1 Inventory is an accounting term that refers to  goods that are in various stages of being made ready for sale. It is that quantity of goods owned and stored by any person/entity that is intended for being used in the process of manufacturing or resale . Inventory can be of raw materials, work in progress or finished goods.  Inventory is classified as a current asset on a company's balance sheet, and it serves as a buffer between manufacturing and order fulfillment.

Example: For an entity which manufactures and sell shoes, Inventory will include 1) The materials purchased for manufacturing 2)Work in progress - the shoes that are in various stages of production 3) The Finished Goods - The manufactured and ready to sell Shoes. The machines that are used for production of shoes are not classified as inventory but are fixed assets. The materials being used are inventory.

Examples of inventory in a Biscuit manufacturing company - Sugar, Milk, Cocoa powder, Essenses, Butter, Flour,Eggs.

BOND INDENTURE

Bond indenture is an agreement associated with the bond. It is a legal document or contract between the bond issuer and the bondholder that records the obligations of the bond issuer and benefits owed to the bondholder. The terms of a bond indenture include a description of the bond features, restrictions placed on the issuer, and the actions that will be triggered if the issuer fails to make timely payments.

Contents of Bond Indenture:

It specifies the important features of the bond such as its maturity date, the timing of interest payments, method of interest calculation, callability. It also outline all the parameters of the bond issue such as - the par amount, issuer, coupon rate, security pledge, and the rights of bondholders.

Other covenants that may be outlined in the indenture include actions such as:

Timely payment of interest/principal, Payment of taxes and other regulatory fees as may be required, Keeping acquired assets in good condition, Limitation on the sale of assets, Limitations on dividend payouts and share repurchases, Regular submission of comprehensive “status” reports to the trustee so as to evaluate compliance with the indenture.

2 

Explicit costs are the out -of-pocket costs, these are the costs for which real payments are made.

In the above example, explicit costs are following

$60,000 salary per year paid to hire an assistant sail maker.

$100,000 on materials like cloth and thread to be used for making sails.

Therefore explicit costs, in total, are $160,000.

Implicit Costs are those costs for which there is no actual payment made rather it represents a loss in income that could have been earned if the asset would have been put to some other use.

In the given example, $20,000 is the implicit cost that could have been earned if Jeny would have rented the house rather than using it for her own business.

Moreover, the salary that sail making firm is paying to Jeny $100,000 will also be a part of implicit cost because Jeny could have earned that if she continues to work with the current employer rather than starting her own business.

Therefore, total implicit costs are $120,000.

Accounting profit is the net income earned for a business, which is calculated by deducting explicit costs from the revenue,whereas, economic profit is calculated by deducting both implicit as well as explicit costs from the revenue.

Therefore, Accounting Profit equals

Particulars    Amount($)

Revenue earned 300,000

Less: Explicit Costs 160,000

Accounting Profit 140,000

Also, Economic Profit equals

Particulars    Amount($)

Revenue earned 300,000

Less:  Explicit Costs 160,000

Less: Implicit Costs    120,000

Economic Profit 20,000

Hence the accounting profit is $140,000 and economic profit is $20,000.

Since the economic profit is greater than 0 hence she shall start her own business and shall leave her current employer because she could earn $20,000 more by starting her own business than her current employment.