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 …
What Are Expenses? Definition, Types, and Examples Read More »
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 …
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 …
Liabilities are debts or obligations a person or company owes to someone else. For example, a liability can be as simple as an I.O.U. to a friend or as big as a multibillion-dollar loan to purchase a tech company. In business, liabilities are building blocks of a company’s finances, often used to fund operations and …
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 …
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 …
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 …
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 …
A company’s weighted average cost of capital (WACC) is the amount of money it must pay to finance its operations. WACC is similar to the required rate of return (RRR) because a company’s WACC is how much shareholders and lenders require from the company in exchange for their investment. In this guide, we’ll go over: …
What Is Weighted Average Cost of Capital (WACC)? Read More »
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 …
