How to Do a Profitability Analysis That Actually Improves Your Bottom Line
Profitability analysis shows you what’s really making you money, and what’s just eating up resources. Too many companies chase revenue without realizing that some products, customers, or regions barely break even (or worse, lose money). Finance teams can’t just look at top-line growth. You need to find the real profit drivers, fix bad pricing, […]
Cost-Volume-Profit (CVP) Analysis Explained (With Formula & Example)
CVP analysis (cost-volume-profit) shows exactly how sales, pricing, and costs impact profit. Get it right, and you’ll know how many units to sell to stay profitable. Get it wrong, and targets get missed, budgets fall apart, and profit margins shrink fast. Read: A Complete Guide to Financial Statement Analysis for Strategy Makers Too […]
Unearned Revenue: Is It an Asset or a Liability? Examples Explained
Is unearned revenue an asset? It might look like one because the cash is in your account. But is it really yours yet? Many businesses get this wrong and treat unearned revenue like extra money to spend. In reality, it’s a liability – a promise to deliver something in the future. Misclassifying it can […]
YOY (Year-over-Year): Meaning, Formula & Examples
Year-over-year (YOY) measures growth by comparing a metric, such as revenue, from one period to the same period a year earlier. Why is this important? Well first, it helps understand trends on a higher scale. And second, it removes the influence of short term events or seasonal fluctuations from the equation. Read: A […]
Pecking Order Theory Explained: How Companies Choose Capital
Ever wondered why some companies decide to take on debt even when they have cash, while others avoid issuing new shares unless absolutely necessary? The Pecking Order Theory explains these decisions. Imagine you’re running a manufacturing company that needs $50 million to expand production. You have three choices: Use your company’s profits (retained […]
What is Ratio Analysis And How To Make the Most of It
You can’t just look at the numbers and know the full story of a company’s financial health. For example, two companies can make $100 million in revenue, but that doesn’t mean they’re equally successful. One might be super successful, while the other is barely making ends meet. Maybe one is drowning in debt, while […]
Deferred Revenue: Definition, Examples & How It Works
Deferred revenue can be tricky. You’ve got cash in the bank, but you can’t count it as revenue just yet. Spend it too soon, and you might run into cash flow problems. Recognize it too early, and you’re messing with your financial reports. A lot of people outside finance assume it is just extra money […]
Retained Earnings Equation – A Practical Guide + Real Examples
The retained earnings equation shows how much profit your business keeps after paying dividends. It’s simple but powerful, helping you track how profits are reinvested to grow or stabilize your company. In this blog, we’ll explain retained earnings, how the equation works, and share real examples of how businesses use it to make smarter […]
Financial Leverage Ratio – Definition, Types, and How It Impacts Your Business Risk
Is your business using debt strategically, or are you taking on more risk than you can manage? The financial leverage ratio is a key metric that shows how much of your company’s assets are funded by debt versus equity. It helps you understand your financial structure and identify potential risks. You’ll need data from […]
What Is Operating Margin? Why It Matters + Key Benchmarks
Operating margin is one of those key metrics in financial analysis that tells a big story in just a few numbers. It shows how efficiently a company turns its revenue into profit after covering all the operating costs. Basically, it tells how well the business runs its day-to-day operations. For businesses, investors, and analysts, it’s […]