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Definition of Deductible

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Deductible

A flat amount that an insured must pay before the insurance company makes any benefit payments under a health insurance policy.



Related Terms:

Deferred Tax Asset

Future tax benefit that results from (1) the origination of a temporary difference
that causes pretax book income to be less than taxable income or (2) a loss, credit, or other
carryforward. Future tax benefits are realized on the reversal of deductible temporary differences
or the offsetting of a loss carryforward against taxable income or a tax-credit carryforward against
the current tax provision.


tax benefit (of depreciation)

the amount of depreciation deductible for tax purposes multiplied by the tax rate;
the reduction in taxes caused by the deductibility of depreciation


tax shield (of depreciation)

the amount of depreciation deductible
for tax purposes; the amount of revenue shielded
from taxes because of the depreciation deduction


Accelerated depreciation

Any depreciation method that produces larger deductions for depreciation in the
early years of a project's life. Accelerated cost recovery system (ACRS), which is a depreciation schedule
allowed for tax purposes, is one such example.


accelerated depreciation

(1) The estimated useful life of the fixed asset being depreciated is
shorter than a realistic forecast of its probable actual service life;
(2) more of the total cost of the fixed asset is allocated to the first
half of its useful life than to the second half (i.e., there is a
front-end loading of depreciation expense).



Accelerated depreciation

Any of several methods that recognize an increased amount
of depreciation in the earliest years of asset usage. This results in increased tax benefits
in the first few years of asset usage.


Accidental Death Benefit (ADB)

Coverage against accidental death usually payable in addition to base amount of coverage.


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Accumulated Benefit Obligation (ABO)

An approximate measure of the liability of a plan in the event of a
termination at the date the calculation is performed. Related: projected benefit obligation.


Accumulated depreciation

A contra-fixed asset account representing the portion of the cost of a fixed asset that has been previously charged to expense. Each fixed asset account will have its own associated accumulated depreciation account.


accumulated depreciation

A contra, or offset, account that is coupled
with the property, plant, and equipment asset account in which the original
costs of the long-term operating assets of a business are recorded.
The accumulated depreciation contra account accumulates the amount of
depreciation expense that is recorded period by period. So the balance in
this account is the cumulative amount of depreciation that has been
recorded since the assets were acquired. The balance in the accumulated
depreciation account is deducted from the original cost of the assets
recorded in the property, plant, and equipment asset account. The
remainder, called the book value of the assets, is the amount included on
the asset side of a business.


Accumulated depreciation

The sum total of all deprecation expense recognized to date
on a depreciable fixed asset.


Acquisition of assets

A merger or consolidation in which an acquirer purchases the selling firm's assets.


After-tax profit margin

The ratio of net income to net sales.


After-tax real rate of return

Money after-tax rate of return minus the inflation rate.


Asset

Any possession that has value in an exchange.


Asset

A resource, recorded through a transaction, that is expected to yield a benefit to a
company.


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Asset

Something that is owned; a financial claim or a piece of property that is a store of value.


Asset

Probable future economic benefit that is obtained or controlled by an entity as a result of
a past transaction or event.



asset

Anything owned by, or owed to, an individual or business which has commercial or exchange value (e.g., cash, property, etc.).


Asset

All things of value owned by an individual or organization.


Asset activity ratios

Ratios that measure how effectively the firm is managing its assets.


Asset allocation decision

The decision regarding how an institution's funds should be distributed among the
major classes of assets in which it may invest.


Asset-Backed Securities

Bond or note secured by assets of company.


Asset-backed security

A security that is collateralized by loans, leases, receivables, or installment contracts
on personal property, not real estate.


Asset-based financing

Methods of financing in which lenders and equity investors look principally to the
cash flow from a particular asset or set of assets for a return on, and the return of, their financing.


Asset-Based Financing

Loans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender.


Asset classes

Categories of assets, such as stocks, bonds, real estate and foreign securities.


Asset Coverage

Extent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position.



Asset-coverage test

A bond indenture restriction that permits additional borrowing on if the ratio of assets to
debt does not fall below a specified minimum.


Asset/equity ratio

The ratio of total assets to stockholder equity.


Asset for asset swap

Creditors exchange the debt of one defaulting borrower for the debt of another
defaulting borrower.


Asset/liability management

Also called surplus management, the task of managing funds of a financial
institution to accomplish the two goals of a financial institution:
1) to earn an adequate return on funds invested, and
2) to maintain a comfortable surplus of assets beyond liabilities.


asset mix

The weighting of assets in an investment portfolio among different asset classes (e.g. shares, bonds, property, cash, overseas investments.


Asset pricing model

A model for determining the required rate of return on an asset.


Asset pricing model

A model, such as the Capital asset Pricing Model (CAPM), that determines the required
rate of return on a particular asset.


Asset-specific Risk

The amount of total risk that can be eliminated by diversification by
creating a portfolio. Also known as company-specific risk or
unsystematic risk.


Asset substitution

A firm's investing in assets that are riskier than those that the debtholders expected.


Asset substitution problem

Arises when the stockholders substitute riskier assets for the firm's existing
assets and expropriate value from the debtholders.


Asset swap

An interest rate swap used to alter the cash flow characteristics of an institution's assets so as to
provide a better match with its iabilities.


Asset turnover

The ratio of net sales to total assets.


asset turnover

a ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets


asset turnover ratio

A broad-gauge ratio computed by dividing annual
sales revenue by total assets. It is a rough measure of the sales-generating
power of assets. The idea is that assets are used to make sales, and the
sales should lead to profit. The ultimate test is not sales revenue on
assets, but the profit earned on assets as measured by the return on
assets (ROA) ratio.


Assets

A firm's productive resources.


ASSETS

Anything of value that a company owns.


Assets

Things that the business owns.


Assets

Items owned by the company or expenses that have been paid for but have not been used up.


Assets requirements

A common element of a financial plan that describes projected capital spending and the
proposed uses of net working capital.


Asymmetric taxes

A situation wherein participants in a transaction have different net tax rates.


Automatic Benefits Payment

Automatic payment of moneys derived from a benefit.


Average tax rate

taxes as a fraction of income; total taxes divided by total taxable income.


average tax rate

Total taxes owed divided by total income.


Before-tax profit margin

The ratio of net income before taxes to net sales.


Benefit

An instruction that pays a cash amount upon the occurrence of a specific event.


Benefit Ratio Method

The proportion of unemployment benefits paid to a company’s
former employees during the measurement period, divided by the total
payroll during the period. This calculation is used by states to determine the unemployment
contribution rate to charge employers.


Benefit Value

The amount of cash payable on a benefit.


Benefit Wage Ratio Method

The proportion of total taxable wages for laid off
employees during the measurement period divided by the total payroll during
the period. This calculation is used by states to determine the unemployment
contribution rate to charge employers.


benefits-provided ranking

a listing of service departments in an order that begins with the one providing the most service
to all other corporate areas; the ranking ends with the
service department providing service primarily to revenueproducing
areas


Break-even tax rate

The tax rate at which a party to a prospective transaction is indifferent between entering
into and not entering into the transaction.


cafeteria plan a “menu” of fringe benefit options that include

cash or nontaxable benefits


capital asset

an asset used to generate revenues or cost savings
by providing production, distribution, or service capabilities
for more than one year


Capital asset

A fixed asset, something that is expected to have long-term usage within
a company, and which exceeds a minimum dollar amount (known as the capitalization
limit, or cap limit).


Capital asset pricing model (CAPM)

An economic theory that describes the relationship between risk and
expected return, and serves as a model for the pricing of risky securities. The CAPM asserts that the only risk
that is priced by rational investors is systematic risk, because that risk cannot be eliminated by diversification.
The CAPM says that the expected return of a security or a portfolio is equal to the rate on a risk-free security
plus a risk premium.


Capital Asset Pricing Model (CAPM)

A model for estimating equilibrium rates of return and values of
assets in financial markets; uses beta as a measure of asset risk
relative to market risk


capital asset pricing model (CAPM)

Theory of the relationship between risk and return which states that the expected risk
premium on any security equals its beta times the market risk premium.


Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized against

future-period revenue.


Cash flow after interest and taxes

Net income plus depreciation.


Contingent deferred sales charge (CDSC)

The formal name for the load of a back-end load fund.


Contra-asset account

An offset to an asset account that reduces the balance of the asset account.


Corporate tax view

The argument that double (corporate and individual) taxation of equity returns makes
debt a cheaper financing method.


Corporate taxable equivalent

Rate of return required on a par bond to produce the same after-tax yield to
maturity that the premium or discount bond quoted would.


Cost-Benefit Analysis

The calculation and comparison of the costs and benefits of a policy or project.


cost-benefit analysis the analytical process of comparing the

relative costs and benefits that result from a specific course
of action (such as providing information or investing in a
project)


Cost-benefit ratio

The net present value of an investment divided by the investment's initial cost. Also called
the profitability index.


Current asset

Typically the cash, accounts receivable, and inventory accounts on the
balance sheet, or any other assets that are expected to be liquidated within a short
time interval.


Current assets

Value of cash, accounts receivable, inventories, marketable securities and other assets that
could be converted to cash in less than 1 year.


Current assets

Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.


Current assets

Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.


current assets

Current refers to cash and those assets that will be turned
into cash in the short run. Five types of assets are classified as current:
cash, short-term marketable investments, accounts receivable, inventories,
and prepaid expenses—and they are generally listed in this order in
the balance sheet.


Current Assets

Cash and other company assets that can be readily turned into cash within one year.


Current Income Tax Expense

That portion of the total income tax provision that is based on
taxable income.


Current Tax Payment Act of 1943

A federal Act requiring employers to withhold income taxes from employee pay.


Death Benefit

Amount paid on death of an insured.


Deferred-annuities

tax-advantaged life insurance product. deferred annuities offer deferral of taxes with the
option of withdrawing one's funds in the form of life annuity.


Deferred Annuity

An annuity providing for income payments to commence at a specified future time.


Deferred call

A provision that prohibits the company from calling the bond before a certain date. During this
period the bond is said to be call protected.


deferred compensation

pay related to current performance
that will be received at a later time, typically after retirement


Deferred equity

A common term for convertible bonds because of their equity component and the
expectation that the bond will ultimately be converted into shares of common stock.


Deferred futures

The most distant months of a futures contract. A bond that sells at a discount and does not
pay interest for an initial period, typically from three to seven years. Compare step-up bond and payment-inkind
bond.


Deferred Income Tax Expense

That portion of the total income tax provision that is the result
of current-period originations and reversals of temporary differences.


Deferred nominal life annuity

A monthly fixed-dollar payment beginning at retirement age. It is nominal
because the payment is fixed in dollar amount at any particular time, up to and including retirement.


Deferred Tax Liability

Future tax obligation that results from the origination of a temporary
difference that causes pretax book income to exceed taxable income.


Deferred taxes

A non-cash expense that provides a source of free cash flow. Amount allocated during the
period to cover tax liabilities that have not yet been paid.


Defined benefit plan

A pension plan in which the sponsor agrees to make specified dollar payments to
qualifying employees. The pension obligations are effectively the debt obligation of the plan sponsor.
Related: defined contribution plan


Defined Benefit Plan

A pension plan that pays out a predetermined dollar
amount to participants, based on a set of rules that typically combine the number
of years of employment and wages paid over the time period when each
employee worked for the company.


Depreciation

A non-cash expense that provides a source of free cash flow. Amount allocated during the
period to amortize the cost of acquiring Long term assets over the useful life of the assets.


Depreciation

A technique by which a company recovers the high cost of its plant-and-equipment assets gradually during the number of years they’ll be used in the business. depreciation can be physical, technological, or both.


Depreciation

An expense that spreads the cost of an asset over its useful life.


depreciation

Refers to the generally accepted accounting principle of allocating
the cost of a long-term operating asset over the estimated useful
life of the asset. Each year of use is allocated a part of the original cost of
the asset. Generally speaking, either the accelerated method or the
straight-line method of depreciation is used. (There are other methods,
but they are relatively rare.) Useful life estimates are heavily influenced
by the schedules allowed in the federal income tax law. depreciation is
not a cash outlay in the period in which the expense is recorded—just
the opposite. The cash inflow from sales revenue during the period
includes an amount to reimburse the business for the use of its fixed
assets. In this respect, depreciation is a source of cash. So depreciation is
added back to net income in the statement of cash flows to arrive at cash
flow from operating activities.


Depreciation

Reduction in value of fixed or tangible assets over some period
for accounting purposes. See Amortization.


Depreciation

Both the decline in value of an asset over time, as well as the gradual
expensing of an asset over time, roughly in accordance with its level of usage or
decline in value through that period.


Depreciation

a) Of capital stock: decline in the value of capital due to its wearing out or becoming obsolete.
b) Of currency: decline in the exchange rate.


Depreciation

The systematic and rational allocation of the cost of property, plant, and equipment
over their useful lives. Refer also to amortization and depletion.



 

 

 

 

 

 

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