Corporate finance is an important area in which funding is very essential for businesses to expand, develop new products, or meet operational needs. The most common way that companies raise funds is by issuing new shares to investors, thereby diluting the ownership of existing shareholders. This way of raising capital by firms is done without additional debt; however, the price that follows can be too cost-effective. We will delve in-depth in this blog about how companies obtain funding with ...

Dilution is one term that often pops up with the discussion of the issuing of new shares in any company. Although it is often associated with diluting ownership in a publicly traded company, it can be applicable for private businesses, partnerships, and even intellectual property conversion or debt conversion scenarios. In its most basic form, dilution is said to be the decrease in ownership percentage of a shareholder of a company when new shares are issued.

What is Dilution ...

Direct Costs vs. Indirect Costs: How to Distinguish Between the Two for Improved Financial Control

Cost management is critical for the financial health and profitability of any business. Among the various cost categories, two main types of costs exist which a business owner or financial manager needs to be aware of, and these are direct and indirect costs. Both kinds of costs impact the price of products, computation of profits, and even preparation of financial reports. This is why one ...

Financial statements are the backbone of financial reporting and provide an ordered, structured presentation of the state of affairs as well as performance of an entity over time. Although each statement speaks uniquely, its real utility arises from the interdependence. Only understanding the interlinking of financial statements will let investors, managers, or analysts view the business in total as of that moment.

Three Key Financial Statements

Income Statement (Profit and Loss S ...

Impairment arises whenever the carrying value of any asset is more than the recoverable amount. Generally, this happens when it's no longer worth as much as what has been recorded on the balance sheet. This usually happens during market changes, obsolescence, or when due to physical damage.

Some points:

Carrying Amount: The value of that asset on the balance sheet.

Recoverable Amount: The greater of an asset's fair value (what it can be sold for) or its value in use (future ...

Leasing is one of the strategic tools in corporate finance. This enables business firms to obtain assets with a minimum amount of investment to buy them outright. There is a significant type of lease referred to as a financing lease or capital lease. The paper discusses key concepts of financing leases and how they affect financial statements so that readers understand why these are important to financial management today.

What is a Financing Lease?

A financing lease is ...

ROCE, or Return on Capital Employed, is a performance measurer for a company. The measure indicates how well a company is utilizing its overall capital - both equity and debt- to generate profits from its operations. It dives into the efficiency of a company in generating profits vis a vis the entire pool of resources at its disposal. This measure is particularly for companies in capital-intensive industries such as manufacturing or utilities.

Formula for ROCE:

ROCE= Earnings Befo ...

Earnings Per Share (EPS) is a basic measure applied by the investors to analyzing the company’s profitability to each shareholder. It is often presented in two formats: basic EPS and diluted EPS. Although such indicators are close in terms of measurement, they are different from the point of view of investors. It will therefore go a long way in helping users of financial statements appreciate the nature of the differences which exist between the two in order to get a deeper appreciation of th ...

Interest rates are one of the most influential factors in shaping investment decisions. Whether you’re an individual investor, a business owner, or a financial institution, understanding how interest rates affect investments is crucial. Interest rates play a pivotal role in the cost of borrowing, the return on investments, and the overall economic environment. In this blog, we’ll explore how changes in interest rates can impact investment decisions and strategies.

What Are Interest Rate ...