Cost of capital is an alternative investment that an investor can invest to get equal rate of return. In other words, it is the opportunity cost that an investor can invest the same money in another investment which is having similar risk and other characteristics. It plays an important role ... Read More

Importance of financial ratios is as follows −By analysing and inspecting the previous results, ratio analysis can relate between different items.Ratio analysis can be used to prepare budget, can formulate policies and also used to plan future.Ratio analysis tells whether the firm is improving or not.Ratio analysis act as surveyor ... Read More

The major differences between temporary working capital and permanent working capital are as follows −Temporary working capitalIt’s the additional working capital to permanent working capital.Variable working capital.Dependent on variable factors.Sometimes increase/decreases (fluctuates from time to time) in nature.Financed through short term funds.Categorised into seasonal working capital and special working capital.Permanent ... Read More

The major differences between net working capital and gross working capital are as follows −Net working capitalQualitative in nature.Tells about whether company can meet its operating expenses and its current liability.Net working capital is result of difference between current and current liability.Concept used in accounting system.Suitable for partnership firms and ... Read More

The major differences between profitability and liquidity are as follows −ProfitabilityProfit made by the company in a period/during a year.May not have enough liquidity.A company which is profitable can go for bankrupt if it does not have liquidity in short term.Present in income statement.Determines Gross profit margin, net profit margin, ... Read More

The major differences between turnover and profit are as follows −TurnoverTotal amount of cash received from sales by a company in certain period.Also called as revenue, sales, topline.Turnover is the multiplication of unit selling price to number of units sold.It is the superior one and is independent of profits.Turnover/revenues from ... Read More

The major differences between corporation and incorporation are as follows −CorporationIncorporationIt’s an entity to run a business.First process in registration as corporation.It is termed as CORP.It is termed as INC.Second stage of business.Takes place incorporation register process.Holds liabilities on personal assets.Limited liability.Outcome of incorporation process.Should follow legal process.Don’t get funds ... Read More

The major differences between dividend and growth are as follows −DividendShorter time horizon (cash inflow is regular).Cash flow (stocks) at periodic intervals.Release of excess return.Tax free (money received).Less risk (money will get at regular intervals).Outperform growth stocks.Less volatile.Capital appreciation and cash flows (upside).Usually perform even in bear market.Investors will look ... Read More

The major differences between asset purchase and stock purchase are as follows −Asset PurchaseStock PurchaseTransfer of ownership is not possible.Transfer of ownership is available.Can claim tax benefits.Can’t claim tax benefits.Less complexity.More complex.Re-negotiation on employee agreement is available.Re-negotiation of employee agreement is not available.Buyers can choose risk and liabilities to bear.Buyers ... Read More

The major differences between short term capital gain and long term capital gain are as follows −Short term capital gainsHeld for less than a year or a period and then sold off.Difference between consideration received and cost basis (short term asset).If the asset is owned for less than 24 months ... Read More