- How Acid-Test Ratios Are Used in Business and Investing
The acid-test ratio is a financial metric that assesses a company’s ability to cover short-term liabilities with its most liquid assets. A higher acid-test ratio suggests a stronger liquidity position, while a lower ratio may indicate potential cash flow challenges. Investors and analysts use this metric to assess financial health, particularly in industries where inventory… read more…
- How Does a Debt/Equity Swap Work?
A debt/equity swap is a financial restructuring strategy where a company exchanges outstanding debt for equity in the business. This can help a company reduce its debt burden and interest costs while giving creditors an ownership stake in lieu of cash repayments. Debt/equity swaps are commonly used amid financial distress, corporate reorganizations or strategic restructuring… read more…
- What Is Bonus Depreciation and How Can Businesses Use It?
Tax credits are important for businesses aiming to maximize profitability and sustainable growth. Bonus depreciation is a key tax provision that has gained considerable attention. It enables companies to immediately deduct a large portion of the cost of eligible assets, such as machinery, equipment, and certain software, in the year they are placed in service.… read more…
- What Is Cash Basis Accounting for Individuals and Businesses?
Cash basis accounting records when cash actually changes hands in a transaction, providing a real-time view of your financial position that reflects the actual cash flow of a business or individual. While straightforward and easy to understand, it doesn’t account for any pending transactions that may be important to future cash flow and forecasting. Whether… read more…
- How to Calculate Net Sales for Your Small Business
Net sales show the true revenue your business makes from selling products or services, after subtracting returns, allowances and discounts. To find net sales, begin with your total sales and deduct any returns, allowances, and discounts. This figure could help you evaluate your business performance and is important for financial reporting and preparing taxes. A… read more…
- How Off-Balance Sheet Financing Works for Small Businesses
Business owners often look for ways to manage their finances while keeping a healthy balance sheet. Off-balance sheet financing has become a popular method for this purpose. It allows businesses to exclude certain assets and liabilities from their balance sheets, which can make the company appear healthier financially and more attractive to investors and lenders.… read more…
- Accelerated Depreciation: Definition and How to Calculate
Accelerated depreciation allows businesses to write off the cost of an asset more quickly than the traditional straight-line method. This can provide asset owners with potentially valuable tax benefits in the earlier years of an asset’s life. By front-loading depreciation expenses using accelerated depreciation, companies can reduce taxable income in the short term. This accounting… read more…
- Due Diligence Checklist for Buying a Small Business
When buying a small business, a due diligence checklist can help you evaluate its financial statements, contracts and existing liabilities. Reviewing the legal standing of the business, including licenses and regulatory compliance, can give you a clearer picture of its viability and any potential risks. This checklist helps buyers make informed decisions, thereby minimizing surprises… read more…
- Pros and Cons of a Management Buyout for Business Owners
A management buyout (MBO) occurs when a company’s existing management team buys all or a majority stake in the business from the current owner. For business owners looking for an exit strategy, an MBO can offer a smooth transition, allowing the leadership team to maintain continuity while taking control of the business. However, MBOs come… read more…
- How to Keep Track of Your Business’ Expenses
Maintaining your business’s financial health can depend on how you track your expenses. Whether you run a small business or a larger one, organizing expenses could position you to make better decisions, manage your budget and prepare for tax season. If you need help managing your business, a financial advisor can recommend strategies to manage… read more…
- How to Find a Financial Advisor as a Small Business Owner
A financial advisor can be a valuable member of a small business owner’s team of professional advisors. A skilled advisor can help manage both personal and business finances, providing insights into tax strategies, retirement planning, investments and more. But some advisors are better-suited to advising small business owners than others. To get maximum benefit, you’ll… read more…
- What Is the Franchise Tax?
The franchise tax is a levy imposed by certain states on businesses and corporations in exchange for doing business in that state. Unlike income taxes, which are based on a company’s profit, franchise taxes are typically calculated based on the company’s net worth, capital or assets. This type of tax can impact a business’s financial… read more…
- How to Manage Passive Income as a Restaurant Owner
Managing passive income as a restaurant owner can enhance your financial stability and help you grow your business. If your restaurant is not yet generating passive income, you can try implementing strategies that can generate revenue for your business without active day-to-day involvement. Then, once you have passive income, you can manage it to build… read more…
- How Much Does It Cost to Start an LLC?
Setting up a business as a limited liability company (LLC) can protect personal assets and shield entrepreneurs from business debts, while providing more flexibility than forming a corporation. Creating an LLC also costs significantly less. A do-it-yourself LLC can be formed for less than $100 in some states, although the final tally can be several… read more…
- Limited Liability Company (LLC) vs. Limited Partnership (LP)
When starting a business, choosing the right structure can significantly impact your control and management of the business. A limited liability company (LLC) offers personal liability protection and flexibility in management for its owners. A limited partnership (LP), by contrast, features general partners who manage the business and face personal liability, and limited partners who… read more…
- Financial Planning vs. Financial Forecasting for Businesses
Financial planning and financial forecasting are essential yet distinct components of business strategy. Financial planning involves setting long-term goals and creating a roadmap to achieve them. This process includes budgeting, investment strategies and risk management, all tailored to align with the company’s vision. On the other hand, financial forecasting focuses on predicting future financial outcomes… read more…
- How to Protect Your Assets From a Lawsuit in California
Methods for protecting assets from lawsuit in California include shifting ownership into legal entities such as trusts, taking advantage of legal protections for homesteads and retirement accounts, and maintaining appropriate insurance coverage. Business owners can protect business assets with the help of a legal business structure such as a Limited Liability Company (LLC). Often multiple… read more…
- What Is Accumulated Depreciation and How Is It Recorded?
Accumulated depreciation is a crucial part of financial analysis. It helps to ascertain the true value of an asset over time, influences purchasing decisions and plays an essential role in tax planning. Here’s a breakdown of how accumulated depreciation is calculated, the recording process and examples of practical applications. A financial advisor can help you… read more…
- What Is Financial Accounting and Why Is It Important?
Financial accounting is the practice of documenting and analyzing all financial transactions of a business. This back-office function, often brushed aside as mundane, plays an exceptionally pivotal role a role far more critical than it usually gets credit for. It can often serve as the pulse of an organization, providing vital indicators of financial health,… read more…
- What Is a Discretionary Expense?
Achieving financial stability often requires a blend of judicious planning, disciplined spending and clever investment approaches. An essential ingredient in this mix is understanding and managing discretionary expenses – those costs we often deem non-essential. These expenses may not appear significant on the surface but can shape your financial trajectory. Here’s a deeper look into… read more…
- What Are Intangible Assets?
Unlike physical assets such as machinery or real estate, intangible assets lack a physical presence. They include things like brand recognition, customer loyalty, patents, copyrights and business methodologies. These assets often stem from innovation, creativity or a company’s strategic initiatives which make them unique and hard to replicate. Ignoring these assets can result in a… read more…
- How Is Solvency Ratio Used for Company Credit?
If you’re a business owner looking for a loan, your lender will be looking for your solvency ratio. Of course, if you have a startup and are new to running a business, you may not know what a solvency ratio… read more…
- Do I Need a CPA for My Small Business?
As a business owner, you might find yourself asking, “Do I need a CPA for my small business?” This is because It’s often not required to hire a certified public accountant (CPA) for your small business. But in many cases,… read more…
- How to Use a ROBS 401(k) to Finance a Business
It takes money to start and keep a business running, and access to capital is one of the major roadblocks to business ownership for many would-be entrepreneurs. However, there are several ways individuals can use their retirement funds to finance… read more…
- What Is a Certified Business Exit Consultant (CBEC)?
When owners of privately held companies are considering how to transition out of their businesses due to planned retirement, health concerns or other reasons, they often get expert help with the process. Valuing, marketing and preparing for sale can be… read more…