In this article, we’ll define predatory pricing and take a closer look at how it works, its short- and long-term effects, and real-world examples. How Does Predatory Pricing Work? Predatory pricing is a strategy that unethical businesses adopt for customers to flock toward their goods or services and away from competitors—often those with smaller financial…
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What Is Revenue Recognition? 5-step Model & Best Practices
Revenue recognition is the five-step process that businesses must follow to recognize revenue properly. It starts with identifying contracts with customers and ends with revenue recognition.
Knowing what revenue recognition is and its importance in financial reporting helps businesses make informed decisions and have a clear picture of business performance and financial health. To help you recognize revenue properly, we’ll borrow the five-step model from ASC 606, which determines the GAAP for revenue recognition. Even if your business isn’t required to comply…
What Is a Periodic Inventory System & When Is It Used? (+ Example)
A periodic inventory system is a method of valuing inventory in which inventory is counted at predetermined intervals.
With a periodic inventory system, the determination of inventory levels and calculation of the cost of goods sold (COGS) for a business takes place at regular intervals, as opposed to being a continuous process. A periodic inventory system relies on physical counts of inventory, which are carried out periodically (e.g., monthly, quarterly, or annually), instead…
What is Property, Plant, and Equipment (PP&E) in Accounting?
Property, plant, and equipment (PP&E) refers to a company’s long-term tangible assets that are used in its operations to generate income. These assets are expected to last for more than one accounting period, typically for a year or more, and are essential for the business to function. Understanding a company’s investment in PP&E can be…
Tipped Minimum Wage: What It Is & Rates by State
Tipped minimum wage is the lowest amount that businesses, like restaurants and resorts, can pay their tipped employees. Currently, the federal tipped minimum wage is $2.13 per hour, but each state has its own regulation. The tipped minimum wages paid by the employer plus the tips received need to equal at least the full minimum…
What Is the Bullwhip Effect? Causes, Examples & Impacts
The bullwhip effect occurs when small changes in customer demand cause large changes in ordering and inventory upstream in the supply chain. The name comes from the physics of using a whip—a smaller force or movement at one end can result in a much more powerful movement at the other end. In this article, we’ll…
Restaurant Insurance Cost & Coverage for Your Business 2024
Restaurant insurance is a policy, or combination of policies, that protects restaurants from financial harm. This harm can be to your property or the financial stability of your company from a lawsuit brought by a third party for different types of losses (e.g., a lawsuit related to food poisoning). The most common type of policy…
Maternity Leave Policy & Laws (+ Free Templates & State Guide)
A maternity leave policy covers employee eligibility and maternity leave duration, along with benefits and other details associated with your policy. Under the federal Family & Medical Leave Act (FMLA), employers with 50 or more employees must provide unpaid maternity leave. Some states, however, require paid maternity leave, and some businesses choose to offer paid…