Author: Arabian Media staff

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Companies and investors review the weighted average cost of capital (WACC) to evaluate the returns that a firm needs to realize to meet all of its capital obligations, including those of creditors and stockholders. Beta is critical to WACC calculations, where it helps ‘weight’ the cost of equity by accounting for risk. WACC is calculated as: WACC = (weight of equity) x (cost of equity) + (weight of debt) x (cost of debt). However, not all capital obligations involve debt and, therefore, the risk of default or bankruptcy. Some comparisons of different obligations require a beta calculation that is stripped…

Accrued Expenses vs. Accounts Payable: An Overview Companies must account for any expenses incurred in the past because these are costs that come due in the future. Accrual accounting is the general accounting term that covers any of these liabilities. Companies use two methods to track these accumulated expenses: accrued expenses or accounts payable. Both are liabilities that businesses incur during their normal course of operations, but they’re inherently different. Accrued expenses are liabilities that build up over time and are due to be paid. Accounts payable are current liabilities that will be paid in the near future. Key Takeaways…

Accounting vs. Economics: An Overview Accounting is a profession that records, analyzes, and reports income and expenses for individuals and businesses. Economics is a branch of social sciences concerned with production, consumption, and market forces. An economist uses data to help shape policies for interest rates, tax laws, and employment. Key Takeaways Accountants track the flow of money for businesses and individuals.Economists monitor trends that drive production and consumption.Accounting and economic data influence the fiscal policies of both businesses and governments. Accounting Most individuals deal with accountants when filing tax returns. In business, accountants track money into and out of…

Businesses depreciate long-term assets for both tax and accounting purposes. For tax purposes, businesses can deduct the cost of the tangible assets they purchase as business expenses. Microsoft Excel has built-in functions for multiple depreciation methods, including the: Straight-line method (SLN function)Sum of the years’ digits method (SYD function)Declining balance method (DB function)Double-declining balance accelerated method (DDB function)Variable declining balance method (VDB function)Units of production method, although this method requires a non-branded Excel template Key Takeaways Microsoft Excel has built-in functions for multiple depreciation methods for businesses’ fixed assets.The straight-line method (or straight-line basis) uses a built-in function, SLN, which takes…

The capital adequacy ratio (CAR), also known as capital to risk-weighted assets ratio, measures a bank’s financial strength by using its capital and assets. It is used to protect depositors and promote the stability and efficiency of financial systems around the world. Key Takeaways The capital adequacy ratio (CAR) is a measure of how much capital a bank has available, reported as a percentage of a bank’s risk-weighted credit exposures.The purpose is to establish that banks have enough capital on reserve to handle a certain amount of losses before being at risk of becoming insolvent.Capital is broken down as Tier-1, core…

What Is the Cost Accounting Method? The cost accounting method, which assesses a company’s production costs, comes in a few broad styles and cost allocation practices. However, cost accounting comes with advantages and disadvantages over other types of accounting methods. Key Takeaways The cost accounting method is an internally focused, firm-specific system used to estimate cost control, inventory, and profitability.It can be much more flexible and specific when compared to general accounting methods.The complexity of cost accounting, however, means that it can be costly in a number of ways. Understanding Cost Accounting Cost accounting was originally developed in manufacturing firms,…

Key Takeaways Employers can contribute to employee HSAs and FSAs, which help pay for qualified medical expenses tax-free.Enroll in a 401(k) to capture employer matching or use an ESPP for discounted company stock.Check for valuable workplace perks like tuition assistance, commuter benefits, and wellness reimbursements.Tax credits directly reduce what you owe at tax time—more impactful than deductions.Earn rewards on everyday spending with a credit card, but always pay your balance in full. The Powerball jackpot for Sept. 6, 2025, has ballooned to a staggering $1.8 billion, luring millions to dream of instant riches. But with odds of just 1 in…

Loss Ratio vs. Combined Ratio: An Overview The loss ratio and combined ratio are used to measure the profitability of an insurance company. The loss ratio measures the total incurred losses in relation to the total collected insurance premiums, while the combined ratio measures the incurred losses and expenses in relation to the total collected premiums. Key Takeaways The loss ratio and combined ratio are used to measure the profitability of an insurance company.The loss ratio measures the total incurred losses in relation to the total collected insurance premiums.The combined ratio measures the incurred losses as well as expenses in…

What Is Value Chain Analysis? Value chain analysis is an investigation of a business’s value chain, the full range of activities a company conducts to create a product or a service. The purpose of value-chain analysis is to increase production efficiency so that a company can deliver maximum value for the least possible cost. Key Takeaways Companies use value chain analysis to determine the lowest-cost methods for delivering the most value.A company can gain a competitive edge and boost profits by analyzing the five primary and four supportive value chain activities and creating efficiencies in them.A primary disadvantage to this…