Author: John

Cash (Treasury) Management: What It Is, Importance, Problems

Navigating the world of finance can be complex work. Among various financial concepts, one stands out as vital to any business – Cash Management, often referred to as Treasury Management. From managing a company’s cash flow to optimizing short-term investments, and mitigating financial risks, Cash Management is a crucial aspect …

Deferred Tax Asset Valuation Allowance

Deferred tax, in accounting, represents the temporary difference between a company’s taxable income and its accounting income. Sometimes, companies might need to recognize a valuation allowance for deferred tax assets. Before discussing it, it is crucial to understand what deferred asset means. What is a Deferred Tax Asset? A deferred …

Life Cycle Costing: Definition, Calculation, Template, Meaning, Importance

An asset’s lifecycle refers to its entire existence, from acquisition to disposal or retirement. It encompasses stages such as procurement, operation, maintenance, and ultimately, the end of an asset’s useful life, with each phase incurring distinct costs and management considerations. Companies can use life cycle costing to determine these costs. …

EBITA (Earnings Before Interest, Taxes, and Amortization): Definition, Example, Calculation, Meaning, Formula

When it comes to finance, it’s important to get familiar with different metrics and terms. One such term is EBITA – a popular financial indicator used by investors, analysts, and businesses alike. It provides a snapshot of a company’s operational performance, excluding certain financial and tax considerations. A thorough understanding …

Inventory Shrinkage: Definition, Types, Meaning, Journal Entry, Example, Formula

Companies bear various risks associated with inventory. One of these includes the difference between the book and the actual value of stock. This occurrence falls under inventory shrinkage. What is Inventory Shrinkage? Inventory shrinkage, often termed “shrink,” encompasses the unaccounted loss or reduction in a company’s inventory levels. This loss …

Selling, General & Administrative (SG&A) Expenses

Understanding financial terms is crucial in the business world. One such term, Selling, General & Administrative (SG&A) Expense, is often encountered in financial reports. This term may sound complex but it’s an integral part of a company’s operations. It encompasses a wide range of costs, all of which play a …

Quality Costs: Definition, Formula, Categories, Calculation, Importance

Quality, for companies, means consistently delivering products or services that meet or exceed customer expectations and conform to established standards. It’s important because high quality enhances customer satisfaction, builds brand reputation, fosters loyalty, and often translates into a competitive edge. Companies must track quality costs to ensure these features. What …

Contribution Margin Ratio: Formula, Definition, Example, Calculation

Understanding financial metrics is crucial in business decision-making. One such critical metric is the Contribution Margin Ratio. It’s a profitability measure that provides insights into the profitability of individual items sold within a company. This ratio helps businesses make informed decisions about pricing, production volume, and product lines. Understanding how …