The issuing company creates these instruments for the express purpose of raising funds to further finance business activities and expansion. Some financial assets that invest in or backed by real assets can blur the lines somewhat, but are still fin... Read more
In turn, steel becomes a direct material to an automobile manufacturer. Manufacturing companies use the most complex product costing methods. To ensure that you understand how and why product costing is done in manufacturing companies, we use many m... Read more
Essentially, a liquidity ratio is a financial metric you can use to measure a business’s ability to pay off their debts when they’re due. In other words, it tells us whether a company’s current assets are enough to cover their liab... Read more
Essentially, to calculate the market risk “premium”, you’ll need to subtract the risk-free rate from the expected market return. Treasuries will then be compared to the equity market returns based on benchmark indexes such as the S... Read more
Forecast demand, set low stock alerts, create purchase orders, know which items are selling or sitting on shelves, count inventory, and more. WAC can help retailers understand how much each item in their inventory costs to purchase (or produce) with... Read more
Funds from the initial start-up are typically used for this phase, and if revenue is low and development costs are high, it can be a period of low cash flow for the company. They feel that that the top customers they have are growing and demanding m... Read more
This will increase subjectivity and reduce the consistency and reliability of the financial statements. It will also be highly inconvenient for those companies that prepare their financial statements more frequently such as monthly. It is a conserva... Read more
An FX forward is a contractual agreement between the client and the bank, or a non-bank provider, to exchange a pair of currencies at a set rate on a future date. The pricing of the contract is determined by the exchange spot price, interest rate di... Read more
If the lender isn’t so accommodating, they may declare default on the loan, apply penalties, or call the loan — that is, demand that it be paid in full right away. If a business runs into unexpected churn, spends money in the wrong place, or i... Read more
For example, if a manufacturing company has to use more machine hours in March vs February, then its budget should logically increase in March. Conversely, if it uses them for few hours, its budget should reflect that decline. Therefore, most compan... Read more
