Companies prepare financial statements and other reports to present to their stakeholders. These reports provide details of the company’s financial position and performance for or over a period. Usually, companies prepare these reports for a whole fiscal year. However, they may also do it for shorter periods. This process falls …

Working capital ratios allow companies and stakeholders to gauge how liquid a company is. Usually, it uses figures from the income statement and balance sheet to show how long it takes to convert a company’s resources to cash. One of the working capital ratios is the days cash on hand. …

When it comes to investments, whether it is a stock, bond, or any other security, there is some degree of risk. Every investment portfolio has its own degree of risk, and this is known as portfolio risk exposure. The higher the risk amount, the greater the potential losses that could …

Owners invest in a business expecting returns which may come in various forms. For companies, these returns include dividends, which are the distribution of earnings during a period. On top of that, it may also consist of a capital gain on shares over a period. Owners do not need dividends …

To understand how much money a particular product or service contributes to paying down the fixed costs of the business, it’s essential to calculate the weighted average contribution margin. It is an aggregate figure, calculated by taking the contribution margin of each product or service in a given group and …

Revenue refers to the income a company generates from its operations. Some companies also term it as sales. Typically, it is the first item that appears on the income statement. Revenue plays a crucial role in companies and how they operate. However, the source of these proceeds may differ from …

Companies pay employees through various forms of compensation. Usually, companies have two types of employees classified based on these forms. These include salary and wage expenses for employees. The former category receives a fixed compensation, while the latter gets compensated based on hourly work. Typically, companies use a wages expense …

It is common in most rental agreements for the landlord to ask for advance rent. Its accounting treatment also differs from the compensation paid in the typical course of the lease. Therefore, it is crucial to understand how it works. What is Advance Rent? Advance rent is a common term …

Pricing and costing have always been important factors in a business’s success. To ensure the prices are competitive, yet still provide enough margin to generate profit, many companies turn to target costing. Target costing is a management technique that involves setting prices based on market conditions. It helps businesses provide …

Changes are inevitable in companies. Sometimes, these changes may relate to accounting standards, policies, and estimates. However, it may not be as straightforward due to various reasons. One of the most common of these includes the comparability of financial statements. Companies must refer to the relevant accounting standards to ensure …