When must a company announce earnings?

July 9, 2024 No Comments

A: The Securities & Exchange Commission (SEC) requires companies to file earnings reports no later than 45 days after the end of their first three quarters, and their quarterly and annual reports 90 days after their fiscal year end. Companies file quarterly earnings reports on

When should a company recognize revenues on its books?

July 9, 2024 No Comments

A: When a company makes revenues from its operations, it must be recorded in the general ledger and then reported on the income statement every reporting period. According to generally accepted accounting principles (GAAP), there are two criteria the company must meet before it can

When should I use depreciation expense instead of accumulated depreciation?

July 9, 2024 No Comments

A: The most basic difference between depreciation expense and accumulated depreciation lies in the fact that one appears as an expense on the income statement, and the other is a contra asset reported on the balance sheet. Both pertain to the “wearing out” of equipment,

Which financial ratio best reflects capital structure?

July 9, 2024 No Comments

A: When analyzing the financial health and growth potential of a company, business owners and investors look to financial ratios that indicate how a company is funded and how effectively those dollars are being used. In ratio analysis, the debt to equity ratio is widely

Which is better: A high or low equity multiplier?

July 9, 2024 No Comments

A: An equity multiplier measures a company’s financial leverage by using a ratio of the company’s total assets to its stockholders’ equity. Generally, a lower equity multiplier indicates a company has lower financial leverage. It is better to have a low equity multiplier, because a

Which metric should I pay more attention to, EV/EBITDA or P/E?

July 9, 2024 No Comments

A: The price-to-earnings (P/E) ratio is one of the most popular and widely used financial metrics, but it has a number of inherent flaws for which the enterprise value to EBITDA (EV/EBITDA) ratio compensates. The EV/EBITDA ratio is a financial metric that measures the return

Which types of industries have the largest capital expenditures?

July 9, 2024 No Comments

A: Capital expenditures are major purchases, such as facilities and equipment, that companies make to maintain or expand their business. Because such purchases involve acquiring assets that provide value and usefulness for a company for a period of several years, companies recover the cost of

Who actually declares a dividend?

July 9, 2024 No Comments

A: It is a company’s board of directors who actually declares a dividend. The declaration date is the first of four important dates in the process of a company paying a dividend. How a Company Handles Paying a Dividend Before a cash dividend is declared

Why are capital expenses (CAPEX) treated differently than current expenses?

July 9, 2024 No Comments

A: Current expenses are the necessary purchases that keep your business going from day to day such as rent, utility bills and office supplies. They are short-term purchases, or those used for less than one year, with no long-term effect on the profitability of a

Why are efficiency ratios important to investors?

July 9, 2024 No Comments

A: When analyzing a company’s potential for investment, it is important to examine its financial performance from every angle. While metrics that measure a company’s ability to turn profit are of paramount importance, the efficiency with which they do so also bears scrutiny. A company

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