Days Inventory Outstanding – DIO: Definition, Formula, Calculation, and More

Businesses are run by sales. Days inventory outstanding is a measure that tells how quickly a business is turning its inventory into sales. Days inventory outstanding (DIO) is an important working capital ratio. It also shows the operating efficiency and short-term liquidity positions of a company. Let us discuss what is a DIO ratio, how …

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Accounting for Stock Appreciation Rights – SARs

Stock appreciation rights (SARs)are one of the many stock-based compensation plans offered by employers. SARs and other stock-based plans are accounted for under ASC 718 guidelines. Let us discuss what are stock appreciation rights and their accounting treatment. What are Stock Appreciation Rights (SARs)? Stock appreciation rights (SARs) are one of the several stock-based compensation …

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Advantages and Limitations of Weighted Average Cost of Capital (WACC)

Definition of WACC Weighted Average Cost of Capital is defined as the company’s cost of capital that is calculated using debt and equity. It can be defined as the minimum required rate of return for the company before the organization makes any new investment. It encapsulates the average cost of capital that the company obtains …

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Accounting for Repurchase Agreements (Repos)

Repurchase agreements are transactions between two parties where they exchange financial security and cash. These agreements can be arranged in different ways. The transfer of financial security means both parties should consider the transfer of control with the transaction among other important considerations. The tax and accounting treatment for both parties depends largely on that. …

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Accounting for Consideration Received from Vendors – ASC 705-20

Vendors offer incentives and allowances to resellers in different forms. These incentives can be in the form of cash or non-cash allowances to their resellers. ASC 705-20 guides on the accounting treatment for the considerations received from the vendors. Whereas, ASC 606-10-32 guides on the accounting principles of the considerations payable to the customers. Let …

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