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EDU Articles

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What is Acquisition Accounting?

Also known as Business Combination Accounting, there are specific guidelines and bits of information that must be documented on the books during an acquisition. Acquisition Accounting is a standardized way to account for the assets and liabilities of companies who are part of a merger or acquisition. International Financial Reporting Standards (IFRS) stipulate that even in a merger where a new company is formed, one company must play the role of acquirer and the other of acquiree, but that rule really only applies outside of the US. Continue reading...

What is Tangible Net Worth?

Tangible Net Worth is another word for Book Value or Net Asset Value. Only the tangible assets and cash are included, and any liabilities are subtracted. Any depreciation that would otherwise be included for accounting purposes is added back in. Tangible net worth, or book value, is the remaining balance after intangible assets and all liabilities are deducted from net assets. This is the amount that will be divided among shareholders in the event of a company liquidation, and the minimum that the company would be purchased for by an acquiring company. Shareholders can use this as a bare-minimum estimation of the value of their shares. Continue reading...

What is Book Value?

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...

What does price to tangible book value (PTBV) mean?

What does price to tangible book value (PTBV) mean?

Price to Tangible Book Value serves as a conservative estimation of the value inherent in a share, without Goodwill and other intangibles (opposite of tangibles) factored in. Price to Tangible Book Value (PTBV) is a ratio of the share price over the Tangible Book Value of a company and helps investors see what inherent value is present on a company's books. The Tangible Value does not include goodwill, patents, and other intangible values. Continue reading...

What are Tangible Assets?

Tangible assets are the property of a company that are tangible and can be quickly liquidated. This includes current-period accounts receivable and money in checking, savings, and money-market accounts. Buildings, land, equipment and inventory are all tangible assets as well. Tangible assets are an important part of a company’s book value. For most valuations, intangible assets such as patents, other intellectual property, and goodwill are not included. Continue reading...

What is the definition of consolidation?

What is the definition of consolidation?

Unlock the power of Consolidation in both Technical Analysis and Accounting! Discover how it guides traders in analyzing price patterns and informs buying decisions. Explore the intricacies of Financial Accounting Consolidation, merging entities, fair market values, and eliminating internal transactions. Essential knowledge for financial professionals navigating diverse markets and corporate finance. Continue reading...

What is a Non-Current Asset?

A non-current asset is an asset on the balance sheet that is not expected to convert into unrestricted cash within a year’s time. Non-current assets may include such things as intellectual property and production/operations equipment - meaning they likely do not have a need to convert to cash. From a balance sheet standpoint, non-current assets are capitalized rather than expensed - meaning the company can allocate the asset’s cost of the asset over the number of years for which the asset will be used, instead of allocating it all in the year it was purchased. Continue reading...

How Does Reimbursement Work? A Comprehensive Guide

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...

What is the Law of Supply?

All other things being equal, if the price of a good increases, the supply of that good will increase, and this is known as the Law of Supply. The Supply Curve is plotted on a graph with a y-axis being price and an x-axis being quantity. The relationship is positive and the line will climb up to the right. The is the opposite direction of the Demand Curve, and the place where the two intersect is considered to be the point of market equilibrium. The curves can be shifted by variables not present on the graph, such as changes in levels of income and other factors, but the slopes will remain the same, theoretically. Continue reading...

What is Accounts Payable for Accounting?

Accounts Payable is part of the Current Liabilities section of a company’s books. Accounts Payable are the short-term expenses and debts that a company must pay out in the near future. These might include utility bills and regular expenses, debt service, and bills to regular suppliers and vendors. The amounts that appear in the Payables, as they are also called, have not been paid out yet, but are scheduled to be paid within the current quarter, generally. Continue reading...

What Constitutes an Asset and What Are Its Various Types?

What Constitutes an Asset and What Are Its Various Types?

Dive into the financial realm of assets, the backbone of economic growth and stability. Whether it's a personal possession or a business resource, understanding the various types of assets is crucial. Uncover how assets, from tangible to intangible, play a pivotal role in financial analysis, and how they pave the way for future economic benefits. Your journey towards financial literacy begins with a closer look at assets. Continue reading...