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Acid Test Ratio: Definition, Formula & Examples

WEBA company’s acid test ratio plays a critical role in evaluating its financial health, including the company’s ability to cover short-term liabilities efficiently.

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Current Ratio: Definition, Formula & Examples

WEBSolution. Company’s current assets = $100,000. Current liabilities = $50,000. Current Ratio Formula = CA/ CL. Current Ratio = $100,000 / $50,000 = 2. It means the …

Category:  Health Go Health

Income Statement: Definition, How to Use & Examples

WEBStep 1: Gather Relevant Information like sales revenue, cost of goods sold (COGS), operating expenses (OPEX), and other income or expenses. Step 2: Calculate …

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Direct Labor: Definition and Calculation Example

WEBThe cost of benefits for the quarter would be $200 x 3 months = $600, and with ten employees, the cost is $6,000. Now we can calculate direct labor costs for the …

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Free Cash Flow: Definition, Formula & Calculation

WEBFCF provides a clear picture of a company’s profitability by revealing the amount of cash left after necessary investments. Financial analysts and investors prefer …

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Burden Cost: Definition, Usage, Formula & Examples

WEBThe burden cost refers to all indirect costs associated with employing or maintaining employees or inventory beyond direct compensation. It typically includes …

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Chart of Accounts: Definition, Working & Examples

WEBA chart of accounts is a comprehensive and structured list of all the accounts used in a business’s ledger. A commercial entity has many types of transactions like …

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Non-Cash Expenses: Definition, Types & Examples

WEBExamples of non-cash expenses include depreciation and amortization, which account for the gradual wear and tear of assets over time, and stock-based …

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Equity in Accounting: Definition, Types & Examples

WEBUsing the formula for calculating equity: Equity = Total Assets – Total Liabilities. Following formula: Equity = $500,000 – $200,000 = $300,000. The equity of …

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Non-Operating Income: Definition & Examples

WEBNon-operating income is commonly referred to as “other income”; it is also known as “income from non-core activities”. Non-operating income is contextual to the …

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15 Small Business Expense Categories with Examples

WEBManaging these expenses efficiently can lead to substantial savings for many business owners, especially those operating small businesses. Typical expenses …

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Fixed Cost: Definition, Calculation & Examples

WEBSolution: Applying the formula: Fixed Cost = Total Cost – (Total Variable Cost per unit * Number of Units Produced) Fixed Cost = 125,000 – (6 * 15,000) Fixed Cost = …

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Solvency vs. Liquidity: Know the Differences

WEBLiquidity evaluates a company’s capacity to pay short-term debt commitments, whereas solvency refers to a company’s capacity to pay long-term debt. Liquidity also …

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Retained Earnings: Definition, Formula & Examples

WEBRetained earnings account can be located on a company’s balance sheet under the shareholders’ equity section, showcasing the accumulated net income (bottom …

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Working Capital: Definition, Formula & Examples

WEBExample 1. If a company has $1,000,000 in current assets and $500,000 in current liabilities, its working capital ratio would be: Working Capital Ratio = $1,000,000 / …

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Accounts Receivable (AR): Definition & Examples

WEBComputing Net Credit Sales: $ 600,000 − $ 30,000 = $ 570,000. Average Accounts Receivable = $ 80,000 + $ 100,000 divided by 2 = $ 90,000. Using Accounts …

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Price-to-Earnings Ratio: Definition, Calculation, Interpretation

WEBPrice-to-Earnings ratio also known as price multiple or earnings multiple is calculated by dividing the company’s stock prices by its earnings per share (EPS). Price …

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Underwriting: Definition, Purpose, Types, and Working

WEBLoan Underwriting: Loan underwriters review the financial background of applicants for personal loans, auto loans, or other types of credit. They assess the …

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