Operating activities refer to the main business activities directly related to the supply of goods or services. Examples are manufacturing, distribution, marketing, and selling activities for products or services.Why is cash flow from operating
Investing Fundamentals
Accounts Receivable: Meaning, How to Report and Analyze It
Accounts receivable, or sometimes called trade receivables, is the amount owed by customers for the purchase of goods and services on credit. In other words, this account appears when the company has provided products or services but has not received
Business Risk: Meaning, Types, Sources, Impacts
Competition has become more dynamic in recent years, increasing the business risk for many companies. The business environment is rapidly changing. And it causes some challenges and problems.What is the business riskBusiness risk is the
Goodwill: Meaning, Examples, Types, How It Is Reported
Goodwill is the excess of the acquisition cost over the fair market value of the net assets. This intangible asset arises when a company acquires another company and pays a premium above the fair market value of the target company.For example,
Completed-Contract Method: Meaning, How to Calculate It, Impacts
Completed-contract method is a revenue recognition method in which the company does not recognize revenue and profits until the contract is complete. This method is common in long-term contracts such as construction, which often face uncertainties
Matching principle
Matching principle is the accounting principle that expenses must be recognized when the associated revenue is recognized. The aim is to present accurately net income for the accounting period and avoid revenue misstatements during the period.For
Materiality concept
The materiality concept requires to incorporate significant items in decision making into financial statements. This principle is to ensure reliable economic decisions by users of financial statements. It not only protects the interests of
Marketable securities
Marketable securities are securities that can be sold in a short time without losing the principal or initial investment. The maturity is usually more than 90 days but less than one year. In the financial balance sheet, the company reports them as a
Minority Interests: Definition, Reporting In Financial Statements
What's it: Minority interest or non-controlling interest refers to a small proportion of shareholders in companies where more than 50% control is held by holding company. Hence, ownership is less than 50%.Minority interest in accounting and the
Fixed Charge Coverage Ratio: Calculation and Interpretation
What's it: The fixed charge coverage ratio is a financial ratio to measure how well a company can cover interest and lease payments. Both represent fixed costs, which the company has to pay regardless of whether the company generates
Straight-line method
Straight-line method is a method of depreciating fixed assets that recognizes depreciation equally over the periods of an asset's estimated useful life. Examples of fixed assets are property, plants, and equipment.Straight-line depreciation
Prepaid expense
Prepaid expense is typical operating cost that have been paid before maturity. In other words, the company has made a cash payment but has not recognized it as an expense in the income statement. Such recognition is possible in accrual accounting in