Encyclopaedia Of Economics, Commerce And Management-Marketing Management (Vol. 7)

The final test of the market viability of any corporate enterprise is its financial performance in terms of turnovers and profits. Both are expected to increase year by year and the rate of growth of profits is far more important than simple arithmetic progression. The components that need to be studied in the financial accounting and budgetary management of a firm include sources of finance, cash flows, costing procedures, including, those for wages, machines, materials and overheads, budgetary control, standard costing, and solvency. In the language of accounting, some assets are more liquid than others, the more liquid assets being the firm?s ready cash and the money owed to it by debtors. The ?acid test ratio? is thus the benchmark of a firm?s accounting and budgetary procedures.