Owners’ Equity

Owners’ equity is the portion of a company’s balance sheet which represents the shareholders’ claim on the assets of the business.  Owner’s equity is calculated […]

Outstanding stock refers to the number of common stock shares that are in the hands of shareholders.   When a corporation is formed, one of the […]

A note receivable is a loan which a company has extended via a formal written agreement.   Because a note receivable represents funds owed to the […]

Operating income refers to the income derived from the firm’s normal business activities.  Operating income excludes interest expense, since interest expense is a financing cost […]

A company’s operating cycle is the number of days, on average, between the acquisition (or production) of inventory and the eventual sale of that inventory.  […]

Net income refers to a company’s revenues less all expenses.   Net income is also called net profit. A company generates a net profit when its […]

Liquidity refers to the ability to convert assets to cash without significant impairment.   An asset which can be sold quickly without impairment is said to […]

A limited liability company (LLC) is an entity formed under state statute which provides limited liability to its owners. Laws governing LLCs vary from state […]

Liabilities are obligations the company has to provide goods, services, or payment to third parties.   Liabilities appear on the balance sheet under the ‘liabilities and […]

Operating leverage is a measure of the amount of fixed costs relative to a company’s total cost structure.   Fixed costs are those costs which do […]