in an assessment of the overall liquidity of the current assets, the current trend of sales in an important factor. Since it takes sales to convert inventory into receivables or cash, an up trend of sales indicates that the conversion of inventories into more liquid assets will be easier to achieve than what sales remain constant. Declining sales, on the other hand, will retard the conversion of inventories into cash. When we measure the net income earned by a business we are measuring its economic performance— its success or failure as a business enterprise. Decision making processes of loan allocation requires a great variety of data processing, a wide range of reliability, and relevance to the decision at hand. The information used includes data on general economic conditions and on industry trends, as well as data on intangibles such as the character and motivation of the management group.