Business Case Analysis
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Financial structure refers to the balance between all of the company's liabilities and its equities. It thus concerns the entire "Liabilities+Equities" side of the balance sheet. Capital structure, by contrast, includes equities and only the long term liabilities. It refers to the makeup of the company's underlying value, in particular the relative balance between funding from equities and funding from long term debt. The presumption is that funds from both sources are used for earning income.
The accounting cycle. Transactions are entered into the journal as the first step in the accounting cycle. The journal is organized chronologically, that is, entries are added one after another in the order they occur. Journal entries are transferred to a ledger (posted to a ledger) as the second step.
The accounting cycle: Transactions are entered into the journal as the first step in the accounting cycle. The journal is organized chronologically, that is, entries are added one after another in the order they occur. Journal entries are transferred to a ledger (posted to a ledger) as the second step, where transactions are organized by account.
The term cash flow (CF) refers literally to the "flow," or movement of cash funds into or out of a business. This entry defines and explains this and related terms such as cash flow stream, net cash flow, and cumulative cash flow, and illustrates their role in financial statement analysis, investment analysis, and business case decision support.
Total Cost of Ownership (TCO) is an analysis meant to uncover all lifetime costs that follow from owning certain kinds of assets. Ownership brings purchase costs, of course, but ownership can also bring costs for installing, deploying, operating, upgrading, and maintaining the same assets. For this reason, TCO is sometimes called life cycle cost analysis. For many kinds of acquisitions, TCO analysis finds a very large difference between purchase price and total long term cost, especially when v…
In its simplest form a budget is a plan or forecast in the form of a list, showing spending items and/or incoming revenue items, with a figure for each item. As time passes, actual spending or revenue may be entered into the list to compare with the originally budgeted figure. If there is a difference between planned and actual figures, the difference is called a variance.
Payback period (PB) is a financial metric for cash flow analysis that addresses questions like thi:How long does it take for investments, acquisitions, or actions to pay for themselves? Payback period is the time required for cumulative returns to equal cumulative costs (for example, the cumulative costs from the purchase of computer systems, training expenses, or new product development). PB period is usually given in decimal years like this: Payback Period = 2.3 years.
The cost of doing business in many situations includes fixed costs and variable costs. For activities such as budgeting, production planning, and profit forecasting, it is crucial to understand the relationships between fixed and variable costs on the one hand, and business volume, pricing, and net cash flow on the other. Break even analysis is central to this understanding.
The terms business cycle or economic cycle refers to changes in economic activity within a country or countries. The cycle in this sense is defined in terms of economic output, especially the country's gross domestic product (GDP) (the market value of all goods and services produced within the country during a year). The image below shows how different named phases of the cycle correspond to increases or decreases in GDP, including Expansion, Recession, and Recovery.
Internal Rate of Return (IRR) is a financial metric for cash flow analysis, often used for evaluating investments, capital acquisitions, project and program proposals, and business case scenarios. This page defines IRR and Modified IRR, explains their mening, illustrates calculations, and compares IRR to other investment metrics including ROI, NPV and payback period.