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Concept
Net Book Value
Net Book Value
(NBV) represents the
value of an asset
as recorded on a
company's balance sheet
, calculated as the
original cost
minus
accumulated depreciation
, amortization, and any
impairment charges
. It is a
crucial measure
for assessing the remaining
value of an asset
over time and is often used in
financial analysis
to determine the
worth of a company's fixed assets
.
Relevant Fields:
Accounting 100%
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Concept
Depreciation
Depreciation is the
accounting method
used to allocate the cost of a
tangible asset
over its
useful life
, reflecting the
asset's consumption
, wear, or obsolescence. It allows businesses to
spread the expense
of an asset over time,
matching the cost
with the
revenue it generates
, and providing
tax benefits
by
reducing taxable income
.
Concept
Amortization
Amortization is the process of
spreading out a loan
or
intangible asset cost
over a
fixed period
, typically through
regular payments
. It helps
businesses and individuals
manage large expenses by breaking them down into more manageable, periodic payments while also accounting for the
decreasing value of an asset
over time.
Concept
Impairment
Impairment refers to a
reduction in the recoverable amount
of an asset below its
carrying amount
, necessitating a
write-down in financial statements
. It is a
crucial consideration in accounting
, ensuring that assets are not overvalued and reflect their
true economic value
.
Concept
Balance Sheet
A
balance sheet
is a
financial statement
that provides a
snapshot of a company's financial position
at a specific point in time, detailing its assets, liabilities, and
shareholders' equity
. It is crucial for assessing the
financial health
, liquidity, and
capital structure
of a business, allowing stakeholders to make
informed decisions
.
Concept
Fixed Assets
Fixed assets
are
long-term tangible pieces of property
or equipment that a firm owns and uses in its operations to generate income, and they are
not expected to be consumed
or
converted into cash
within a year. These assets are subject to depreciation, which is the gradual
reduction in value
due to
wear and tear
, obsolescence, or age.
Concept
Asset Valuation
Asset valuation
is the process of determining the
fair market value
of an asset, which is crucial for
investment analysis
, financial reporting, and
merger and acquisition decisions
. It involves various methodologies and considerations, such as
market conditions
,
asset characteristics
, and
economic factors
, to ensure accurate and
reliable valuations
.
Concept
Historical Cost
Historical cost
is an
accounting principle
that records an asset at its
original purchase price
, without adjusting for inflation or
market fluctuations
. This provides a consistent and
verifiable valuation
basis but may not reflect the current
market value of the asset
.
Concept
Financial Analysis
Financial analysis
involves
evaluating businesses
, projects, budgets, and financial statements to determine their performance and
suitability for investment
. It is essential for making
informed decisions
, identifying
financial strengths
and weaknesses, and forecasting future financial conditions.
Concept
Book Value
Book Value
represents the
net asset value
of a company as recorded on its
balance sheet
, calculated by subtracting
total liabilities
from
total assets
. It is often used by investors to assess whether a stock is undervalued or overvalued compared to its
market price
.
Concept
Carrying Value
Carrying value
, also known as
book value
, refers to the
value of an asset
as recorded on a
company's balance sheet
, calculated as the
original cost
minus
accumulated depreciation
, amortization, or
impairment costs
. It is crucial for assessing the
financial health of a company
and determining the
potential gains or losses
upon the
sale of the asset
.
Concept
Asset Disposal
Asset disposal
refers to the process of
removing an asset
from a
company's balance sheet
, typically through sale, destruction, or donation, and is crucial for
accurate financial reporting
and
tax purposes
. It involves
calculating the gain or loss on disposal
, which impacts the
financial statements
and may have
tax implications
for the business.
Concept
Residual Value
Residual value
is the
estimated amount
that an asset will be worth at the end of its
useful life
or
lease term
, impacting
depreciation calculations
and
lease agreements
. It is crucial for
financial forecasting
and
investment decisions
, as it affects the
overall cost
and profitability of owning or
leasing an asset
.
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