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Sunk costs are unrecoverable past expenditures. These should not normally be    taken into account when determining whether to continue a project or abandon it, because they cannot be recovered either way. It is a common instinct to count them, however. It also referred to as “stranded cost.”  For e.g. a worn-out piece of equipment bought [...]

With the passenger of time, all fixed assets, with the exception of land, lose their capacity to provide services. According the cost of such fixed assets such as furniture, building, machinery, equipment, etc. must be transferred to the related expense accounts in a systematic manner during their expected economic life time. This periodic cost expiration [...]

Marketable investments are those investments which are acquired by the company by employing its surplus funds or cash temporarily. These investments are short term in nature. These investments can be disposed off by the company at its free will and thus convert it into cash as and when the need arises. Hence, these investments are [...]

A cost of labor, material or overhead that changes according to the change in the volume of production units. Combined with fixed costs, variable costs make up the total cost of production. While the total variable cost changes with increased production, the total fixed costs stays the same.

The repurchase of outstanding shares by a company in order to reduce the no of shares in the market. Companies will buy back shares either to increase the value of shares still available, or to eliminate any threats by shareholders who may be looking for a controlling stake.

A stock split or stock divide increases the number of shares in a public company. The price is adjusted such that the before and after market capitalization of the company remains the same and dilution does not occur. Options and warrants are included. For example, a company with 100 shares of stock priced at $50 [...]

Ploughing back of profits’ is an important source of internal or self financing by a company. It refers to the process of retaining a part of the company’s net profits for the purpose of reinvesting in the business itself. In other words, the savings generated internally by a company in the form of ‘retained earnings’ [...]

The price by the purchaser to the vendor in cash or kind for taking its business wholly or partly is said to as purchase consideration.

Float is an important technique to reduce the length of the cash cycle. When a firm receives or makes payments in the form of Cheque etc., there is usually a time gap between the time the Cheque is written and when it is cleared. This time gap is known as float. The float for the [...]

A letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase. Letters of credit [...]