The accrual principle in accounting is a concept that requires entities to record transactions in the period in which they occur. This concept goes against the cash accounting method in which entities only account for cash transactions. However, the accrual principle does not consider the timing of the cash flows. …

It’s an important distinction to be made in the world of finance. Earnings at risk are when a company’s future earnings are threatened due to factors such as unfavorable economic conditions or changes in consumer tastes. Cash flow at risk, on the other hand, is when a company’s current cash …

What is Amortization? Amortization is a method through which businesses lower the book value of their loans or intangible assets. It is similar to depreciation for assets. Both of these techniques help companies record the gradual decrease in an asset’s book value. However, depreciation only applies to property, plant, and …

Backtesting can become a key factor in the success of a system. Not even all experienced traders understand how to correctly implement a backtest, which often results in erroneous outcomes. If it is done correctly, we can expect some excellent results. In this article, we are going to talk about …

Stakeholders use financial statements to make decisions about their relationship with a company or organization. However, they also need certainty related to the figures reported in those statements. Hence, they refer to the audit report, which includes an independent auditor’s audit opinion. This opinion may be of four types. However, …

Both backtesting and forward testing can and should be used to test a trading strategy. A trading strategy is a set of rules for when to buy and sell an investment, usually in the form of computer code or a trading algorithm. A trading algorithm can be viewed as a …

Manufacturing companies incur various costs within different processes. These costs are vital in helping companies generate revenues and make profits. One of the essential items for those companies includes raw materials, which contribute to a significant portion of the overall expenses. However, there are other costs as well, which can …

In recent years, ESG (environmental, social, and governance) risks have received increased attention from investors due to the growing awareness of the impact these issues can have on their investments. Regulators are also increasingly requiring companies to disclose them in annual reports. Investors who want to assess ESG risks should …

Efficiency is one of the primary factors in a company’s success. There are several metrics that provide valuable insights into a company’s operating efficiency. One of these includes the net operating assets. However, it is crucial to know about operating assets and liabilities first. What are Operating Assets and Liabilities? …

In the past, there was a global trend for investors to seek out low-risk investment opportunities. However, this has changed in recent years with many investors looking at higher-risk investments as a way of generating more returns on their capital. This is especially true when considering political risk in investment. …