Financial Terms
Real Wage

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Definition of Real Wage

Real Wage Image 1

Real Wage

wage expressed in base-year dollars, calculated by dividing the money wage by a price index.

Related Terms:

After-tax real rate of return

Money after-tax rate of return minus the inflation rate.

approximated net realizable value at split-off allocation

a method of allocating joint cost to joint products using a
simulated net realizable value at the split-off point; approximated
value is computed as final sales price minus
incremental separate costs

Benefit Wage Ratio Method

The proportion of total taxable wages for laid off
employees during the measurement period divided by the total payroll during
the period. This calculation is used by states to determine the unemployment
contribution rate to charge employers.

Efficiency Wage

wage that maximizes profits.

Exchange Rate, Real

The nominal exchange rate corrected for price level differences.

Interest Rate, Real

Nominal interest rate less expected inflation.

Minimum Wage

An hourly wage rate set by the federal government below
which actual hourly wages cannot fall. This rate can be increased by state governments.

Real Wage Image 2

Net Realizable Value

Selling price of an asset less expenses of bringing the asset into a saleable state and expenses of the sale.

net realizable value approach

a method of accounting for by-products or scrap that requires that the net realizable value of these products be treated as a reduction in the cost of the primary products; primary product cost may be reduced by decreasing either
(1) cost of goods sold when the joint products are sold or
(2) the joint process cost allocated to the joint products

net realizable value at split-off allocation

a method of allocating joint cost to joint products that uses, as the proration base, sales value at split-off minus all costs necessary
to prepare and dispose of the products; it requires
that all joint products be salable at the split-off point

Net realizeable value

The expected revenue to be gained from the sale of an item or
service, less the costs of the sale transaction.


Measured in base year, or constant, dollars. Contrast with nominal.

Real Actions (Earnings) Management

Involves operational steps and not simply acceleration
or delay in the recognition of revenue or expenses. The delay or acceleration of shipment would
be an example.

Real assets

Identifiable assets, such as buildings, equipment, patents, and trademarks, as distinguished from a
financial obligation.

real assets

Assets used to produce goods and services.

Real Business Cycle Theory

Belief that business cycles arise from real shocks to the economy, such as technology advances and natural resource discoveries, and have little to do with monetary policy.

Real capital

Wealth that can be represented in financial terms, such as savings account balances, financial
securities, and real estate.

Real cash flow

A cash flow is expressed in real terms if the current, or date 0, purchasing power of the cash
flow is given.

Real Exchange Rate

Exchange rate adjusted for relative price levels.

Real exchange rates

Exchange rates that have been adjusted for the inflation differential between two countries.

Real GDP

GDP expressed in base-year dollars, calculated by dividing nominal GDP by a price index.

Real Income

Income expressed in base-year dollars, calculated by dividing nominal income by a price index.

Real interest rate

The rate of interest excluding the effect of inflation; that is, the rate that is earned in terms
of constant-purchasing-power dollars. Interest rate expressed in terms of real goods, i.e. nominal interest rate
adjusted for inflation.

Real Interest Rate

The rate of interest paid on an investment adjusted for inflation

real interest rate

Rate at which the purchasing power of an investment increases.

Real market

The bid and offer prices at which a dealer could do "size." Quotes in the brokers market may
reflect not the real market, but pictures painted by dealers playing trading games.

real microprofit center

a center whose output has a market value

Real Money Supply

Money supply expressed in base-year dollars, calculated by dividing the money supply by a price index.

real options

Options embedded in real assets.

Real Rate of Interest

See interest rate, real.

Real time

A real time stock or bond quote is one that states a security's most recent offer to sell or bid (buy).
A delayed quote shows the same bid and ask prices 15 minutes and sometimes 20 minutes after a trade takes place.

real value of $1

Purchasing power–adjusted value of a dollar.

Realizable Revenue A revenue transaction where assets received in exchange for goods and

services are readily convertible into known amounts of cash or claims to cash.

Realized compound yield

Yield assuming that coupon payments are invested at the going market interest
rate at the time of their receipt and rolled over until the bond matures.

Realized Gains and Losses

Increases or decreases in the fair value of an asset or a liability that
are realized through sale or settlement.

Realized return

The return that is actually earned over a given time period.

Realized Revenue

A revenue transaction where goods and services are exchanged for cash or
claims to cash.

realized value approach

a method of accounting for byproducts or scrap that does not recognize any value for these products until they are sold; the value recognized
upon sale can be treated as other revenue or other income

REIT (real estate investment trust)

real estate investment trust, which is similar to a closed-end mutual
fund. REITs invest in real estate or loans secured by real estate and issue shares in such investments.

REMIC (real estate mortgage investment conduit)

A pass-through tax entity that can hold mortgages
secured by any type of real property and issue multiple classes of ownership interests to investors in the form
of pass-through certificates, bonds, or other legal forms. A financing vehicle created under the Tax Reform
Act of 1986.

Wage expense

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

Wage Flexibility

Ease with which wages adjust in response to excess supply or demand.

Wage/Price Controls

An incomes policy in which wages and prices are constrained by law not to rise by more than a specified percentage.

Wage Stickiness

Resistance of wages to change.

Accomodating Policy

A monetary policy of matching wage and price increases with money supply increases so that the real money supply does not fall and push the economy into recession.







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