Value and Price of a Forward Contract at Expiration, During the Life of the Contract, and at Initiation
This learning outcome covers how to differentiate forward price and forward value and how these are affected differently during the initiation, life cycle, and expiration of the contract. It is crucial to understand the difference between forward price and forward…
Principles of Revenue Recognition and Accrual Accounting
Companies disclose their revenue recognition policies in the notes to their financial statements. It is useful to review these policies to understand how and when a company recognizes revenue, especially when making comparisons with other companies. General Principles of Revenue…
Calculate and Interpret Liquidity and Solvency Ratios
Ratio analysis can assist with the conduct of time-series and cross-sectional analysis of a company’s financial position. Balance sheet ratios are those ratios that involve balance sheet items only and include (i) liquidity ratios, which measure a company’s ability to…
Uses and Limitations of the Balance Sheet
The balance sheet can provide very useful information to users of financial statements. It, however, has several limitations. Uses of the Balance Sheet The balance sheet gives insight into a company’s financial condition at a particular point in time. It…
Assets, Liabilities, and Equity
The balance sheet is also known as the statement of financial position or statement of financial condition. It is a financial statement that gives a snapshot of a company’s assets, and its sources of capital, i.e., liabilities and shareholder’s equity,…
Direct and Indirect Methods – Cash from Operating Activities
Cash flow from Operating Activities may be reported in either presentation format: the direct method and the indirect method. Both IFRS and US GAAP encourage the use of the direct method but will allow either method to be used. Under…
NPV as a Capital Budgeting Evaluation Method
Projects which have a positive NPV should, in theory, increase the value of a company as well as the value of its stock. This could help explain the popularity of NPV as a capital budgeting evaluation method. Relationship Among NPV,…
