Definition of Gross Pay

Gross Pay

The amount of earnings due to an employee prior to tax and other deductions.

W-2 Form

A form used to report gross pay and tax deductions for each employee
to the IRS for a calendar year.
W-4 Form
A form on which an employee declares the amount of federal tax deductions
to be deducted from his or her pay.

Accounts payable

Money owed to suppliers.

Balance of payments

A statistical compilation formulated by a sovereign nation of all economic transactions
between residents of that nation and residents of all other nations during a stipulated period of time, usually a
calendar year.

Break-even lease payment

The lease payment at which a party to a prospective lease is indifferent between
entering and not entering into the lease arrangement.

Break-even payment rate

The prepayment rate of a MBS coupon that will produce the same CFY as that of
a predetermined benchmark MBS coupon. Used to identify for coupons higher than the benchmark coupon
the prepayment rate that will produce the same CFY as that of the benchmark coupon; and for coupons lower
than the benchmark coupon the lowest prepayment rate that will do so.

Clearing House Automated Payments System (CHAPS)

A computerized clearing system for sterling funds
that began operations in 1984. It includes 14 member banks, nearly 450 participating banks, and is one of the
clearing companies within the structure of the Association for payment Clearing Services (APACS).

Clearing House Interbank Payments System (CHIPS)

An international wire transfer system for high-value
payments operated by a group of major banks.

Coupon payments

A bond's interest payments.

Customary payout ratios

A range of payout ratios that is typical based on an analysis of comparable firms.

Date of payment

Date dividend checks are mailed.

Delivery versus payment

A transaction in which the buyer's payment for securities is due at the time of
delivery (usually to a bank acting as agent for the buyer) upon receipt of the securities. The payment may be
made by bank wire, check, or direct credit to an account.

Discounted payback period rule

An investment decision rule in which the cash flows are discounted at an
interest rate and the payback rule is applied on these discounted cash flows.

Dividend payout ratio

Percentage of earnings paid out as dividends.

Feasible target payout ratios

payout ratios that are consistent with the availability of excess funds to make
cash dividend payments.

FHA prepayment experience

The percentage of loans in a pool of mortgages outstanding at the origination
anniversary, based on annual statistical historic survival rates for FHA-insured mortgages.

Fixed-rate payer

In an interest rate swap the counterparty who pays a fixed rate, usually in exchange for a
floating-rate payment.

Floating-rate payer

In an interest rate swap, the counterparty who pays a rate based on a reference rate,
usually in exchange for a fixed-rate payment

Full-payout lease

See: financial lease.

Graduated-payment mortgages (GPMs)

A type of stepped-payment loan in which the borrower's payments
are initially lower than those on a comparable level-rate mortgage. The payments are gradually increased over
a predetermined period (usually 3,5, or 7 years) and then are fixed at a level-pay schedule which will be
higher than the level-pay amortization of a level-pay mortgage originated at the same time. The difference
between what the borrower actually pays and the amount required to fully amortize the mortgage is added to
the unpaid principal balance.

Gross domestic product (GDP)

The market value of goods and services produced over time including the
income of foreign corporations and foreign residents working in the U.S., but excluding the income of U.S.
residents and corporations overseas.

Gross interest

Interest earned before taxes are deducted.

Gross national product (GNP)

Measures and economy's total income. It is equal to GDP plus the income
abroad accruing to domestic residents minus income generated in domestic market accruing to non-residents.

Gross profit margin

gross profit divided by sales, which is equal to each sales dollar left over after paying
for the cost of goods sold.

Gross spread

The fraction of the gross proceeds of an underwritten securities offering that is paid as
compensation to the underwriters of the offering.

Interest payments

Contractual debt payments based on the coupon rate of interest and the principal amount.

Lag response of prepayments

There is typically a lag of about three months between the time the weighted
average coupon of an MBS pool has crossed the threshold for refinancing and an acceleration in prepayment
speed is observed.

Level pay

The characteristic of the scheduled principal and interest payments due under a mortgage such that
total monthly payment of P&I is the same while characteristically the principal payment component of the
monthly payment becomes gradually greater while the monthly interest payment becomes less.

Payable through drafts

A method of making payment that is used to maintain control over payments made
on behalf of the firm by personnel in noncentral locations. The payer's bank delivers the payable through draft
to the payer, which must approve it and return it to the bank before payment can be received.

Payables

Related: Accounts payable.

Payback

The length of time it takes to recover the initial cost of a project, without regard to the time value of money.

Paydown

In a Treasury refunding, the amount by which the par value of the securities maturing exceeds that
of those sold.

Payment date

The date on which each shareholder of record will be sent a check for the declared dividend.

Payment float

Company-written checks that have not yet cleared.

Payments netting

Reducing fund transfers between affiliates to only a netted amount. Netting can be done on
a bilateral basis (between pairs of affiliates), or on a multi-lateral basis (taking all affiliates together).

Payments pattern

escribes the lagged collection pattern of receivables, for instance the probability that a
72-day-old account will still be unpaid when it is 73-days-old.

Payout ratio

Generally, the proportion of earnings paid out to the common stockholders as cash dividends.
More specifically, the firm's cash dividend divided by the firm's earnings in the same reporting period.

Pay-up

The loss of cash resulting from a swap into higher price bonds or the need/willingness of a bank or
other borrower to pay a higher rate of interest to get funds.

Payment-In-Kind (PIK)

bond A bond that gives the issuer an option (during an initial period) either to make
coupon payments in cash or in the form of additional bonds.

Prepayment speed

Also called speed, the estimated rate at which mortgagors pay off their loans ahead of
schedule, critical in assessing the value of mortgage pass-through securities.

Prepayments

payments made in excess of scheduled mortgage principal repayments.

Production payment financing

A method of nonrecourse asset-based financing in which a specified
percentage of revenue realized from the sale of the project's output is used to pay debt service.

Single-payment bond

A bond that will make only one payment of principal and interest.

Take-or-pay contract

A contract that obligates the purchaser to take any product that is offered to it (and pay
the cash purchase price) or pay a specified amount if it refuses to take the product.

Target payout ratio

A firm's long-run dividend-to-earnings ratio. The firm's policy is to attempt to pay out a
certain percentage of earnings, but it pays a stated dollar dividend and adjusts it to the target as base-line
increases in earnings occur.

Zero prepayment

assumption The assumption of payment of scheduled principal and interest with no payments.

ACCOUNTS PAYABLE

Amounts a company owes to creditors.

GROSS PROFIT

The profit a company makes before expenses and taxes are taken away.

Gross profit

The difference between the price at which goods or services are sold and the cost of sales.
Income The revenue generated from the sale of goods or services.

Payback

A method of investment appraisal that calculates the number of years taken for the cash flows from an investment to cover the initial capital outlay.

Prepayment

A payment made in advance of when it is treated as an expense for profit purposes.

Accounts payable

Amounts owed by the company for goods and services that have been received, but have not yet been paid for. Usually Accounts payable involves the receipt of an invoice from the company providing the services or goods.

Accrued expenses payable

Expenses that have to be recorded in order for the financial statements to be accurate. Accrued expenses usually do not involve the receipt of an invoice from the company providing the goods or services.

Bonds payable

Amounts owed by the company that have been formalized by a legal document called a bond.

Gross profit

The result of subtracting cost of goods sold from sales. Synonymous with gross margin.

Interest payable

The amount of interest that is owed but has not been paid at the end of a period.

Loans payable

Amounts that have been loaned to the company and that it still owes.

Notes payable

Amounts owed by the company that have been formalized by a legal document called a note.

Payment date

The date established for the payment of a declared dividend.

Payroll expense

The amount paid to employees for services rendered; synonymous with salary expense and wage expense.

Payroll journal

A journal used to record the payroll of a company.

Payroll tax expense

The amount of tax associated with salaries that an employer pays to governments (federal, state, and local).

Payroll taxes payable

The amount of payroll taxes owed to the various governments at the end of a period.

Salaries payable

Salaries that are owed but have not been paid at the end of a period.

accounts payable

Short-term, non-interest-bearing liabilities of a business
that arise in the course of its activities and operations from purchases on
credit. A business buys many things on credit, whereby the purchase
cost of goods and services are not paid for immediately. This liability
account records the amounts owed for credit purchases that will be paid
in the short run, which generally means about one month.

accrued expenses payable

The account that records the short-term, noninterest-
bearing liabilities of a business that accumulate over time, such
as vacation pay owed to employees. This liability is different than
accounts payable, which is the liability account for bills that have been
received by a business from purchases on credit.

dividend payout ratio

Computed by dividing cash dividends for the year
by the net income for the year. It’s simply the percent of net income distributed
as cash dividends for the year.

gross margin, or gross profit

This first-line measure of profit
equals sales revenue less cost of goods sold. This is profit before operating
expenses and interest and income tax expenses are deducted. Financial
reporting standards require that gross margin be reported in
external income statements. gross margin is a key variable in management
profit reports for decision making and control. gross margin
doesn’t apply to service businesses that don’t sell products.

Payback Period

The number of years necessary for the net cash flows of an
investment to equal the initial cash outlay

contingent pay

compensation that is dependent on the
achievement of some performance objective

merit pay

a pay increment earned by achieving a specific
level of performance

payback period

the time it takes an investor to recoup an
original investment through cash flows from a project

Accounts payable

Acurrent liability on the balance sheet, representing short-term obligations
to pay suppliers.

Gross margin

Revenues less the cost of goods sold.

Gross sales

The total sales recorded prior to sales discounts and returns.

Payback method

A capital budgeting analysis method that calculates the amount of
time it will take to recoup the investment in a capital asset, with no regard for the
time cost of money.

dividend payout ratio

Percentage of earnings paid out as dividends.

payback period

Time until cash flows recover the initial investment of the project.

payment float

Checks written by a company that have not yet cleared.

payout ratio

Fraction of earnings paid out as dividends.

Balance of Payments

The difference between the demand for and supply of a country's currency on the foreign exchange market.

Balance of Payments Accounts

A statement of a country's transactions with other countries.

Gross Domestic Product

Total output of final goods and services produced within a country during a year.

Gross National Product

Total output of final goods and services produced by a country's citizens during a year.

Transfer Payment

A grant or gift that is not payment for services rendered.

Current Tax Payment Act of 1943

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

Electronic Federal Tax Payment Systems (EFTPS)

An electronic funds transfer system used by businesses to remit taxes to the government.

Equal Pay Act of 1963

A federal Act requiring that both sexes receive equal pay
in situations where work requires equivalent effort, responsibility, and skills,
performed under similar working conditions.

Net Pay

The amount of an employee’s wages payable after all tax and other deductions have been removed.

Paycard

A credit card into which a company directly deposits an employee's net pay.

Payroll Cycle

The period of service for which a company compensates its employees.

Payroll Register

A report on which is summarized the wage and deduction information
for employees for a specific payroll.

Payroll Stabilization

This calculation is used by states to determine the unemployment
contribution rate to charge employers and links the contribution rate
to fluctuations in a company’s total payroll over time.

Sick Pay

A fixed amount of pay benefit available to employees who cannot
work due to sickness. Company policy fixes the amount of this benefit that can
be carried forward into future periods.

Termination Pay

Additional pay due to an employee whose employment is
being terminated, usually in accordance with a termination pay schedule contained
within the employee manual.

Unclaimed Pay

Net pay not collected by an employee, which is typically transferred
to the local state government after a mandated interval has passed from
the date of payment.

Accounts Payable

Amounts due to vendors for purchases on open account, that is, not evidenced
by a signed note.

Accounts Payable Days (A/P Days)

The number of days it would take to pay the ending balance
in accounts payable at the average rate of cost of goods sold per day. Calculated by dividing
accounts payable by cost of goods sold per day, which is cost of goods sold divided by 365.

Gross Profit

Revenue less cost of goods sold.

Gross Profit Margin

gross profit divided by revenue.

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