What is meant by the term "scarcity"?
Simply put, it describes the difference between the boundless wants and desires of a society and the "scarce" resources available to meet those wants and desires. Decisions must be made on how to best allocate and utilize the resources available.
Calculate the net profit margin given the following: $50,000 Sales $20,000 Earnings Before Interest and Taxes 40% Tax Rate
Net Profit Margin= NI/Sales (20,000) (1-0.4) / 50,000= 0.24 24% Net Profit Margin
What is the difference between cash and accrual accounting?
Cash accounting is based on the actual flow of cash only. Revenue and expenses are recorded as cash changes hands. The way it functions is not unlike your regular life. You get a paycheck. You pay some bills. Whatever is left over is your income for the month. Accrual accounting takes a different approach. It attempts to recognize the value of a revenue earned or an expensed incurred when it happens as opposed to when cash changes hands. If a revenue is earned in August but won't be received in September, it must be recorded in August. The same thing applies for expenses.