Companies set a par value for their shares, representing the minimum price. However, they may still sell those shares at a higher rate. This process results in capital in excess of par. What is Capital in Excess of Par? Capital in excess of par, often referred to as additional paid-in …

Gross profit represents the earnings a company generates from its operations. Companies include it in the income statement as a part of the calculation for net profits. However, the figure is incomparable and does not show how the company performs over time. Therefore, investors may rely on the gross profit …

When it comes to economics and understanding the flow of goods and services in an economy, one of the most commonly used models is the circular flow model. This model depicts how money and goods move through an economy between households, firms, and governments. It is a simple yet very …

For companies offering sales on credit, accounts receivable balances are prevalent in the balance sheet. These balances may vary based on several factors. However, it may affect ratios and financial metrics that use accounts receivable balances. Therefore, companies may calculate average net receivables instead. What is Average Net Receivables? Average …

Understanding the financial landscape can sometimes feel overwhelming due to the multitude of terms and concepts. One such term that commonly comes up is ‘Cash Equivalents.’ This concept plays a pivotal role in finance and accounting, serving as a crucial component for individuals and businesses. Understanding this term can offer …

Companies accumulate financial performance as a metric in the balance sheet. Depending on whether a company has been profitable or loss-making historically, the name will differ. If companies make more losses than profits, they get an accumulated deficit. What is Accumulated Deficit? Accumulated deficit, or retained deficit or accumulated losses, …

Navigating the world of insurance can often seem like a daunting task. Different policies, premium payments, and various clauses make it a complex field. One such term that frequently comes up in insurance discussions is the ‘Nonforfeiture Clause’. It holds significant importance in life insurance and long-term care policies. This …

Companies undertake projects that span over various periods. When preparing financial statements, they must determine the percentage for the completion of these projects. Companies can use several methods to establish this ratio. One of these methods is called cost-to-cost. What is the Cost-to-Cost Method? The cost-to-cost method, or the percentage …

Financial statements provide crucial information regarding a company’s activities. The balance sheet encompasses all aspects of a company’s finances. What is the Balance Sheet? The balance sheet, or the statement of financial position, is a foundational document in accounting and financial reporting. Its primary function is to provide a detailed …

When it comes to financial metrics, EBITDA Margin holds a significant place. It serves as an insightful lens to understand a business’s operational efficiency and profitability. By focusing on earnings generated before certain financial considerations, it provides a clear picture of how a company is performing at its core. It’s …