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The fundamental accounting equation, also called the balance sheet equation, is the foundation for the double-entry bookkeeping system and the cornerstone of the entire accounting science. Like any equation, each side will always be equal. In the accounting equation, every transaction will have a debit and credit entry, and the total debits ...
Return on investment. Return on investment (ROI) or return on costs (ROC) is the ratio between net income (over a period) and investment (costs resulting from an investment of some resources at a point in time). A high ROI means the investment's gains compare favourably to its cost. As a performance measure, ROI is used to evaluate the ...
Earnings before interest and taxes. In accounting and finance, earnings before interest and taxes (EBIT) is a measure of a firm's profit that includes all incomes and expenses (operating and non-operating) except interest expenses and income tax expenses. [1][2] Operating income and operating profit are sometimes used as a synonym for EBIT when ...
To calculate the capital gain for US income tax purposes, include the reinvested dividends in the cost basis. The investor received a total of $4.06 in dividends over the year, all of which were reinvested, so the cost basis increased by $4.06. Cost Basis = $100 + $4.06 = $104.06; Capital gain/loss = $103.02 − $104.06 = -$1.04 (a capital loss)
Cost of capital. In economics and accounting, the cost of capital is the cost of a company's funds (both debt and equity), or from an investor's point of view is "the required rate of return on a portfolio company's existing securities". [ 1 ] It is used to evaluate new projects of a company.
A balance sheet is often described as a "snapshot of a company's financial condition". [1] It is the summary of each and every financial statement of an organization. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business's calendar year. [2]
v. t. e. In accounting, as part of financial statements analysis, economic value added is an estimate of a firm's economic profit, or the value created in excess of the required return of the company's shareholders. EVA is the net profit less the capital charge ($) for raising the firm's capital. The idea is that value is created when the ...
The return on equity (ROE) is a measure of the profitability of a business in relation to its equity; [1] where: . ROE = Net Income / Average Shareholders' Equity [1] Thus, ROE is equal to a fiscal year's net income (after preferred stock dividends, before common stock dividends), divided by total equity (excluding preferred shares), expressed as a percentage.