When it comes to analyzing a company’s financials, there are many avenues we can take. One way is through multiples; calculating the EV/2P multiple is the focus of this analysis. This ratio looks at a business’ enterprise value against its proven and probable 2P reserves. While ratios or multiples are used in valuing companies, this … Continue reading “Valuation Ratio Calculating the EV / 2P”
The subscription economy, according to Forbes, is expected to reach $1.5 trillion in revenue for businesses. With the potential likely realized this year, it’s vital to understand how it is tracked – and more importantly, how it’s able to be tracked on a separate basis. Also known as net dollar retention (NDR), this metric calculates … Continue reading “Defining Net Revenue Retention (NRR)”
Return on Ad Spend (ROAS) is one way to help advertising and marketing professionals and investors analyze how well promotions do (or don’t) produce sales. It helps advertisers develop data based on their campaigns’ revenue production (or lack thereof). Understanding how this metric is calculated and how to analyze ROAS is essential for businesses to … Continue reading “Analyzing Return on Ad Spending”
The CAC Payback Period looks at how a business needs to recover its investment in attracting new customers. It is especially crucial for companies that are in industries with large marketing and sales costs. It’s an important metric because it helps businesses measure their performance in a number of ways. First, it shows how well … Continue reading “Calculating the CAC Payback Period”
No matter the type of business or industry, being able to analyze and deduce patterns is essential to discovering a business’ financial health. Here are four commonly used calculations to help internal and external stakeholders determine an organization’s ability to manage its finances. Break-Even Analysis This formula analyzes fixed costs versus the profitability a business … Continue reading “Common Business Accounting Calculations”
This metric, which is also referred to as the cash cycle or the net operating cycle, looks at the time a business takes to recover its investment in inventory to eventually sell. The process starts from selling its goods, collecting on outstanding receivables or invoices, and satisfying its operating costs with the sale proceeds. It’s … Continue reading “Cash Conversion Cycle (CCC) Defined”
Analyzing a company’s Accounts Receivables is an effective way to measure its current cash flows and the likelihood of maintaining healthy cash flows. According to the U.S. Chamber of Commerce’s Small Business Index (Third Quarter 2024), 68 percent of small business owners reported being content with their third quarter cash flow performance. This illustrates the … Continue reading “How to Measure the Quality of Accounts Receivable”
Whether it’s a private equity transaction or an institutional or retail investor, analyzing a company’s financial statements is an important part of fundamental analysis. One important but basic way to analyze whether a company is worth investing in is through the expanded accounting equation. The most straightforward equation to analyze a business’ balance sheet is: … Continue reading “Looking at the Expanded Accounting Equation”
When it comes to running a business, there are a lot of expenses incurred during operations. As of January 2024, New York University’s Stern School of Business had recorded nearly $1.2 trillion in capital expenditures by U.S. sectors. Considering this, there are two important concepts that are imperative to study for effective accounting treatment: capital … Continue reading “Accounting Considerations for Capital Expenditures and Operating Expenses”
With more than eight million small businesses in America, and more than $776 billion in net premiums issued by the insurance industry in 2022 for commercial policies (according to the Insurance Information Institute), business insurance is big business. Along with protecting businesses from a myriad of claims, insurance expenses also have to be accounted for … Continue reading “Accounting Considerations for Business Insurance Coverages”
