Report Analysis - How to Read the Statements

Debt to Equity Ratio

Another leverage ratio used to evaluate the financial integrity of a business is the debt to equity ratio.   It is strictly a bottom half balance sheet ratio.   Its result explains the relationship of volume of debt […]

Report Analysis - How to Read the Statements

Net Profit Margin

The net profit margin reflects the profitability of the company as a percentage of net sales.   It is one of the performance ratios used in evaluating business.   Interestingly, some consider it the most important ratio.   […]

Report Analysis - How to Read the Statements

Return on Assets

One of the performance ratios used in business identifies the overall ability of management to efficiently utilize resources to generate a profit.   Corporate resources include human knowledge/skills and the balance sheet assets of the business.   […]

Accounting Concepts and Principles

Breakeven Analysis – Fundamentals

Breakeven analysis is a managerial (cost) accounting tool used to examine the relationship of price to cost of a product.   It also considers various sales volumes and the effect on profit given the different relationships of […]

Terminology

Economic Substance Principle

The Internal Revenue Service uses an economic substance test to identify sham transactions that exist solely to reduce or eliminate taxes.    In addition,  the courts use this same doctrine to rule on the legitimacy of activity […]

Terminology

Business Trusts

The common law definition of a business is an investment of capital or property by individuals which creates the means to carry on towards the goal of generating a profit.   Every state recognizes different legal […]