Financial Audits – Basic Tests

Financial audits are intended to provide some assurance to the public that a company’s financial statements are presented fairly and accurately, in accordance with the established or stated criteria.  The public may include the shareholders of the company, debtors such as bondholders, banks or other financial institutions and some government entities. In general, a financial … Continue reading Financial Audits – Basic Tests

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Perpetuities – Definition & Calculation

Perpetuity Definition: A perpetuity is an annuity that provides payments indefinitely. Since this type of annuity is unending, its sum or future value cannot be calculated. Examples of perpetuity: Local governments set aside monies so that funds will be available on a regular basis for cultural activities. A children’s charity club set up a fund … Continue reading Perpetuities – Definition & Calculation

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Standard Deviation — Definition & Calculation

Definition: Standard deviation is a measure of how far apart the data are from the average of the data. If all the observations are close to their average then the standard deviation will be small. How to calculate standard deviation:Suppose that an investor has $600 to invest and is considering investing all of it in … Continue reading Standard Deviation — Definition & Calculation

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Information Asymmetry

An economy is said to be characterized by information asymmetry when some parties to business transactions may have an information advantage over others. Types of information asymmetry The first is adverse selection. Adverse selection occurs because some persons, such as managers and other insiders know more about the current condition and future prospects of the … Continue reading Information Asymmetry

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Simple Interest – Definition and Calculation

When we borrow money we are expected to pay for using it – this is called interest. There are three components to calculate simple interest: principal (the amount of money borrowed), interest rate and time. Formula for calculating simple interest: I = Prt Where, I = interest P = principal r = interest rate (per … Continue reading Simple Interest – Definition and Calculation

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