The cash flow is one of the four primary financial statements in accounting. Typically, companies prepare it using the indirect method. However, there is an alternative presentation known as the cash flow statement direct method. What is the Cash Flow Statement Direct Method? The cash flow statement prepared using the …

In business, the cost and benefit is an important aspect that must be considered when making decisions. Marginal analysis is a tool that helps decision-makers evaluate the additional costs and benefits of a certain action or decision. The concept of marginal analysis can be a very useful tool in understanding …

Companies require assets to generate revenues and run operations. However, not all of those resources may be essential for a company’s activities. Operating assets help run operations and build a company. Therefore, it is crucial to understand what they are. What are Operating Assets? Operating assets are the essential tools …

Running a successful business requires a healthy cash flow and a positive balance sheet. However, it is common for businesses to experience periods of negative cash flow, where the company’s expenses exceed its revenue. This can be due to various reasons such as seasonal fluctuations, unforeseen expenses, or market changes. …

As companies grow, the size of their operations and segments increases. Accounting standards may entail reporting these segments separately. However, the requirements may differ between different accounting frameworks. Segment reporting is a crucial aspect of accounting, especially for larger companies. Therefore, it is critical to discuss it. What is Segment …

When it comes to economics, it’s impossible to ignore the impact of unemployment. One particular type of unemployment, often overlooked yet significant, is frictional unemployment. This idea sheds light on the job market, giving a new understanding of employment dynamics. It’s not about job absence or economic downturn – rather, …

A general ledger is an accounting record summarizing financial transactions for a specific account. However, companies need more information than that provided in this ledger. Therefore, they may use a supplementary record to back it up, known as the subsidiary ledger. What is a Subsidiary Ledger? A subsidiary ledger is …

The term ‘Asset Valuation’ might seem complex, but it’s a fundamental concept in finance and investment. It’s a process that involves determining the worth of assets, from stocks and bonds to real estate and machinery. Understanding this method can unlock new standpoints on investment opportunities and financial management. It can …

When a company acquires interest in another company, it must establish a relationship. If this relationship is deemed “controlling”, the parent company must prepare consolidated financial statements. What are Consolidated Financial Statements? Consolidated financial statements are a crucial tool in financial reporting that combines the financial information of a parent …

Economic Order Quantity (EOQ) is a fundamental concept in business, specifically in inventory management. It’s a tool that aids companies in smartly managing their stock levels. It’s an important concept in managing supply chain operations, as it helps companies strike the right balance between inventory holding costs and ordering costs. …