Category Archive Personal Finance

Understanding Depreciation in Corporate Finance 2011

Depreciation is a non-cash charge against tangible assets, such as buildings or machines. It is taken for the purpose of showing an asset’s estimated dollar cost of the capital equipment used up in the production process. Amortization is a non-cash charge against intangible assets, such as goodwill. EBITDA is earnings before interest, taxes, depreciation, and [...] Read More…

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Purpose of Statement of Retained Earnings 2011

The statement of retained earnings shows how much of the firm’s earnings were retained in the business rather than paid out in dividends. Note that retained earnings represents a claim against assets, not assets per se. Firms retain earnings primarily to expand the business, not to accumulate cash in a bank account. The statement of [...] Read More…

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Legal and Social Infrastructure of Business and Finance 2011

Every business operates in a legal and social environment, and the Standard Model assumes that a sophisticated framework of institutions is in place and is functioning properly. In view of the recent financial scandals, it is relevant to state several essential characteristics that a country’s financial system has to have. There has to be rule [...] Read More…

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