What are Pro-Rata Participation Rights? Pro-rata participation rights, or pro-rata investing rights, guarantee existing investors the right to participate in future fundraising activities. Pro-rata participation rights allow private investors to maintain and/or expand their share of a business by participating in future funding rounds. As a result, the rights allow private investors to protect against…
Interest Expense Interest expense is one of the core expenses found in the income statement. A company must finance its assets either through debt or equity. With the former, the company will incur an expense related to the cost of borrowing. Understanding a company’s interest expense helps to understand its capital structure and financial performance….
What is a Forensic Audit? A forensic audit is an examination of a company’s financial records to derive evidence which can be used in a court of law or legal proceeding. For example, Telemart, on the recommendation of its Chief Financial Officer (CFO), entered into a contract with RJ Inc for the supply of carts….
What is Target Costing? Target costing is not just a method of costing, but rather a management technique wherein prices are determined by market conditions, taking into account several factors, such as homogeneous products, level of competition, no/low switching costs for the end customer, etc. When these factors come into the picture, management wants to…
What is Budgeting Software? Budgeting software is any computer program that helps an individual or business design, manage, monitor, and alter their budget. Examples of software range from Microsoft Excel on one end to SAP on the other end. In this article, we will examine and compare various types of software for budgeting purposes. Types…
What is Prorated? In accounting and finance, prorated means adjusted for a specific time period. For example, if an employee is due a salary of $80,000 per year, and they join the company on July 1, their prorated salary for that year would be $40,000. How to Prorate a Number Let’s look at an example….
What is the Equity Method? The equity method is a type of accounting used for intercorporate investments. It is used when the investor holds significant influence over the investee but does not exercise full control over it, as in the relationship between a parent company and its subsidiary. In this case, the terminology of “parent”…
What is an Installment Sale? An installment sale is a financing arrangement in which the seller allows the buyer to make payments over an extended period of time. In an installment sale, the buyer receives the goods at the beginning of the installment period and makes payments over an installment period. Revenue and expense are…
