In manufacturing, businesses produce an output, which they then sell. The revenue from selling the output is the total amount of money that the business receives from sales. The marginal revenue is the increase in revenue that the business gets from selling one more unit of output. The marginal revenue …

A swap is a derivative instrument that allows two parties to “swap” the cash flows from financial instruments. However, it does not involve exchanging the underlying liabilities in most cases. It is a part of a hedging strategy followed by entities to mitigate their risks. Two common examples of these …

Financial statements provide crucial information about a company’s finances to its stakeholders. Most users prefer the balance sheet and income statement. However, they do not provide essential information about cash transactions during the year. Therefore, companies also prepare a cash flow statement that satisfies this requirement. Accounting standards require companies …

When it comes to inflation, there is no way to have too much of a good thing—at least in the eyes of the Federal Reserve and other central banks. That’s why they use contractionary monetary policy to slow things down and keep prices in check. The idea is simple: when …

Accounting profit is the net income companies receive after deducting expenses from revenues. It provides a base to measure financial performance during a financial period. However, companies may also use other metrics internally to gauge it. One includes contribution margin, which companies can translate into contribution per unit. The base …

A company allows shareholders to buy its stock to give them partial control over its operations. Once shareholders own enough shares in that company, they hold a controlling interest. Usually, this interest comes with having enough voting stock shares. Sometimes, it may not be necessary, as in variable interest entities. …

Decision-making and creating business strategies are huge parts of running a successful business. In the business world, there are different ways to make decisions. When it comes to Nash Equilibrium, it is a process of making decisions where the company tries to find the best possible outcome. It’s used by …

When a financial transaction occurs, companies record it in the books of prime entry. Some companies also record it as a journal entry. As these transactions occur, companies accumulate them and post the cumulative amount in the general ledger. It happens through a process known as posting in accounting. It …

Companies and businesses employ several employees who perform tasks to achieve organizational goals. In exchange, employees receive salaries, wages, and other benefits. For companies, these payments are expenses that fall under the payroll system. Companies record these expenses using payroll journal entries. What is a Payroll Journal Entry? The term …

In a market where there are only a few firms, each firm has the power to influence the market and the prices of its products. The decisions made by one firm will have an impact on other firms in the market. An oligopolistic market is not as efficient as a …