Every business has some kind of debt, and it is of the key ratios that creditors look at to determine a company’s creditworthiness. The Times Interest Earned ratio measures a company’s ability to make its interest payments on time. In other words, it indicates how well a company can cover …

Payroll refers to the expense on employees for a given period. It also includes any compensation and benefits provided to employees for their work. Usually, these payments occur at regular intervals. However, these intervals may differ from one company to another. Every company uses a different payroll system that dictates …

To make informed decisions, business owners need to track their income and expenses. Without this knowledge, it would be difficult to know whether the business is succeeding or failing. Bookkeeping involves recording all financial transactions made by a business. This can include sales, purchases, payments, and receipts. The goal is …

In business, when we refer to the “year to date,” or YTD, we are talking about the period starting from the beginning of the current year up until the present day. This calculation is important for portfolio managers to track and compare their investments against benchmarks and also measure their …

Most companies acquire goods and sell them at a profit. During this process, they may also process those goods or convert them to another form. However, purchases are crucial to the operations of these companies. Usually, companies acquire goods for credit and pay for them at a later date. During …

Understanding your company starts with an understanding of your company’s costs. To make informed decisions and to keep track of your company’s profitability, understanding the cost of goods manufactured (COGM) is essential. Mostly used by manufacturing companies, COGM includes all of the direct costs associated with making a product. These …

A company may accumulate several liabilities throughout its operations. Accounting standards require companies to classify these liabilities into non-current and current portions. While non-current liabilities are long-term, current obligations last for a year. Trade payable is one of the most prevalent items in current liabilities. These are a common occurrence …

Let’s say you are an investor and you are looking to invest your money in certain companies. What would be the first thing you look at? Most people would look at the company’s financial statements to get an idea of its profitability. More specifically, they would look at the net …

When it comes to the financial health of a company, the current ratio is one of the most important indicators to look at. This ratio measures a company’s ability to pay its short-term obligations with its current assets. In other words, it shows how well a company can pay off …

The income statement is a valuable indicator of how a company has performed for a period. Investors use it to determine whether a company has been profitable during that period. However, it reports the accounting profits only. While these profits are highly crucial, investors can also use other types of …