It is very important when looking at companies of different sizes and different industries. Ratios tend to vary across these factors and often tell a story when you compare a company to its respective industry. One example is leverage ratios. This shows how much debt a company has and the ratio is used as an indicator of health. Total debt and assets shows total debt of a compare compared to the assets of a company. One should note that an industry such as oil & gas will have companies with higher debt figures due to being capital intensive versus a tech company that can solely rely on equity to finance its operations. These different ratio or financial metrics can explain the story of a company, its financial health, and a brief overview of the operations of a company.
“Merchandising businesses generate revenue by selling goods. They buy the merchandise they sell from other companies called suppliers. The goods purchased for resale are called merchandise inventory. Merchandising businesses include retail companies and wholesale companies” (Edmonds, McNair, and Olds, p.212-213).
Over the last 10 years or so wholesale companies are being a strong trend in today’s society. Costco, Sam’s Club and Oriental Trading Co has made such an impact on consumers looking to cut cost with quality goods. I understand the concept of buying from suppliers at a cheaper rate and selling with a slight markup that benefits the company and the consumer. What is interesting is why other competitors aren’t following suit. what are the numbers that have kept these wholesale companies in business for so long? Is this the new approach to doing business? There are tons of “wholesale” companies popping up in all different industries; how are they faring in the market?
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Penalty or reward?
One portion of the textbook reading for this week was discussing how most companies will charge a fee for a late payment because it is more effective than a reward for early payment. Do you agree with this? It is very common for companies to charge a late fee when payment is not received by the due date. Do you think the current system for a penalty for a late payment is effective in getting customers to pay their bill on time? I did not think about how when I pay my bill effects the books of the company but it is crazy to think about it in that way.