Companies try to weigh the costs and benefits of borrowing money vs. issuing stock, including both monetary and non-monetary considerations, to arrive at an optimal balance that minimizes opportunity costs. Because opportunity cost is a forward-looking consideration, the actual rate of return (RoR) for both options is unknown at that point, …
The direct costs portion of the income statement is where net sales can be found. Net income is gross profit minus all other expenses and costs and other income and revenue sources that are not included in gross income. Some costs subtracted from gross profit to arrive at net income include interest on debt, taxes, […]
Finally, IRR is a calculation used for an investment’s money-weighted rate of return (MWRR). The MWRR helps determine the rate of return needed to start with the initial investment amount factoring in all of the changes to cash flows during the investment period, including sales proceeds. In order to calculate the multiple-of-money …
While you may not consider $310 a huge difference, this example is only a three-year loan; compound interest piles up and becomes oppressive with longer loan terms. Let’s say that you are borrowing $10,000 from Bank A to finance an automobile purchase. It’s a simple interest loan with a rate of 5% and a term […]
Any money your business brings in over the cost of goods sold for a time period can be allotted to overhead costs, and whatever is leftover is your business’s profit. Without properly calculating the cost of goods sold, you will not be able to determine your profit margin, or if your business is making a […]
On the other hand, if this were applied to a put option, the breakeven point would be calculated as the $100 strike price minus the $10 premium paid, amounting to $90. What this answer means is that XYZ Corporation has to produce and sell 50,000 widgets to cover their total expenses, fixed and variable. At […]