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Word of the Week 'Business Cycle'

Word of the Week 'Business Cycle'

What is the 'Business Cycle' The business cycle describes the rise and fall in production output of goods and services in an economy. Business cycles are generally measured using rise and fall in real – inflation-adjusted – gross domestic product (GDP), which includes output from the household and nonprofit sector and the government sector, as well as business output. "Output cycle" is therefore a better description of what is measured. The business or output cycle should not

Word of the Week 'Retained Earnings'

Word of the Week 'Retained Earnings'

What are 'Retained Earnings' Retained earnings are the cumulative net earnings or profit of a firm after accounting for dividends — some people refer to them as earnings surplus. Retained earnings are the net earnings after dividends that are available reinvestment in the company's core business or to pay down its debt. Companies record retained earnings under shareholders' equity on the balance sheet. The formula calculates retained earnings by adding net income to or subtra

Word of the Week 'Income Statement'

Word of the Week 'Income Statement'

What is an 'Income Statement' An income statement is a financial statement that reports a company's financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period. BREAKING DOWN 'Income Statement' Also known as the profit and loss statement or st

Word of the Week 'Gross Margin'

Word of the Week 'Gross Margin'

Gross Margin What is 'Gross Margin' Gross margin is a company's total sales revenue minus its cost of goods sold (COGS), divided by total sales revenue, expressed as a percentage. The gross margin represents the percent of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services it sells. The higher the percentage, the more the company retains on each dollar of sales, to service its other costs and debt obl

Word of the Week 'Return on Equity'

Word of the Week 'Return on Equity'

What is 'Return on Equity (ROE)' Return on equity (ROE) is the amount of net income returned as a percentage of shareholders' equity. Return on equity (also known as "return on net worth" [RONW]) measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. ROE is expressed as a percentage and calculated as: Return on Equity = Net Income/Shareholder's Equity Net income is for the full fiscal year (before div