Unlock Financial Security with Liability Insurance: Shield against legal claims, injuries, and property damage. Discover its types - Personal, Commercial, Product, D&O, Umbrella, and more. Embrace this essential tool for individuals and businesses. #LiabilityInsurance #FinancialSafety Continue reading...
In the world of finance, one concept that has stood the test of time is arbitrage. It's a term that may sound complex, but at its core, it's a straightforward strategy employed by traders to capitalize on differences in asset prices across various markets. In this article, we'll delve into the world of arbitrage, exploring what it is, how it works, and why it's a critical component of efficient financial markets. Continue reading...
Remuneration, a term often heard in the realm of employment and finance, encompasses the entire spectrum of compensation an employee receives for their labor. While the base salary is an integral part, it's just one piece of the puzzle. In this article, we will delve into the intricacies of remuneration, exploring its various components, its importance, and its tax implications. Continue reading...
In recent years, crowdfunding has emerged as a transformative force in the world of finance and entrepreneurship. This innovative approach to raising capital has enabled individuals and businesses to turn their ideas into reality, reach a global audience, and receive financial support from a diverse group of backers. In this article, we will delve into the intricacies of crowdfunding, exploring what it is, how it works, and some of the most popular crowdfunding websites. Continue reading...
Discover the power of Non-Disclosure Agreements (NDAs) in safeguarding your business secrets. This comprehensive guide covers NDA types, applications, and the vital role they play in protecting intellectual property and sensitive data. Learn how NDAs foster trust and security in various business relationships. Don't miss out! Continue reading...
Unlock the world behind the lines! Dive into the intricate dynamics of barcodes, from their humble beginnings in the 1970s to their profound impact on today's commerce. Discover how these simple black and white patterns revolutionized business efficiency and their deeper symbolic meanings. Continue reading...
In an ever-evolving business landscape, the role of a traditional office assistant has transformed. Enter the virtual assistant, a versatile and indispensable player in the world of remote work and digital entrepreneurship. In this article, we'll explore what a virtual assistant is, what they do, and the opportunities they offer in today's interconnected, digital age. Continue reading...
In the world of law and governance, few concepts are as fundamental and essential as "due process." It's a phrase that often finds its way into discussions about individual rights, the rule of law, and the proper functioning of a just society. But what exactly is due process, and why is it so crucial? The roots of due process can be traced back to the 13th century, with the signing of the Magna Carta. This historic document marked a pivotal moment in history when King John of England was compelled to accept limitations on his power. Among these limitations was the commitment that "No free man shall be seized or imprisoned, or stripped of his rights or possessions, except by the lawful judgment of his equals or by the law of the land." Continue reading...
Unravel the complexities of tenders in the financial landscape. This comprehensive guide sheds light on the essence of tenders, from their basic definition to their diverse applications in business and finance. Discover the structured processes that ensure fairness in vendor selection, the legal frameworks that safeguard against malpractices, and the subtle differences between tenders and tender offers. With real-world examples, including Dell's 2021 tender offer, and insights into competitive vs. non-competitive tenders, this article offers a deep dive into a pivotal aspect of the financial world. Equip yourself with the knowledge to navigate tenders with confidence. Continue reading...
Ever heard of 'green shoots' in the context of the economy? Dive into this enlightening exploration of how nature's resilience mirrors signs of economic recovery, and understand why this term holds significant weight during financial downturns. Continue reading...
From ancient civilizations using seashells to today's digital transactions, cash has been at the heart of trade and commerce. Dive into the evolution and significance of cash, and discover its impact on our modern economy and societal structures. Continue reading...
Ever wondered how assets move from funds to investors or how products reach end-users? Dive into the intricate world of distribution, from software to financial assets, and uncover its pivotal role in the modern economy. Continue reading...
Unravel the allure of SPACs, the financial world's modern marvel. From their rapid rise to the intricacies of their operations, discover how these 'blank check companies' are reshaping the landscape of public listings in 2023. Continue reading...
Ever wondered about the shadowy world of the black market? From illicit drug trades on street corners to high-stakes transactions on the dark web, delve into the hidden economy that operates beyond government regulations and discover its profound impact on society. Continue reading...
In the realm of economics, the term "austerity" has become a topic of intense debate and discussion. It refers to a set of economic policies that a government adopts to regain control over its public sector debt. These policies are typically implemented when a country's public debt reaches alarming levels, posing a risk of default or an inability to meet its financial obligations. In this article, we will delve into the concept of austerity, explore the different types of austerity measures, and examine real-world examples of their implementation. Continue reading...
Ever wondered about the financial tool that measures a stock's volatility against the broader market? Dive into the world of Beta, the key to understanding market volatility and shaping smart investment decisions. Continue reading...
Fraud is a deceitful act with the explicit purpose of gaining an unlawful advantage or depriving a victim of their rights. It's a term that permeates various facets of our society, and within the realm of finance, fraud takes on many forms. In this article, we'll explore the concept of fraud, its types, and the significant consequences it can unleash. Continue reading...
An industry is a classification that refers to a group of companies related by their primary business activities. In this article, we will explore the definition of an industry, its importance, and how it fits into the broader economic landscape. An industry is essentially a grouping of companies that share common characteristics or are engaged in similar business activities. These commonalities can range from the products they manufacture or sell to the services they provide. The classification of companies into industries is a systematic way to categorize businesses, allowing for better analysis, comparison, and understanding of their operations. Continue reading...
Capital, in its essence, is a term that encapsulates anything that bestows value or benefits to its proprietors. This could range from tangible assets like machinery in a factory to intangible ones like patents or intellectual property. While it's tempting to equate money directly with capital, the latter is more frequently linked with cash that's employed for productive or investment activities. Capital is the lifeblood that fuels the daily operations of a business and underpins its future expansion. Continue reading...
Business-to-Consumer (B2C) is a prevalent sales model where businesses sell their products or services directly to individual consumers. This model stands in contrast to the Business-to-Business (B2B) approach, where transactions occur between businesses. B2C has evolved significantly with the advent of the internet, giving rise to e-commerce and transforming the way consumers shop. Continue reading...
Reimbursement is a financial mechanism where an organization compensates an individual or another entity for expenses they've incurred on the organization's behalf. This is not a reward or a bonus but a repayment for out-of-pocket expenses. Common scenarios include business-related expenditures, insurance claims, and overpaid taxes. Importantly, unlike regular compensation, reimbursements are typically not subject to taxation. Continue reading...
In the dynamic world of entrepreneurship and business, the term "startup" has become synonymous with innovation, ambition, and a touch of uncertainty. But what exactly is a startup, and what are the critical elements involved in getting one off the ground? In this article, we'll explore the intricacies of startups, from their definition to the challenges and opportunities they present. Continue reading...
Price-cap regulation is a powerful tool in the realm of economic regulation. It sets a maximum price that a utility provider can charge for its services, helping to strike a balance between ensuring fair consumer prices and allowing utility companies to remain profitable. This regulatory approach, initially developed in the United Kingdom for the condom industry in the 1980s, has since found application in various utility industries worldwide. In this article, we will explore the nuances of price-cap regulation, its key principles, and its impact on industries. Continue reading...
A sample is a powerful tool in the world of statistics and research. It represents a smaller, manageable version of a larger group, providing a way to draw meaningful insights without the burden of studying an entire population. In this article, we'll delve into what a sample is, why it's essential, different sampling techniques, and real-world examples of its application. In statistical terms, a sample is an analytical subset of a more extensive population. A population, on the other hand, encompasses the total observations within a specific group or context. Think of a sample as a slice of the population, a fraction that encapsulates the characteristics and traits of the larger whole. Continue reading...
Infrastructure is a term often thrown around in economic discussions, but what exactly does it mean? In essence, infrastructure refers to the basic systems and services that a country, region, or organization needs to function effectively. These systems range from physical structures like roads and bridges to vital services like healthcare and education. In this article, we will delve deeper into the concept of infrastructure, explore its various types, and highlight its critical importance to society. The term "infrastructure" made its debut in the late 1880s, stemming from the French language where "infra-" means below, and "structure" refers to building. This word aptly encapsulates its meaning, as infrastructure forms the foundation upon which an economy and society are constructed. Continue reading...
If you've ever connected your bank account to popular financial apps like American Express, Venmo, or Upstart, you've likely encountered Plaid. This fintech powerhouse plays a pivotal role in the seamless exchange of financial information between users and financial service providers. In this article, we'll delve into what Plaid is, how it operates, and most importantly, whether it's safe to trust with your sensitive financial data. Continue reading...
Unlock capital without the IPO hustle! Dive into Private Placements: the direct sale of securities to handpicked investors. Enjoy less red tape, maintain company control & harness financial strength from accredited investors. Discover the key to fueling growth! 📈🔒 #PrivatePlacements Continue reading...
🔍 Unlock marketing success by diving deep into customer behavior! 🧠 Grasp why loyal customers are pure gold 🏆, how customer service can make or break loyalty 💔, and the pivotal roles of both external & internal customers. Decipher the core essence of your audience for a thriving business future. 🚀 #CustomerFirst Continue reading...
Business process outsourcing (BPO) has emerged as a pivotal strategy for modern businesses looking to streamline operations, reduce costs, and gain a competitive edge in today's fast-paced global economy. This article delves into the essence of BPO, exploring its various facets, benefits, and potential drawbacks. Continue reading...
Explore the intricate world of Multinational Corporations (MNCs) in this comprehensive guide. Discover how MNCs operate across borders, their economic impact, and the various structures they adopt. From centralized management to controversial aspects, this article is a must-read for anyone interested in international business. Continue reading...
Explore the world of Financial Technology (Fintech) in this comprehensive guide. Discover how Fintech is revolutionizing financial services through innovative applications, transforming traditional processes, enhancing accessibility, and reshaping modern banking. From mobile payments to cryptocurrencies, learn how Fintech is making finance more efficient and user-friendly. Continue reading...
Supply Chain Management (SCM) stands as the backbone of modern business, seamlessly converting raw materials into consumer-ready products. In today's competitive market, SCM's role is paramount, ensuring businesses deliver value while maintaining an edge. This guide delves deep into SCM's essence, from strategic planning and efficient sourcing to the nuances of delivery and returns. With the rise of ethical considerations and technological advancements, SCM has evolved, becoming more than just a business operation—it's a critical success driver. Dive in to unravel the intricacies of SCM and discover strategies that can elevate efficiency, reduce risks, and boost profitability in the ever-changing business landscape. Continue reading...
Unravel the mystery behind 'In the Black'! 🖤 Dive deep into its origins, its significance in today's business landscape, and why companies strive for this financial status. Discover the connection between ancient ink practices and modern profitability metrics. 💼✍️📈 #InTheBlackExplained Continue reading...
Unlock the power of streamlined business operations with ERP! Dive into how it integrates departments, enhances decision-making, and drives growth. Plus, discover the financial ripple effect on DCF & WACC. Essential read for modern businesses! 🚀📊 #ERP #BusinessEfficiency Continue reading...
Unlock the secrets of ERP! 🌐 Dive deep into its role in integrating company operations, the shift from on-premises to cloud, and its future infused with IoT, AI, & blockchain. From back-end to front-end processes, discover how ERP is reshaping business. 🚀 #ERPExplained #BusinessTech Continue reading...
A layoff occurs when an employer suspends or terminates a worker, either temporarily or permanently, for business rather than performance reasons. This practice is distinct from firing, which typically arises from performance issues or workplace misconduct. In this article, we delve into the concept of layoffs, exploring their implications, statistics, and providing a real-world example. Continue reading...
A company, in its simplest definition, is a legally recognized entity formed by a group of individuals to engage in business activities, be they commercial or industrial. It serves as the framework through which entrepreneurial ideas are transformed into tangible ventures that drive economic growth. The structure and purpose of a company can vary widely, with different forms of ownership, legal obligations, and operational methodologies. In this article, we delve into the intricacies of what a company truly is, how it functions, and the diverse types it can take. Continue reading...
Value is a term that permeates the world of business and finance, shaping decisions and strategies at every turn. From assessing the worth of assets to determining investment opportunities, understanding the concept of value is crucial for investors, executives, and analysts alike. In this article, we delve into the various dimensions of value, its forms, and its implications in the realm of business and finance. Continue reading...
Amortization, at its core, is an accounting technique with dual applications. It aids in either gradually decreasing the value of an intangible asset or systematically reducing the balance of a loan through regular payments. Whether it’s applied to intangible assets or loans, the essence remains the same - distributing a large cost over multiple periods to ensure better financial management. Continue reading...
Unlock the secrets of equity calculation and learn how it influences a company's financial health. This article covers everything from shareholder value to the difference between book value and market value. Discover how equity reflects the company's net worth and informs investment decisions. Make smarter financial choices with a clear understanding of equity. Continue reading...
Unlock the mysteries behind the CEO's desk! Dive deep into the multifaceted world of Chief Executive Officers, contrasting their pivotal roles with other chief positions. Discover the influence they wield on company performance and where they stand in the corporate hierarchy. Continue reading...
Unlock the power of targeted marketing! Dive into market segmentation, discover its transformative strategies, and learn how to avoid common pitfalls. Tailor your approach for maximum impact and reach your ideal audience effectively." Continue reading...
Point of Sale (POS) systems have become the cornerstone of modern commerce, transforming the way businesses operate and engage with customers. These intricate systems, a blend of hardware and software, not only facilitate transactions but also offer insights into market trends, inventory management, and customer behavior. From the traditional cash register to the sophisticated digital platforms of today, POS systems have evolved to meet the dynamic needs of retailers. They play a pivotal role in both physical stores and e-commerce domains, ensuring seamless transactions and providing valuable data for strategic decision-making. With innovations like Amazon Go redefining the shopping experience, the future of POS systems promises even greater convenience and efficiency. As technology continues to advance, POS systems stand as a testament to the symbiotic relationship between innovation and commerce, shaping the way we buy and sell in the 21st century. Continue reading...
Stakeholders: the unsung heroes behind every successful business venture. These are the entities, be they individuals, groups, or organizations, that hold a vested interest in a company's actions and outcomes. Their roles, ranging from investors and employees to communities and governments, shape the very fabric of business operations. But who are they really? And why are they so crucial? Dive into the intricate dance of stakeholder relationships, where interests meet influence, and discover the art of balancing diverse expectations. As businesses evolve, understanding this complex web becomes paramount. It's not just about profit; it's about harmonizing the myriad voices that contribute to a company's grand performance. Join us as we unravel the enigma of stakeholders and their pivotal role in the corporate world. Continue reading...
Discover the secret weapon behind successful businesses and savvy investors—financial leverage. Unravel the mysteries of using borrowed capital strategically to expand operations, amplify profits, and drive business growth. In this in-depth analysis, we delve into the world of financial leverage, exploring its advantages, potential pitfalls, and the art of using it effectively. Get ready to master the art of leveraging debt to unlock new opportunities and create lasting value in the dynamic world of finance. Continue reading...
The W-9 form is an essential document for independent contractors, freelancers, and certain financial institution customers. It ensures the IRS has the necessary information to track income and ensure the correct taxes are paid. Continue reading...
Dive into the world of marketing with our in-depth exploration of the 4 Ps - product, price, place, and promotion. This comprehensive guide will equip you with the knowledge to craft a powerful marketing strategy that resonates with your target audience. Discover how to differentiate your product, set the right price, strategically place your product, and create compelling promotions. Plus, learn about the modern extensions of the 4 Ps - people, process, and physical evidence - and how to use them to stay competitive in today's rapidly evolving market. Don't miss this opportunity to take your marketing efforts to the next level and drive your business to unprecedented success. Continue reading...
Discover the pivotal role of Human Resources (HR) in shaping an organization's success. From recruitment and training to employee well-being and career growth, delve into the multifaceted responsibilities of HR departments. Unearth how HR management strategies can transform a company's workforce, making it resilient in a fast-changing business landscape. Find out how HR's support and guidance can propel both employees and the organization toward new heights. Is HR truly the driving force behind organizational triumphs? Let's explore the answer in this comprehensive analysis. Continue reading...
Sole proprietorships are businesses owned by a single person. The owner assumes all legal and financial responsibility for the company. Most sole proprietors will file an LLC with their state, to shield their personal assets from business risks to the extent that they can, as well as to be recognized by the state as a business for other purposes. LLC stands for limited liability company, and it serves as a pass-through entity for the owner. Continue reading...
A partnership is a business owned by two or more people, usually designated as an LLC. They play a role in the operation of the business, and are responsible for the legal and financial liabilities. In a partnership, as in a sole proprietorship, there is no legal shield against law suits and liabilities unless they have filed as an LLC or S-Corp. If the partnership were to be sued, without any kind of legal shield in place, the owners would be held completely accountable. Continue reading...
A corporation is a business entity which has filed articles of incorporation. Unlike a Sole Proprietorship or a Partnership, a corporation is a legal entity that is separate from its owners. They are often referred to as C-corporations or C-corps, to distinguish them from S-corps, which are named after the subchapter which describes them in the law (though technically speaking, S-corps are corporations, too). Continue reading...
S-Corporations, also called S-corps, are a cross between a traditional corporation and an LLC. S-Corporations are companies which, as opposed to C-Corporations, do not pay any federal income tax on their earnings, except in a few exceptional cases. Instead, the earnings (or losses) are passed to the shareholders and will appear on their individual income tax reports. The “S” comes from the subchapter of the Internal Revenue Code where the taxation laws are outlined. S-corps can actually be owned and operated by a sole proprietor after incorporating or starting an LLC in the state of residence and filing IRS form 2253 (link to instructions and form — found here). Continue reading...
C-corps are generally the larger, more established companies in the country – most publicly-traded companies are C-corps. C-Corporations are companies which, as opposed to S-Corporations, are subject to federal income tax entirely separately from their owners. In addition, the earnings (or losses) are distributed among the shareholders (usually as dividends) and will appear on their individual income tax reports. This is the double-taxation for which C-corps are infamous. Continue reading...
A limited liability company (LLC) establishes a separate entity from the sole proprietor or partners in a business which shields them from some of the liability associated with the business. An LLC is a business entity that creates a distinction between the business’s assets and liabilities and the assets and liabilities of the owner or partners. Sole proprietors and partnerships who do not file for this distinction leave themselves and all of their personal assets at risk, in the event of a lawsuit or bankruptcy. Continue reading...
Each state has different stipulations concerning what defines a corporation, but there are some commonalities across the country. Businesses must file Articles of Incorporation with the Secretary of State in the state of their home office, which detail the proposed structure of the business, before their status as a corporation can be approved. Each corporation is going to be different, of course, and each state has slightly different laws delineating the structure and bylaws that corporations must adopt. Continue reading...
Companies often hold minority interest positions in other companies, but sometimes they decide to merge into one company, maybe by selling-out to a bigger company, or acquiring a smaller one. Very often, small companies are very agile and develop new technologies quickly, but do not have sufficient funds to bring them to the market. Large companies need the technologies and it is cheaper for them to buy smaller companies rather than spending money to develop them on their own. Continue reading...
A company's balance sheet gives a picture of how all the assets, liabilities, and equities of the company "balance out." The basic accounting equation is Total Assets = Total Liabilities + Equity, and a Balance Sheet is going to detail these parts to show how everything adds up at the time of the report. With things equal on both sides of the equation, the company's books are balanced, the same way someone might go back through the carbon copies of checks they've written and "balance the checkbook" to make sure all checks written have been accounted for. Continue reading...
A 10-k is an annual filing required by the SEC for companies over a certain size, which provides the regulators with more detail than can be found in an Annual Report. If a company has over $10 Million in assets and equity shares divided among 500 or more people, it must file a 10-K within 60 days of the end of the fiscal year, as well as 10-Q filings quarterly, whether it is publicly or privately traded. The 10-K will include specific details that companies may not have put in their Annual Report to shareholders, such as executive compensation, subsidiaries, audited financial statements, lawsuits, and so on. Continue reading...
On a balance sheet, Accounts Payable is a section under ‘Liabilities’ that details the obligations the company has to pay off short-term debts. Goods and services rendered to a company by suppliers, banks, utilities, and so forth will need to be paid for in the short term, and these bills are accounted for in the Accounts Payable. In a Company's Balance Sheet, the Payables will appear in the Current Liabilities section, and these tend to have cycles of 30-90 days in which they should be paid. Continue reading...
Accounts Receivable is part of the Assets on a Balance Sheet, and it details the money due to the company from its customers or debtors in the near future. Accounts Receivable will include money which should be received by the company from those who owe it. This appears in the Current Assets section of the Balance Sheet. The money should be receivable within the next 30 or 90 days, generally. This might be rent payments or other bills which are paid regularly or after the goods or services have been rendered. An account receivable also might include interest due. Continue reading...
Accrued Interest applies to a bond or loan, accounting for the interest that is calculated per diem for the time between payments. Accrued Interest is the amount of interest that has "built up" between the last payment and the present, with regards to bonds and loans. If a bond is sold from one person to another, and the corporation or municipality that issued the bond pays out an interest payment at regular intervals, the sale price will have to factor-in the "accrued interest" since the last distribution, and the buyer will have to pay the seller for the accrued interest due while the latter held the bond. Continue reading...
Amortization is like giving a life span to a financial obligation, over a set number of years, and gradually killing-off the obligation with set payments. Amortization is the calculation of a fixed payment schedule over a set number of years to allow the repayment of a loan, such as a home mortgage. From an accounting standpoint, it can refer to the practice of spreading-out the cost of any intangible asset over time. For example, the IRS will allow a taxpayer to amortize the premium of a bond for deductions. Continue reading...
APY is an annualization of an interest rate which may be assessed on a different schedule, such as on a monthly basis, and is useful for comparing debt and loan agreements that use different schedules. Annual Percentage Yield is a way to compare products and loans with different interest rates and different schedules for calculating the interest. It is a calculation of the effective annual rate, and it takes into account the effects of compounding interest, which a similar calculation for APR (Annual Percentage Rate) does not do. Continue reading...
When a lending institution offers a Bank Guarantee, they are reducing the risk involved in a transaction by guaranteeing payment to the seller. Bank Guarantees often come into play with deals made internationally, where the participants in the deal prefer to have some assurances before they do business. The guarantee acts as insurance to protect the parties involved in transactions where they are not fully able to assess the strength and reliability of the other, such as when small companies bid for projects or when bids for a job come-in from around the world. Continue reading...
When a person or company is no longer able to pay the amount of debt they owe, they can file bankruptcy and be given options for relief. There are different types of bankruptcy filings available (found here — debt would have to have accumulated to a point where there is no mathematically feasible way to repay it all. There may be a way to repay some of it, however. It may mean that a business is able to continue to keep its doors open, with payment plans to service some of the outstanding debt, but this is likely after some assets have been liquidated to settle some of the creditors' claims. Continue reading...
When percentages being used to describe a security are very small, basis points are often used to describe the numbers. A Basis Point (bp) is 1/100th of a percent, so 1% = 100 bps. This metric is used when discussing financial instruments for which very small changes in percentages can make a difference. For example, rates on single premium immediate annuities change weekly, and generally only by a few basis points. These small changes can make a difference competitively week-to-week, because a few basis points can translate to thousands of dollars of income over time. Other places where basis points are used include: advisory and management fees, moves in indexes and securities, bonds, and so on. Continue reading...
Book value is based on an accounting method that only considers certain factors, generally the more tangible or easily quantifiable ones, and excludes the more ethereal factors such as ‘goodwill.’ Book value can apply to an individual asset, a security, or a company, and tends to be pretty straightforward. Whatever value an asset is given on a balance sheet is its book value. For a tangible asset, this is calculated as the cost of the asset minus accumulated depreciation. Continue reading...
A business with a fast ‘cash conversion cycle’ can efficiently use funds and resources to fulfill the different needs of the business and to generate more business. In the simplest terms, the ‘cash conversion cycle’ is an accounting and efficiency model which measures how fast a retailer can disburse cash to suppliers and then receive cash from customers. To be more descriptive, the business would use cash from Receivables, to get Inventory (and cover Payables), sell that Inventory, and Receive cash again. Continue reading...
The Cost of Goods Sold, or COGS, represents the overhead associated with the materials and labor, which were needed to produce the goods sold during a given period. The COGS calculation is only concerned with the production costs of a good, and does not take distribution and sales force costs into account. It will always include the direct materials cost and direct labor cost for each item, but indirect overhead associated with production, such facility costs, are distributed between Inventory and COGS, according to Generally Accepted Accounting Practices (GAAP). Continue reading...
Cash flow is the liquid flow of cash and cash equivalents into and out of a business. Cash flow is an accounting metric that keeps track of the liquid assets going into and out of a business, project, or fund. Cash flow does not include accounts receivable, necessarily, because those funds may not be in-hand at the present time. The cash conversion cycle (CCC) and some valuation calculations will use cash flow numbers. Accounts may demonstrate positive or negative cash flow, which is either adding to or decreasing total assets. Continue reading...
A statement of cash flows is an accounting report which describes the changes in cash flows, which is distinct from net income. Cash Flow Statements are an important part of corporate accounting. While net income reports include non-cash items such as depreciation, as well as accounts receivable and accounts payable, cash flow statements will isolate the cash transactions in and out of the company. This helps get an idea of whether the company can pay its bills in a timely manner and so forth. Continue reading...
Depreciation is the accounting practice of recording the decreasing value of a fixed asset, such as a building or piece of equipment, over time, or, effectively, spreading the tax deduction for the cost of the asset over time. The IRS has created set schedules which describe the number of years over which a business can amortize the cost of a business asset for the purpose of tax deductions. The number of years is different for each type of asset or equipment. Continue reading...
If all the convertible securities a company had issued were converted at once to common stock, the stock would be diluted; Diluted EPS reveals by how much. Companies will sometimes entice investors to buy bonds or preferred stock by giving them an option to convert them into shares of common stock. If a bond is converted, shareholders equity increases on the balance sheet and liabilities go down, since a debt liability is being retired. Continue reading...
Dilution is the disassociation of value from current common stock shares due to the issuance or conversion of additional shares of the same company into the market, causing value to be reallocated. If a company issues a follow-on (aka Secondary) issue of shares, or if many holders of convertible shares decide to use their conversion privilege, the share price will be diluted. Each share’s value will decrease because there are now an increased number of shares dividing up the same amount of earnings that the company generates. Continue reading...
Discounted Cash Flow (DCF) uses an estimated future cash flow amount and a Discount Rate to determine the Present Value (PV). An investor or business executive might project an estimated future cash flow for a business based on recent growth rates, industry information, futurism, estimated inflation, etc. The most common future cash flow to use is free cash flow, which takes out capital expenditures. Continue reading...
Due diligence is the responsibility of the investor and broker to research all pertinent information about the individual's, investments, and companies involved prior to doing business. Due diligence is a responsibility and also a legal defense. If a fiduciary person or company is accused of negligent or criminal behavior, it may be a good defense to show a document trail of research about the people, companies, and investments involved in a transaction. Continue reading...
Earnings are the net revenue of a company after expenses and, sometimes, taxes. Also known as profit. Corporate earnings are an important metric for individual companies and the economy as a whole, because it shows how much money has been made. Revenue is the inflow of money to a company, and earnings are the net revenue, or profit, after expenses have been taken out. Of course there is also EBITDA, which is Earnings Before Interest Taxes Depreciation and Amortization, but this is a non-GAAP method. Earnings are usually calculated on a quarterly basis. Continue reading...
Enterprise Value is the total cost to acquire a company. The Enterprise Value of a company is the amount that would have to be paid for full ownership of it, which would include market capitalization (price per share x shares outstanding) + net debt (all liabilities - cash and equivalents). Market cap alone is technically just shareholders equity, and not capital from debt, so Enterprise Value adds that in for consideration. Enterprise value is the numerator in EV/E (Enterprise Value over EBITDA), a very common valuation ratio. Continue reading...