What are Accounts Expenses? An expense in accounting is the money spent, or costs incurred, by a business in their effort to generate revenues. Essentially, accounts expenses represent the cost of doing business; they are the sum of all the activities that hopefully generate a profit. It is important to understand the difference between “cost”…
What is Operating Cash Flow? Operating Cash Flow (OCF) is the amount of cash generated by the regular operating activities of a business within a specific time period. The formula for each company will be a little different, but the basic structure always consists of the same three elements: 1) OCF begins with net income, 2)…
What is an Expense? Businesses incur various types of expenses. An expense is a type of expenditure that flows through the income statement and is deducted from revenue to arrive at net income. Due to the accrual principle in accounting, expenses are recognized when they are incurred, not necessarily when they are paid for. Types…
What is IFRS vs US GAAP? The IFRS vs US GAAP refers to two accounting standards and principles adhered to by countries in the world in relation to financial reporting. More than 110 countries follow the International Financial Reporting Standards (IFRS), which encourages uniformity in preparing financial statements. On the other hand, the Generally Accepted Accounting…
What is Inheritance Tax? Inheritance tax is a tax paid by a person or persons who inherit the estate (money or property) of a deceased person. In some jurisdictions, the terms “estate tax” and “inheritance tax” can be used interchangeably. In the United Kingdom and a few Commonwealth countries, the tax is also called the…
What is Cash? In finance and accounting, cash refers to money (currency) that is readily available for use. It may be kept in physical form, digital form, or invested in a short-term money market product. In economics, cash refers only to money that is in the physical form. Cash in Business Operations Cash is the…
What is Direct Labor? Direct labor refers to the salaries and wages paid to workers directly involved in the manufacture of a specific product or in performing a service. The work performed must be related to the specific task. For a business that provides services to its customers, direct labor is the work performed by…
How to Calculate FCFE from EBITDA? You can calculate FCFE from EBITDA by subtracting interest, taxes, change in net working capital, and capital expenditures – and then add net borrowing. Free Cash Flow to Equity (FCFE) is the amount of cash generated by a company that can be potentially distributed to the company’s shareholders. FCFE…
How to Calculate FCFE from Net Income Free Cash Flow to Equity (FCFE) can be calculated using net income as well as using the Free Cash Flow to the Firm (FCFF) formula. It is the amount of cash generated by a company that can be potentially distributed to the company’s shareholders. When using an intrinsic…
