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Under the accrual basis of accounting, this account reports the cost of the temporary help services that a company used during the period indicated on its income statement.

What is a service department? Author: Harold Averkamp, CPA, MBA Definition of Service Department A service department is usually associated with a manufacturer’s production departments. However, a service department...

A department within a factory that does not directly produce a product. Examples are the factory maintenance department, factory administrative department, and quality assurance department.

Under the accrual basis of accounting, the Service Revenues account reports the fees earned by a company during the time period indicated in the heading of the income statement. Service Revenues include work completed...

How do I calculate the after-tax cost of debt? Author: Harold Averkamp, CPA, MBA Definition of After-Tax Cost of Debt The after-tax cost of debt is the interest paid on the debt minus the income tax savings as the result...

The ratio of total liabilities to total assets. For example, a company with total assets of $800,000 and total liabilities of $200,000 will have a debt ratio of 0.25 to 1, or 25% ($200,000 divided by $800,000).

The ratio of total liabilities to stockholders’ equity. The higher the proportion of debt to equity, the more risky the company appears to be. An indicator of the amount of financial leverage at a company. It...

What is the debt ratio? Author: Harold Averkamp, CPA, MBA Definition of Debt Ratio The debt ratio is also known as the debt to asset ratio or the total debt to total assets ratio. Hence, the formula for the debt ratio...

Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...

The interest rate of debt (bonds, loans) after deducting the income tax savings. For example, if a corporation has issued bonds with an interest rate of 8% and the corporation’s income tax rate is 25%, the...

What is long-term debt? Author: Harold Averkamp, CPA, MBA Definition of Long-term Debt In accounting, long-term debt generally refers to a company’s loans and other liabilities that will not become due within one year...

What is the debt to equity ratio? Author: Harold Averkamp, CPA, MBA Definition of Debt to Equity Ratio The debt to equity ratio or debt-equity ratio is the result of dividing a corporation’s total liabilities by the...

Total liabilities divided by total assets. This indicates how much of a corporation’s assets are financed by lenders/creditors as opposed to purchased with owners’ or stockholders’ funds. If a high...

A method used in allocating the costs of manufacturing service departments (factory administration, maintenance, etc.) directly to the producing departments in the factory. Under this method, no service department cost...

What is the cost of capital? Author: Harold Averkamp, CPA, MBA Definition of Cost of Capital The cost of capital is the weighted-average, after-tax cost of a corporation’s long-term debt, preferred stock (if any), and...

The principal portion of an obligation that must be paid within one year of the balance sheet date. For example, if a company has a bank loan of $50,000 that requires monthly interest and principal payments, the next 12...

What is the debt to total assets ratio? Author: Harold Averkamp, CPA, MBA Definition of Debt to Total Assets Ratio The debt to total assets ratio is an indicator of a company’s financial leverage. It tells you...

One of two broad functional categories for sorting and reporting a nonprofit organization’s expenses. (The other is program expenses.) Supporting services expenses consists of 1) management and general expenses,...

The situation where manufacturing service departments provide service to each other. For example, the factory maintenance department provides services to the factory administrative department and the factory...

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