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Financial Terms | |
Obsolescence |
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Definition of ObsolescenceObsolescenceThe reduction in utility of an inventory item or fixed asset. If it is an
Related Terms:ABC inventory classificationA method for dividing inventory into classifications, Accelerated cost recovery system (ACRS)Schedule of depreciation rates allowed for tax purposes. Accelerated depreciationAny depreciation method that produces larger deductions for depreciation in the accelerated depreciation(1) The estimated useful life of the fixed asset being depreciated is Accelerated depreciationAny of several methods that recognize an increased amount Account ValueThe sum of all the interest options in your policy, including interest. Accounting rate of return (ARR)A method of investment appraisal that measures ![]() accounting rate of return (ARR)the rate of earnings obtained on the average capital investment over the life of a capital project; computed as average annual profits divided by average investment; not based on cash flow Accumulated depreciationA 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 depreciationA contra, or offset, account that is coupled Accumulated depreciationThe sum total of all deprecation expense recognized to date Accumulated ValueAn amount of money invested plus the interest earned on that money. Acquisition of assetsA merger or consolidation in which an acquirer purchases the selling firm's assets. Active portfolio strategyA strategy that uses available information and forecasting techniques to seek a Adjustable rate preferred stock (ARPS)Publicly traded issues that may be collateralized by mortgages and MBSs. Adjusted present value (APV)The net present value analysis of an asset if financed solely by equity ![]() After-tax real rate of returnMoney after-tax rate of return minus the inflation rate. algebraic methoda process of service department cost allocation All equity rateThe discount rate that reflects only the business risks of a project and abstracts from the Allowance methodA method of adjusting accounts receivable to the amount that is expected to be collected based on company experience. Amortizing interest rate swapSwap in which the principal or national amount rises (falls) as interest rates Annual percentage rate (APR)The periodic rate times the number of periods in a year. For example, a 5% annual percentage rate (APR)Interest rate that is annualized using simple interest. approximated net realizable value at split-off allocationa method of allocating joint cost to joint products using a Arithmetic average (mean) rate of returnArithmetic mean return. AssetAny possession that has value in an exchange. AssetA resource, recorded through a transaction, that is expected to yield a benefit to a AssetSomething that is owned; a financial claim or a piece of property that is a store of value. AssetProbable future economic benefit that is obtained or controlled by an entity as a result of assetAnything owned by, or owed to, an individual or business which has commercial or exchange value (e.g., cash, property, etc.). AssetAll things of value owned by an individual or organization. Asset activity ratiosRatios that measure how effectively the firm is managing its assets. Asset allocation decisionThe decision regarding how an institution's funds should be distributed among the Asset-Backed SecuritiesBond or note secured by assets of company. Asset-backed securityA security that is collateralized by loans, leases, receivables, or installment contracts Asset-based financingmethods of financing in which lenders and equity investors look principally to the Asset-Based FinancingLoans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender. Asset classesCategories of assets, such as stocks, bonds, real estate and foreign securities. Asset CoverageExtent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position. Asset-coverage testA bond indenture restriction that permits additional borrowing on if the ratio of assets to Asset/equity ratioThe ratio of total assets to stockholder equity. Asset for asset swapCreditors exchange the debt of one defaulting borrower for the debt of another Asset/liability managementAlso called surplus management, the task of managing funds of a financial asset mixThe weighting of assets in an investment portfolio among different asset classes (e.g. shares, bonds, property, cash, overseas investments. Asset pricing modelA model for determining the required rate of return on an asset. Asset pricing modelA model, such as the Capital asset Pricing Model (CAPM), that determines the required Asset-specific RiskThe amount of total risk that can be eliminated by diversification by Asset substitutionA firm's investing in assets that are riskier than those that the debtholders expected. Asset substitution problemArises when the stockholders substitute riskier assets for the firm's existing Asset swapAn interest rate swap used to alter the cash flow characteristics of an institution's assets so as to Asset turnoverThe ratio of net sales to total assets. asset turnovera ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets asset turnover ratioA broad-gauge ratio computed by dividing annual AssetsA firm's productive resources. ASSETSAnything of value that a company owns. AssetsThings that the business owns. Assetsitems owned by the company or expenses that have been paid for but have not been used up. Assets requirementsA common element of a financial plan that describes projected capital spending and the Auction rate preferred stock (ARPS)Floating rate preferred stock, the dividend on which is adjusted every Average-Cost Inventory MethodThe inventory cost-flow assumption that assigns the average Average inventoryThe beginning inventory for a period, plus the amount at the end of Average rate of return (ARR)The ratio of the average cash inflow to the amount invested. Average tax rateTaxes as a fraction of income; total taxes divided by total taxable income. average tax rateTotal taxes owed divided by total income. balancing itemVariable that adjusts to maintain the consistency Bank for International Settlements (BIS)An international bank headquartered in Basel, Switzerland, which Barbell strategyA strategy in which the maturities of the securities included in the portfolio are concentrated Base interest rateRelated: Benchmark interest rate. Basic business strategiesKey strategies a firm intends to pursue in carrying out its business plan. Benchmark interest rateAlso called the base interest rate, it is the minimum interest rate investors will Benefit Ratio MethodThe proportion of unemployment benefits paid to a company’s Benefit ValueThe amount of cash payable on a benefit. Benefit Wage Ratio MethodThe proportion of total taxable wages for laid off Blanket inventory lienA secured loan that gives the lender a lien against all the borrower's inventories. Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit CommitteesA committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial Bond valueWith respect to convertible bonds, the value the security would have if it were not convertible Book inventoryThe amount of money invested in inventory, as per a company’s book rate of returnAccounting income divided by book value. Book valueA company's book value is its total assets minus intangible assets and liabilities, such as debt. A BOOK VALUEAn asset’s cost basis minus accumulated depreciation. Book ValueThe value of an asset as carried on the balance sheet of a Book valueAn asset’s original cost, less any depreciation that has been subsequently incurred. book valueNet worth of the firm’s assets or liabilities according book value and book value per shareGenerally speaking, these terms BOOK VALUE OF COMMON STOCKThe theoretical amount per share that each stockholder would receive if a company’s assets were sold on the balance sheet’s date. Book value equals: Book value per shareThe ratio of stockholder equity to the average number of common shares. Book value Book Value per ShareThe book value of a company divided by the number of shares Bootstrapping, bootstrap methodAn arithmetic method for backing an Break-even payment rateThe prepayment rate of a MBS coupon that will produce the same CFY as that of Break-even tax rateThe tax rate at which a party to a prospective transaction is indifferent between entering Broker loan rateRelated: Call money rate. Bullet strategyA strategy in which a portfolio is constructed so that the maturities of its securities are highly business-value-added activityan activity that is necessary for the operation of the business but for which a customer would not want to pay Buy-and-hold strategyA passive investment strategy with no active buying and selling of stocks from the Call money rateAlso called the broker loan rate , the interest rate that banks charge brokers to finance capital assetan asset used to generate revenues or cost savings Capital assetA fixed asset, something that is expected to have long-term usage within Capital asset pricing model (CAPM)An economic theory that describes the relationship between risk and Capital Asset Pricing Model (CAPM)A model for estimating equilibrium rates of return and values of capital asset pricing model (CAPM)Theory of the relationship between risk and return which states that the expected risk Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |