Financial ratios such as the equity ratio play an important role in financial statement analysis, because they are easy to calculate and provide a gauge for business performance. The equity ratio is a solvency ratio, providing insight into capital structure, the company’s assets, equity and the financial well-being of a business. Below are the advantages …
What is the Equity Ratio and how is it Calculated? Read More »
The accounting cycle is a process that bookkeepers, accountants and businesses use to prepare financial statements. It’s a systematic and disciplined approach that ensures the consistency and accuracy of financial reporting. Below are components of the accounting cycle and the relevance to business stakeholders. Accounting Cycle Defined The process of identifying relevant transactions and economic …
A percentage of accounts receivable will become uncollectible for a myriad of reasons, requiring a periodic write-off of receivables. Whether the allowance for doubtful accounts or the direct write off method are used, an uncollectible accounts expense must be recorded to remain compliant with U.S. GAAP. Below are details regarding this expense, and how it …
When making managerial decisions about overhead expenses, sales growth, profitability and a myriad of operational objectives, incomes statement analysis is needed. A high level of detail is useful when reviewing operations, which is why the multi-step income statement is utilized. Expense line items are detailed making it possible to gauge operations effectively. Overview The multi …
When a company borrows money, they must pay interest and record the expense accurately to reflect the costs of borrowing. Calculating interest expense can be straightforward, if the note payable has a stated interest rate or coupon. However, the process can become difficult to account for, given the nature of the debt instrument and related …