What does it mean to be “above water”?

June 30, 2024 No Comments

A: The term “above water” is used to describe any situation in which the ending or current value of a subject is higher than its beginning or opening price. In accounting, an asset with a value that has appreciated is said to be “above water”

What does it mean to capitalize accrued interest?

June 30, 2024 No Comments

A: When a company capitalizes accrued interest, it adds up the total amount of interest owed since the last debt payment made and adds the amount to the cost of the long-term asset or loan balance. There are two components to capitalizing accrued interest: Accrued

What causes dividends per share to increase?

June 30, 2024 No Comments

A: There are two primary causes for increases in a company’s dividend per share payout. The first is simply an increase in the company’s net profits out of which dividends are paid. The second is a shift in the company’s growth strategy that leads the

What changes in working capital impact cash flow?

June 30, 2024 No Comments

A: Understanding Working Capital Working capitalrepresents the difference between a firm’s current assets and current liabilities. Working capital, also called net working capital, is the amount of money a company has available to pay its short-term expenses. Positive working capital is when a company has more current

What debt/equity ratio is common for companies in the drugs sector?

June 30, 2024 No Comments

A: The average long-term debt-to-equity (D/E) ratio common for companies in the drugs sector is 70.66 based on trailing 12-month data as of May 12, 2015. The drugs sector is composed of more specialized industries, including drug delivery, drug manufacturers – major, drug manufacturers –

What debt/equity ratio is typical for companies in the utilities sector?

June 30, 2024 No Comments

A: In the utilities sector, for companies providing general utilities such as gas and electricity, the average debt/equity ratio, or D/E ratio, is approximately 1.3. For companies primarily engaged in providing water and sewage service, the average ratio is slightly lower, approximately 1.2. Utilities carry

What did Knight Trading Group do to incur a $1.5 million fine for violating trading rules?

June 30, 2024 No Comments

A: The dotcom boom accelerated many deceitful business practices that first became apparent during the ’80s and ’90s. Many of these had to do with analyst recommendations being tied with investment banking divisions’ interests and other basic conflict of interest problems. One of the clearest

What do efficiency ratios measure?

June 30, 2024 No Comments

A: Efficiency ratios measure a company’s ability to use its assets and manage its liabilities effectively. Some efficiency ratios include the inventory turnover ratio, asset turnover ratio and receivables turnover ratio. These ratios measure how efficiently a company uses its assets to generate revenues and

What does a futures contract cost?

June 30, 2024 No Comments

A: The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have a very high value, a trader can buy or sell the contract with a much smaller amount, which is known as the

What does a high inventory turnover tell investors about a company?

June 30, 2024 No Comments

A: Inventory turnover is an important metric for evaluating how efficiently a firm turns its inventory into sales. Below is a discussion of what a high turnover ratio says about a company. What Inventory Turnover Tells Investors Intuitively, it makes sense that a retailer that

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