The term “Cash is King” is a popular saying in the business world that emphasizes the importance of cash flow. In general, businesses need cash to buy inventory, pay expenses, and make profits. Therefore, it is important for businesses to generate positive cash flow in order to stay afloat. There are a few different ways … Read more
. How Accrual Accounting Works. Who uses accrual accounting? Accrual accounting is used by businesses and organizations to record and report financial transactions. This method of accounting recognizes revenue when it is earned and expenses when they are incurred. This is in contrast to cash accounting, which recognizes transactions only when cash is exchanged. Accrual … Read more
What You Need to Know About Fiscal Year-End What are the six 6 basic financial statements? 1. The Income Statement: This statement shows a company’s revenue and expenses over a given period of time, usually one year. The bottom line of the income statement is the net income or profit. 2. The Balance Sheet: This … Read more
. What is a fixed cost? How is a fixed cost used in business? What is fixed cost and its formula? A fixed cost is a cost that does not change with an increase or decrease in the amount of goods or services produced. A good example of a fixed cost is rent. A company … Read more
Diluted earnings per share (diluted EPS) is a measure of a company’s profit that takes into account the dilutive effect of stock options, warrants, and convertible securities. Diluted EPS is calculated by dividing the company’s net income by the weighted average number of shares outstanding, including dilutive securities. Dilutive securities are those that have the … Read more
The deferred revenue definition is the amount of revenue that a company has earned but has not yet been paid for. This can happen when a company sells a product or service on credit, or when it provides a service that will be used in the future. Deferred revenue is often seen as a liability … Read more
Business Segment Reporting Definition The term “business segment reporting” refers to a company’s presentation of financial information about its different business segments in its financial statements. This type of reporting is required by generally accepted accounting principles (GAAP) in the United States. A business segment is a component of a company that engages in business … Read more
A restatement is an amendment to a financial statement that changes the way in which the financial statement is presented. For example, a restatement might be made to correct an error in the original financial statement, or to reflect a change in accounting policy. What is a prior period error? A prior period error is … Read more
The term “invested capital” is used to describe the funds that have been invested in a company or enterprise. This can include money that has been invested by shareholders, lenders, or other financial institutions. The purpose of invested capital is to provide the company with the funds necessary to grow and expand its operations. Invested … Read more
Accounts payable (AP) represents the money a company owes to its suppliers. It is a liability account, which means that it is a debt that the company will eventually have to pay off. Accounts payable is not just one liability, but rather a category of different types of liabilities that a company may have. The … Read more
