Category Archives: Corporate Finance

Financial Break-even

Financial break-even refers to the level of sales or revenue required for a company to cover all of its costs, including both cash and non-cash expenses, resulting in zero net income or profit. In other words, it is the point at which a company’s total revenue equals its total costs, both fixed and variable, including… Read More »

Cash Break-Even

Cash break-even refers to the level of sales or revenue required for a company to cover its cash expenses, resulting in zero net cash flow. In other words, it is the point at which a company’s cash inflows equal its cash outflows. To calculate the cash break-even point, a company can use the following formula:… Read More »

Accounting Break-Even

Accounting break-even refers to the level of sales or revenue required to cover all of a company’s fixed and variable costs, resulting in zero net income or profit. In other words, it is the point at which a company’s total revenue equals its total costs, both fixed and variable. To calculate the accounting break-even point,… Read More »

Bond Value

The value of a bond is the present value of its future cash flows, which include periodic coupon payments and the repayment of the principal at maturity. The value of a bond can be calculated using the following formula: Bond value = (C / r) x (1 – (1 / (1 + r)^n)) + (F… Read More »

Baumol Allais Tobin model

The Baumol-Tobin model, also known as the Baumol-Allais-Tobin model, is an economic model that helps determine the optimal level of cash or cash equivalents that a firm should hold for transaction purposes. It was first introduced by economists William Baumol, Maurice Allais, and James Tobin in the mid-20th century. The model assumes that a firm… Read More »

Balance Sheet Identity

The balance sheet identity, also known as the accounting equation, is a fundamental principle of accounting that shows the relationship between a company’s assets, liabilities, and equity. It is expressed as follows: Assets = Liabilities + Equity The equation shows that a company’s total assets must always equal the sum of its liabilities and equity.… Read More »

Average Daily Float

Average daily float is a financial metric that measures the average amount of time it takes for checks or other payments to clear the bank after they are deposited. The float is the difference between the balance in a bank account and the balance reported by the bank, and can be caused by delays in… Read More »

Average Accounting Return

The average accounting return (AAR) is a financial metric that measures the average profitability of an investment over a specific period of time. It is calculated by dividing the average annual accounting profit by the initial investment. The formula for AAR is: AAR = Average Annual Accounting Profit / Initial Investment The average annual accounting… Read More »

Asset Turnover Ratio

Asset turnover is a financial ratio that measures a company’s efficiency in using its assets to generate revenue or sales. It is calculated by dividing a company’s net sales by its total assets. The formula for asset turnover is: Asset Turnover = Net Sales / Total Assets Net sales are the total sales revenue earned… Read More »

Asset Management

Asset management refers to the practice of managing a portfolio of assets, typically on behalf of an individual or an organization, with the goal of maximizing the value of those assets over time. The assets can be financial, such as stocks, bonds, and mutual funds, or physical, such as real estate, vehicles, and equipment. Asset… Read More »

What is Asset?

In finance, an asset is anything that has value and can be owned or controlled by an individual or a business, and is expected to provide future economic benefits. Assets can be tangible, such as physical objects like buildings, equipment, or inventory, or intangible, such as intellectual property, patents, or copyrights. Assets are classified into… Read More »

What is Annuity Due?

An annuity due is a type of financial contract that involves a series of equal payments made at the beginning of each period, instead of at the end of each period as in a regular annuity. This means that the first payment is due immediately at the beginning of the first period, rather than at… Read More »

Acid Test Ratio

The acid-test ratio, also known as the quick ratio, is a financial ratio that measures a company’s ability to pay off its short-term debt obligations with its most liquid assets. It is a more conservative measure of liquidity than the current ratio, as it excludes inventory, which may not be easily converted into cash. The… Read More »

Current Ratio

The current ratio is a financial ratio that measures a company’s ability to pay off its short-term debt obligations with its current assets. It is a commonly used measure of liquidity, as it provides an indication of a company’s ability to meet its financial obligations in the near future. The formula for calculating the current… Read More »

Cost of Equity

The cost of equity is the return that a company must offer to its shareholders to compensate them for the risk they take in investing in the company’s stock. It is one of the components used in calculating a company’s weighted average cost of capital (WACC). The cost of equity is calculated using the capital… Read More »