Vertical and horizontal analysis provide valuable insights into multiple aspects of a company’s financial performance. However, they differ in the way they help analyze financial statements. What is Vertical Analysis? Vertical analysis (or common-size analysis) is a financial evaluation method focused on dissecting and comparing individual components within financial statements …

When it comes to a company going public, there are two main ways to do it: through an initial public offering (IPO) or through direct listing. While IPOs have long been the traditional route for companies looking to become publicly traded, direct listings have gained popularity in recent years. It’s …

Job costing is crucial for companies as it helps determine the cost of individual jobs or projects, enabling accurate pricing, budgeting, and profitability analysis. An essential document that helps companies is a job cost sheet. What is a Job Cost Sheet? A job cost sheet is a comprehensive document used …

When it comes to issuing new securities, flotation costs play a major role. It’s important to understand how much capital they will be able to raise from those new securities and how much it will cost them to do so. It’s an important factor that helps businesses determine if issuing …

When it comes to understanding how well a company is doing, there’s more than just looking at the numbers. It’s crucial to dig deeper and see the real picture behind those figures. This is where the significance of a certain type of analysis becomes important. It provides a clearer, more …

When allocating costs, companies must determine the number of units produced during a period. However, it becomes more complicated when some units haven’t finished manufacturing. Therefore, companies use equivalent units of production to solve the issue. What are Equivalent Units of Production? Equivalent units of production (EUP) is a concept …

Understanding normal profit is crucial when it comes to running a successful business. Normal profit is basically a condition where a business earns enough revenue to cover all its expenses and achieve zero economic profit. By understanding how normal profit works, businesses can make better financial decisions and plan for …

Companies may use detailed records to ensure traceability and accuracy. Before transferring these records to the accounting system, they must consolidate them. Therefore, companies may use a control account. What is a Control Account? A control account serves to consolidate and simplify financial record-keeping. Instead of inundating the general ledger …

In capital budgeting, the discounted payback period measures how long it takes for a project’s discounted cash flows to cover its initial investment – it helps assess the profitability of the project. It not only helps in understanding the payback time but also considers the time value of money by …

Companies maintain a general ledger recording of all accounts within the accounting system. These accounts are known as ledger accounts. What is a Ledger Account? A ledger account is a pivotal element in double-entry accounting, constituting a comprehensive record of financial transactions. Organized into categories such as assets, liabilities, equity, …