A Global Depository Receipt is a security which represents ownership in shares of a foreign corporation. Investment banks in the United States and elsewhere purchase shares in foreign corporations and sell the equity in the form of a Global Depository Receipt, also called an International Depository Receipt, and formerly known as an American Depository Receipt. They allow foreign companies to find investors in other countries, and vice versa, and the Americans and other foreigners can pay for the GDRs in American currency. They are typically sold in lots such that 1 GDR equals 10 shares of the underlying foreign company, but other ratios can be used. Continue reading...
A Bill of Sale is essentially a trumped-up receipt, unless you are in England. A Bill of Sale is a document affirming that the rights of ownership of an asset have been transferred from one party to another, in exchange for “full consideration,” which is another word for compensation or payment. A receipt from a retail transaction can be considered a Bill of Sale, but a full-fledged bill of sale should accompany large transactions like car sales and so on. The British definition of Bill of Sale, however, is somewhat different. Continue reading...
Accounting records are the supporting documents that verify the history of transactions, audits, and reports. Accounting documents are sometimes required to be kept on file for a certain number of years. They may be paper or electronic records. Records may include point-of-sale documents such as receipts and invoices, as well as inventory delivery and audit records, and the results of internal and third-party audits from various periods. Continue reading...
Leveraged Recapitalizations involve issuing new corporate bonds to finance a share buyback or large dividend, essentially rebalancing the capital structure of the business. Dividend recapitalizations will cause the share price to reduce, largely because the company’s debt-to-equity ratio has changed. This can be used to make the company look unattractive to potential acquirers. Recapitalizations are restructuring of a company’s capital. Dividend recapitalizations are sometimes called dividend recaps. 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...
Financing companies can step in and take over the accounts receivables of a company who no longer wants to wait to be paid on their receivables. Financing companies, who are sometimes called Factoring Companies or Factors, will pay about 75% of the amount due to companies who want to offload or outsource their Receivables. The factoring company will then take over the task of collections, and will transfer most of the money received back to the original company, after their fees have been deducted from the proceeds. Continue reading...
The Accounts Receivable Subsidiary Ledger will be a separate ledger from a company’s General Ledger, where all of the information pertaining to all Accounts Receivable will be reported. Receivables may have only a line-item on the General Ledger of a company, but may have an entire department dedicated to servicing the receivable accounts. Because there may be a large amount of information in just the Receivables sub-account, there is often a Subsidiary Ledger dedicated to the minutia of all the Accounts Receivable business. Continue reading...
Receivables Turnover Ratio gives a snapshot of how well a company does by extending credit. The ratio is computed by putting the number of credit sales over the total amount of outstanding receivables. If a company is not able to efficiently collect on credit that it has extended to its customers or debtors, it will have a low Receivables Turnover Ratio. The top number is the amount of new receivable accounts opened during a period, and the lower number is the total number of outstanding receivable accounts. A much larger bottom number suggests that they are not able to efficiently collect on and close their receivables. Continue reading...
A Dividends Received Deduction (DRD) is a tax deduction available to corporations when they are paid dividends from another corporation. This is a provision to reduce the number of times an amount of earnings can be taxed: company A, which is paying the dividend, will have already been taxed on it, and the shareholders of company B will be taxed as well, so the Dividends Received Deduction alleviates taxes at the intermediary stage when Company B receives it. Continue reading...
Billing Statements are primarily used by credit card companies, listing the transaction history and balance due on a customer account. A billing statement is mailed, physically or electronically, to a customer at the end of a billing cycle, which is usually monthly. The statement will show the balance due and the transaction history, perhaps including recent payments received from the customer. The term “billing statement” is sort of a blend between two distinct documents: a bill and a statement. Continue reading...
Revenue that has not yet been received for goods or services already rendered may be documented as Accrued Revenue. Accrual accounting allows a business to put the payments due to it for good and services already rendered into the Assets column of its books. If no invoice or payment plan is established, it sits in the Accrued Revenue line; if so, the item goes into Accounts Receivable. Accrual accounting is different than cash accounting in this regard: cash accounting will only make an entry on the books when cash or goods are exchanged. Accrual accounting is actually mandatory for publicly traded companies with revenues over $5 million who are based in the US, per SEC regulations. Continue reading...
Cash Accounting is the accounting method where only finalized transactions are documented. Larger, publicly traded companies are actually not allowed to use Cash Accounting because it can’t keep up with all the Payable, Receivables, and so forth that large companies have to keep on their books. Instead, larger companies are required by the SEC to use Accrual Accounting, which makes ledger entries for cash that has not yet be paid or received, among other things. Continue reading...
Revenue is a word describing any cash flowing into a business as a result of goods and services rendered. It is sometimes call gross income, and is a representation of income before all expenses. It is notable, though, that revenue only includes receivables in the current period. The Accounts Receivable on the company’ s books may include the entire cost of the goods or services rendered during that period, but the Revenue should generally only reflect the amount that is paid to the company in the current year. Continue reading...
There are two main kinds of accounting methods: accrual accounting and cash accounting. Depending on who is speaking, accounting “methods” may also extend to the GAAP vs pro-forma distinction. For the most part, accounting methods can be defined based on the year in which the revenues and expenses are put on the books. In cash accounting, only the revenues and expenses which are collected and paid in the current year or period are documented. Continue reading...
Current Assets are items on a balance sheet that are either cash or are going to be cash in the near future. The current assets section of a balance sheet is an indication of cash flows and liquidity. The assets are usually listed in order of liquidity, or the amount of time that it will take for them to become cash. This section includes cash, accounts receivable, prepaid expenses, inventory, supplies, and temporary investments. (The order given here is not necessarily the order of liquidity found on a balance sheet.) Continue reading...
An Asset-Backed Security, or ABS, are bonds or notes backed by financial assets. It is an example of “securitization.” The assets within the ABS generally tend to consist of different kinds of debt receivables, such as credit cards, auto loans, home equity loans, and so forth. Banks build portfolios of receivables in making loans and issuing credit, and then in many cases package these loans together and sell them to investors (known as “securitization”). Continue reading...
Also simply called Receivables, the Accounts Receivable line on a General Ledger will contain the amounts owed to the company which are due to be received in the near future. If a company offers financing for the items it sells, or it has regular payments coming in for things such as rent, leases, monthly subscription or membership fees, and so on, they will have substantial numbers in their accounts receivable. Continue reading...
Before Lehman Brothers and Bear Sterns, probably the most well-known and publicized bankruptcy was the infamous Enron scandal. To summarize, Enron executives, fully aware that the company was insolvent, started to sell their stock, while convincing the general public that the stock would continue to rise and the company was prospering (despite actual horrendous losses). As the stock dropped lower and lower, the executives continued to lie to the public, and most people fell into the trap, convinced that the low stock prices were a great opportunity (the stock was going to rebound any day – or so they thought). Continue reading...
Sometimes when orders are made for the delivery of goods at a person’s residence or place of business, they can choose to only pay once the goods have been delivered. Payment by COD (Cash On Delivery) is an option that older Americans are likely more familiar with than younger Americans, but it still takes place. In this payment arrangement, a customer can wait until the goods have been delivered before actually paying for them. Continue reading...
Throughout the history of the U.S. Stock Market, there have been countless crooks, swindlers, and villains. Money can drive people to cheat, and there have been no shortage of cheaters over the years. Undoubtedly, the biggest hoax in the history of the market is credited to Bernard Madoff, who made off (no pun intended) with over $10 billion of his investors’ money through a massive Ponzi scheme. However, there have been countless other criminal activities, such as the Enron scandal of the early 2000’s. Continue reading...