Manufacturing and construction companies typically use the exponential depreciation formula when calculating the depreciation of their fixed assets. For companies that make long-term investments in large equipment and machinery, it’s important to use a formula that considers how the value of the asset decreases with time. This way they can …

The cost of goods sold (COGS) is a critical financial metric used by businesses to calculate the direct costs associated with producing or acquiring the goods or services sold during a specific accounting period. However, the COGS figure can be further adjusted to account for additional expenses or factors that …

The cost of goods sold (COGS) refers to the direct costs incurred by a company in producing or acquiring the goods it sells during a specific period. It includes all the costs directly associated with goods, such as raw materials, direct labour, and manufacturing overhead. Companies may divide this amount …

Dual pricing, also known as price discrimination, is a pricing strategy that has been used by businesses for many years. It involves charging different prices for the same product or service to different customers. This strategy is often used in situations where businesses can identify different groups of customers with …

What is Free Cash Flow? Free cash flow (FCF) is a financial metric representing the amount of cash a company has available after deducting its operating expenses, taxes, and investments in fixed assets. It measures the cash generated by the company’s operations for various purposes, such as investing in new …

Companies may use several classifications for costs. Two of the primary ones include cost center and cost unit. Therefore, it is crucial to discuss these in detail. What is a Cost Center? A cost center is a segment that incurs costs but does not directly generate revenue. It is a …

When it comes to analyzing a company’s financial performance, there are several metrics that investors commonly use, one of which is known as the trailing twelve months (TTM). This metric allows investors to see a company’s financial performance over the most recent 12-month period, providing a useful snapshot of its …

Companies can calculate variances for several areas of their operations. One of these areas also includes overheads. Typically, these include the indirect costs of running a company not directly tied to goods or services. Any differences in these amounts fall under overhead variances. What are Overhead Variances? Overhead variances refer …

A production budget is an essential aspect of financial planning for organizations that manufacture products. It provides a detailed estimate of the quantity of goods that a company must produce to meet the forecasted sales demand. The production budget is not only an essential component of the operating budget but …

Accounts receivables are balances owed to a company by its customers. For the company, it represents an asset that can result in future cash inflows. Usually, companies track how soon they can expect customers to pay as a part of their cash budgets. The duration typically depends on the credit …