What is an Interest Rate Swap? Interest rate swaps are an example of financial derivative contracts. With interest rate swaps, entities can exchange one source of interest payments with another. There is also another party that agrees to swap the stream with the entity. The interest rate swap occurs based …

What is Share Buyback? A share buyback refers to a process that companies use to buy their outstanding shares in the market. The reason for doing so is to reduce the number of a company’s outstanding shares available on the market. It can provide several advantages to a company but …

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 …

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 …

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 …