The amount of free cash flow divided by the weighted average number of common shares of stock outstanding during the year.
The amount of free cash flow divided by the weighted average number of common shares of stock outstanding during the year.
The mathematical result of sales revenues divided by average total assets during the period of the sales.
Our Explanation of Financial Statements provides you with the highlights of each of the five external financial statements issued by U.S. corporations. Our insights will give you a good understanding of what the...
the supplier to its location. If the freight cost is $1, then the retailer’s inventoriable cost of the item is $21. [If this is the only item in the retailer’s inventory, the retailer’s balance sheet will report...
Cost that is considered to be part of the cost of merchandise. For a retailer, the inventoriable cost is the cost from the supplier plus all costs necessary to get the item into inventory and ready for sale, e.g....
Our Explanation of Working Capital and Liquidity provides you with an in-depth look at the components of working capital and the challenges of converting current assets to cash before obligations come due. You will see...
This indicates (on average) how many days of credit sales have not yet been collected. If the credit terms are net 30 days, you would expect this to be at least 30 days. To learn more, see Explanation of Financial...
A corporation’s cost of capital is its weighted average after-tax cost of its debt, preferred stock, common stock, retained earnings, and other components of stockholders’ equity. The cost of capital is...
What is the price earnings ratio? The price earnings ratio, or P/E ratio, is the market price per share of common stock divided by the earnings per share of common stock. A corporation with a high price earnings...
statements are an integral part of each of the annual external financial statements in order for the users to understand the amounts appearing on the face of the financial statements. For example, accounting principles...
Our Explanation of Stockholders' Equity covers the unique terminology for a corporation's paid-in capital, retained earnings, treasury stock, and accumulated other comprehensive income. Included are cash dividends, stock...
What is the cost of capital? 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 stockholders’ equity...
of earning the next dollar of taxable income. The marginal cost is important because a company’s fixed costs are unlikely to change when one more unit is produced or one additional unit of activity takes place....
How do I determine the cost of missing inventory? Definition of Determining the Cost of Missing Inventory The approximate cost of missing inventory is the difference between 1) the cost of the inventory items that are...
Why Does Inventory Get Reported on Some Income Statements? Reporting of Inventory on Financial Statements Inventory is an asset and its ending balance is reported in the current asset section of a company’s balance...
Why and how do you adjust the inventory account in the periodic method? Definition of Inventory Account in Periodic Method Under the periodic method or periodic system, the account Inventory is dormant throughout the...
Why does an inventory error affect two periods? Definition of Inventory Error An inventory error could be the result of any of the following: Omitting some items when physically counting inventory Double counting some...
Why does a company debit Purchases instead of Inventory? Definition of Purchases and Inventory When a company uses the periodic inventory system the amount of the company’s inventory is determined by a physical count...
How do I record money received for an insurance claim on inventory loss? Definition of Money from Insurance Claim for Inventory Loss Let’s assume that a company has insurance on its inventory and its inventory is...
If inventory is understated at the end of the year, what is the effect on net income? Definition of Inventory is Understated If inventory is understated at the end of the year, it means that the amount of inventory being...
How do you calculate the cost of carrying inventory? Definition of Cost of Carrying Inventory The cost of carrying inventory (or cost of holding inventory) is the sum of the following: Cost of money tied up in inventory,...
Should inventories be reported at their cost or at their selling prices? Definition of Inventory Cost Inventories are reported at cost, not at selling prices. A retailer’s inventory cost is the cost to purchase the...
statement. (The cost of goods sold is likely the largest operating expense and it is being matched to the related sales revenue to arrive at a company’s gross profit.) The cost of the items that are not yet sold are...
The financial ratio which indicates the speed at which a company collects its accounts receivable. If a company’s turnover is 10, this means the company’s accounts receivable are turning over 10 times per...
ways: The COGS could be calculated as the cost of the beginning inventory plus the cost of its net purchases minus the cost of the ending inventory: The COGS could be calculated as the cost of the net purchases minus...
Why can a retailer record its purchase of merchandise as a debit to purchases within the cost of goods sold, instead of the asset inventory? Before we explain why companies will record the purchases of merchandise in the...
How do you calculate the cost of goods sold for a retailer? Formula for Calculating a Retailer’s Cost of Goods Sold A retailer’s cost of goods sold is: The cost of the retailer’s beginning inventory Plus the cost...
in the company’s general ledger account Materials Purchase Price Variance. The company’s general ledger accounts for inventories (raw materials, work-in-process inventory, finished goods) and the cost of goods sold...
How can I determine the inventory methods used by other companies in my industry? Definition of Inventory Methods Inventory methods refers to the order or manner in which a company moves its actual costs out of the...
income statement as the cost of goods sold. The goods that are unsold at the end of the accounting period must be reported on the retailer’s balance sheet as inventory. Accounting for the Goods Purchased There are two...
, conservatism means recording the transaction or situation in a manner that results in less profit, less asset amount, and/or a greater liability amount. Example of Conservatism in Accounting One example of...
What is the gross profit method? Gross Profit Method Definition The gross profit method is a technique used to estimate the amount of ending inventory. The technique could be used for monthly financial statements when a...
Cost of goods sold is usually the largest expense on the income statement of a company selling products or goods. Cost of Goods Sold is a general ledger account under the perpetual inventory system. Under the periodic...
This accounting guideline states that if doubt exists between two acceptable alternatives (in other words the accountant needs to break a tie), the accountant should choose the alternative that will result in a lesser...
Are LIFO inventory amounts ever written-up to their market value? LIFO inventory amounts will not be written-up, even when the current market value of the inventory is far greater than the amount reported on the balance...
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