Breakeven Calculation

Let’s say you’re trying to decide whether or not to produce a certain product. Say a new type of cuddly teddy bear. You’ll inevitably ask yourself “how many teddy bears do I need to sell to break even?” Breakeven analysis helps you answer that question. The first step is to figure out the costs involved. […]

Financial Statement Analysis – Ratios

Computing and interpreting financial ratios is the cornerstone of financial statement analysis. The main financial statements are the balance sheet, income statement and statement of cash flows. Ratios are fractions that show the relationship between the numerator and denominator. These ratios are computed as a convenient way to see how the firm is performing financially. […]

Measuring Cash Flow – The Cash Flow Statement

As discussed in another article, the income statement provides a measure of an organization’s performance in generating net assets. Because net assets are claims on cash, the income statement doesn’t measure the organization’s performance in generating cash directly. Many businesses with strong income statements have gone bankrupt because they were unable to come up with […]

Basic Accounting Concepts

This article deals with basic accounting principles that most business people and managers need to be familiar with. What is accounting? Accounting is the main way information about economic activities is communicated. Accountants analyze, classify, record, summarize and interpret economic transactions. This information is then provided to decision makers in the form of financial statements. […]