When and why should the terminal value be discounted?

July 9, 2024 No Comments

A: Typically, an asset’s terminal value is added to future cash flow projections and discounted to the present day. Discounting is performed because the terminal value is used to link money value between two different points in time. Though there are several terminal value formulas,

When are businesses required to use accrual accounting?

July 9, 2024 No Comments

A: Accrual accounting involves stating revenues and expenses as they occur, not necessarily when cash is received or paid out. In contrast, cash accounting systems do not report any income or expenses until the cash actually changes hands. In general, most businesses use accrual accounting,

When are expenses and revenues counted in accrual accounting?

July 9, 2024 No Comments

A: Under the accrual basis of accounting, revenues and expenses are counted when they are earned. This is different from the cash basis of accounting, where they are reported whenever cash actually flows in and out of the business. Most accountants consider the accrual accounting

When do you use installment sales method vs. the cost recovery method?

July 9, 2024 No Comments

A: There are four primary methods that accountants use to recognize business sales revenue: percentage of completion, completed contract, cost recovery and installment sales. In some circumstances, complications in a transaction make it uncertain as to how much revenue from a particular sale is collectible

When does Q4 start and finish?

July 9, 2024 No Comments

A: Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins on October 1st. Other companies have financial years that end on odd dates; the financial year for Nike ends on May 31, for example.

When evaluating terminal value, should I use the perpetuity growth model or the exit approach?

July 9, 2024 No Comments

A: In discounted cash flow (DCF) analysis, neither the perpetuity growth model nor the exit multiple approach is likely to render a perfectly accurate estimate of terminal value. The choice of which method of calculating terminal value to use depends partly on whether an investor

What profit margin is average for a company in the electronics sector?

July 9, 2024 No Comments

A: The electronics sector offers an attractive addition to a portfolio because it provides strong growth opportunities. The electronics sector is very diverse and includes semiconductors, technical instruments, circuit boards, photographic equipment, communication devices, and other electronic and computer equipment. Profit margin is one of

When is accrual accounting more useful than cash accounting?

July 9, 2024 No Comments

A: The accrual accounting method is more useful than the cash accounting method when a person or company is trying to understand the performance of a business over a specified time period. Under the accrual accounting method, all revenue and expenses are matched together. All

What qualifies a company as blue chip?

July 9, 2024 No Comments

A: The term “blue chip” in poker signifies the chip that has the highest value. The term was taken from the poker world and used as stock market terminology. In the investment world, a blue-chip company is well-known, well-established and well-secured. It is considered to

What is the most typical holding in an SPV?

July 9, 2024 No Comments

A: Special Purpose Vehicles, or SPVs, have been extensively used as a means of securitizing property-based assets. Since the 1980s, large financing corporations have come to rely on SPVs and similar products to spread risk and move liabilities off of their balance sheets. The Great

All Rights Reserved