FIN 300 - Principles of Finance for the Private Sector 1-8 Essay

FIN 300 - Principles of Finance for the Private Sector 1-8 - Essay Example2009). Current proportionality is obtained by dividing circulating(prenominal) assets by current liabilities while quick ratio is obtained the same way yet that inventory is eliminated from current assets since it replications time to convert to cash. The two ratios indicate the level of liquidity and hence they jock to maintain the required liquidity for retailers (Phillips et al. 2009). The higher the ratios the stronger liquidity is.Phillips, M. D., Volker, J. X., Anderson, S. J. (2009). A behavioral comparison of financial ratios for diametric size privately-held retail and service businesses. Journal of Behavioral Studies in Business, 1(1), 1-7.Residual value estimated is normally the amount of money up that can be realized if the asset was to be sold after its useful life. However, most organizations take the estimated residual value to be zero. This method allocates equal amount to each year.Pres ent value is the current value of a given future value of money or cash flow streams (Chiu2010). combining is process of purpose the future value when the present value is given while discounting if the process of finding the present value when the future value is given. Gollier (2010) discusses the following differences.Future value of a lump sum is higher than future value of an annuity given similar factors. This is because the lump sum amount earns by-line in all the periods while not all the annuities earn interest for the entire period.Long terminal figure bonds are those ones that incur a longer maturity period. Interest rates are used as discounting rates in calculating the value of a bond. An increase in interest rate whence reduces the value of a bond and this is a risk called interest rate risk. Short term bonds have a shorter maturity period and a fluctuation in interest affects income hence reinvestment risk.The value of a corporate bond is determined through the f undamental theory, where the value is the present value of the