Day: August 30, 2024

What is an Income Statement?

Income statements are defined as financial reports that are used by businesses to keep track of the expenses, gains, revenue, and losses of the company during a set period. These income statements are also known as the statement of revenue or the profit and loss (P&L) statement. They are considered one of the three most important financial statements used to analyze and report a company’s financial performance during a set accounting period. This statement provides crucial insight into the operations of the company, the sectors that are underperforming, management efficiency, and the performance of the company as compared to the competition. 

Now that you understand what an income statement is, keep on reading to understand how to analyze income statement based on key metrics. 

How to Analyze Income Statement?

To analyze income statements, the two techniques that are most frequently used are vertical analysis and horizontal analysis. 

Vertical Analysis

Vertical analysis is a financial analysis technique where each line item in the statement is listed as a percentage of a base amount. This technique involves scrolling down a single column of data in an income statement to analyze how various line items relate to one another. 

As relative proportions can be seen, vertical analysis makes comparison of income statements between companies, industries, and periods simple as well as convenient. It can be easily used to analyze whether the key performance indicators are progressing. 

Horizontal Analysis

As explained above, vertical analysis focuses on each line item as a percentage of a base figure within a current period whereas horizontal analysis compares as well as reviews changes in the ₹amounts in an organization’s income statements over multiple reporting periods. Horizontal analysis is also used in absolute comparisons but it can be used as percentages too. 

Horizontal analysis is valued over vertical analysis by investors and analysts as it can improve the reviews of a company’s consistency over time, as well as its growth compared to competitors. Moreover, if used correctly this analysis can also help you identify factors that influence the financial performance of a company over time. Analysts also use this technique to spot trends throughout time, like comparisons between Q1 and Q2, instead of displaying how specific line items connect. 

When you analyze an income statement, the question should not be which technique is the best- vertical or horizontal. You should learn how to effectively combine both types of analysis to unearth critical data needed to make the right decision for your company. If you combine both techniques, you can gain more insight than using just one of the methods. 

5 Key Metrics to Focus On When Analyzing Income Statement?

When analyzing income statements, all the available financial data is important to gain an insight into the financial health of the company, however, there are certain key metrics that you must focus on. These include:

Revenue

Also referred to as sales, revenue represents the amount that a company earns through normal operations and sales of goods or services to customers over a set period. Revenue data includes:

• Revenue by product
• Revenue by customer/channel
• Revenue by location 

Gross Margin

This is a key profitability metric as it provides a snapshot of how much revenue remains once the cost from product and service production is deducted. The formula for gross margin is:

Gross Margin = Revenue – Cost of Goods Sold

Gross Margin % = Gross Margin/Revenue

This kind of categorisation is important to implement cost-controlling initiatives effectively. 

Contribution Margin

This is a profitability metric that plays a key role in analyzing performance at a product or service level. Contribution margin is a crucial metric used to evaluate the scalability of the business in conjunction with a cost-volume-profit-analysis. 

Contribution Margin = Product Revenue – Product Variable Cost

Net Income

Net income is an indicator that tells about a company’s bottom line or the overall profitability of the business. This is a simple and effective metric that helps determine how much revenue exceeds expenses or vice versa. 

Net Income = Revenue – Expenses

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and Management Adjusted (EBITDA)

EBITDA also known as Management Adjusted EBITDA, are non-GAAP metrics that are used to analyze and assess the performance of the company as a proxy for operating cash flow. This metric allows business owners to determine the financial health of a company, without taking into consideration the impacts of financing and accounting decisions. 

EBITDA = Revenue – Expenses + Interest + Taxes + Depreciation + Amortization

Conclusion

Income statements play a crucial role in displaying how a business or company makes or spends money over time. With the help of an income statement, you can learn a lot about the business’s health and a comparison of income statements of several years can also highlight important trends. 

If you want to build a career in the world of finance, then a Chartered Financial Analyst (CFA) charter is a finance credential that can open doors to diverse opportunities. The CFA course by Imarticus Learning covers economics, investment analysis, accounting, and ethics in a well-structured curriculum that can significantly boost your career.

The AI industry is at an all-time high, with a projected CAGR of 38.1%. It is estimated that the AI industry is going to reach a staggering $1,811.8 billion on a global level. This growth can also be attributed to ground-breaking advancements in generative AI tools like ChatGPT and Google Bard.

Both ChatGPT and Google Bard have been huge contributors to revolutionising the way people interact with the text. On one hand, Bard, which is designed by Google, aims at captivating audiences with its exceptional storytelling, whereas ChatGPT, a brainchild of OpenAI, specialises in generating conversational responses that mimic human-like interactions. Both Google Bard and ChatGPT models have gained prominence in the tech world and found applications across various industries. 

Keep on reading, to gain a comprehensive insight into Bard Vs ChatGPT comparison, their features, and how their unique product strengths can enhance customer experiences while at the same time helping streamline operations in the digital world of today.

What Powers Google Bard vs ChatGPT?

When it comes to the Bard vs ChatGPT discussion, the first question that comes to mind is- which is better? Both Bard and ChatGPT are extremely advanced chatbots that are powered by AI and they both have gained prominence in the tech world for their ability to generate coherent and contextually relevant text. However, when it comes to Google Bard vs ChatGPT comparison, they both have some differences in their development and capabilities. 

Keep on reading to get an insight into the features of both Bard vs ChatGPT.

Google Bard

Bard, developed by Google is an AI-powered chatbot that is created to give fresh, high-quality responses to queries put up by users. Powered by LaMDA , Bard is a large language model that is trained on a huge dataset consisting of text and codes with the primary focus on giving high-quality responses to users. Google Bard is designed to be a chatbot that is not just helpful to users but also informative. 

ChatGPT

ChatGPT, was launched in late November 2022 by OpenAI and gained immense popularity. It surpassed 100 million active users within two months of its launch, which makes it one of the fastest-growing consumer applications in history.  Based on OpenAI’s, highly advanced language model- GPT 3.5 architecture, ChatGPT is known for its conversational abilities as well as its potential to generate coherent and contextually relevant text to user queries. 

Google Bard vs ChatGPT- A Comparison

Below is a side-by-side comparison of the features of Google vs ChatGPT and what makes them unique. 

Endnotes

There is no doubt that in the world of conversational AI, both Bard and ChatGPT are powerhouses and are also extremely impressive language models. When it comes to choosing between Bard vs ChatGPT, the choice depends on specific use and the type of interaction that a user seeks. Both of them come with their own unique set of capabilities and the choice also depends on the preferences and requirements of the user.

If you want to build a successful career for yourself in the field of AI, then joining a senior leadership course in your chosen sector can give your career journey the boost it needs. Imarticus Learning has forged trusted partnerships with global leaders to develop industry-approved learning material, deliver world-class training, and offer internationally recognised certifications. Visit now and seek guidance from experts. 

In today’s dynamic business environment, it is essential for organisations to make the right predictions for future trends to stay viable and succeed. The objectives of forecasting in business depend on how you are developing an informed evaluation of future events and situations. With business forecasting, you can make accurate predictions for future trends by examining current and historical data. Basically, forecasting is a type of tool that aids companies in making well-informed business decisions about their forthcoming. So, let’s understand the core objectives of forecasting in business.

What is Business Forecasting?

Business forecasting contains the tools and techniques that are used in predicting the developments in business, such as expenses, sales, profits and losses. The main objective of forecasting in business is to establish improved strategies on the basis of these informed future predictions, helping to remove possible losses before they occur. Through quantitative or qualitative models, historical data is collected and examined to identify the problems. 

Types of Forecasting in Business

Generally, there are two types of models that are used for forecasting in business, which include:

• Quantitative Models: Quantitative is a long-term method of forecasting in business that is examined with assessable data such as statistics and historical data. Previous performance is used to detect trends or rates of change. Through this approach, organisations can predict if variables like sales, housing values and gross domestic product, will be for a long period. Quantitative models include:
• Econometric Modelling: This is a mathematical model that uses multiple regression equations to test the internal consistency of datasets over time and the importance of the relationship between datasets. This is useful for predicting economic shifts and the possible impact of those shifts on the organisation. Basically, these models are used in sectors, including financial forecasting, pricing strategies and market analysis.
  
• Indicator Approach: This approach observes the relationship between certain indicators and makes use of the leading indicator data to evaluate the performance of the lagging indicators. Lagging indicators assess business performance eventually and provide the understanding of business strategies impact on the acquired results.
  
• Trend Analysis Method: It is one of the most common methods that uses historical data to predict future trends. Also known as ‘Time Series Analysis’, this forecast method helps organisations get significant views of the future by tracking past data. Also, this is the most affordable method.
• Qualitative Models: Qualitative is a short-term method of forecasting that depends on industry experts. This method is particularly valuable in forecasting markets for which past data is limited to make statistically appropriate decisions. Qualitative models include:
• Market Research: With a large number of people, polls and surveys are organised about a specific product or service to predict whether the amount of the consumption will less or rise.
  

• Delphi Model: Polling is done by asking a panel of experts for their opinions on specific topics. Their estimations are collected anonymously and made a forecast.

Importance of Forecasting in Business

Forecasting is essential in businesses because it provides the capacity to make well-informed decisions and develop business strategies. Financial and operational forecasting depends on present market situations and estimations of future trends. Historical data is collected and examined to discover patterns that are useful in the prediction of future events and changes.

The core objectives of forecasting in business include – helping forecasters to not only create prediction reports effortlessly, but also understand the predictions better and how to make informed decisions based on these predictions. 

Here are some reasons why forecasting is important in business:

• It enables businesses to set goals and make strategic plans for the future.
• It is essential in financial planning that helps organisations evaluate revenues, expenses and profits for the future.
• It aids organisations in detecting issues, possible risks and doubts, and makes risk management strategies to minimise them.
• It provides forecasters with beneficial insights and data, which can help them make well-informed decisions.

What is Financial Forecasting?

Financial forecasting helps organisations estimate their financial health for the future by tracking historical data. Additionally, the process should study the main market conditions and past financial trends. The main objectives of financial forecasting include the understanding of future economic performance, enabling organisations to make informed decisions and create strategic plans. 

By examining historical financial data, market trends, and other related factors, financial professionals can create forecasts for crucial financial metrics, such as expenses, revenue, profits and balance sheet items.

For those interested in transforming their career in this field, a financial analyst course can provide a complete industry-approved syllabus, exclusive real-world projects and practical training. 

Conclusion

Forecasting in business is an essential tool that helps make informed decisions about the future of the company. The core objectives of forecasting are to predict the future which can help businesses assign resources and determine the investment allocation, staffing, budgeting, marketing and more. Without forecasting, a business may not be able to regulate itself to the right path of success.

If you are looking to transform your career in the financial sector, then enrol in the Financial Analysis Prodegree in collaboration With KPMG offered by Imarticus Learning. This 4-month long program helps build a career in investment banking and corporate finance. 

If you want to build your career as an accountant, then there are certain technical accounting skills that you need to excel. Apart from perfecting these technical accounting skills, you will also need to stay on top of deadlines, keep up with the changing regulations, as well as manage clients. In the modern world of today, accountants need to think and go beyond number crunching and become strategic business advisors. Keep on reading to learn about the crucial technical skills for accountants that can help you build a successful career. 

Top Technical Accounting Skills 

Expertise in Accounting Software

In the tech savvy business world of today, it is crucial to know all the ins and outs of accounting and office software such as Excel, QuickBooks, and Google Workspace. This is one technical accounting skill that you need to master as technology keeps bringing new changes in the field of accounting. 

Being Deft at Preparing and Reporting Financial Statements

This is amongst the most crucial technical accounting skills as financial statements are the bread and butter of accounting firms and business operations. You need to have in-depth knowledge on how to report and prepare financial statements if you want to be successful at your job as it will include tracking and reporting on balance sheets, creating income as well as cash flow statements. 

Knowledge of Spreadsheet Software

Excel is one of the most important tools for an accountant even today. This is why, before you pursue a career in accounting, ensure that you understand how to use Excel to organise and manipulate data. In case you don’t have a deft hand at an Excel spreadsheet, take out time and practice. You can even take up an online course before you apply for accounting jobs.

Essential Soft Skills for an Accountant

Apart from technical skills for accountant, you also need to be an expert at certain soft skills. This is important because building strong professional relationships with clients, peers and colleagues is just as important as your ability to perform complex financial analyses. Moreover, these soft skills also give you an edge over other applicants in the accounting job market. These soft skills include:

Communication

Effective communication is very important in almost all business roles and accounting is no different. Apart from being sound with your numbers you are also required to meet clients, stakeholders and fellow employees and you will be required to communicate financial updates. 

Time Management and Organization

You need to organise and also manage your time effectively if you want to become an accountant. During the tax season in the early part of the year, the volume of work usually increases and you will be required to juggle a lot of work including handling clients, making spreadsheets and reports. All this requires keeping a track of your time and staying aware of strict deadlines to file taxes and reports. 

Critical Thinking

It is true that technical accounting skills will make you successful but this job goes way beyond numbers. You will be required to have strong critical thinking skills so that you can deal with ethical dilemmas. Moreover, you will require to report errors and take care of unbalanced spreadsheets after careful thoughts and investigations so that you can come up with the best solutions. 

Problem-Solving

No matter how technologically advanced we become, an accountant needs to predict trends and make financial forecasts through his/her problem solving skills. This is why it remains as one of the most sort-after skills in accountants. You need to remember that employers do not need a robot, they are seeking creative problem solvers who can help with accounting as well as identify innovative solutions to help take their organisation forward. 

Conclusion

A career in accounting can be very fulfilling for you, provided you have the right set of technical accounting skills as well as soft skills. Kickstart your journey in the field of accounting and become a CPA with AICPA at Imarticus. This CPA course can propel your career to new heights, and will also provide you access to the exclusive AICPA community. 

Are you a finance professional? Are you looking forward to playing a leading role in the business domain? If your answer to these questions is a yes, then you need to upskill yourself and acquire knowledge related to crucial business concepts like capital structure in order to help a company maximise its returns. Read on to know the capital structure definition and capital structure theories. 

What is Capital Structure?

Capital structure involves the act of balancing the debt and equity financing of a company. Simply put, it refers to the different sources of funds, including equity and debt, that a company uses to finance its operations and investments. It can be calculated using the following formula:

Capital Structure = Debt / (Debt + Equity)

Here, debt refers to the total amount of debt financing, and equity refers to the total amount of equity financing.

Determining an optimal capital structure helps in minimising the overall cost of capital, which can balance the expenses associated with debt and equity financing. Also, a well-defined capital structure offers much-needed financial flexibility to companies that provides them access to different sources of funding depending on their needs and market conditions. 

Additionally, financial risk can be managed well by properly structuring debt and equity. Further, a company can reduce its tax liabilities by utilising debt in capital structure. Moreover, maintaining an appropriate capital structure leads to enhancing shareholder value.  

A crucial aspect of any organisation, capital structure can influence a company’s value, financial performance and the cost of capital. On the other hand, it is influenced by the industry, size, and risk profile of the company. 

Case Studies on Capital Structure

Here are some case studies that can help develop a better understanding of capital structure theories.

1. A mid-sized industrial company, XYZ Manufacturing opted for a mix of debt and equity while expanding its operations. Its leverage increased by taking on debt and this in turn amplified returns on equity. But, higher leverage is also associated with increased risk. And, the company struggled to meet interest payments when the economy slowed down. It faced financial distress owing to a debt-heavy capital structure during the 2008 financial crisis. To cope, XYZ Manufacturing had to sell assets and renegotiate debt terms.  
2. A research-driven company, ABC Pharmaceuticals aimed to maximise shareholder value. To achieve this, it needed the optimal debt-to-equity ratio. As debt provides a tax shield due to interest deductions, the company leveraged this advantage by issuing bonds. While too much debt could lead to bankruptcy risk, ABC Pharmaceuticals analysed its cost of debt and equity to find the sweet spot.
3. A tech startup, DEF Innovations had a capital requirement for product development. To meet this need, they followed the pecking order theory, which suggests companies prefer 

internal funds first, then debt, and finally equity. Until DEF Innovations reached a stable growth phase, the company relied on retained earnings and short-term debt. Later, it considered equity issuance.

1. When GHI Retail planned to expand globally, it wondered when to issue debt. The company meticulously monitored interest rates and market conditions, and issued debt when rates were favourable. This move of issuing long-term bonds during a low-interest-rate environment helped the company secure funds for its expansion. GHI Retail considered investor sentiments and capitalised on the demand for corporate bonds during bullish markets.

Conclusion

Influenced by risk appetite, industry dynamics, and market conditions, capital structure decisions are multifaceted. They require thoughtful analysis and strategic alignment. If you want to contribute to shaping a company’s financial foundation, then pursuing the Global Senior Leadership Programme Specialisation: Chief Finance Officer course by Indian Institute of Management, Lucknow, can help. Connect with Imarticus Learning for more details. 

If you want to make a mark in the financial and accounting world, then being a Certified Management Accountant (CMA) is the way to go. To be a CMA, you are required to register with the Institute of Management Accountants (IMA) and enrol in the CMA programme. Also, it must be noted that CMA certification provides unique professional benefits that regular bachelor’s degrees don’t. Read ahead to know about the reasons why you should get your CMA USA certificate now!

• Enhance Financial Skills and Knowledge

With a thorough and diligent knowledge of management accounting processes, CMAs perform more specialised tasks than included in a general accountant’s job description. They are responsible for performing budget analysis and planning, making key investment decisions and risk management.

• Career Advancement

If you enjoy managing and mentoring others, then CMA certification can be a fast track to manager-level roles. Demonstrating your knowledge of financial planning and management processes, it helps a professional stand out amongst other accountants for new roles.  

• Get Credibility 

Having CMA certification not only speaks volumes about your skills but also solidifies your status of being a versatile accountant. Certainly, earning a CMA distinguishes you from others in the field, adding increased credibility to your other qualifications. 

• Global Recognition

Holding acclaim around the world, CMA certification is amongst the few accounting credentials that are recognized across international borders owing to its global relevance. Professionals with this universal accreditation are highly respected in the accounting and finance world. If this interests you, then you can enrol in a reputable CMA certification course to begin your journey. 

• Better Understanding of a Business 

Whether it is a regional business or a multinational company, this certification will help you contribute to larger business objectives. By analysing external trends and figures, CMAs prepare data in a digestible way for executive boards and other important company personnel. Also, they have a deeper understanding of a company’s financial workings. 

• Higher Earnings 

It is observed that CMA-certified professionals earn around 60% more than their non-certified counterparts across the world. With an average of Rs 6 lakh offered per annum in India, a Certified Management Accountant earns somewhere between Rs 1.4 lakh and Rs 20 lakh annually.

• International Appeal 

Pursuing a college degree can land you a good job in the finance or accounting sector, but if you want to bag opportunities in another country, then having CMA certification, which is recognised worldwide, is necessary. This is because CMAs are known to have the same level of expertise, irrespective of the country they are working in. And, this makes CMAs preferable for employers. 

• Industry Opportunities 

As financial and accounting functions are available everywhere, CMAs can add value to any industry. From alternative energy, technology and artificial intelligence domains to healthcare and transport sectors, CMAs enjoy endless career development opportunities in varied fields globally.

• Plethora of Positions 

CMA-certified professionals can successfully work as financial analysts, operations managers and vice presidents. Also, they can offer services in different business functions such as management finance, sustainability, and technology. Besides bringing opportunities to build a career, this flexibility also enhances professional satisfaction.

• Great Future Scope

As business organizations or industries are extending to a brighter world, the job outlook for CMAs is growing. According to IMA, new CMAs grew 17% globally since 2019.

Conclusion

Earning a CMA certification provides a boost to professionals at all stages of their careers. CMA-certified professionals not only have unique and substantial skills and knowledge, but also enjoy access to different career paths. If you want to be a CMA, then connect with Imarticus Learning to pursue a well-reputed CMA certification course in India. 

Accounting is an essential component of any organisation, hence it is a consistent and expanding topic. According to an IRCC estimate, more than 79,600 new accountant employment openings are expected between 2019 and 2028.

As the global economy continues to recover from the pandemic, the demand for specialists to store and assess financial records is expected to increase.

This is great news for accounting students and professionals looking to work in the sector. A widely recognized qualification, the ACCA, can not only enhance your chances in a wide range of job areas, but it can also prepare you for a long and lucrative career.

Whether you want to take your initial steps into a career in finance or you’re a financial professional wishing to build strategic leadership skills to boost your earning potential, options of ACCA careers might prove to be a boon for you.

What is ACCA?

The Association of Chartered Certified Accountants (ACCA) qualification is a globally recognised certification in accounting, and finance awarded by the ACCA body in the United Kingdom. It has a structure consisting of three levels, namely Knowledge, Skill, and Professional.

ACCA is accepted in 180 countries and it provides better career opportunities worldwide. The ACCA Course prepares professionals for various domains such as accounting, taxation, management, finance, investment banking, corporate finance, forensic and consulting.

Truths About ACCA That will Direct Your Career 

1. ACCA is a globally recognised qualification: Employers all over the world trust ACCA, through the rigorous training of our students and members, to ensure their businesses operate at the highest international levels. Moreover, ACCA holds recognition from key regulatory bodies in India, including ICAI, SEBI, and RBI, validating its acceptance within the Indian financial sector.
2. Offers success and security with diverse career paths: The field opens doors to diverse ACCA career opportunities in finance, banking, consulting, government, and academia, beyond traditional accounting roles.
3. Inculcates skills for life: An ACCA qualification isn’t just about mastering the numbers, it’s about shaping well-rounded finance professionals equipped with a comprehensive skill set. The ACCA course inculcates strategic thinking, technical expertise, innovative approach, ethical integrity, and leadership and management skills.
4. A flexible qualification for modern students: ACCA accommodates candidates at different career stages, offering a flexible pathway to certification. With its modular structure and recognition of prior learning ensure accessibility for individuals with diverse backgrounds and experiences, not just recent graduates. So, an aspirant can start ACCA at his/her level.
5. ACCA has affordable options and is a valuable investment option: While there are expenses involved with ACCA exams, study materials, and membership, ACCA provides a variety of aid alternatives. These include scholarships, discounts, payment plans, and corporate sponsorship schemes, making the qualification available to people from a variety of backgrounds.

Furthermore, ACCA graduates frequently have superior earning potential, job progression chances, and international reputation.

Essential Details About ACCA

Conclusion 

The ACCA course is intended to provide aspiring candidates with a solid foundation in finance and accounting. Whether you are a 12th-grade dropout with an aptitude for accounting or an established professional, ACCA can help you launch a successful career in accounting.

If you want to get certified, embark on a journey with Imarticus’ Association of Chartered Certified Accountants course. From ACCA-certified teachers and extensive study materials to placement bootcamps, this is your opportunity to develop your accounting career.