Dividends are not only a way to reward shareholders, but they can also provide important insight into a company’s financial health. A key measure of dividend performance is the dividend payout ratio. This ratio compares the number of dividends paid out to shareholders relative to the total profits earned by …

Customers are the fuel that runs any business whether it’s a small one or a big one. Without customers, no business will survive and grow. That is why it is so important to acquire new customers, maintain existing ones and measure the success of customer acquisition efforts. Customer Acquisition Cost …

Understanding how the annual interest affects an investment can help investors plan more effectively and make more informed decisions. The effective annual interest rate is the yearly rate of an investment that takes into account the compounding frequency and other factors such as fees or charges that may be associated …

When companies generate profits, they may decide to keep the amount for future projects or distribute it among shareholders. The latter, known as dividends, come based on the dividend policy that a company follows. However, every company has a dividend policy that dictates the treatment of the profits generated during …

In order for businesses to maintain a good cash flow, it is important to keep track of the amount of money that they owe to their suppliers. This metric, also known as the Accounts Payable Turnover Ratio, measures the number of times in a given period that a business pays …

Clerical errors may exist in every organization. These errors can be critical if not rectified on time. However, companies have various tools to allow them to identify and correct errors. One of these includes the debit memo. A debit memo is the opposite of a credit memo. However, it is …

Pro Rata is the Latin word for “in proportion”. It is used to describe a method of allocating or distributing items in proportion to the relative size of each item. In accounting and finance, Pro Rata calculations are used to calculate the portion of an expense that each party should …

Each debt comes with a seniority ranking that dictates the priority of its repayment when the borrower defaults. This priority occurs on the borrower’s side. However, the lender also gets impacted by it. Usually, seniority rankings are crucial when a company accumulates debt finance from several sources. If the company …

Derivative financial instruments are contracts that derive their value from an underlying asset. This can be anything from stocks and bonds to commodities and currencies. There are a variety of different types of derivatives, each with its own unique features and benefits. In this blog post, we will discuss the …

Companies fund their capital structures through equity and debt. While the former comes from shareholders, the latter originates from lenders. Usually, companies use several forms of debt to fund their operations. However, these come with a default risk to the lender. Lenders can recover losses if their loans have collateral …