The share market is a significant source of income for many investors. Most investors hold various assets and securities in the market. Usually, they invest in those securities for two reasons, including capital gains and dividend income. On top of that, when they buy a company’s shares, they become its part-owner. It allows them to […]
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Financial statements are a link between a company and its stakeholders. Through this link, companies can present a picture of their operations. Usually, they show this picture through four primary financial statements. These include the balance sheet, income statement, cash flow statements and statement of changes in equity. Companies can use these statements to communicate
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Dividends represent the distribution of resources to shareholders. Usually, these resources include cash or stock that a company pays from its profits. At the end of each accounting period, companies decide how much dividends to pay to their shareholders. Usually, this process occurs annually. In some cases, however, companies may also pay quarterly or ad-hoc
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The primary reason why shareholders invest in a company is the returns they get. While capital gains on share prices are crucial, dividends make a more stable type of earning. For most shareholders, these returns provide more certainty on their earnings. However, these distributions are usually at a company’s management or board of directors’ discretion.
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The financial statements of any business entity tell a lot about financial health and profitability. If we talk about the income statement alone, the firm’s profitability, revenues, and expenses are covered in it. The last item on the income statement is profit that tells how much the company has made during a financial period after
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Companies raise finance from various sources. One of the primary sources includes equity, which refers to any investment in a company from its shareholders. Usually, companies rely more on equity than any other finance. However, companies also have the option to raise finance from debt. Debt refers to finance acquired from third parties other than
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Many companies sell physical products, which constitute their primary income source. Some companies may manufacture these products while others acquire them from an external source. Usually, companies also keep their stock in hand so they can meet customer demand when it arises. These may include raw materials, finished goods, or work-in-progress inventory. Every type of
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Businesses prepare financial statements; these are historical figures and do not guarantee profit or revenue in the future. If the business entity wants to predict future growth projections, there must be reliable measures and methodologies. Therefore, budgeting or forecasting is inevitable in all kinds of business entities. Besides forecasting and budgeting, companies use significant estimations
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Depending on the size, nature, and industry of a business, there are varying financial reporting requirements for every business entity. Small and medium enterprises usually do not prepare formal financial statements and rely on bookkeeping. However, there are many circumstances when the presentation of formal financial statements is necessary. A company may decide to prepare
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The perpetual inventory system is the process of keeping inventory records in real-time. The company updates its inventory account as and when it makes new inventory purchases. On the other hand, the periodic system first adds the inventory to the purchases accounts, and after the inventory count, it adds the figures to the inventory account.
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