Accounting

FCF has also gained prominence against the dividend discount model of valuation, especially in the case of non-dividend paying firms. Free cash flow to equity is composed of net income, capital expenditures, working capital, and debt.

It is shown as a part of the owner’s equity in the liability side of the company’s balance sheet. Property Plant And EquipmentProperty plant and equipment (PP&E) refers to the fixed tangible assets used in business operations by the company for a […]

Gross sales serve as the basis for measuring top-line revenue within a certain timeframe. It would be impossible to calculate important revenue metrics, such as net sales and gross profit margins, without gross sales. A sales allowance is a reduction in price charged by the seller. The reduction could be due to a problem with the goods sold. For example, the quality of the items sold did not meet the seller’s standards.
Returns – Customers return products for a number of reasons and, depe […]

The January 2019Reviewer Alert provides a scenario where an audit firm performs a Yellow Book audit and prepares financial statements. Then the firm has an engagement quality control review performed, but it does not identify the preparation of financial statements as a significant threat. Limitations of services to clients whose billings would be significant to the firm (actions prohibited by a firm’s internal controls) reduce undue influence and self-interest threats. The self-review th […]

The 3D printing machine costs $50,000 and has a depreciation expense of $3,000 per year over its useful life of 15 years under the straight line basis of calculating depreciation and amortization. Assume ABC Plumbing buys a $23,000 truck to assist in the performing of residential plumbing work, and the accounting department creates a new plumbing truck asset on the books with a value of $23,000. Due to factors such as the total mileage and service history, the truck is assigned a useful life of […]

The owner’s equity statement (also known as the statement of retained earnings) is a sum of the owner’s investments and withdrawals, as well as the business’s income and expenses. This data needs to get organized into something more useful for the investors, creditors, and analysts interested in the startup’s performance. The accounting process is long […]

If the contribution margin for an ink pen is higher than that of a ball pen, the former will be given production preference owing to its higher profitability potential. Such decision-making is common to companies that manufacture a diversified portfolio of products, and management must allocate available resources in the most efficient manner to products with the highest profit potential. Another example of fixed cost is a website hosting provider that offers unlimited hosting space to its clie […]