By having a grasp of the Rule of 72, you can make more informed decisions regarding your investments, savings, or loans. This indicates that prices would double in around 24 years due to inflation. Similarly, if the inflation rate is 3%, dividing 72 by 3 gives you 24. The Rule of 72 works on the […]

This approach provides a more accurate picture of a company’s cost of goods sold (COGS) and can be particularly useful for businesses that experience significant fluctuations in costs. If the standard cost of producing a widget is $5, and the desired profit margin is 20%, the selling price can be set at $6. Knowing the […]

Under U.S. GAAP, all nonmanufacturing costs (selling and administrative costs) are treated as period costs because they are expensed on the income statement in the period in which they are incurred. In Chapter 2, we discussed how to report manufacturing costs and nonmanufacturing costs following U.S. Whatever the outcome, companies with limited resources are wise […]

Where Net Income is the total profits earned by the company during the period, preferred Dividends are the dividend amounts paid to preferred shareholders. Return on equity (ROE) is a popular profitability metric that calculates how efficiently a company generates profits from its shareholders’ equity. A high P/E suggests that investors expect higher growth from […]