This post will take a dive into the concept of the quick ratio and its interpretation, along with an example. The quick ratio, commonly referred to as the acid-test ratio, measures the ability of a business to pay its short-term liabilities using only the current assets that are readily convertible into cash. These “quick” assets are mainly […]
What Is the Market Approach Valuation? The market approach valuation is one of the three approaches to value a business, along with the cost approach and income approach. In simpler terms, the market approach determines the value of a business based on the price of transfer or the value of comparable businesses (or even the same business). This valuation […]
The cost approach values a business based on the net assets (total assets minus total liabilities) a business holds. The approach uses the economic principle that a buyer will pay no more for an asset than the cost to obtain the asset of equal characteristics, and can be referred to as the “cost to replace”. […]
The current ratio, commonly referred to as the current liquidity ratio or the working capital ratio, is one of the most important liquidity measures to assess a business’ performance. This post will take a dive into the concept of the current ratio and its interpretation, along with an example. The current ratio measures a business’ […]
Intangible assets are those that are not stored or accumulated in physical form. Like all assets, intangible ones can be owned, transferred, or licensed, and they have value. An intangible asset can be any intellectual property or brand — trademarks, copyrights, and patents are all classified as such. Intangible assets usually exist in opposition to tangible […]
Cash Flow & Cash Flow Statement A cash flow statement is a financial statement that contains aggregated data and the value of all the cash inflows and outflows that a company receives from its current business operational, investing, and financing activities. A detailed cash flow statement is crucial for investors, creditors, shareholders, vendors, regulators, taxing entities, and other interested […]
For every business, it is important to record revenue and expenses in an organized manner. The arrangement of profit and loss information in the form of data is useful when making new strategies and work policies. A business with regularly updated, gathered income and expense details can run smoothly because the weak areas are visible, […]
This post will take a dive into the concept of asset sales, an important concept in the domain of private business sales/transfers and their valuation. In an asset sale, a company sells some or all of its business assets to a buyer, but the company itself (as a legal entity) is not sold. Further, the buyer has the right […]
Accounts receivable come into existence when a business offers products or services to its customers on credit. The amount of money that the customers owe to the company is written as an asset on the balance sheet. This asset represents the money that a customer has to pay to the company. For example, a water filtration company […]
The assets that cannot be quickly converted into cash or cash equivalents to pay for debts or short-term liabilities are known as non-current assets. These assets are not liquid by nature (in other words, they take longer to sell and realize their value into cash) and include long-term investments that cannot be used as a […]