The formal planning for significant expenditures, such as property, plant and equipment.
The formal planning for significant expenditures, such as property, plant and equipment.
What is working capital? Definition of Working Capital Working capital is the amount of a company’s current assets minus the amount of its current liabilities. Example of Working Capital Let’s assume that a...
The owner’s equity account that reports the amount invested in the sole proprietorship owned by Tony Mandella plus the cumulative amount of net income minus the cumulative amount of the sole proprietor’s...
Part of stockholders’ equity representing the fair market value of an asset at the time it was received as a gift. For example, a corporation may be given a large tract of land from a community if the corporation...
The account in which the owner’s investment is recorded plus the net income earned by the company minus the draws made by the owner. Current year net income and draws will be in temporary accounts until the end of...
Working Capital and Liquidity For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided....
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...
What is a capital account? Definition of Capital Account In accounting and bookkeeping, a capital account is a general ledger account that is part of the balance sheet classification: Owner’s equity (in a sole...
The par value of common and preferred stock.
The result of subtracting all variable expenses from revenues. It indicates the amount available from sales to cover the fixed expenses and profit.
What is contribution margin? Definition of Contribution Margin In accounting, contribution margin is defined as: revenues minus variable expenses. The contribution margin can be expressed as an amount and/or as a ratio...
This ratio indicates the percentage of each sales dollar that is available to cover a company’s fixed expenses and profit. The ratio is calculated by dividing the contribution margin (sales minus all variable...
See pass-through contributions.
Contributions collected by Charity #1 who is merely acting as a collection agent for Charity #2. Also known as flow-through contributions.
What is the definition of capital market? Often, capital market refers to the structured market for trading stocks and bonds. Examples are the New York Stock Exchange, the American Stock Exchange, NASDAQ, and the New...
A weighted-average of the cost of a company’s debt, common stock, and preferred stock.
What is net working capital? Definition of Net Working Capital Net working capital is the amount (as opposed to being a ratio) remaining after subtracting a company’s total amount of current liabilities from its total...
What is the working capital ratio? Definition of Working Capital Ratio The working capital ratio is defined as the amount of a company’s current assets divided by the amount of its current liabilities. Hence, the...
Is the drawing account a capital account? Definition of Drawing Account A sole proprietorship will have a drawing account in which the owner’s withdrawals or draws of cash or other assets are recorded. The amounts of...
Working Capital and Liquidity Working Capital Working capital is defined as current assets minus current liabilities. Therefore, a company with current assets of $43,000 and current liabilities of $38,000 has working...
What is the contribution margin ratio? Definition of Contribution Margin Ratio The contribution margin ratio is the percentage of sales revenues, service revenues, or selling price remaining after subtracting all of the...
An income statement that subtracts all variable costs and expenses from revenues in order to show the contribution margin. From that is subtracted the fixed costs and expenses to arrive at net income. To learn more, see...
Selling price per unit minus variable costs per unit, or revenues per unit minus expenses per unit.
A retirement plan that does not specify the amount that a retiree will receive. Rather, the employer’s obligation is to contribute a specific amount into a fund to be used for payments to retirees.
To include in the cost of an asset. For example, the interest incurred by a company when it constructs its own building is added to the cost of the building’s components. This is referred to as capitalizing the...
The owner’s equity account that contains the amount invested in the sole proprietorship by R. Smith plus the net income since the company began minus the draws made by R. Smith since the company began. The current...
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...
What is the working capital turnover ratio? Definition of Working Capital Turnover Ratio The working capital turnover ratio is also referred to as net sales to working capital. It indicates a company’s effectiveness in...
Working Capital and Liquidity(Quick Test #2 with Coaching) Download PDF This Quick Test with Coaching includes a “View Coaching” button to the right of each answer box. If you choose to click the button, an...
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...
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...
How can working capital be improved? Definition of Working Capital Working capital is defined as the amount by which a company’s current assets exceed its current liabilities. How Working Capital Can be Improved Some...
How is working capital defined and measured? Definition of Working Capital Working capital is defined as the amount of a company’s current assets minus the amount of its current liabilities usually as of the final...
What is a capital expenditure versus a revenue expenditure? Definition of Capital Expenditure A capital expenditure is an amount spent to acquire or significantly improve the capacity or capabilities of a long-term asset...
Under this method, net income is determined by analyzing the change in owner’s equity. The alternative is the transaction approach in which each transaction is recorded, sorted and stored.
See paid-in capital in excess of par value – common stock, or paid-in capital in excess of par value – preferred stock.
What is a non-discount method in capital budgeting? Definition of Non-discount Method of Capital Budgeting A non-discount method of capital budgeting is one that does not consider the time value of money. In other words,...
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...
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...
What will cause a change in net working capital? Definition of Net Working Capital Net working capital, which is also known as working capital, is defined as a company’s current assets minus itscurrent liabilities....
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