Financial Leverage

Financial leverage refers to the amount of borrowed money (debt) a company uses to finance its assets.  Debt is referred to as financial leverage because […]

The double-declining balance method is an accelerated method of depreciation in which depreciation is recognized at twice the rate recognized under the straight-line method.  The […]

Gross profit refers to a company’s sales, net of discounts, returns, and allowances, minus the direct costs of selling goods and services.  The composition of […]

Free cash flow is the amount of operating cash flow which remains after subtracting capital expenditures.   Free cash flow is a measure of a company’s […]

Goodwill is an intangible asset which arises from an acquisition and represents the positive difference between the purchase price and the fair market value of […]

The last-in, first-out (LIFO) method is an inventory valuation method which assumes that the most recent inventory purchases are sold first.   The LIFO method is […]

A fixed asset is a tangible economic resource which is expected to provide economic benefits to the firm beyond the greater of one year or […]

A deferral is a delay in the recognition of a revenue or expense transaction.   Deferred revenue is revenue which is not yet earned. Deferred revenue […]

Carrying value refers to the balance sheet value of an asset.   For tangible assets, the carrying value is the asset’s acquisition price less accumulated depreciation […]

The first-in, first-out (FIFO) inventory method is a method for valuing inventory which assumes that the oldest purchases are the first units sold.  The FIFO […]