A liability is an obligation that results in a probable outflow of economic benefits. This obligation comes from past events, for example, contracts or agreements. For most companies, these include payables, loans, etc. However, it may also consist of provision expenses relating to future costs. In accounting, these fall under …

In managerial accounting, classifying costs into different categories is crucial in analyzing and controlling costs. However, there are various categories within those classes. One such classification is differentiating between direct and indirect costs. While they may sound straightforward, the classification may be complex due to how managerial accounting separates them. …

Zero-sum is a concept often used in game theory, which states that one person’s gain is equivalent to another’s loss. In other words, the net change in wealth or benefit for all participants of the game remains zero. Zero-sum games can have as little as two players or millions of …

A liability is obligation companies accumulate from past transactions and events. This obligation creates an economic outflow of benefits in the future. Practically, liabilities may come in various forms for a company. Two of the two common ones include account and note payable. Both are similar in many aspects. However, …

Maintaining the current position is extremely important for companies to ensure that their operations continue to run smoothly. Most importantly, it is important to identify potential risks and opportunities that exist in the current environment. To achieve that companies need strategies to manage these risks and take advantage of the …

Investors get their returns from a company in two ways. The first comes from dividends that a company distributes from its profits. However, that does not imply that the amount the company holds back from allocating as dividends doesn’t provide value. This amount falls under retained earnings and can help …

Every firm that is a FINRA member must provide its executives, employees, and other associated persons with a notice about their obligation to adhere to Rule 407 of the FINRA. This rule restricts how and when these individuals are allowed to buy or sell securities in their personal accounts. According …

Companies need financial assets to operate and survive in the long run. Most companies focus on working capital, including liquid assets that help run daily operations. However, that does not imply non-liquid resources do not play a role in activities. Companies also need long-term assets that help provide the base …

An asset is a financial resource that results in an inflow of economic benefits in the future. It has a value coming from its cost or other valuation models. In accounting, assets may classify as monetary or non-monetary. It is among many classifications of resources. Due to this difference, these …

The economic profit of a company tells us the true economic value of a company, which is why EVA has become popular among investors and owners of companies. It helps to show the financial performance of a business by taking into account both its costs of capital and taxes. Companies …