Business financial analysis
Working Capital: Why the Composition Matters More Than the Total
Distinguish accounting working capital from operating funding needs, and test whether receivables and inventory can meet near-term obligations.
Financial education
Money guides & analysis
Find a specific answer to a money question. Explore cash flow, borrowing, housing, saving, investing and the cost of running a business.
The financial library
352 articles
Business financial analysis
The Cash Conversion Cycle: Tracking Days That Tie Up Operating Funds
Calculate inventory, receivable, and payable days, then examine how a shorter cash conversion cycle changes funding needs without guaranteeing liquidity.
Business financial analysis
Receivables Aging: Finding Collection Risk Behind the Sales Total
Use invoice aging and a hypothetical loss matrix to distinguish sales growth from collection quality, while respecting the limits of aggregate balances.
Business financial analysis
Days Sales Outstanding: Avoiding False Signals from Revenue Timing
Examine days sales outstanding with matched receivable and sales periods, and see why quarter-end invoicing can distort apparent collection speed.
Business financial analysis
Inventory Turnover: Measuring Movement Without Confusing It with Demand
Calculate inventory turnover using cost-based inputs, then distinguish leaner stock management from write-downs, stockouts, and seasonal distortions.
Business financial analysis
Capital Expenditure Versus Expense: Following Equipment Through the Accounts
Trace an equipment purchase from cash outflow to asset recognition and depreciation, and understand why capital spending is not an immediate profit charge.
Business financial analysis
Depreciation Estimates: How Useful Life Changes Margins and Asset Values
Evaluate useful-life and residual-value assumptions with a hypothetical asset, separating reported expense changes from actual operating improvement.
Business financial analysis
Operating Leverage: Why Small Sales Changes Can Produce Large Profit Changes
Explore fixed and variable costs through a hypothetical service business, showing how operating leverage magnifies both expansion and contraction.
Business financial analysis
Break-Even Analysis: Testing Volume, Pricing, and Capacity Assumptions
Calculate a hypothetical break-even volume, then examine how contribution per unit, capacity limits, and cash commitments alter the conclusion.
Business financial analysis
EBITDA: What It Removes and What It Leaves Unanswered
Reconcile EBITDA to earnings and test its limits with two hypothetical firms whose identical EBITDA masks different investment and financing needs.
Business financial analysis
Adjusted Earnings: Deciding Whether an Excluded Cost Is Economically Recurring
Evaluate earnings adjustments by recurrence, symmetry, and business necessity, using a hypothetical reconciliation rather than accepting labels at face value.
Business financial analysis
Free Cash Flow: Why the Definition Must Travel with the Number
Compare common free-cash-flow constructions and distinguish operating cash less capital spending from cash remaining after contractual commitments.