Found 1015 Articles for Finance Management

The major differences between turnover and profit are as follows −TurnoverTotal amount of cash received from sales by a company in certain period.Also called as revenue, sales, topline.Turnover is the multiplication of unit selling price to number of units sold.It is the superior one and is independent of profits.Turnover/revenues from operations, Non-operating turnover/revenues are types of turnover.Present at top in income statement.Determines demands in market for products/services of a company.ProfitCash available after accommodating costs like administration costs, depreciation, taxes etc.Also called as net income, net profits, profit after tax, bottom line.Profit is difference between turnover and costs.Product of turnover.Depends on ... Read More

The major differences between corporation and incorporation are as follows −CorporationIncorporationIt’s an entity to run a business.First process in registration as corporation.It is termed as CORP.It is termed as INC.Second stage of business.Takes place incorporation register process.Holds liabilities on personal assets.Limited liability.Outcome of incorporation process.Should follow legal process.Don’t get funds for company.Act as pool to get funds.Relates to day to day activities of business.Safeguards the interests and personal assets of owners/shareholders.Will have almost same functioning, features and goals.Process differ from country to country.Formed to carry out specific operations.Helps entity to become a corporation by series of steps.Read More

The major differences between dividend and growth are as follows −DividendShorter time horizon (cash inflow is regular).Cash flow (stocks) at periodic intervals.Release of excess return.Tax free (money received).Less risk (money will get at regular intervals).Outperform growth stocks.Less volatile.Capital appreciation and cash flows (upside).Usually perform even in bear market.Investors will look for low market value than intrinsic value.Investors will look at dividend yields, pay-out ratio.GrowthLonger time horizon (cash inflow is end of period).Cash flow at redemption/sale only.Re-investment of excess return.Tax free (money received), only for some schemes of mutual funds.Higher returns for investors.Underperform than dividends stocks.More volatile.Only capital appreciation (upside).Poorly perform ... Read More

The major differences between asset purchase and stock purchase are as follows −Asset PurchaseStock PurchaseTransfer of ownership is not possible.Transfer of ownership is available.Can claim tax benefits.Can’t claim tax benefits.Less complexity.More complex.Re-negotiation on employee agreement is available.Re-negotiation of employee agreement is not available.Buyers can choose risk and liabilities to bear.Buyers absorb risk and liabilities.Ownership can’t be lost and can’t exchange hands.Ownership can be lost, exchange hands.Less prevalent in market.More prevalent in markets.Retitling of asset is required.Retitling assets in not required.Minority shareholders don’t create problems.Minority shareholders can create problems.Read More

Cost of capital is an alternative investment that an investor can invest to get equal rate of return. In other words, it is the opportunity cost that an investor can invest the same money in another investment which is having similar risk and other characteristics. It plays an important role in capital budgeting decisions. It provides guidelines to determine optimal capital structure for a company.Significance of cost of capital is mentioned belowHelpful in making capital budgeting decisions by using discount rates to calculate future cash flow using present values.Helpful in making capital structure decisions by raising its source of funds ... Read More

The major differences between short term capital gain and long term capital gain are as follows −Short term capital gainsHeld for less than a year or a period and then sold off.Difference between consideration received and cost basis (short term asset).If the asset is owned for less than 24 months it is considered as immovable property and if it is owned for less than 36 months it is termed movable property.Easily tradable and liquid assets.Short term view of market.Lesser profits compared to long term gains.Less risk.Tax rates are same as income tax for individuals.Taxes may be reduced by including short ... Read More

According to International Financial Reporting standards (IFRS), Liabilities are present obligations of the enterprises arising from past events, the settlement of which is expected to result in an outflow from the enterprises of resources embodying economic benefits.In simple words, it is amount owned by the company to the creditors.Classification of liabilities is as follows −Current liabilities − Payment period is less than one year. It is also called as short term liability.Examples − Accounts payable, interest payable, income tax payables, bills payable, bank account overdrafts, accrued expenses, short term loans.Non – current liabilities − Payment period is more than one ... Read More

An asset is a resource which has an economic value which can generate future cash flows. It is owned or controlled by individuals, corporation or a government. Asset can be a property, inventory, trademarks or patents.Based on its liquidity, assets are recorded in the balance sheet in descending order. More the asset is liquid takes more time to convert into cash.Classification of assetsThe assets are classified as follows −ExamplesThe examples of assets as per convertibility are as follows −Currents assets − Cash, cash equivalents, short term deposits, stock, office supplies, marketable securities etc.Non- current assets − Land, building, equipment, machinery, ... Read More

The main difference between accrual base accounting and cash base accounting is as follows −Cash based accountingAccrual based accountingIt is a single entry accounting.Only cash transactions are recognised.Doesn’t recognise account receivables or accounts payable.Useful for small companies.Easy to understand.Focus on liquidity.Not recognised by companies act.Not a holistic approach.Not more accurate.Matching concept can’t be applicable.Low degree of accuracy.Shows lower income in income statement.Doesn’t meet GAAP requirements.Can mislead financial status.It is double entry accounting.Revenue and expenses are recorded irrespective of cash.Commonly used method.Complex and difficult to understand.Recognised by companies act.Focus on revenue, expenses, profit and loss.It has holistic approach.More accurate method.Match concept ... Read More

Cash based accounting means, it records only those transactions relates to cash. That means transactions of revenue and expenses are recorded when payments are made or received through cash only. It is a single entry accounting.It is useful for simple accounting system.It is used, if inventory is to be valued.It is useful, when audit is not necessary.It is useful in services business.Reasons why companies prefer cash based accounting are given below −Single entry accounting.Few financial transactions.Very few employees.Few valuable physical assets.Very few inventory, supplies and cash in bank.Sole proprietorship.Privately held.Legal reporting includes −Supports company’s income tax reporting.Paid government taxes.Forecast future ... Read More