Businesses invest in projects to earn profits and create cash flows. The dilemma with project investments is to calculate the correct rate of return and estimate the future cash flows in terms of present value. The business entity may use several net present value methods to discount the future cash flows in present terms. For […]
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In this article, we will cover the interest rate risk management. This includes the overview of interest rate risk management, the key definition and interest rate hedging techniques. Overview All business entities acquire financing facilities from the banks and other lenders. The cost of borrowing depends on many factors including collateral, gearing, risk exposure of
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In this article, we will cover how to calculate interest coverage ratio. This includes the key definition, formula, example calculation, advantages and limitation as well as other areas which you should know. Overview Businesses seek an optimal balance for the gearing level. Basically, debt financing is cheaper than equity financing. The interest paid on the
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In this article, we will cover how to calculate the residual income in management accounting or performance management. Before jumping into detail, let’s understand some overview as well as some key definitions of the residual income. Management of a company appraises the income yielded after paying all the relevant costs of capital in order to
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In this article, we will cover in detail about the financial analysis techniques or tools in order to analyse financial statements. This ultimate guides of the financial analysis techniques will provide you an insights how to use various techniques or tools in performing the financial analysis of financial statements of a company. Reading financial statements
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In this article, we will cover how to calculate the variable overhead rate variance. This includes the definition, important, formula, example, reasons for favorable and adverse as well as the limitation of variable overhead rate variance. What is Variable Overhead Rate Variance? The variable overhead rate variance is the difference between the actual and budgeted
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In this article, we will cover how to calculate sales mix variance. This includes the definition, important of sales mix variance, example calculation, causes for favorable and adverse variance as well as the limitation of sales mix variance. Variance reports are developed at the closing of each control period (say, at the end of each
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The statement of stockholders’ equity is also known by the following names; statement of shareholders’ equity, statement of equity, statement of changes in stockholders’ equity, statement of changes in shareholders’ equity, and statement of changes in equity. We usually use these key term interchangeably. Statement of stockholders’ equity is one of the five components of
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Bonds are one type of debt financing. Basically, bonds are considered as long-term debt of capital that a company raised in order to get more fund for its investment projects. The company raises the bonds need to pay fixed interest to bondholders; usually semi-annually or annually. There are several types of bonds; one of which
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Budgeting is the process of making a plan or forecast for the future of a business. Budgeting is an important part of the management and cost accounting of a business. The budgeting process of a business consists of forecasting its incomes and expenses. Once these incomes and expenses are determined, the forecasted profits of the
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