In capital budgeting, the discounted payback period measures how long it takes for a project’s discounted cash flows to cover its initial investment – it helps assess the profitability of the project. It not only helps in understanding the payback time but also considers the time value of money by …

Companies maintain a general ledger recording of all accounts within the accounting system. These accounts are known as ledger accounts. What is a Ledger Account? A ledger account is a pivotal element in double-entry accounting, constituting a comprehensive record of financial transactions. Organized into categories such as assets, liabilities, equity, …

When it comes to trusts and beneficiaries, distributable net income plays a major role. It is essentially the amount of income that can be distributed to beneficiaries without incurring additional tax liabilities. It is a base amount that is used to calculate the trust’s tax liability and determine how much …

A budget is a financial plan that serves as a benchmark against which a company can compare its financial results. However, having a plan alone does not suffice. Companies must have a robust budgetary control process to make it worthwhile. What is Budgetary Control? Budgetary control is a strategic and …

Perfect competition is used to describe a market structure in which businesses only make just enough profit to keep running. It is considered the most ideal market structure because it leads to the efficient allocation of resources and benefits both consumers and producers. Perfect competition often gets overlooked because no …

There are several types of funds in governmental accounting, each serving specific purposes and accounting for different activities. These funds fall into three broad categories, including governmental, fiduciary, and proprietary funds. Furthermore, each category can have its classifications. One of the classifications within proprietary funds is enterprise funds. What is …

When it comes to customer acquisition, there are many factors that businesses need to consider, including the cost of acquiring a new customer and the lifetime value of that customer. The LTV/CAC ratio is a metric used to measure the effectiveness and efficiency of a company’s customer acquisition strategy. By …

Companies often encounter challenges related to the timely collection of receivables. Usually, uncertainties arise when customers, for various reasons, fail to fulfill their payment obligations. In addressing these uncertainties, companies must recognize a bad debt expense. What is Bad Debt Expense? Bad debt expense refers to the anticipated financial loss …

Running any successful business starts with having customers and understanding their value. Each customer is different and has different value to a business as a whole. Understanding the lifetime value of a customer is crucial when it comes to making strategic and data-driven decisions. LTV is a crucial metric in …

Companies use various financial tools to forecast information. This information helps anticipate future outcomes, enabling informed decision-making, strategic planning, and efficient resource allocation based on anticipated business conditions. One of these tools is the three-statement model. What is the 3 Statement Model? The three-statement model is a core financial modeling …