Accounting / July 15, 2018 / Holly Mercer
Discount rate. Use a credit-adjusted risk-free rate to discount cash flows to their present value. Thus, the credit standing of a business may impact the discount rate used.
Probability distribution. When calculating the expected present value of an ARO, and there are only two possible outcomes, assign a 50 percent probability to each one until you have additional information that alters the initial probability distribution. Otherwise, spread the probability across the full set of possible scenarios.
Net interest margin is typically used for a bank or investment firm that invests depositors' money, allowing for an interest margin between what is paid to the bank’s client and what is made from the borrower of the funds.
Every business needs cash to operate. Cash flow refers to the amount of operating cash that "flows" through the business and affects the business’s liquidity. Cash flow reports reflect activity for a specified period of time, usually one accounting period or one month. Maintaining tight control of cash flow is especially important if your small business is new, since ready cash can be limited until the business begins to grow and produce more working capital.
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