Accretion expense is an ongoing expense related to a long-term liability. The liability is often an asset retirement obligation (ARO) under the contractual or compliance requirements of a company. Accretion expense records the change in the ARO liability that changes with the passage of time. Usually, it represents the change in the present value of […]
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Financial statements contain four reports that provide valuable insights into a company’s operations. The first of these is the balance sheet, which includes various account balances. Similarly, the second is the income statement, detailing a company’s financial performance. They also consist of the cash flow statement, which contains cash transactions during the year. Lastly, they
What is Operating Margin Ratio? How to Calculate It? Read More »
Companies and businesses depend on cash flows to operate efficiently. These cash flows arise from several sources and also go into many more. Although profits are an essential metric to measure a company’s success, cash flows also play a critical role. Companies that suffer from poor cash flow management don’t survive for long despite being
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Companies obtain capital from two sources, including equity and debt. Equity is the finance that comes from a company’s shareholders. Usually, this equity is in the form of shares or preferred stocks. These shares may also come with voting rights. Debt, on the other hand, is finance received from third parties. It usually carries an
Market Value of Equity: Definition and How to Calculate It Read More »
When companies raise finance, they generally have two options. The first is equity, which represents funds they can get from shareholders. Usually, equity is an easier option for companies due to the availability of these funds. Companies can get equity finance from new shareholders or existing ones. However, equity finance is usually more expensive due
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Companies and businesses need finance to operate. Some companies have affluent owners that provide them with this finance. Others can raise finance through their existing shareholders. Similarly, some companies can also generate funds from the public. However, small companies and startups usually don’t have these facilities. For these companies, obtaining finance is a substantial challenge.
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The net worth of a company is what is left for the shareholders after settling all obligations. It can be termed as net assets of a company after adjusting for all types of liabilities. Return on net worth is the ratio that links the net income with the net shareholders’ equity. This figure closely resembles
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A yield to call (YTC) is the interest rate if a callable bond is called before the maturity date. It is the effective rate of return that an investor would receive instead of the usual yield to maturity. The YTC accounts for similar considerations like the coupon rate, time to maturity, and market value of
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Secured bonds come with a pledge of collateral. Unsecured bonds are issued by entities with higher credit ratings and do not offer collateral. Investors can analyze both types of bonds for the perceived risks. Both types of bonds carry a varying degree of default risk. Thus, the return on investment will also be different. Let
Secured vs Unsecured Bonds – Key Differences and Implications Read More »
Operating assets are the resources that run a business. These are the assets employed in an operational capacity to generate revenue for the business. Net operating assets mean all resources applied in operations net of operational obligations. Importantly, operating assets exclude financial assets and financial obligations of the business. Let us discuss net operating assets,
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