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 …

What is Profit Margin? Profit margin is a metric used to determine the degree of profitability of a company or business. It is one of the prevalent profitability ratios. The purpose of using profit margin ratios is to calculate how much money a company or business makes from its activities. …

When it comes to evaluating assets, there are various methods prevalent in finance. Among those, two common ones include fair value and market value. There are several differences between both of them. However, it is crucial to understand what each of these is first. What is Fair Value? The fair …

What is Fair Value? The fair value of an asset refers to its estimated worth in the market. It may also refer to the actual agreed-upon value of an asset by a buyer and a seller. These may include products, inventory, stock, or security.  Any asset traded on the market …

There are various methods of valuing bonds that companies may use. Among these, the prevalent method is using the amortized cost technique of valuation. However, some companies may also evaluate their bonds using the fair value method. There are some differences between both of them. It is better to understand …

At the end of each year, companies or businesses must report their activities to their stakeholders. They achieve that through financial reports, also known as financial statements. What is a Financial Report? A financial report, or a financial statement, represents formal records of an entity’s activities. Usually, financial reports represent …

What are Retained Earnings? Retained Earnings represent a company’s accumulated profits that it has not distributed as dividends to its shareholders. These are profits that the company holds to reinvest into its business. Retained earnings are an internal source of capital that it uses for short-term capital needs. These may …