A balance sheet is a type of financial statement used in business and finance to give an overview of a company’s assets, liabilities, and shareholder equity at a given point in time. These balance sheets are essential tools for business owners, accountants, and investors because they provide insight into a company’s financial standing and show …
A company’s weighted average cost of capital (WACC) is the amount of money it must pay to finance its operations. WACC is similar to the required rate of return (RRR) because a company’s WACC is how much shareholders and lenders require from the company in exchange for their investment. In this guide, we’ll go over: …
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Net working capital (NWC) is also referred to as working capital and is a way to measure a company’s ability to pay off short-term liabilities. NWC is often used by business owners and accountants to quickly check a company’s financial health at any given moment. However, the results are sometimes difficult to interpret. In this …
Enterprise value, or EV, is a form of business valuation finance professionals often use in mergers and acquisitions (M&A). To calculate EV, you add together a company’s market capitalization (how much its publicly traded shares are worth) and total debt, and subtract its highly-liquid assets, like cash or savings. Enterprise Value Definition Enterprise value (EV) …
NPV, or net present value, is how much an investment is worth throughout its lifetime, discounted to today’s value. The NPV formula is often used in investment banking and accounting to determine if an investment, project, or business will be profitable in the long run. What Is NPV? Net present value is used to determine …
CAPM, or the capital asset pricing model, is a type of financial model used in corporate finance to describe the relationship between the risk of a security (such as a stock) and the market as a whole. Investment bankers often use this model to analyze individual stocks or whole portfolios, and CAPM forms a foundation …
GAAP is a set of principles that form the foundation for careers in accounting. But, what does GAAP stand for? GAAP are the generally accepted accounting principles, and these guidelines standardize financial reporting and govern how accountants approach all aspects of their job. What Is GAAP? GAAP stands for generally accepted accounting principles. Using GAAP, …
The current ratio is a metric used by accountants and finance professionals to understand a company’s financial health at any given moment. This ratio works by comparing a company’s current assets (assets that are easily converted to cash) to current liabilities (money owed to lenders and clients). In this guide, we’ll cover: Current Ratio Definition …
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The quick ratio is a formula and financial metric determining how well a company can pay off its current debts. Accountants and other finance professionals often use this ratio to measure a company’s financial health simply and quickly. In this guide, we’ll go over: Quick Ratio Definition The quick ratio, also called an acid-test ratio, …
EBITDA stands for earnings before interest, taxes, depreciation, and amortization. Finance professionals use EBITDA, calculated from details reported in annual financial statements, to determine a company’s profitability. Essentially, EBITDA looks at how much money a company makes before expensing taxes and interest without considering the depreciation of assets. EBITDA Definition EBITDA is a measure of …
