Business Finance and Accounting: Economic value
It must be taken into consideration that, economic value added refers to one of the most essential terms in case of corporate finance. This would help in order to calculate the profits of the organization. The main goal for economic value added would be to earn subsequent amount of profits which would be less than the cost of capital. The second terms which the CFO should be well acquainted with refers to Profit Margin. Profit Margin refers to a measure of profitability. This would help to create a comparison amongst two or more companies based upon the profits earned. Profit margin would be calculated by dividing net income from the revenues earned & then convert them in to denomination of 100. The fixed turnover ratio shall be used in order to estimate or value the assets (fixed) added within the Balance Sheet. This figure would help in order to provide a fair idea to its stakeholders regarding the how the fixed assets could be generated from the sales figure. The Break even analysis refers to one of the most important term in cost accounting. BEP refers to a point which would seek the level at which the cost & revenue earned would be equal. At this point the organization would neither have loss nor profit. In the end, sales forecasts should be done by the organization. This would help in order to see how much & when the levels of sales would increase or decrease. Good forecasting shall be practiced within the organization. This should be taken in a positive sense as the forecasting done today would affect the organization in the future years to come.
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