Calculate Value in Use under IAS 36
The core underlying principle of IAS 36 Impairment of Assets is that an asset’s carrying value in the financial statements of the company should not exceed the highest amount the business can recover through its use or sale. The standard applies to all assets for which there are no impairment considerations elsewhere. As an example, […]
Opportunity Cost in Financial Modeling and Analysis
Introduction Opportunity cost represents the benefits the business misses out on when picking between alternatives. When we have two desirable options, the benefit from the one not chosen is our opportunity cost. These costs are usually the result of bottlenecks in business processes. Therefore, finance professionals use Opportunity Cost analysis to improve the decision-making process […]
Using the Net Present Value (NPV) in Financial Analysis
The Net Present Value (NPV) is a profitability measure we use to figure out the present value of all expected future cash flows a project or investment will generate, including the initial capital we invest. It shows us the difference between the current value of cash inflows and outflows over a period. Net Present Value […]