In this article, we cover the flexible budget. Now let’s go through some basic overview. As you may know, budgets are financial forecasts of a business for its revenue and expenses for a specific period. These are quantified estimations of revenues and expenses. A budget can be planned for various activities or divisions of a […]
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Gearing ratios are the measure of a company’s capital structure. It provides information about a company’s leverage including operational and financial gearing. A business can fund its projects by either debt or equity financing. The proportion of each financing option will affect the cost of capital and the returns of the company. Gearing ratios can
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In this article, we will cover how to prepare a cash budget. Typically, cash plays a critical part in every business. Having enough cash enables a business to optimize its operation; especially it helps in the investing activities. In order to help for a business to manage its cash for both investing and financing activities,
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In this article, we will cover how to calculate modified internal rate of return (MIRR). This includes the overview, key definition, formula, example calculation as well as advantages and limitations of MIRR. Overview The conventional method of internal rate of return IRR assumes all cash flows arising from a project to be reinvested in the
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Introduction The accounts receivable balance of business represents all its credit sales to customers for which it hasn’t received cash. Usually, businesses will have credit policies that will influence their account receivable balances. Different factors influence these policies. For example, it may depend on the credit terms of the industry or competitors of the business.
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Introduction There are many resources that businesses use to generate profits. These resources are known as assets. Some of these assets are long-term while some are short-term. Examples of long-term assets also called fixed assets or non-current assets, are property, plant and equipment. Businesses use these assets for more than a single period to generate
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Introduction The intrinsic value of a stock is different from its price in the stock market. This is mainly because other factors may also determine the value of a stock. Investors value stocks based on what they will be worth in the future rather than the stocks’ current market price. Therefore, the intrinsic value of
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Introduction Fixed assets, often referred to as property, plant and equipment, are an essential part of any business, especially businesses in the manufacturing industry. They use fixed assets in their operations to generate wealth in the long-term. Fixed assets are also defined as assets that business use for more than a single accounting period and
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In this article, we cover the working capital management. This includes the definition of working capital management, its objectives as well as working capital management strategies. So, let’s dive in! Overview Liquidity is one of the most vital parts of a business. Liquidity refers to how easily a business can convert its assets into cash.
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In this article, we will cover how to calculate discounted payback period. This will include the overview, key definition, example calculation, advantages and limitation of discounted payback period that you should know. Overview When businesses evaluate and appraise projects or investments, they consider two-factor evaluations. The rate of return on the investment and the time
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