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Rating agencies examine an insurer’s liquidity in order to establish a credit rating. These agencies will publish the liquidity ratio as well as a quick ratio, which compares cash and cash equivalents to liabilities. The results of these stress tests for a single insurer are compared to the results of other insurers offering similar policies. Current liquidity is the total…

Market value refers to the asset’s current replacement cost, and it has a defined ceiling and floor, although the floor can be subjective. Companies usually record assets at cost (how much it cost to acquire the asset). Sometimes the business cannot recover this amount and must report such assets at the lower of cost and Net Realizable Value. Accounting standards…

Construction companies and contractors calculate the percentage of completion by dividing costs incurred to date by the estimated total costs at completion. A key advantage of the accrual method is that it supports projected cash flows, based on accounts receivable and accounts payable. This helps construction companies to plan and allocate resources more effectively, with an eye toward the future.…

If you seek funding from a bank or investor, your business plan will be especially important because it is how potential lenders and investors will understand your business. The specific amount you charge your clients for bookkeeping services will depend on your certifications, years of experience and familiarity with the client’s business. Some popular options include QuickBooks, Xero, FreshBooks and…

Free cash flow indicates the amount of cash generated each year that is free and clear of all internal or external obligations. A company could have diverging trends like these because management is investing in property, plant, and equipment to grow the business. In the previous example, an investor could detect that this is the case by looking to see…