CA Avinash Shukla

  Let me begin with some assumptions – I am assuming a small business which may be in any formal form like proprietary, partnership or even closely held private limited company and most important - there is only one principal decision maker (PDM). I will quote actual ratios (suitably rounded up or down) of one of my clients to make the example easy to understand. (How to calculate the mentioned ratios is not part of this writeup) The client is into manufacturing of MDF furniture (Customized and standard both). Standard furniture is sold to furniture retailers on credit. Customized furniture is normally without credit, barring few exceptions. Ratio Clients Values Current ratio 1.5 (Outstanding CC included) Average Receivable period 135 Days Average Payable Period 45 Days Average Inventory Holding Period 100 Days Turnover 15Lakhs Co...

  On reading the title you must be surprised, why am I writing about such a basic thing, but don’t worry, I will present both these terms in a different perspective. Traditionally “Asset” means property, land, building, furniture, vehicles and it also includes intangible assets like goodwill, patents etc. i.e anything on which the person has “Rights” and can execute his/her will for using, destroying or selling the same. You will find all such assets on the asset side of the balance sheet. Liabilities are the financial obligations that are to be honored  at pre-decided time or sometime. If we look at the assets and liabilities with different lenses, we will be surprised to find how many assets we hold, actually are liabilities. Liabilities are invariably the same and don’t need explanation, one must be aware of the compounding effect on our liabilities as well. Robert Kiyosaki in his book “Rich Dad Poor Dad” has given a fantastic definition of assets and liabilities. H...

W e often use the word “Contingencies” casually for defining emergencies and unexpected events while planning. Do we really provide for “Contingencies” of our life? I am not referring to having insurance, yes, it’s necessary to have insurance which will take care of financial needs of family in case of bread winner’s death or in case of medical expenses or any other mishaps like damage to car, house etc. I am talking about contingencies which do not fall in any of the insurable category. We all have experienced such a contingency recently when total lockdown of 3 weeks was announced by our PM. Many would have had the first though about how to run the show, how to meet daily household expenses and so on. Business owners were worried about how to meet the obligations of salaries and other payments. On the other hand, there also was a class of people who were not worried and enjoyed the lockdown period spending quality time with family. What was the defining distinction? It was obvi...

Some people are naturally smart in managing finances and many others are not, though them may be really good in many other things. What makes a person really good at managing finances? This article will focus on looking at the “Financial Acumen” from “Multiple Intelligence” perspective. It is imperative to write about what is Multiple Intelligence (MI) for the readers to appreciate the same. Howard Gardner in his book titled “Frames of Mind” later updated with title “Intelligences Reframed” has put forth a theory of Multiple Intelligence, thereby stating that every human being has eight types of intelligences. 4 on left brain and 4 on right brain (to be precise there are 10 intelligences, 5 on each side, but 2 are clubbed, I will tell about this in detail some other time). Left Brain Right Brain Intrapersonal Intelligence - Rational Thinking, Executive Planning, Coordinating, Controlling, Self-Achievement Interpersonal Intelligen...

I know the word “Compounding” is known to every person who has done basic schooling, but still I chose to write about it because the older it gets, mightier it gets. Compounding though is a word from Financial vocabulary, it is applicable to all the aspects of life as well. I need not explain the power of compounding to all my well read readers, still to give an example, if one invests Rs.100/- on 1 st Jan and earns just 1% per day for 365 days the amount at the end of the year would be Rs.3,778/-. I can make out what you are thinking, its impossible to earn 1% per day for 365 days, ok, take another example, if Mr.X who invests just Rs.1,000/- per month for 50 Years and the Rate of return is just 4% the amount at the end of 50 Years would be 19,15,721/- (Investment of Rs.6,00,000/- and gain of Rs. 13,15,721/-), obviously all the learned readers will immediately ask for inflation adjustment, but consider that I have taken only 4% gain, if we assume the investor will gain at 10% PA and ...

The occasion of Dasara is best suited to write about a different side of finance which is neither talked about nor forming part of financial reporting. When we think about finance as profession or even look at investing at corporate or personal level, what comes to mind instantly is MS-excel tables, charts, graphs or changing numbers on electronic screens at stock exchange etc. Even any promotional image having some nexus to finance, invariably uses numbers, tables, graphs, calculator in the background. The question is, Is finance only about numbers? Or it also has a different dimension which plays an important role in financial decision making. Let us take an example which fits apt on today’s occasion. Dasara is considered as one of the most auspicious occasion out of 3-1/2 muhurtas followed by Hindus. It is believed that any investment done on any of these 3-1/2 occasions brings luck and prosperity. Thus, irrespective of the financial ability, innumerable households try to buy gol...