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How to Increase Your Firm’s Net Worth

by gbaf
https://gawdo.com

An asset is anything that can be used as security for obtaining money. A person can choose to use any of his assets, including his house, car, jewelry and even his child’s toys and possessions. Most people think of their assets as money but in truth, assets can also be anything that can be used to obtain something or someone’s services. Hence, assets can be anything that one can acquire.

There are many things to consider when it comes to asset allocation. First, you need to determine your tolerance for risk and your goals. You also need to set your maximum acceptable earnings and take other into consideration as well. Then, you need to determine your investment objectives. Will you use the asset allocation technique to simply buy and sell stocks? Or, are you looking for more long-term gains by investing in bonds and mutual funds?

Another thing to consider is whether your asset allocation is a mix of equities and fixed assets, or simply a stock portfolio based on fundamental and economic factors. To determine the allocation, you have to break down what you can afford to invest into categories like raw materials, fixed assets like equipment and manufacturing goods, and tangible assets like plants, buildings, and equipment. After that, you have to calculate your risk tolerance. Remember that the risk you are exposed to depends on how much you are willing to lose, so it is important to assess your tolerance and compare it with your income and other resources.

One very important thing to remember when it comes to asset allocation is that if you are an exporter of goods, your assets must be protected against economic dislocation caused by shifts in international market prices. For example, suppose that the price of oil rises by two percent in the next year and you import goods worth five million dollars from Japan. If the price rises by twenty percent, then you will lose all your investment and if you were to sell all your assets, you would still be in negative equity. The value of your inventory simply does not exceed the amount of cash you have in your account.

Your short-term investments are in two categories: Accounts receivable and Accounts payable. Your accounts receivable is the money you pay your customers within a month for their purchases and accounts payable is what you pay your suppliers within a period of time for their purchases. It usually takes two months for your accounts payable to reach zero, while accounts receivable will show a positive number. The reason for this is that the items you pay customers for do not represent actual cash. Instead, the money is paid in terms of credit lines and sometimes, products such as prepaid electricity. Therefore, when calculating your asset allocation for your company, don’t include cash equivalents in your calculation because they will only reduce the value of your equity by a percentage point.

An important asset to protect is your goodwill or brand. The value of a company’s goodwill is extremely sensitive to the state of the economy, and companies are especially careful not to let their goodwill go to waste. By purchasing a portion of your total market cap (the total market cap of your company divided by the total gross cap less net worth of your assets) you can insure future economic benefits. This type of sale is referred to as a buyout.

One other way to increase the value of your business is through the increase of the fair market value of your tangible assets. The fair market value of a tangible asset is the amount by which the total monetary value of all future net tangible assets sold to acquire them is less than their current market value. Examples of tangible intangibles are patents, trademarks, trade names, and equipment.

You must periodically review your balance sheet to determine if you are using all of your available economic resources to make up for the losses you may incur. If there are any negative items, such as accounts receivable, your cash flow situation must be reviewed. You should calculate the amount of cash that you currently have and the amount you will need in order to finance new purchases. Then, add the current liabilities that you have to your existing cash resources and determine if your financial position is improving. Keep track of your investment, your retained cash, and your net worth. If your assets and liabilities are all decreasing in value, it is necessary to identify a short-term economic resource.

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