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Financial Terms | |
Economic income |
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Definition of Economic incomeEconomic incomeCash flow plus change in present value.
Related Terms:Accrued Incomeincome that has been earned but not yet received. For instance, if you have a non-registered Guaranteed Investment Certificate (GIC), Mutual Fund or Segregated Equity Fund, growth accrues annually or semi-annually and is taxable annually even though the gain is only paid at maturity of your investment. Accumulated Other Comprehensive IncomeCumulative gains or losses reported in shareholders' Adjusted Income from ContinuingOperations Reported income from continuing operations Book IncomePretax income reported on the income statement. Cash Flow–to–Income Ratio (CFI)Adjusted cash flow provided by continuing operations Classical MacroeconomicsThe school of macroeconomic thought prior to the rise of Keynesianism. common-size income statementincome statement that presents items as a percentage of revenues. ![]() Current Income Tax ExpenseThat portion of the total income tax provision that is based on Deferred Income Tax ExpenseThat portion of the total income tax provision that is the result Disposable Incomeincome less income tax. Dividend incomeincome that a company receives in the form of dividends on stock in other companies that it holds. earned incomeEarned income is generally an individual's salary or wages from employment. It also includes some taxable benefits. Earned income also includes business income if the individual is self-employed. Earned income is used as the basis for calculating RRSP maximum contribution limits. earnings before interest and income tax (EBIT)A measure of profit that Economic assumptionseconomic environment in which the firm expects to reside over the life of the economic components modelAbrams’ model for calculating DLOM based on the interaction of discounts from four economic components. Economic defeasanceSee: in-substance defeasance. Economic dependenceExists when the costs and/or revenues of one project depend on those of another. Economic earningsThe real flow of cash that a firm could pay out forever in the absence of any change in Economic exposureThe extent to which the value of the firm will change because of an exchange rate change. economic integrationthe creation of multi-country markets Economic lifeThe period over which a company expects to be able to use an asset. economic order quantityOrder size that minimizes total inventory costs. Economic order quantity (EOQ)The order quantity that minimizes total inventory costs. economic order quantity (EOQ)an estimate of the number economic production run (EPR)an estimate of the number Economic rentsProfits in excess of the competitive level. Economic riskIn project financing, the risk that the project's output will not be salable at a price that will Economic surplusFor any entity, the difference between the market value of all its assets and the market Economic unionAn agreement between two or more countries that allows the free movement of capital, Economic Value Added (EVA)Operating profit, adjusted to remove distortions caused by certain accounting rules, less a charge economic value added (EVA)a measure of the extent to which income exceeds the dollar cost of capital; calculated economic value added (EVA)Term used by the consulting firm Stern Stewart for profit remaining after deduction of the cost economically reworkedwhen the incremental revenue from the sale of reworked defective units is greater than EconomicsThe study of the allocation and distribution of scare resources among competing wants. Employee Retirement Income Security Act of 1974 (ERISA)A federal Act that sets minimum operational and funding standards for employee benefit Fixed-income equivalentAlso called a busted convertible, a convertible security that is trading like a straight Fixed-income instrumentsAssets that pay a fixed-dollar amount, such as bonds and preferred stock. Fixed-income marketThe market for trading bonds and preferred stock. Fixed-income securityA security that pays a specified cash flow over a IncomeNet earnings after all expenses for an accounting period are subtracted from all Income beneficiaryOne who receives income from a trust. Income bondA bond on which the payment of interest is contingent on sufficient earnings. These bonds are Income from Continuing OperationsAfter-tax net income before discontinued operations, Income fundA mutual fund providing for liberal current income from investments. income fundsMutual funds that seek regular income. This type of fund invests primarily in government, corporate and other types of bonds, debt securities, and other income producing securities and in certain circumstances can also hold common and preferred shares. Income SmoothingA form of earnings management designed to remove peaks and valleys Income SplittingThis is a tax planning strategy of arranging for income to be transferred to family members who are in lower tax brackets than the one earning the income, thus reducing taxes. Even though attribution rules limit income splitting, there are still a number of legitimate ways to do so, such as through the use of spousal RRSPs. INCOME STATEMENTAn accounting statement that summarizes information about a company in the following format: Income StatementOne of the basic financial statements; it lists the revenue and expense accounts of the company. income statementFinancial statement that summarizes sales revenue Income statementA financial report that summarizes a company’s revenue, cost of income statementFinancial statement that shows the revenues, expenses, and net income of a firm over a period of time. Income statement (statement of operations)A statement showing the revenues, expenses, and income (the Income StatementsA financial statement that displays a breakdown of total sales and total expenses. Income stockCommon stock with a high dividend yield and few profitable investment opportunities. INCOME TAXWhat the business paid to the IRS. Income taxA government tax on the income earned by an individual or corporation. Income Tax ExpenseSee income tax provision. Income Tax ProvisionThe expense deduction from pretax book income reported on the Incomes PolicyA policy designed to lower inflation without reducing aggregate demand. Wage/price controls are an example. Interest incomeincome that a company receives in the form of interest, usually as the result of keeping money in interest-bearing accounts at financial institutions and the lending of money to other companies. Investment incomeThe revenue from a portfolio of invested assets. Leading economic indicatorseconomic series that tend to rise or fall in advance of the rest of the economy. Life Income FundCommonly known as a LIF, this is one of the options available to locked in Registered Pension Plan (RPP) holders for income payout as opposed to Registered Retirement Savings Plan (RRSP) holders choice of payout through Registered Retirement income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80. MacroeconomicsThe study of the determination of economic aggregates such as total output and the price level. MicroeconomicsThe study of firm and individual decisions insofar as they affect the allocation and distribution of goods and services. Monthly income preferred security (MIP)Preferred stock issued by a subsidiary located in a tax haven. National IncomeGDP 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. National Income and Product AccountsThe national accounting system that records economic activity such as GDP and related measures. Net incomeThe company's total earnings, reflecting revenues adjusted for costs of doing business, NET INCOMEThe profit a company makes after cost of goods sold, expenses, and taxes are subtracted from net sales. Net incomeThe last line of the income Statement; it represents the amount that the company earned during a specified period. Net incomeThe excess of revenues over expenses, including the impact of income taxes. net income (also called the bottom line, earnings, net earnings, and netoperating earnings) Operating incomeThe net income of a business, less the impact of any financial activity, Operating IncomeA measure of results produced by the core operations of a firm. It is common Permanent Income HypothesisTheory that individuals base current consumption spending on their perceived long-run average income rather than their current income. RATIO OF NET INCOME TO NET SALESA ratio that shows how much net income (profit) a company made on each dollar of net sales. Here’s the formula: RATIO OF NET SALES TO NET INCOMEA ratio that shows how much a company had to collect in net sales to make a dollar of profit. Figure it this way: Real Incomeincome expressed in base-year dollars, calculated by dividing nominal income by a price index. Registered Retirement Income Fund (Canada)Commonly referred to as a RRIF, this is one of the options available to RRSP holders to convert their tax sheltered savings into taxable income. residual incomethe profit earned by a responsibility center that exceeds an amount "charged" for funds committed to that center residual incomeAlso called economic value added. Profit minus cost of capital employed. Residual income (RI)The profit remaining after deducting from profit a notional cost of capital on the investment in a business or division of a business. Spread incomeAlso called margin income, the difference between income and cost. For a depository Supply-Side EconomicsView that incentives to work, save, and invest play an important role in determining economic activity by affecting the supply side of the economy. tax-deferred incomecurrent compensation that is taxed at a future date tax-exempt incomecurrent compensation that is never taxed Tax-Related Incomes Policy (TIP)Tax incentives for labor and business to induce them to conform to wage/price guidelines. Taxable incomeGross income less a set of deductions. Taxable Incomeincome subject to income tax as reported on the tax return. Underwriting incomeFor an insurance company, the difference between the premiums earned and the costs equityRefers to one of the two basic sources of capital for a business, the financial reports and statementsFinancial means having to do with VelocityThe number of times during a year that the money supply turns over in supporting that year's economic activity, measured as the ratio of nominal income to the money supply. 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