The current ratio is a liquidity ratio that measures a firm’s ability to pay off its short-term liabilities with its current assets. The current ratio is important because short-term liabilities are due within a period of twelve months. The current ratio is calculated using two standard figures thatRead more
The current ratio is a liquidity ratio that measures a firm’s ability to pay off its short-term liabilities with its current assets. The current ratio is important because short-term liabilities are due within a period of twelve months.
The current ratio is calculated using two standard figures that are shown in the company’s balance sheet: current assets and current liabilities. The formula for the same goes as:
Current ratio = Current Assets / Current Liabilities
A current ratio of 2:1 is considered ideal. Generally, a ratio between 1.5 to 2 is considered beneficial for the business, which means that the company has more financial resources (Current Assets) to cover its short-term debt (Current Liabilities).
A high current ratio may indicate that the business is having difficulties managing its capital efficiently to generate profits.
On the other hand, a lower current ratio (especially lower than 1) would signify that the company’s current liabilities exceed its current assets and the business may have difficulty covering its short-term debt. Although the definition of a good current ratio may vary in the different industry groups.
Example- Where,
1) CR is 2:1, the company is in a good situation as it has double the Current Assets in order to cover the short-term debt.
2) CR is 0.5:1, the company is not in a good situation as it has only half the Current Assets in order to cover the short-term debt.
Let us assume that we are discussing Input Tax Credit in GST of India. Input Tax Credit or ITC is the tax that a business pays on a purchase and that it can claim credit and use it to reduce its tax liability when it makes a sale. In other words, it means at the time of paying tax on output (Final sRead more
Let us assume that we are discussing Input Tax Credit in GST of India.
Input Tax Credit or ITC is the tax that a business pays on a purchase and that it can claim credit and use it to reduce its tax liability when it makes a sale. In other words, it means at the time of paying tax on output (Final sale product), you can reduce the tax you have already paid on inputs (Purchase).
Example For a manufacturer, tax payable on output (Final product) is Rs 500 and tax paid on input A is Rs 100, input B is Rs 50 and, input C is Rs50. You can claim INPUT CREDIT of Rs 200(100+50+50) and you only need to deposit Rs 300(500-200) in taxes.
Conditions- Only a Registered Person would be able to claim the benefit of Input Tax Credit of GST after satisfying the following:
He is in possession of a Tax Invoice or any other specified tax-paid document.
He has received the goods or services. Includes “Bill to ship” scenarios.
Tax is actually paid by the supplier.
The supplier has furnished the GST Return.
To claim ITC, the buyer should pay the supplier for the supplies received (inclusive of tax) within 180 days from the date of issuing the invoice.
Claiming of ITC – Discussed by taking an example, seller A sold his goods to B. Now B who is a buyer will be eligible to claim the input tax credit on purchases based on the invoices when he makes further sales. Now,
S will upload the details of all the tax invoices in GSTR 1.
All the details in accordance with the sales to B will reflect in GSTR 2A, and the same data will be taken by B to file GSTR 2 (i.e. details of inward supply).
B will accept the details about the purchase that has been made and uploaded by the seller, the tax on purchases will be credited to ‘Electronic Credit Ledger’ of B and he can adjust it against future output tax liability and get the refund.
What is a good current ratio?
The current ratio is a liquidity ratio that measures a firm’s ability to pay off its short-term liabilities with its current assets. The current ratio is important because short-term liabilities are due within a period of twelve months. The current ratio is calculated using two standard figures thatRead more
The current ratio is a liquidity ratio that measures a firm’s ability to pay off its short-term liabilities with its current assets. The current ratio is important because short-term liabilities are due within a period of twelve months.
The current ratio is calculated using two standard figures that are shown in the company’s balance sheet: current assets and current liabilities. The formula for the same goes as:
Current ratio = Current Assets / Current Liabilities
A current ratio of 2:1 is considered ideal. Generally, a ratio between 1.5 to 2 is considered beneficial for the business, which means that the company has more financial resources (Current Assets) to cover its short-term debt (Current Liabilities).
A high current ratio may indicate that the business is having difficulties managing its capital efficiently to generate profits.
On the other hand, a lower current ratio (especially lower than 1) would signify that the company’s current liabilities exceed its current assets and the business may have difficulty covering its short-term debt. Although the definition of a good current ratio may vary in the different industry groups.
Example- Where,
1) CR is 2:1, the company is in a good situation as it has double the Current Assets in order to cover the short-term debt.
2) CR is 0.5:1, the company is not in a good situation as it has only half the Current Assets in order to cover the short-term debt.
See lessWhat is Input Tax Credit in GST?
Let us assume that we are discussing Input Tax Credit in GST of India. Input Tax Credit or ITC is the tax that a business pays on a purchase and that it can claim credit and use it to reduce its tax liability when it makes a sale. In other words, it means at the time of paying tax on output (Final sRead more
Let us assume that we are discussing Input Tax Credit in GST of India.
Input Tax Credit or ITC is the tax that a business pays on a purchase and that it can claim credit and use it to reduce its tax liability when it makes a sale. In other words, it means at the time of paying tax on output (Final sale product), you can reduce the tax you have already paid on inputs (Purchase).
Example For a manufacturer, tax payable on output (Final product) is Rs 500 and tax paid on input A is Rs 100, input B is Rs 50 and, input C is Rs50. You can claim INPUT CREDIT of Rs 200(100+50+50) and you only need to deposit Rs 300(500-200) in taxes.
Conditions- Only a Registered Person would be able to claim the benefit of Input Tax Credit of GST after satisfying the following:
Claiming of ITC – Discussed by taking an example, seller A sold his goods to B. Now B who is a buyer will be eligible to claim the input tax credit on purchases based on the invoices when he makes further sales. Now,
- S will upload the details of all the tax invoices in GSTR 1.
- All the details in accordance with the sales to B will reflect in GSTR 2A, and the same data will be taken by B to file GSTR 2 (i.e. details of inward supply).
- B will accept the details about the purchase that has been made and uploaded by the seller, the tax on purchases will be credited to ‘Electronic Credit Ledger’ of B and he can adjust it against future output tax liability and get the refund.
See less