Definition of Operational Gearing Operational gearing can be defined as the impact of fixed costs on the relationships between sales and profits. If the said company has no operational gearing, the operating profit is likely to increase at the same rate as the sales growth. Operational gearing is also referred to as operating leverage. Therefore, …
What is Operational Gearing? Definition, Formula, and Example Read More »
Companies plan for their future activities using various tools. Usually, this process falls under the managerial accounting process. This process involves creating and communicating information for internal use. Companies do not share their plans with external parties. Instead, these plans are for internal use only. Planning allows companies to understand how to operate to achieve …
Nonprofits, or nonprofit organizations, are entities that serve a specific purpose. Usually, this purpose includes a collective, public or social benefit. Nonprofits do not operate to generate profits from their activities. Any income from those operations is secondary to the nature of these entities. Usually, these entities conform to several rules resulting from the purpose …
What is Program Expense Ratio? Definition, Example Calculation? Read More »
Definition of Retained Earnings to Assets Ratio Retained Earnings to Total Assets is a ratio that measures accumulated earnings over the total assets possessed by the company. It mainly represents the total assets that are funded by the retained earnings of the organization. The retained earnings to assets ratio indicate the management’s approach towards using …
What Is A Good Retained Earnings To Assets Ratio? Read More »
A company’s working capital plays a crucial role in its cash management. This term represents the residual current assets after deducting its current liabilities. Usually, companies use working capital to cover their short-term obligations. On top of that, it plays a critical role in how companies operate and fund their daily activities. For stakeholders, it …
Advantages and Disadvantages of Current Ratio You Should Know Read More »
Companies use financial statements to present their activities and finances to their stakeholders. Usually, these include four reports that are crucial in reporting different areas. They consist of the balance sheet, income statements, cash flow statements, and statement of changes in equity. Companies prepare these statements for a specific period. With these statements, stakeholders can …
What is a Budgeted Cash Flow Statement? And How to Prepare It Read More »
Releasing working capital means freeing up the cash from working capital to achieve an optimal cash operating cycle that leads to higher business profitability. The optimal cash operating cycle is achieved when debtor days and inventory days are shortened by introducing effective business strategies to align receivables and creditors in such a way that cash …
What Does Release of Working Capital Mean? (Explanation) Read More »
Background The business needs to analyze operational and strategic aspects to make financial decisions, and the cost of capital is one of the essential inputs in the process of decision-making. It helps to understand if business operations are value-adding, destructive, or need attention to improve profitability. So, it’s all about measuring, controlling, and taking steps …
