When it comes to finance, it’s important to get familiar with different metrics and terms. One such term is EBITA – a popular financial indicator used by investors, analysts, and businesses alike. It provides a snapshot of a company’s operational performance, excluding certain financial and tax considerations. A thorough understanding …

Companies bear various risks associated with inventory. One of these includes the difference between the book and the actual value of stock. This occurrence falls under inventory shrinkage. What is Inventory Shrinkage? Inventory shrinkage, often termed “shrink,” encompasses the unaccounted loss or reduction in a company’s inventory levels. This loss …

Understanding financial terms is crucial in the business world. One such term, Selling, General & Administrative (SG&A) Expense, is often encountered in financial reports. This term may sound complex but it’s an integral part of a company’s operations. It encompasses a wide range of costs, all of which play a …

Quality, for companies, means consistently delivering products or services that meet or exceed customer expectations and conform to established standards. It’s important because high quality enhances customer satisfaction, builds brand reputation, fosters loyalty, and often translates into a competitive edge. Companies must track quality costs to ensure these features. What …

Companies record liabilities at their discounted value in the first year. As time passes, they recognize an interest charge on the screen while increasing the obligation. This process liability on the balance sheet reflects the actual amount paid by the company. Companies use accretion expenses to achieve that. What is …

Other comprehensive income (OCI) is a part of the statement of other comprehensive income. When companies have gains from several accounting periods, they must accumulate it and report it on the balance sheet. This cumulative figure appears as accumulated other comprehensive income, similar to accumulated profits and losses. What is …

Startups incur various costs they must account for following the relevant accounting standards. However, the accounting treatment is not as straightforward. Before discussing that, it is crucial to know what startup costs are. What are Startup Costs? Startup costs (or initial or setup costs) represent the financial outlays associated with …

Expenses are a part of operations and crucial to generating income. However, companies must understand how and when to recognize them under the relevant accounting principles. That is why expense recognition is a critical part of accounting. What is Expense Recognition? Expense recognition in accounting is a critical principle that …

Companies set a par value for their shares, representing the minimum price. However, they may still sell those shares at a higher rate. This process results in capital in excess of par. What is Capital in Excess of Par? Capital in excess of par, often referred to as additional paid-in …

Gross profit represents the earnings a company generates from its operations. Companies include it in the income statement as a part of the calculation for net profits. However, the figure is incomparable and does not show how the company performs over time. Therefore, investors may rely on the gross profit …