Financial statements are a set of records that present a company’s financial position and performance. While most investors focus on the income or cash flow statement, the balance sheet is also crucial. It shows various accounting balances classified into three categories. Usually, these balances have a specific classification known as …

Hedging allows investors to cover their risks by investing in derivatives and other instruments. Some of these derivatives help them mitigate the risks associated with interest payments. While interest rate swaps are the most prevalent type, interest rate caps can also provide similar features. It is also crucial to understand …

Understanding profitability and sales revenue are not only important for business owners and managers but investors as well. After all, a company that does not generate revenue cannot be profitable. Most investors look closely at a company’s revenue before making any decisions about investing in that company. So it’s important …

Project management can be a hassle when using both full-time and part-time employees. For that reason, companies may need to calculate the full-time equivalent. It is crucial in project management and federal programs. It allows companies to determine the number of full-time employees they employ. Before discussing how to calculate …

Investors purchase shares in companies expecting income from their investment. This income comes in two forms. For most investors, capital gains from the appreciation in the price of a share constitute the primary earning from these investments. However, some companies also pay dividends that contribute to the income that shareholders …

Companies present their income statement to investors to help them make various decisions. It is a part of the financial statements that companies prepare. However, companies also prepare some reports internally which can resemble these statements. One of these includes the contribution margin income statement. It relates to the concept …

Accounting standards require companies to expense out their assets over their useful life. These assets come at a cost that companies must spread over that life. Usually, companies use techniques like depreciation or amortization to achieve that. However, both differ in various ways. Before discussing the differences, it is crucial …

Companies pay their employees for the services they provide. The compensation provided to those employees may include salaries or wages. In many places, salaries and wages are terms that often get confused. While both represent payments to employees for their services, these forms differ significantly. Before discussing the differences, it …

In financial accounting, costs usually appear as account balances on the balance sheet or as expenses in the income statement. Companies classify these costs based on accounting conventions and standards. However, the same does not apply to managerial accounting. In that branch, companies may divide costs based on other factors. …

Companies maintain an accounting system to record and report their financial transactions. Journal entries are the essence of that system. These are a system of recording transactions by creating an impact on the related accounts. However, journal entries follow the double-entry system of accounting. Before discussing these entries, it is …