|cost management system (CMS)|
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Definition of cost management system (CMS)
cost management system (CMS)
a set of formal methods
Schedule of depreciation rates allowed for tax purposes.
The argument that specifies that the various agency costs create a complex environment in
The incremental costs of having an agent make decisions for a principal.
Total costs, explicit and implicit.
Also called surplus management, the task of managing funds of a financial
A firm's required payout to the bondholders and to the stockholders expressed as a
The argument that expected indirect and direct bankruptcy costs offset the other
A management style that de-emphasizes the significance of economic
costs that increase with increases in the level of investment in current assets.
Very short maturity bills that the Treasury occasionally sells because its cash
A computerized clearing system for sterling funds
An international wire transfer system for high-value
The application of financial principals within a corporation to create and
Arrangement whereby the shareholders of a project receive output free of
The required return for a capital budgeting project.
Cost of carry
Related: Net financing cost
Cost of funds
Interest rate associated with borrowing money.
Cost of lease financing
A lease's internal rate of return.
Cost of limited partner capital
The discount rate that equates the after-tax inflows with outflows for capital
The net present value of an investment divided by the investment's initial cost. Also called
Dupont system of financial control
Highlights the fact that return on assets (ROA) can be expressed in terms
Equivalent annual cost
The equivalent cost per year of owning an asset over its entire life.
European Monetary System (EMS)
An exchange arrangement formed in 1979 that involves the currencies
The difference between the execution price of a security and the price that would have
Federal Reserve System
The central bank of the U.S., established in 1913, and governed by the Federal
Financial distress costs
Legal and administrative costs of liquidation or reorganization. Also includes
A cost that is fixed in total for a given period of time and for given production levels.
costs, both implied and direct, associated with a transaction. Such costs include time, effort,
Imputation tax system
Arrangement by which investors who receive a dividend also receive a tax credit for
Incremental costs and benefits
costs and benefits that would occur if a particular course of action were
Transaction costs that include the assessment of the investment merits of a financial asset.
Just-in-time inventory systems
systems that schedule materials/inventory to arrive exactly as they are
Management/closely held shares
Percentage of shares held by persons closely related to a company, as
Management buyout (MBO)
Leveraged buyout whereby the acquiring group is led by the firm's management.
An investment advisory fee charged by the financial advisor to a fund based on the fund's
Market impact costs
Also called price impact costs, the result of a bid/ask spread and a dealer's price concession.
Market timing costs
costs that arise from price movement of the stock during the time of the transaction
Related: Investment management.
A technical trading strategy that combines mechanical rules, such as the CRISMA
Net financing cost
Also called the cost of carry or, simply, carry, the difference between the cost of financing
Nonmarket or firm-specific risk factors that can be eliminated by diversification. Also
Opportunity cost of capital
Expected return that is foregone by investing in a project rather than in
The difference in the performance of an actual investment and a desired investment
Passive investment management
Buying a well-diversified portfolio to represent a broad-based market
Related: Investment management
Price impact costs
Related: market impact costs
Progressive tax system
A tax system wherein the average tax rate increases for some increases in income but
cost to replace a firm's assets.
The process of identifying and evaluating risks and selecting and managing techniques to
Round-trip transactions costs
costs of completing a transaction, including commissions, market impact
costs associated with locating a counterparty to a trade, including explicit costs (such as
costs that fall with increases in the level of investment in current assets.
Split-rate tax system
A tax system that taxes retained earnings at a higher rate than earnings that are
costs that have been incurred and cannot be reversed.
Related: asset management
Common to all businesses.
Also called undiversifiable risk or market risk, the minimum level of risk that can be
Systematic risk principle
Only the systematic portion of risk matters in large, well-diversified portfolios.
Top-down equity management style
A management style that begins with an assessment of the overall
costs of buying and selling marketable securities and borrowing. Trading costs include
The time, effort, and money necessary, including such things as commission fees and the
True interest cost
For a security such as commercial paper that is sold on a discount basis, the coupon rate
Two-tier tax system
A method of taxation in which the income going to shareholders is taxed twice.
Also called the diversifiable risk or residual risk. The risk that is unique to a company
A cost that is directly proportional to the volume of output produced. When production is zero,
Weighted average cost of capital
Expected return on a portfolio of all the firm's securities. Used as a hurdle
Working capital management
The management of current assets and current liabilities to maximize shortterm liquidity.
An asset’s purchase price, plus costs associated with the purchase, like installation fees, taxes, etc.
Cost of goods sold
The cost of merchandise that a company sold this year. For manufacturing companies, the cost of raw
MACRS (Modified Accelerated Cost Recovery System)
A depreciation method created by the IRS under the Tax Reform Act of 1986. Companies must use it to depreciate all plant and equipment assets installed after December 31, 1986 (for tax purposes).
A method of costing in which all fixed and variable production costs are charged to products or services using an allocation base.
A set of accounts that summarize the transactions of a business that have been recorded on source documents.
A method of costing that uses cost pools to accumulate the cost of significant business activities and then assigns the costs from the cost pools to products or services based on cost drivers.
costs that are identifiable with and able to be influenced by decisions made at the business
The amount of cash expended.
A resource sacrificed or forgone to achieve a specific objective (Horngren et al.), defined
The idea that fixed costs and variable costs react differently to changes in the volume of
A division or unit of an organization that is responsible for controlling costs.
The process of either reducing costs while maintaining the same level of productivity or maintaining costs while increasing productivity.
The most significant cause of the cost of an activity, a measure of the demand for an activity
Anything for which a measurement of cost is required – inputs, processes, outputs or responsibility centres.
Cost of capital
The costs incurred by an organization to fund all its investments, comprising the risk-adjusted
Cost of goods sold
See cost of sales.
Cost of manufacture
The cost of goods manufactured for subsequent sale.
Cost of quality
The difference between the actual costs of production, selling and service and the costs that would be incurred if there were no failures during production or usage of products or services.
Cost of sales
The manufacture or purchase price of goods sold in a period or the cost of providing a service.
A method of pricing in which a mark-up is added to the total product/service cost.
The costs of (cross-functional) business processes, irrespective of the organizational structure of the business.
Cost–volume–profit analysis (CVP)
A method for understanding the relationship between revenue, cost and sales volume.
costs that are readily traceable to particular products or services.
costs that do not change with increases or decreases in the volume of goods or services
The cost of a product/service that includes an allocation of all the (production and
costs that are necessary to produce a product/service but are not readily traceable to particular products or services – see overhead.
A method of accounting that accumulates the costs of a product/service that is produced either
The non-salary or wage costs that follow from the payment of salaries or wages, e.g. National
An approach to costing that estimates and accumulates the costs of a product/service over
The production of financial and non-financial information used in planning for the future; making decisions about products, services, prices and what costs to incur; and ensuring that plans are implemented and achieved.
The cost of producing one extra unit.
The lost opportunity of not doing something, which may be financial or non-financial, e.g. time.
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