Capitalize: What It Is and What It Means. What items should be capitalized? There are a few key items that should always be capitalized on a financial statement, including: -Revenue -Expenses -Assets -Liabilities -Equity How does capitalization affect the balance sheet? Capitalization refers to the process of recording certain expenditures as assets on the balance … Read more
What is Vertical Analysis? Vertical analysis is a financial statement analysis technique that shows relationships between a company’s various account balances and items over time. What is another term for vertical analysis? Vertical analysis is also known as common-size analysis. How do you do vertical analysis on Excel? Vertical analysis is a financial statement analysis … Read more
Definition, Types, and Examples. What is an asset? An asset is anything that has economic value and can be owned or controlled to produce positive economic value. Assets can be either physical or intangible, and can be classified as either real or financial. Real assets are physical resources that are used in the production of … Read more
Current liabilities are those liabilities that are due and payable within one year. They are typically short-term in nature and include items such as accounts payable, wages payable, and taxes payable. Current liabilities are important to monitor because they represent a company’s short-term financial obligations. How assets and liabilities are classified? Assets are classified as … Read more
Operating cash flow is a measure of how much cash a company generates from its normal business operations. This metric is important because it shows how much cash a company has available to pay for things like new equipment, new products, or acquisitions. Operating cash flow is calculated by taking a company’s net income and … Read more
A comparative statement is a financial statement that compares financial information for two or more periods. The periods being compared can be adjacent, such as last year and this year, or they can be nonadjacent, such as 2013 and 2014. Comparative statements are often used in business to track changes in financial performance over time. … Read more
Operating expenses are those expenses incurred in the day-to-day operations of a business. They include things like rent, utilities, payroll, and office supplies. Operating expenses are different from capital expenses, which are costs incurred in the acquisition or improvement of long-term assets. Capital expenses are typically not deductible for tax purposes, while operating expenses usually … Read more
Financial Statement Analysis: How to Do It, by Statement Type What is formal financial statement? A formal financial statement is a document that records a company’s financial activity over a specific period of time. This statement can be used to provide information about a company’s financial position, performance, and cash flow. Financial statements are typically … Read more
The carrying value of an asset is the value at which it is carried on the balance sheet. For example, if a company buys a machine for $1,000 and the expected life of the machine is 10 years, the carrying value of the machine would be $1,000. The company would depreciate the machine over its … Read more
The present value (PV) of a financial asset is the value of the asset in today’s dollars. PV is also known as “present worth.” The PV of an asset is the sum of all future cash flows from the asset, discounted at the asset’s required rate of return. The required rate of return is the … Read more
