Every business needs to monitor its revenue, expenditure, and profits to ascertain its financial health and success. Gross profit is an important parameter that shows how much revenue a company brings after the subtraction of expenses involved with that revenue. This value tells the company’s management and investors the profitability of a certain product or […]
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Many interpret funds as mere cash, and a fund flow statement formulated out of this aspect is known as a cash flow statement, where only the outflow and inflow of cash flow get recorded. The cash flow statement omits numerous accounting items which do not directly impact cash or working capital. This is the reason
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EBIT (Earnings Before Interest and Taxes) is a measure of a company’s profitability. It calculates a business’s operating profits by deducting operating expenses and the cost of goods sold from its net revenue. This calculation is relatively simple as it does not consider taxes or interest. Investors and creditors use this value to see how
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EPS (earnings per share) is an important unit of measurement for investors to gauge a company’s profitability. It indicates a company’s profitability against its peers on a per-share basis. One can calculate EPS on a quarterly or annual basis by dividing a company’s net income by its total number of outstanding shares. Now, let’s dive
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Introduction Business assets usually cost a fortune and have a limited lifespan. Hence, it is necessary that this cost be expensed proportionately across their functional life. Depreciation and amortization are two such accounting processes that involve spreading out the cost of these assets throughout their useful life. Before understanding how these two methods work, let
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‘Cash is king’ is a popular saying that you might’ve heard. This is particularly true for all types of businesses, as cash is a measure of their financial standing in the long run. Hence, cash management is an essential skill to sustain the ongoing activities of a business, mobilize funds where needed and optimize its
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Cash and cash equivalents are essential metrics that form a huge portion of a company’s operating plan. Companies with higher cash and cash equivalents in the balance sheet can overcome the crisis more conveniently than those companies which are cash strapped. Read the following to know the cash and cash equivalents meaning and examples. What
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Capital structure refers to a combination of debt and equity that a company utilises to purchase assets and finance overall operations. Organisations can fund their activities via equity financing, debt financing, vendor financing and preference share capital. The composition of debt and equity in the capital structure of a company represents its financial position and
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Capital budgeting refers to the process of evaluating potential risks and expected returns of a project. It helps businesses to establish a quantitative view of every proposed investment, which enables them to make rational decisions. Typically, such investments pertain to long-term assets that can potentially increase an organization’s profitability. Before knowing the different capital budgeting
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The term ‘black swan event’ was first used by former Wallstreet trader, Nassim Nicholas Taleb in 2001. He, later, went on to write a complete book about this concept – The Black Swan: The Impact Of The Highly Improbable in the year 2008. Black swan events can cause catastrophic damage to an economy. Since they
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