How do operating income and revenue differ?

June 30, 2024 No Comments

A: Operating income and revenue are important metrics that show the income earned by a company. However, the two numbers are different ways of expressing a company’s earnings. Revenue and operating income have different deductions and credits involved in their calculations, and both are essential in analyzing whether a company is

How do share capital and paid-up capital differ?

June 30, 2024 No Comments

A: Companies issue shares of stock or equity for various reasons including to fund expansion or pay down debt. In this article, we’ll explore the various terms that are used in the process of issuing stock to raise capital. Share Capital Share capital consists of all

How do I calculate the P/E ratio of a company?

June 30, 2024 No Comments

A: The price-to-earnings ratio or P/E is one of the most widely-used stock analysis tools used by investors and analysts for determining stock valuation. In addition to showing whether a company’s stock price is overvalued or undervalued, the P/E can reveal how a stock’s valuation

How do I discount Free Cash Flow to the Firm (FCFF)?

June 30, 2024 No Comments

A: Discounted free cash flow for the firm (FCFF) should be equal to all of the cash inflows and outflows, adjusted to present value by an appropriate interest rate, that the firm can be expected to bring in during its lifetime. It’s a form of

How do I perform a financial analysis using Excel?

June 30, 2024 No Comments

A: Investors can use Excel to run technical calculations or produce fundamental accounting ratios. Corporations use Excel to run capital budgeting analysis, risk analysis or discount cash flows. Options traders can run Black-Scholes pricing. There are dozens, if not hundreds, of standard financial analysis models

How do I read and analyze an income statement?

June 30, 2024 No Comments

A: The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the revenues, expenses and net income generated by an organization over a specific period of time. It is one of the most heavily scrutinized financial statements

How do intangible assets show on a balance sheet?

June 30, 2024 No Comments

A: Intangible assets are typically nonphysical assets used over the long-term. Intangible assets are often intellectual assets. Proper valuation and accounting of intangible assets are often problematic, due in large part to the way in which intangible assets are handled. The difficulty assigning value stems from the uncertainty of their future benefits. Also,

How do interest rates affect the weighted average cost of capital (WACC) calculation?

June 30, 2024 No Comments

A: Weighted average cost of capital (WACC) is the average after-tax cost of a company’s various capital sources, including common stock, preferred stock, bonds and any other long-term debt. It is calculated by multiplying the cost of each capital source by its relevant weight, and

How do current assets and fixed assets differ?

June 30, 2024 No Comments

A: Current assets and fixed assets are listed on the balance sheet. The balance sheet shows a company’s resources or assets while also showing how those assets are financed whether through debt as shown under liabilities or through issuing equity as shown in shareholder’s equity. Current assets are short-term assets, whereas

How do dividend distributions affect additional paid in capital?

June 30, 2024 No Comments

A: Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: cash or stock. What Is Additional Paid-In Capital? Additional paid-in capital is a subaccount of the paid-in capital section on a company’s balance sheet.

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