The project is expected to generate $25 million per year in net cash flows for 7 years. This capital budgeting and investment appraisal technique divides the present value of all estimated future cash flows by the projected initial outflows. However, it adds a layer of complexity to the basic model by introducing the total sum […]

As a core concept in modern accounting, this provides the basis for keeping a company’s books balanced across a given accounting cycle. As you can see, no matter what the transaction is, the accounting equation will always balance because each transaction has a dual aspect. The equation is generally written with liabilities appearing before owner’s […]

Some common errors to avoid when calculating operating cycle include inaccurate reporting of inventory days, accounts payable days, and accounts receivable days. The truck and equipment purchased by Big Dog Carworks Corp. in January are examples of plant and equipment assets that provide economic benefits for more than one accounting period. Because plant and equipment […]

All disbursements are payments, but not all payments are disbursements. A disbursement is a finalized payment that has been officially recorded as a debit by the payer and as a credit by the payee. A cash disbursement report can help you keep track of cash-based spending during the year to better manage your company’s cash […]

Other sectors like real estate often take long periods of time to convert inventory into revenue. Though real estate transactions may result in high-profit margins, the industry-wide asset turnover ratio is low. The asset turnover ratio can also be analyzed by tracking the ratio for a single company over time. As the company grows, the […]