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
An operating loss is a company’s net loss from its normal business operations. This is in contrast to a non-operating loss, which is a net loss from activities that are not part of the company’s main business. Operating losses can be caused by a variety of factors, including a decrease in sales, an increase in … Read more
The cash flow from operating activities (CFO) is a measure of a company’s financial performance that shows how much cash is generated from the company’s normal business operations. This cash flow metric is important because it shows how much cash a company has available to pay for its debts and other expenses. A company with … Read more
An adjunct account is a financial statement that provides supplementary information about a company’s financial position, performance, or cash flows. Adjunct accounts are typically presented alongside the company’s primary financial statements, such as the balance sheet, income statement, and statement of cash flows. Adjunct accounts can provide insights into a company’s overall financial health and … Read more
Vertical Analysis: What’s the Difference? Horizontal vs. Vertical Analysis: What’s the Difference? How do you perform a horizontal analysis of financial statements? A horizontal analysis of financial statements is a way of looking at financial data over time, usually over the course of several years. This can be done for a single company or for … Read more
An impairment definition is a set of guidelines used to determine whether an asset is impaired and, if so, how to measure the impairment. There are two types of impairment definitions: 1. those that focus on the asset itself (e.g. physical damage, obsolescence), and 2. those that focus on the entity’s ability to generate cash … Read more
Examples of current assets include cash, accounts receivable, and inventory.. Current assets are those assets which are either cash or can be converted into cash within one year. Examples of current assets include cash, accounts receivable, inventory, and marketable securities. What is the current asset from the following? The current asset from the following is … Read more
The Average Cost Flow Assumption is an accounting principle that stipulates that the cost of inventory should be based on the average cost of the goods purchased during the period. This means that the cost of goods sold (COGS) will be based on the average cost of the inventory on hand during the period. This … Read more
Profit and Loss Statement: Meaning, Importance, Types, and Examples. What are the 4 important types of financial statement? The balance sheet, income statement, statement of cash flows, and statement of shareholders’ equity are the four most important types of financial statements. The balance sheet provides a snapshot of a company’s assets, liabilities, and shareholders’ equity … Read more
