What is the Statement of Cash Flows? The Statement of Cash Flows, also known as Cash Flow Statement, is one of the primary financial statements. It summarizes the amount of the cash and cash equivalents entering and exiting a company or business. The Statement of Cash Flows consists of all …

Companies incur various expenses throughout their operations. Usually, companies must categorize each of them based on several factors. Among these, the most common classification is by nature. Companies may aggregate their expenses of similar nature for various reasons. Usually, companies use expense classifications to present several aspects of their profitability …

What is Net Income? Companies need to be profitable to stay in business. Therefore, they need to ensure their earnings exceed their expenses. Sometimes, it may not stand true. However, in the long run, it is crucial to maintain a positive net income. Companies can calculate their earnings by deducting …

A company’s or business’s net income is one of the most critical line items on its Income Statement. It is a favourite figure for most stakeholders. Through net income, stakeholders can establish a company’s profitability. Similarly, companies may also use the net income figure for various purposes, such as decision-making …

What is an Embedded Derivative? An embedded derivative constitutes a part of a financial instrument that also includes a non-derivative host contract. When a hidden derivative contract exists in a non-derivative host that does not go through the profit and loss account is called an embedded derivative. In an embedded …

The Balance Sheet of a company may consist of several account balances. Companies need to classify these balances as either assets, liabilities, or equity. Each of these represents an element of the financial statement. Among these balances, most companies report Accounts Payable balances on their Balance Sheets. However, there’s often …

A company’s Balance Sheet may show various balances. Companies break up their balances into three categories. These are assets, equity, and liabilities. Each of these represents different aspects of a business. The classification comes as a result of the accounting standards. One balance that often is a part of the …

What is an Audit Report? An audit report is a statement usually presented by the external auditors of a company. The audit report provides the auditor’s opinion regarding whether a company’s financial statements are accurate and fair. In official terms, the audit report comments on whether a company’s financial statements …

When it comes to decision-making, whether for companies or investors, there are two figures they can use. These are the profits or cash flows of a company. However, some people tend to confuse the two and not be able to differentiate between them. Therefore, it is necessary to understand what …

What are Operating Costs? Operating costs are the expenses that relate to the maintenance and administration of the operations of a company or business. The operating costs of a company include its direct cost of goods sold and its overall operating expenses. Therefore, a company’s operating costs include its salaries …