Days sales outstanding is defined in several ways. However, the simplest way to understand DSO is the days a company takes to collect the payment after purchasing an order. The more limited the DSO, the quicker the organization gathers installment or pending payment from its clients – and the sooner it can utilize its money. […]
What is Days Sales Outstanding (DSO)? How to Calculate and Improve DSO? Read More »
Return on assets is one of the most crucial matrices to assess profitability and business operations performance. If the business efficiently manages its operations and utilizes assets, the return on assets is expected to be higher and vice versa. Detailed understanding Return on assets is calculated by dividing net income by the total assets. The
Periodicity assumption states that a business can report its financial information in any designated period of time. It means that they can divide the activities of a business into an artificial period. That’s the reason why the periodicity assumption is preferred while presenting financial information. This assumption allows the companies to prepare their financial statements
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Accounting has evolved to be complex for providing comprehensive insights to the user of financial statements. The objective of improving financial reporting is to enhance the true representation of the financial and operational information presented in the financial statement. So, the process to enhance user experience requires the business accountant to present financial information that
True Up in accounting: What is It? Read More »
Budget padding aims to inflate the proposed budget; it can be done by artificially increasing estimates that favor managers. This results in the room to cover unexpected expenses the business may have to face during the project. Artificial increment/budget padding can be perceived as unethical, but sometimes it’s logical in times of inflation when there
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Definition The current ratio measures the ability of the business to pay off short-term obligations falling due in the next twelve months. Calculation and analysis of the current ratio help to assess the liquidity of the business and offers great help in understanding if the business is liquid and able to meet the commitments in
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Every business sets a shutdown point. It is the point where a company cannot sustain its operations. The point can be about a product, a department, or a company. Several factors contribute to the shutdown decisions. The most prominent factor is profitability. A business must also consider broader factors. Let us discuss what are shutdown
Shutdown Decisions: What Is It, Why Companies Opt For Shutdown Decision and More Read More »
Shadow pricing or proxy pricing is the process of assigning theoretical values to different metrics. The method can be used to assign values to intangible assets such as social welfare services. Companies can use this method in several cost-benefit and project appraisal scenarios. However, this method relies heavily on estimates. Let us consider what is
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Full cost-plus and marginal cost-plus are two widely used pricing methods. Both methods calculate the selling price of a product per unit in different ways. Both methods offer some benefits and limitations to their users. A business must consider a few key factors discussed below in detail before choosing one of these two methods. Full
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The marginal cost-plus pricing approach considers variable costs of production. It is a useful method for businesses with a large proportion of variable costs. It is a simple and easy method to practice. Businesses can set the desired markup on top of the variable costs. However, this method is not suitable for all types of
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