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Free Cash Flow vs. Operating Cash Flow: An Overview Free cash flow is the cash that a company generates from its normal business operations before interest payments and after subtracting any money spent on capital expenditures. Capital expenditures, or CAPEX for short, are purchases of long-term fixed assets, such as property, plant, and equipment. Operating cash flowon the other hand, …

When people think of restaurant chains, they think of the most popular ones; McDonald’s, KFC, Pizza Hut, and so on. However, the fastest-growing restaurant chains in the U.S. are names that might not be common to most eaters. On top of that, the rise of the health-conscious consumer has made an impact on what is most popular these days. The …

What Is a Leverage Ratio? A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt (loans) or assesses the ability of a company to meet its financial obligations. The leverage ratio category is important because companies rely on a mixture of equity and debt to finance their operations, …

What Is a Red Clause Letter Of Credit? A red clause letter of credit is a specific type of letter of credit in which a buyer extends an unsecured loan to a seller. Red Clause Letters of Credit permit documentary credit beneficiaries to receive funds for any merchandise outlined in the letter of credit. These letters are commonly used by …

What Is the Average Annual Return (AAR)? The average annual return (AAR) is a percentage used when reporting the historical return, such as the three-, five-, and 10-year average returns of a mutual fund. The average annual return is stated net of a fund’s operating expense ratio. Additionally, it does not include sales charges, if applicable, or portfolio transaction brokerage …

What Is Section 16? Section 16 is a rule within the Securities Exchange Act of 1934 (SEA) that articulates the regulatory filing responsibilities that directors, officers, and principal stockholders are legally required to adhere to. The Securities and Exchange Act of 1934 is a law that governs the secondary trading of securities in the U.S. This wide-ranging legislation was established …

What Is a Benefit Period? A benefit period is the length of time during which an insurance policyholder or their dependents may file and receive payment for a covered event. All insurance plans will include a benefit period, which can vary based on policy type, insurance provider, and policy premium. Most individuals are familiar with the benefit period for healthcare insurance, but disability, long-term care, homeowners, …

What Are Successful-Efforts and Full-Cost Accounting? Companies involved in the exploration and development of crude oil and natural gas can choose between two accounting approaches: the successful-efforts (SE) method and the full-cost (FC) method. These approaches differ in how they treat specific operating expenses related to the industry.  Key Takeaways Successful-efforts accounting allows a company to capitalize on only …

You can learn a lot from looking at the disclosures made about a company’s board of directors in its annual reportbut it takes time and knowledge to pick up clues on the level of quality of a company’s governance as reflected in its board’s composition and responsibilities. In theory, the board is responsible to the shareholders and is supposed to …