What is capital budgeting?

Venture capital is often raised from investment firms and affluent individuals and pooled by investment firms. The venture capitalist offers the funds recognizing that the firm’s future profitability and cash flow are subject to severe risk. Instead of being offered as a loan, funds are invested in exchange for a share of the company’s ownership. Investors provide venture...

Bad debt is an expense incurred by a firm when a consumer’s credit repayment previously granted to them is deemed to be uncollectible and hence recorded as a charge off. Bad debt is a risk to which all companies that give credit to clients must account because there is always a chance that payment will not be made. To identify bad debt expenses, there are two ways available. Accounts are...

The cost that does not fluctuate as the number of products or services produced or sold increases or decreases is referred to as fixed costs. These are expenses that a business must pay regardless of its own business operations. As a result, fixed costs are often indirect, as they do not apply to the production of any products or services by such a firm. Fixed and variable costs are the two...

The assets that will benefit the organization for much more than a year, whether they are tangible or intangible, are called long-term assets. Long-term assets can be both tangible and intangible, such as a company’s brand or patent, which cannot be touched. Long-term assets are recorded on the balance sheet at the acquisition price, which may or may not reflect the asset’s current...

Regular business costs that reflect in the general ledger and have a direct impact on the profitability of a company are referred to as explicit costs or accounting costs. The dollar amounts of explicit costs are specified and flow through to the income statement. These costs are simple to identify and link to the activities of a company’s business to which the expenses are assigned. The...