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We prepare most type of tax returns:

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Amended.

Gary Bode, CPA is a Master's Degreed, nation wide accountant offering tax and business services. Member of AICPA and NCACPA. Our virtual office provides excellent service to long distance and international clients. Call (910) 399-2705 for a free phone consult.

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Hi Gary,


 


Now that we're a few months past filing our taxes, I wanted to send you a quick THANK YOU!!!  We were so overwhelmed with our taxes when we reached out to you and really feel like you were a blessing to us during that stressful time.  Thanks again for all of your help, professionalism, and expertise!


 


Katie Griffin



Katie Griffin

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Even though Gary enjoys helping colleagues, we no longer provide free consults to other tax preparers. He's happy to consult on an hourly billing basis if our schedule allows.

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Tracking Liquidity | a Wilmington CPA says it can do more than just satisfy the bank

Wilmington NC CPA firm and tax accountant

Liquidity is just part of overall cash flow management

Cash is King; a common business adage which should be modified to Cash Flow is King.  Why?  Liquidity.  Liquidity refers to being able to pay your debts when due.  As an example, banks are proactively interested in liquidity before making a loan to a business.  One aspect of predicting liquidity uses Liquidity Ratios, explained below.  Some of the covenants banks enforce, during the term of business loans include, albeit indirectly, maintaining the Liquidity Ratios at defined levels. 

Financial ratios are derived from Financial Statement components and are a standard aspect of financial analysis.  They also form the basis of tools larger companies use to make informed managerial decisions.  A common subset of the Financial Ratios are the Liquidity Ratios.

The most common is the Current Ratio.  This is simple the company’s current assets divided by current liabilities.  The common benchmark is 1.0 (100%).  Below 1.0, current assets aren’t enough to current liabilities (debt).

For manufacturing firms, the Quick Ratio may be more relevant.  It modifies the Current Ratio by excluding Inventory from the calculation.  Why? Inventory can be hard to convert to cash within the relevant time period.

Tracking Liquidity Internally

If banks and creditors are so interested in Liquidity Ratios, doesn’t it make sense to use the concept internally as part of cash flow management?  Brilliant minds have forged managerial tools from Financial Statements over the centuries.  Yet smaller businesses, without an internal CPA or trained CFO, often don’t use them.  A shame since accounting software like QuickBooks can export reports and Financial Statements into Excel. When we build performance dashboards for our business clients, the Liquidity Ratio we use is the Operating Cash Flow Ratio.

Tracking Liquidity over Time

Financial ratios can be tracked over time.  A dual axis graph line graph is easy to maintain in Excel.  It also makes trend analysis possible, a powerful prediction tool.

Many CPAs just act as an interface between your company and the IRS.  Which is important of course.  But, if you’d like a free initial consult with a local Wilmington NC CPA who believes your QuickBooks bookkeeping and accounting should be used for more than just tax preparation, please call us at (910) 399-2705.

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