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What Are Expenses? Definition, Types, and Examples

An expense is money spent to acquire something — expenses includes daily transactions everyone encounters (like paying a phone bill) and big purchases made by companies (like buying a new piece of machinery). While some people may track their personal expenses for budgeting purposes, businesses and accountants have strict guidelines on what counts as an …

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Businessperson reviewing monthly expenses
What Are Capital Expenditures (CapEx)?

CapEx or capital expenditures are investments a company makes into long-term assets. These long-term assets are resources the company will use for many years, such as an office building or production machinery. Understanding capital expenditures and how they affect a company’s future financial performance is vital for accountants and business professionals.  In this guide, we’ll …

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What Is CapEx - Capital Expenditures?
What Is an Expenditure?

An expenditure is a purchase of services or goods. Everyone experiences expenditures in their day-to-day activities, like buying groceries. However, in business and accounting, expenditures are a bit more complicated.  In this guide, we’ll go over:  Expenditure Definition An expenditure is simply a purchase of products, goods, or services. Anyone can incur one: Buying a …

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Couple reviewing their small business expenditures
Internal Rate of Return: Formula and Example

An investment’s internal rate of return (IRR) is technically how much the investor will get back from their investment without accounting for external factors like the economy. In practice, IRR serves as a metric of profitability that allows investors, business owners, and financial analysts to compare investment options.  In this guide, we’ll cover: What Is …

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Two businesspeople calculating and comparing internal rate of return for investment options
What Is a Cash Flow Statement?

A cash flow statement is a financial statement that shows how cash entered and exited a company during an accounting period. Cash coming in and out of a business is referred to as cash flows, and accountants use these statements to record, track, and report these transactions.  In this guide, we’ll go over:  Cash Flow …

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Accountants reviewing finances to create cash flow statement and other financial statements.
What Is Contribution Margin?

A contribution margin measures how profitable a product is to produce. A company’s contribution margin shows how much revenue is available after it deducts variable costs like raw materials and transportation expenses. For a product to be profitable, the remaining revenue after variable costs needs to be higher than the company’s fixed costs, like insurance …

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Accountants comparing contribution margins
What Is a Balance Sheet?

A balance sheet is a type of financial statement used in business and finance to give an overview of a company’s assets, liabilities, and shareholder equity at a given point in time. These balance sheets are essential tools for business owners, accountants, and investors because they provide insight into a company’s financial standing and show …

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Businesspeople analyzing company standing using balance sheet financial statement
What Is Net Working Capital?

Net working capital (NWC) is also referred to as working capital and is a way to measure a company’s ability to pay off short-term liabilities. NWC is often used by business owners and accountants to quickly check a company’s financial health at any given moment. However, the results are sometimes difficult to interpret.  In this …

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Two businesspeople discussing company's recent NWC, working capital formula