Guide to Financial Statements Financial Statements are the single most valuable source of financial information on a business – providing valuable insights into a company's financial health and performance. As a manager, investor, shareholder, employee, supplier, customer, government, or a creditor, having the ability to analyse and interpret financial statements is a critical
Pecking Order Theory: Definitions, Concepts and Examples Deciding how to finance a company's operations and growth is a what corporate finance is all about! Companies must choose how to raise capital from various internal and external sources. The pecking order theory provides an influential model for thinking about how companies make these financing decisions.
Mergers Explained: Definitions, Concepts and Examples Mergers are an important part of the corporate finance world. Companies pursue mergers for a variety of strategic reasons, and understanding mergers is key to interpreting events in the business world. This article will explain what mergers are, why they happen, the different types of mergers, the
Gearing Ratio Explained: Definitions, Formulas, and Examples Gearing ratio is an important financial metric that measures the level of debt used to finance a company’s assets and operations relative to equity. The gearing ratio gives insight into a company’s financial leverage and helps evaluate its financial risk. It doesn’t have an agreed textbook
Fixed Costs Explained: Definitions, Formulas and Examples Fixed costs are a parallel concept to variable costs in corporate finance and business management. Understanding fixed costs allows companies to better forecast their expenses, set prices, and make informed budgeting decisions. Article Contents What are Fixed Costs? Variable Costs vs
Sensitivity Analysis Explained: Definitions, Formulas and Examples Sensitivity analysis is an indispensable tool utilized in corporate finance and business analysis to comprehend how the variability in key input variables influences the performance of a business. By methodically adjusting the inputs and observing the ensuing effect on outputs, analysts can discern which variables have
LBO Modelling Explained: Definitions, Concepts, and Examples LBO (Leveraged Buyout) Modelling is one of the core tools for M&A in corporate finance. LBO models are a type of financial model which is built to evaluate the financial viability and returns of a leveraged buyout transaction. Article Contents What
Earnings per share (EPS) is a key metric used to evaluate a company's profitability on a per-share basis. EPS indicates profitability for per ordinary share over the company reporting period and is disclosed in its financial statements – usually on the same page as the Income Statement. EPS provides insights into a company’s financial health
Dividend Coverage Ratio (DCR) Explained: Definitions, Formulas, and Examples Dividend coverage is an important risk metric for equity analysts and investors, spotlighting a company's ability to pay dividends to its shareholders. The dividend coverage ratio (DCR) serves as a crucial metric to gauge how secure a dividend payment. This article calculates the dividend
Annuities are an essential concept in both individual finance and corporate finance contexts. A simple annuity is a series of equal payments made at equal intervals over a specified period. Perpetuities are a special class of annuities which literally go on forever. Between 1751 and 2015 the British Government had a number of these (potentially)
