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Financial Accounting II Lecture 38

Financial Accounting II Lecture 38

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Published by Mohsin

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Categories:Types, Business/Law
Published by: Mohsin on Nov 23, 2009
Copyright:Attribution Non-commercial

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11/08/2012

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Financial Accounting IILecture 38
 
Difference Between Profitability and Liquidity
Liquidity
It is the ability of a business to pay itsdebts in time. By having good liquidity wemean that a business has sufficient liquidfunds (cash and cash equivalents) sothat it can repay liabilities.
 
Difference Between Profitability and Liquidity
A small business is started with a capitalof 20,000.
During the first accounting period goodsworth Rs. 15,000 are purchased. Out of the total 15,000, Rs.10,000 are paid incash while the remaining amount will bepaid in 15 days.
All the goods are sold on credit for Rs.35,000, receivable in 30 days .

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