It also assesses the financial health of the company by calculating the amount of money left over from product sales after subtracting COGS. Because the expenses that factor into gross profit are inevitable expenses, investors consider gross profit a measure…

Instead, retainage is tracked in separate accounts on the general ledger, typically called retention receivable and retention payable. Once the retained funds are due to be released, the amounts are transferred to accounts receivable or payable. Additionally, while a manufacturing…

To illustrate these challenges with an example, consider a company contemplating whether to discontinue a product line. The differential cost analysis would involve comparing the costs saved by discontinuing the product against the revenues lost. However, this analysis might not…

In practice, businesses often use both differential and incremental cost analyses to gain a comprehensive understanding of their financial landscape. While differential cost analysis provides a broad view of the financial implications of different strategic options, incremental cost analysis offers…

Katherine Haan, MBA is a former financial advisor-turned-writer and business coach. For over a decade, she’s helped small business owners make money online. When she’s not trying out the latest tech or travel blogging with her family, you can find…

On the other hand, if production costs decrease due to increased efficiency or automation, then this could lead to lower product costs. Therefore, understanding the relationship between product and production costs is essential for businesses seeking to optimize their manufacturing…

Without a thorough risk assessment, banks have no way of knowing if capital reserves accurately reflect risks or if loan loss reserves adequately cover potential short-term credit losses. Vulnerable banks are targets for close scrutiny by regulators and investors, as…

Generally, partners do not receive any interest in the capital contribution made to the firm according to accounting for partnership. If the deed states that interest must be credited, it is given at an agreed rate. When the contribution to…

When recording transactions in a cash book, many things need to be considered. For example, if money has been received, the description might be  “Received in cash from client for a service.” The amount is the amount of the transaction.…

The industry benchmarks for capital turnover can vary significantly depending on the definition of capital, the type and intensity of capital, and the growth and profitability of the industry. Therefore, it is important to compare a company's ratio with the…