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Definition of cost-plus contract
a contract in which the customer agrees
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.
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 guaranteed investment contract purchased with a single (one-shot) premium. Related:
Amounts of directly contributed equity capital in excess of the par value.
costs that increase with increases in the level of investment in current assets.
Futures contracts, such as stock index futures, that settle for cash, not involving
Similar to equipment trust certificates except that the lender is either the
A term of reference describing a unit of trading for a financial or commodity future. Also, the actual
The month in which futures contracts may be satisfied by making or accepting a delivery.
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
For any entity, the difference between the market value of all its assets and the market
Equivalent annual cost
The equivalent cost per year of owning an asset over its entire life.
The difference between the execution price of a security and the price that would have
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.
A guaranteed investment contract where the credit rating is tied to some variable
A cash market transaction in which delivery of the commodity is deferred until after the
Forward forward contract
In Eurocurrencies, a contract under which a deposit of fixed maturity is agreed to
costs, both implied and direct, associated with a transaction. Such costs include time, effort,
Agreement to buy or sell a set number of shares of a specific stock in a designated future
Futures contract multiple
A constant, set by an exchange, which when multiplied by the futures price gives
Guaranteed insurance contract
A contract promising a stated nominal interest rate over some specific time
Guaranteed investment contract (GIC)
A pure investment product in which a life company agrees, for a
A contract that obligates a purchaser of a project's output to make cash
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.
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
Most distant futures contract
When several futures contracts are considered, the contract settling last.
Nearby futures contract
When several futures contracts are considered, the contract with the closest
Net financing cost
Also called the cost of carry or, simply, carry, the difference between the cost of financing
Next futures contract
The contract settling immediately after the nearby futures contract.
Nexus (of contracts)
A set or collection of something.
contracts which have been bought or sold without the transaction having been completed by
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
The contract that balances the three types of agency costs (contracting, monitoring, and
A contract that, in exchange for the option price, gives the option buyer the right, but not
Options contract multiple
A constant, set at $100, which when multiplied by the cash index value gives the
ealers in government bonds normally give price quotes in 32nds. To quote a bid or offer in 64ths, they
Price impact costs
Related: market impact costs
The surplus as measured using regulatory accounting principles (RAP) which may allow
cost to replace a firm's assets.
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
Set of contracts perspective
View of corporation as a set of contracting relationships, among individuals
costs that fall with increases in the level of investment in current assets.
The surplus of an insurance company determined by the accounting treatment of both
costs that have been incurred and cannot be reversed.
Cash flow available after payment of taxes in the project.
Related: asset management
A contract that obligates the purchaser to take any product that is offered to it (and pay
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
Turnkey construction contract
A type of construction contract under which the construction firm is
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
A guaranteed investment contract purchased with deposits over some future designated
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 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 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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