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Definition of Depreciation
A non-cash expense that provides a source of free cash flow. Amount allocated during the
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.
a) Of capital stock: decline in the value of capital due to its wearing out or becoming obsolete.
Amortization of fixed assets, such as plant and equipment, so as to allocate the cost over their depreciable life.
An expense that spreads the cost of an asset over its useful life.
Both the decline in value of an asset over time, as well as the gradual
Reduction in value of fixed or tangible assets over some period
Refers to the generally accepted accounting principle of allocating
The systematic and rational allocation of the cost of property, plant, and equipment
Any depreciation method that produces larger deductions for depreciation in the
(1) The estimated useful life of the fixed asset being depreciated is
Any of several methods that recognize an increased amount
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.
A contra, or offset, account that is coupled
The sum total of all deprecation expense recognized to date
Tax deductions that businesses can claim when they spend money on investment goods.
An expense account that represents the portion of the cost of an asset that is being charged to expense during the current period.
The value of the tax write-off on depreciation of plant and equipment.
Reduction in taxes attributable to the depreciation allowance.
Method of accelerated depreciation.
The operating profit before deducting interest, tax, depreciation and amortization.
An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working
This measure is used principally by
An equal dollar amount of depreciation in each accounting period.
A depreciation method that depreciates an asset the same amount for each year of its estimated
This depreciation method allocates a uniform
Constant depreciation for each year of the asset’s accounting life.
Method of accelerated depreciation.
tax benefit (of depreciation)
the amount of depreciation deductible for tax purposes multiplied by the tax rate;
tax shield (of depreciation)
the amount of depreciation deductible
Accelerated cost recovery system (ACRS)
Schedule of depreciation rates allowed for tax purposes.
Conventional earnings before interest, taxes, depreciation, and amortization (EBITDA) revised to exclude the effects of mainly nonrecurring items of revenue or gain and expense or loss.
See depreciation, but usually in relation to assets attached to leased property.
This term has two quite different meanings. First, it may
Reduction in value of an asset over some period for accounting
The systematic and rational allocation of capitalized costs over their useful lives.
Average accounting return
The average project earnings after taxes and depreciation divided by the average
An asset’s cost basis minus accumulated depreciation.
An asset’s original cost, less any depreciation that has been subsequently incurred.
Capital Consumption Allowance
Capital Cost Allowance (CCA)
The annual depreciation expense allowed by the Canadian Income Tax Act.
The gain recognized on the sale of a capital item (fixed asset), calculated
In investments, it represents earnings before depreciation , amortization and non-cash charges.
In investments, NET INCOME plus depreciation and other noncash charges. In this sense, it is synonymous with CASH EARNINGS. Investors focus on cash flow from operations because of their concern with a firm's ability to pay dividends.
Cash flow after interest and taxes
Net income plus depreciation.
Cash flow coverage ratio
The number of times that financial obligations (for interest, principal payments,
cash flow from operating activities, or cash flow from profit
This equals the cash inflow from sales during the period minus the cash
Changes in Financial Position
Sources of funds internally provided from operations that alter a company's
An accelerated depreciation method that calculates depreciation each year by applying a fixed rate to the asset’s book (cost–accumulated depreciation) value. depreciation stops when the asset’s book value reaches its salvage value.
A method of depreciation.
The systematic and rational allocation of the cost of natural resources over their useful
Earnings before interest, taxes, depreciation, and amortization.
The variability of a firm's value that results from unexpected exchange rate changes or the
Land, buildings, plant, equipment, and other assets acquired for carrying on the business of a company with a life exceeding one year. Normally expressed in financial accounts at cost, less accumulated depreciation.
The practice of reporting to shareholders using straight-line depreciation and
Funds From Operations (FFO)
Used by real estate and other investment trusts to define the cash flow from
Finance generated within a firm by retained earnings and depreciation.
internally generated funds
Cash reinvested in the firm; depreciation plus earnings not paid out as dividends.
Value of property, equipment and other capital assets minus the depreciation. This is an
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).
Modified Accelerated Cost Recovery System (MACRS)
depreciation method that allows higher tax deductions in early years and lower deductions later.
GDP with some adjustments to remove items that do not make it into anyone's hands as income, such as indirect taxes and depreciation. Loosely speaking, it is interpreted as being equal to GDP.
A bond characteristic such that the price appreciation will be less than the price
Net book value
The current book value of an asset or liability; that is, its original book value net of any
Net Domestic Product
GDP minus depreciation.
The company's total earnings, reflecting revenues adjusted for costs of doing business,
Gross, or total, investment minus depreciation.
Investment spending minus depreciation.
Net National Product
GNP minus depreciation.
A cost, such as depreciation, depletion, and amortization, that does not involve any cash outflow.
The practice of making a charge in the income account equivalent to the tax savings
The reduction in utility of an inventory item or fixed asset. If it is an
Operating cash flow
Earnings before depreciation minus taxes. It measures the cash generated from
Amount of funds generated during the period from operations by sources other than
property of option-free bonds whereby the price appreciation for a large upward change
Accounting for an acquisition using market value for the consolidation of the two entities'
Safe harbor lease
A lease to transfer tax benefits of ownership (depreciation and debt tax shield) from the
A method of depreciation.
An accelerated depreciation method that makes the sum of the digits in an asset’s expected
UNITS OF PRODUCTION
A depreciation method that relates a machine’s depreciation to the number of units it makes each
User Cost of Capital
The implicit annual cost of investing in physical capital, determined by things such as the interest rate, the rate of depreciation of the asset, and tax regulations. What would be paid to rent this capital if a rental market existed for it.
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