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Expensed |
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Definition of ExpensedExpensedCharged to an expense account, fully reducing reported profit of that year, as is appropriate for
Related Terms:Capitalized interestInterest that is not immediately expensed, but rather is considered as an asset and is then Absorption costingA methodology under which all manufacturing costs are assigned Spoilage, abnormalSpoilage arising from the production process that exceeds the normal Aggressive Cost CapitalizationCost capitalization that stretches the flexibility within generally Floor stocksLow-cost, high-usage inventory items stored near the shop floor, SuppliesGeneral supplies used throughout a company and expensed at the time fractional interest discountthe combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value factor. Accrued interestThe accumulated coupon interest earned but not yet paid to the seller of a bond by the Amortizing interest rate swapSwap in which the principal or national amount rises (falls) as interest rates Base interest rateRelated: Benchmark interest rate. Benchmark interest rateAlso called the base interest rate, it is the minimum interest rate investors will Best-interests-of-creditors testThe requirement that a claim holder voting against a plan of reorganization CapitalizedRecorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures Cash flow after interest and taxesNet income plus depreciation. Compound interestinterest paid on previously earned interest as well as on the principal. Covered interest arbitrageA portfolio manager invests dollars in an instrument denominated in a foreign Earnings before interest and taxes (EBIT)A financial measure defined as revenues less cost of goods sold Effective annual interest rateAn annual measure of the time value of money that fully reflects the effects of Equilibrium rate of interestThe interest rate that clears the market. Also called the market-clearing interest Forward interest rateinterest rate fixed today on a loan to be made at some future date. Gross interestinterest earned before taxes are deducted. InterestThe price paid for borrowing money. It is expressed as a percentage rate over a period of time and Interest coverage ratioThe ratio of the earnings before interest and taxes to the annual interest expense. This Interest coverage testA debt limitation that prohibits the issuance of additional long-term debt if the issuer's Interest equalization taxTax on foreign investment by residents of the U.S. which was abolished in 1974. Interest paymentsContractual debt payments based on the coupon rate of interest and the principal amount. Interest on interestinterest earned on reinvestment of each interest payment on money invested. Interest-only strip (IO)A security based solely on the interest payments form a pool of mortgages, Treasury Interest rate agreementAn agreement whereby one party, for an upfront premium, agrees to compensate the Interest rate capAlso called an interest rate ceiling, an interest rate agreement in which payments are made Interest rate ceilingRelated: interest rate cap. Interest rate floorAn interest rate agreement in which payments are made when the reference rate falls Interest rate on debtThe firm's cost of debt capital. Interest rate parity theoreminterest rate differential between two countries is equal to the difference Interest rate riskThe risk that a security's value changes due to a change in interest rates. For example, a Interest rate swapA binding agreement between counterparties to exchange periodic interest payments on Interest subsidyA firm's deduction of the interest payments on its debt from its earnings before it calculates Interest tax shieldThe reduction in income taxes that results from the tax-deductibility of interest payments. Nominal interest rateThe interest rate unadjusted for inflation. Open interestThe total number of derivative contracts traded that not yet been liquidated either by an Pooling of interestsAn accounting method for reporting acquisitions accomplished through the use of equity. Rate of interestThe rate, as a proportion of the principal, at which interest is computed. Real interest rateThe rate of interest excluding the effect of inflation; that is, the rate that is earned in terms Short interestThis is the total number of shares of a security that investors have borrowed, then sold in the Simple interestinterest calculated only on the initial investment. Related:compound interest. Spot interest rateinterest rate fixed today on a loan that is made today. Related: forward interest rates. Stated annual interest rateThe interest rate expressed as a per annum percentage, by which interest Times-interest-earned ratioEarnings before interest and tax, divided by interest payments. True interest costFor a security such as commercial paper that is sold on a discount basis, the coupon rate Activity-based costingA 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. Earnings before interest and taxes (EBIT)The operating profit before deducting interest and tax. Earnings before interest, taxes, depreciation and amortization (EBITDA)The operating profit before deducting interest, tax, depreciation and amortization. InterestThe cost of money, received on investments or paid on borrowings. Job costingA method of accounting that accumulates the costs of a product/service that is produced either Lifecycle costingAn approach to costing that estimates and accumulates the costs of a product/service over Process costingA method of costing for continuous manufacture in which costs for an accounting compared are compared with production for the same period to determine a cost per unit produced. Profit before interest and taxes (PBIT)See EBIT. Target costingA method of costing that is concerned with managing whole-of-life costs of a product/service during the product design phase â€“ the difference between target price (to achieve market share) and the target profit margin. Variable costingA method of costing in which only variable production costs are treated as product costs and in which all fixed (production and non-production) costs are treated as period costs. 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. Interest payableThe amount of interest that is owed but has not been paid at the end of a period. activity based costing (ABC)A relatively new method advocated for the earnings before interest and income tax (EBIT)A measure of profit that times interest earnedA ratio that tests the ability of a business to make Accrued InterestThe amount of interest accumulated on a debt security between Compound Interestinterest paid on principal and on interest earned in previous Effective Interest RateThe rate of interest actually earned on an investment. It is Nominal Interest RateThe rate of interest quoted, or stated, to be paid on a security Real Interest RateThe rate of interest paid on an investment adjusted for inflation Simple Interestinterest paid only on the principal; calculated by multiplying the Times Interest Earned RatioA measure of how well a company is able to meet its interest activity-based costing (ABC)a process using multiple cost drivers to predict and allocate costs to products and services; attribute-based costing (ABC II)an extension of activitybased costing using cost-benefit analysis (based on increased customer utility) to choose the product attribute backflush costinga streamlined cost accounting method that speeds up, simplifies, and reduces accounting effort in an environment that minimizes inventory balances, requires compound interesta method of determining interest in which interest that was earned in prior periods is added to the original investment so that, in each successive period, interest is earned on both principal and interest direct costingsee variable costing FIFO method (of process costing)the method of cost assignment that computes an average cost per equivalent full costingsee absorption costing hybrid costing systema costing system combining characteristics job order costing systema system of product costing used life cycle costingthe accumulation of costs for activities that modified FIFO method (of process costing)the method of cost assignment that uses FIFO to compute a cost per process costing systema method of accumulating and assigning costs to units of production in companies producing large quantities of homogeneous products; relevant costinga process that compares, to the extent possible simple interesta method of determining interest in which interest is earned only on the original investment (or principal) amount strict FIFO method (of process costing)the method of cost assignment that uses FIFO to compute a cost per equivalent unit and, in transferring units from a department, keeps the target costinga method of determining what the cost of a variable costinga cost accumulation and reporting method weighted average method (of process costing)the method of cost assignment that computes an average cost per Activity-based costing (ABC)A cost allocation system that compiles costs and assigns Direct costingA costing methodology that only assigns direct labor and material costs First in, first-out costing method (FIFO)A process costing methodology that assigns the earliest InterestThe cost of funds loaned to an entity. It can also refer to the equity ownership Kaizen costingThe process of continual cost reduction that occurs after a product Pooling of interestsAn method for accounting for a business combination. When used, the expenses of the combination are charged against income at once, and the net Process costingA costing methodology that arrives at an individual product cost through the calculation of average costs for large quantities of identical products. compound interestinterest earned on interest. effective annual interest rateinterest rate that is annualized using compound interest. interest rate parityTheory that forward premium equals interest rate differential. interest tax shieldTax savings resulting from deductibility of interest payments. nominal interest rateRate at which money invested grows. real interest rateRate at which the purchasing power of an investment increases.
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