Auditing a Business

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How Dividend Policy Influences the Cost of Equity

The cost of equity is heavily influenced by the corporation’s dividend policy. When a company makes a profit, that profit technically belongs to the owners of the company, which are the stockholders. So [more…]

Choose the Proper Capital Structure

From the corporation’s perspective, investing, debt, and equity all come back to the original question of how to fund its operations and how to properly balance the amount of debt or equity that is being [more…]

Analyze a Corporation's Financial Success

Determining how financially successful a corporation is actually provides a lot more information about the corporation than simply how well it manages money. Financial performance analyses are the way [more…]

Conventional Evaluations of Investment Performance

The degrees of success being generated by corporations can be measured in many ways. There are several different methods for evaluating the success of standard capital investments as well as financial [more…]

Portfolio Manager Evaluations

One concept that can be applied to any expenditure or investment is generally applied to evaluations of the success of investment portfolio managers. These evaluations involve [more…]

Collect Data to Analyze Your Corporation’s Future Financial Performance

Before you can analyze any of the data that will actually help you project your corporation’s future financial performance, you need to actually collect that data. Thankfully, in the age of the Internet [more…]

Determine an Average from Your Financial Data

After you collect all your financial data, you need to figure out what to do with it. You need to do some simple descriptive calculations of statistics and [more…]

Determine the Distribution of Financial Data

You can measure the manner in which data is distributed around the average in a few different ways. Obviously, not all the numbers in a data set are going to be exactly the same as the average. Say that [more…]

The Role of Probability in Analyzing Financial Data

Probability theory is pretty easy. The total probabilities of an event occurring or not will always equal 100 percent. If you have a 10 percent probability that something may happen, then you have a 90 [more…]

Find Trends and Patterns in Financial Data

When you review historical financial data, the first thing one should do is look for trends and patterns. If you can identify trends that are occurring and any cyclical patterns that have happened in the [more…]

Look at Regression When Analyzing Financial Data

The goal of regression is to look at past data to determine whether there are any variables that are influencing financial movements. This process now typically utilizes very advanced computer programs [more…]

Use Statistics and Probability to Make Financial Forecasts

To forecast your finances, you watch for trends, patterns, and relationships, determine the probability of these influencing a particular outcome, and use that to model your forecast. [more…]

How to Optimize Portfolio Risk

Collections of individual assets interact together to influence the overall portfolio. So when several investments are lumped together in a portfolio, every single investment has an influence on the portfolio [more…]

How to Enforce Strong Internal Accounting Controls

Any accounting system worth its salt should establish and vigorously enforce effective internal controls— basically, additional forms and procedures over and above what’s needed strictly to move operations [more…]

Internal Controls against Mistakes and Theft

Internal controls are designed to minimize errors in bookkeeping that processes a great deal of detailed information and data. Equally important, controls are necessary to deter employee fraud, embezzlement [more…]

How to Juggle the Books to Conceal Embezzlement and Fraud

Fraud, embezzlement, and illegal practices occur in large corporations and in one-owner/ manager-controlled small businesses — and in every size business in between. The purchasing managers in any size [more…]

How to Scan Revenue and Expense Horizons

Recording sales revenue and other income can present some hairy accounting problems. The — accounting rule-making authorities — rank revenue recognition as a major problem area. A good part of the reason [more…]

How Auditors Discover Fraud, or Not

Auditors have trouble discovering fraud for several reasons. The most important reason is that those managers who are willing to commit fraud understand that they must do a good job of concealing it. [more…]

How to Finance Your Micro-Entrepreneurial Business

At some point, your micro-entrepreneurial business may need financing to help pay for things, such as expansion. Maybe you’re a micro-entrepreneur with a home-based business that needs financing to warehouse [more…]

How to Hire Permanent Employees for Your Micro-Entrepreneurial Business

Hiring an employee isn’t a light decision, so if you decide to add permanent people for your micro-entrepreneurial business, tread carefully. Outsourcing is a temporary and limited solution for some workload [more…]

13 Ways to Spot Fraud in Business Financial Statements

Financial statement fraud, commonly referred to as "cooking the books," involves deliberately overstating assets, revenues, and profits and/or understating liabilities, expenses, and losses. When a forensic [more…]

The Securities Act of 1933: Arming Investors with Information

The Securities Act of 1933 is sometimes referred to as the “truth in securities” law, because it requires that investors receive adequate and thorough financial information about significant aspects of [more…]

The Securities Exchange Act of 1934: Establishing the SEC

Although the 1933 Act set ambitious goals and standards for disclosure, it was silent on the practical aspect of enforcement. To plug this hole, Congress passed the Securities Exchange Act of 1934, which [more…]

What Is a Security?

Sarbanes-Oxley Act (SOX) makes reference to the Securities Act of 1933 and the Securities Exchange Act of 1934 for purposes of defining what is and is not a security. Both acts contain similar definitions [more…]

How Stock Exchanges Work

After a company decides to go public, it has some important decisions to make about how to market its shares to the public: Should it register to sell the shares on a stock exchange? If so, which exchange [more…]

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