Recent Articles

How to Read a Balance Sheet – Equity Section

The equity section of the balance sheet equals assets minus liabilities. Traditionally the equity section is referred to as the net worth of the company. If you were to dispose of all the assets through a sale and pay off liabilities, the money left over would be available for distribution to the shareholders. The shareholders basically own the equity section of the balance sheet.

Retained Earnings – How it Works

03/21/2015

In the equity section of the balance sheet there is an account that tallies the lifetime earnings net of dividends for the company.  The value identifies the total amount retained by the company for operational purposes.  This account is referred [...]

Three Primary Characteristics of Successful Businesses

11/11/2014

Well, this is my 200th article in two years.  So I’m going back to the very first article I wrote and essentially rewriting that piece.  When I reviewed it, I thought how poorly written and formatted the piece is and therefore I wanted to make [...]

Book Value – Definition and Usage

05/15/2014

There are several definitions associated with the term ‘Book Value’ and depending on the context of its use, determines the correct definition and proper use.  The three primary uses of the term are as follows: Stock, Corporate Value or Balance [...]

Dividends and Distributions –Use in the Proper Context

04/29/2014

Dividends and distributions refer to the payment of cash to investors.  So why two separate terms?  Well, the term is tied back to the type of entity that makes the payment.  Simply stated, regular corporations, i.e. C-Corporations as identified [...]

Insolvency and Bankruptcy – Know the Difference

02/01/2014

Every business owner needs to know the difference between insolvency and bankruptcy.  Often these two terms are misunderstood and improperly used in conversation.  You need to know their correct meaning because both are used in civil law and both [...]

Common Stock – Definition

01/21/2014

A document indicating ownership in a corporation is often referred to as common stock.   It identifies an equity position in a business.  The document or certificate is commonly referred to as a security and provides certain rights to the holder [...]

What is Accrual Accounting?

02/11/2013

Accrual accounting is the preferred method of accounting for all business operations.  Any publicly traded company must comply with the principles of accrual accounting.  Small business operations can choose between cash and accrual accounting for [...]

Capitalizing a New Home Builder Business

01/30/2013

Bankrolling any startup business is difficult enough.  Capitalizing a new home builder operation is a leap forward in required funds.  Typically, small businesses can be capitalized on a shoestring budget, for a new home contractor, just a little [...]