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Definition of Purchases

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Items purchased by the company for the purpose of resale.

Related Terms:

Minimum purchases

For mutual funds, the amount required to open a new account (Minimum Initial
Purchase) or to deposit into an existing account (Minimum Additional Purchase). These minimums may be
lowered for buyers participating in an automatic purchase plan

Purchases journal

A journal used to record the transactions that result in a credit to accounts payable.

Acquisition of assets

A merger or consolidation in which an acquirer purchases the selling firm's assets.

Acquisition of stock

A merger or consolidation in which an acquirer purchases the acquiree's stock.

Basket options

Packages that involve the exchange of more than two currencies against a base currency at
expiration. The basket option buyer purchases the right, but not the obligation, to receive designated
currencies in exchange for a base currency, either at the prevailing spot market rate or at a prearranged rate of
exchange. A basket option is generally used by multinational corporations with multicurrency cash flows
since it is generally cheaper to buy an option on a basket of currencies than to buy individual options on each
of the currencies that make up the basket.

Capitalization method

A method of constructing a replicating portfolio in which the manager purchases a
number of the largest-capitalized names in the index stock in proportion to their capitalization.

Clearing house / Clearinghouse

An adjunct to a futures exchange through which transactions executed its floor are settled by a
process of matching purchases and sales. A clearing organization is also charged with the proper conduct of
delivery procedures and the adequate financing of the entire operation.

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Direct lease

Lease in which the lessor purchases new equipment from the manufacturer and leases it to the

Freddie Mac (Federal Home Loan Mortgage Corporation)

A Congressionally chartered corporation that
purchases residential mortgages in the secondary market from S&Ls, banks, and mortgage bankers and
securitizes these mortgages for sale into the capital markets.

Gray market

purchases and sales of eurobonds that occur before the issue price is finally set.

Long hedge

The purchase of a futures contract(s) in anticipation of actual purchases in the cash market. Used
by processors or exporters as protection against an advance in the cash price. Related: Hedge, short hedge

Materials requirement planning

Computer-based systems that plan backward from the production schedule
to make purchases in order to manage inventory levels.

Portfolio turnover rate

For an investment company, an annualized rate found by dividing the lesser of
purchases and sales by the average of portfolio assets.

Purchase and sale

A method of securities distribution in which the securities firm purchases the securities
from the issuer for its own account at a stated price and then resells them, as contrasted with a best-efforts sale.

Sterilized intervention

Foreign exchange market intervention in which the monetary authorities have
insulated their domestic money supplies from the foreign exchange transactions with offsetting sales or
purchases of domestic assets.


purchases of goods or services from suppliers on credit to whom the debt is not yet paid. Or a
term used in the Balance Sheet to denote current liabilities.

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Petty cash

The amount of currency and coin that a company keeps on hand to pay for small purchases and expenses.

Purchase discounts

A contra account that reduces purchases by the amount of the discounts taken for early payment.

Purchase returns

A contra account that reduces purchases by the amount of items purchased that were subsequently returned.

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.

operating leverage

A relatively small percent increase or decrease in
sales volume that causes a much larger percent increase or decrease in
profit because fixed expenses do not change with small changes in sales
volume. Sales volume changes have a lever effect on profit. This effect
should be called sales volume leverage, but in practice it is called operating
operating liabilities
The short-term liabilities generated by the operating
(profit-making) activities of a business. Most businesses have three types
of operating liabilities: accounts payable from inventory purchases and
from incurring expenses, accrued expenses payable for unpaid expenses,
and income tax payable. These short-term liabilities of a business are
non-interest-bearing, although if not paid on time a business may be
assessed a late-payment penalty that is in the nature of an interest

Capital Account

That part of the balance of payments accounts that records demands for and supplies of a currency arising from purchases or sales of assets.

Accounts Payable

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

Adjusted Cash Flow Provided by Continuing Operations

Cash flow provided by operating
activities adjusted to provide a more recurring, sustainable measure. Adjustments to reported cash
provided by operating activities are made to remove such nonrecurring cash items as: the operating
component of discontinued operations, income taxes on items classified as investing or financing activities, income tax benefits from nonqualified employee stock options, the cash effects of purchases and sales of trading securities for nonfinancial firms, capitalized expenditures, and other nonrecurring cash inflows and outflows.

Average-Cost Inventory Method

The inventory cost-flow assumption that assigns the average
cost of beginning inventory and inventory purchases during a period to cost of goods sold and
ending inventory.


Expenditures purchases of productive long-lived assets, in particular, items of property,
plant, and equipment.

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Dollar Cost Averaging

A way of smoothing out your investment deposits by investing regularly. Instead of making one large deposit a year into your RRSP, you make smaller regular monthly deposits. If you are buying units in a mutual fund or segregated equity fund, you would end up buying more units in the month that values were low and less units in the month that values were higher. By spreading out your purchases, you don't have to worry about buying at the right time.

debit card

A card which enables you to directly access your bank account when paying for purchases. So instead of paying in cash or with a credit card, a debit card allows the specified amount of the purchase to be electronically debited, or withdrawn, from your bank account. See Interac Direct Payment for an explanation of the actual procedures that you follow at the point of sale (POS) terminal to use your debit card.







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