When a company generates net income, it is typically recorded as a credit to the retained earnings account, increasing the balance. In contrast, when a company suffers a net loss or pays dividends, the retained earnings account is debited, reducing the balance. Net profit refers to the total revenue generated...

For example, the way to avoid intentional circularities in the example above is to calculate interest expense using the beginning debt balance. When the model short circuits, the IFERROR function evaluates to the FALSE condition and populates the model with 0s automatically. A user can simply locate the area for...

It shows us the money made from selling products or services after covering the costs to make them. This statement highlights the importance of managing regular income, operating income, and the costs involved in making products or services. In a contribution margin income statement, variable cost of goods sold is...

Retained earnings play a vital role in a company’s financial management, as they provide a source of financing for business operations, expansions, and investments. By retaining a portion of its net income, a company can reduce its reliance on external financing, such as debt or equity issuances, and maintain control...

Legal precedents, such as Smith v. Van Gorkom, highlight the importance of informed decision-making in these transactions. Failure to disclose pertinent information can lead to legal challenges, including claims of misrepresentation or breach of fiduciary duty. In mergers and acquisitions (M&A), imputed knowledge plays a critical role in due diligence...

Usually a pay period is one month, but employees can also receive paychecks weekly or every two weeks. Using the formula to calculate net pay, determine the employee’s net pay. You also need to determine whether to hold additional money for employee benefits and other non-tax deductions. Withhold FICA taxes....

By using this formula, you can determine the total value your series of regular investments will reach in the future, considering the power of compound interest. This seemingly minor difference in timing can impact the future value of an annuity because of the time value of money. Money received earlier...

The amortization must be high sufficient to ensure that the mortgage is repaid in full throughout the agreed time period without exceeding the financial burden. The amortization period ought to ideally be between 5 and 15 years, depending on the kind of investment and individual monetary targets. Let's assume you're...

Such reports may include audited financial statements that help investors and analysts decide whether to buy or sell shares of the company. Financial leverage refers to a company's use of borrowed capital in order to acquire assets and increase its return on investments. Through balance sheet analysis, managerial accountants can...

With liabilities, this is obvious – you owe loans to a bank, or repayment of bonds to holders of debt, etc. These are also listed on the top because, in case of bankruptcy, these are paid back first before any other funds are given out. Balance sheets are one of...