What is a Bond? A bond is a fixed-income instrument that refers to a loan made to a borrower by an investor. Usually, the borrower may be a company or a government entity. A bond gives the bondholder an entitlement to a future payment. Usually, companies or government bodies use …

Investors must base their investment decisions on a set of assumptions and inputs. Sometimes, these assumptions may be uncertain and may impact their judgments. This impact comes in the form of investment risk. Therefore, investors may use various tools to assess the influence that these risks have and compare them …

What are Profitability Ratios? Profitability ratios are one of the most crucial groups of financial metrics. These are useful in assessing a company’s or business’s ability to generate profits relative to various other metrics. These may include its revenues, equity, assets, or operating costs, among other figures. Profitability ratios show …

What are Liquidity Ratios? Liquidity ratios are crucial financial metrics that help measure a company’s ability to pay off its short-term obligations using its current assets. The capacity of a company to stay liquid in the long-term is vital for its long-term success. Therefore, liquidity ratios help users measure if …

Investors usually evaluate their investments in companies by measuring their profitability. For that, these investors may use profitability ratios. Among the various profitability ratios that they can use, the Return on Equity is one of the most common ones. What is the Return on Equity ratio? The Return on Equity …

Investors can use various profitability ratios to evaluate a company’s performance. These may include several metrics, one of which is the Return on Assets (ROA) ratio. What is the Return on Assets ratio? The Return on Assets (ROA) ratio indicates a company’s profitability in relation to its total assets. It …

Companies or businesses use assets to generate value from their operations. These assets may have several forms or types. Among those, companies may have financial and real assets. It is necessary to look at both of them individually to understand the differences between them. What are Financial Assets? A financial …

What are Intangible Assets? Intangible assets represent those assets that do not have a physical existence and are not touchable. Usually, companies or businesses use intangible assets for long-term purposes. Similarly, they are often intellectual assets. For most modern companies, using intangible assets during their lifetime is inevitable. Intangible assets …

What is Working Capital? A company’s working capital represents its residual current assets after deducting all its current liabilities. In other words, it is the difference between its current assets and current liabilities. Current assets usually comprise of accounts receivable, inventory, and cash. On the other hand, current liabilities may …

Two topics in auditing closely relate to each other. These are audit risk and materiality. While both of these are crucial in any audit assignment, they are different concepts. Therefore, it is necessary to know what each of these is to understand them better. What is Audit Risk? Audit risk …