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Requirements explosion

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Definition of Requirements explosion

Requirements Explosion Image 1

Requirements explosion

The component-level requirements for a production run,
derived by multiplying the number of parent-level requirements by the component
requirements for each parent, as specified in the bill of materials.



Related Terms:

Assets requirements

A common element of a financial plan that describes projected capital spending and the
proposed uses of net working capital.


Material requirements planning

A computerized system used to calculate material
requirements for a manufacturing operation.


Material requirements planning (MRP)

A computer-driven production methodology
that manufactures products based on an initial demand forecast. It tends to result in
more inventory of all types than a just-in-time (JIT) production system.


materials requirements planning (MRP)

a computerbased information system that simulates the ordering and
scheduling of demand-dependent inventories; a simulation
of the parts fabrication and subassembly activities that are
required, in an appropriate time sequence, to meet a production
master schedule


Reserve requirements

The percentage of different types of deposits that member banks are required to hold
on deposit at the Fed.



Acquisition of assets

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


Advance material request

Very early orders for materials before the completion
of a product design, given the long lead times required to supply some items.


Requirements Explosion Image 1

Aggregate planning

A budgeting process using summary-level information to
derive various budget models, usually at the product family level.


Assets

A firm's productive resources.


ASSETS

Anything of value that a company owns.


Assets

Things that the business owns.


Assets

Items owned by the company or expenses that have been paid for but have not been used up.


Bill of materials

A listing of all the materials and quantities that go to make up a completed product.


bill of materials

a document that contains information about
the product materials components and their specifications
(including quality and quantities needed)


Bill of materials

An itemization of the parts and subassemblies required to create a
product, frequently including assumed scrap rates that will arise as part of the production
process.


Bill of materials (BOM)

A listing of all parts and subassemblies required to produce one
unit of a finished product, including the required number of units of each part
and subassembly.


Requirements Explosion Image 2

Breeder bill of materials

A bill of material that accounts for the generation and
cost implications of byproducts as a result of manufacturing the parent item.


Corporate financial planning

Financial planning conducted by a firm that encompasses preparation of both
long- and short-term financial plans.



Current assets

Value of cash, accounts receivable, inventories, marketable securities and other assets that
could be converted to cash in less than 1 year.


Current assets

Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.


Current assets

Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.


current assets

Current refers to cash and those assets that will be turned
into cash in the short run. Five types of assets are classified as current:
cash, short-term marketable investments, accounts receivable, inventories,
and prepaid expenses—and they are generally listed in this order in
the balance sheet.


Current Assets

Cash and other company assets that can be readily turned into cash within one year.


direct material

a readily identifiable part of a product; the cost of such a part


Direct materials cost

The cost of all materials used in a cost object, such as finished goods.


Direct materials mix variance

The variance between the budgeted and actual mixes of
direct materials costs, both using the actual total quantity used. This variance isolates
the unit cost of each item, excluding all other variables.


Earmarked material

Inventory that has been physically marked as being for a
specific purpose.


Requirements Explosion Image 3

enterprise resource planning (ERP) system

a packaged software program that allows a company to
(1) automate and integrate the majority of its business processes,
(2) share common data and practices across the entire enterprise, and
(3) produce and access information in a realtime environment



Enterprise resource planning system

A computer system used to manage all company
resources in the receipt, completion, and delivery of customer orders.


Estate Planning

An insurance program designed to provide funds for insured's dependents upon death of the insured, and to also conserve, as much as possible, the personal assets that the insured wants to bequeath to heirs.


Exchange of assets

Acquisition of another company by purchase of its assets in exchange for cash or stock.


Financial assets

Claims on real assets.


financial assets

Claims to the income generated by real assets. Also called securities.


Financial planning

The process of evaluating the investing and financing options available to a firm. It
includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in
the form of a financial plan, and then comparing future performance against that plan.


Fixed assets

Things that the business owns and are part of the business infrastructure – fixed assets may be
tangible or intangible.


fixed assets

An informal term that refers to the variety of long-term operating
resources used by a business in its operations—including real
estate, machinery, equipment, tools, vehicles, office furniture, computers,
and so on. In balance sheets, these assets are typically labeled property,
plant, and equipment. The term fixed assets captures the idea that the
assets are relatively fixed in place and are not held for sale in the normal
course of business. The cost of fixed assets, except land, is depreciated,
which means the cost is allocated over the estimated useful lives of the
assets.


Fixed Assets

Land, buildings, plant, equipment, and other assets acquired for carrying on the business of a company with a life exceeding one year. Normally expressed in financial accounts at cost, less accumulated depreciation.


Fixed Assets Turnover Ratio

A measure of the utilization of a company's fixed assets to
generate sales. It is calculated by dividing the sales for the period
by the book value of the net fixed assets.


Floor planning

Arrangement used to finance inventory. A finance company buys the inventory, which is then
held in trust by the user.


Indented bill of material

A bill of material reporting format under which successively
lower levels of components are indented farther away from the left
margin.


Intangible assets

assets owned by the company that do not possess physical substance; they usually take the form of rights and privileges such as patents, copyrights, and franchises.


Intangible fixed assets

Non-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks).


Long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an
entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect
the market value of the assets.


Longer-Term Fixed Assets

assets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied.


Manufacturing resource planning

An integrated, computerized system for planning
all manufacturing resources.


manufacturing resource planning (MRP II)

a fully integrated materials requirement planning system that involves
top management and provides a basis for both strategic
and tactical planning


Manufacturing resource planning (MRP II)

An expansion of the material requirements planning concept, with additional computer-based capabilities in the areas of
direct labor and machine capacity planning.


material mix variance

(actual mix X actual quantity X standard price) - (standard mix X actual quantity X standardprice);
it computes the monetary effect of substituting a nonstandard mix of material


material price variance

total actual cost of material purchased
minus (actual quantity of material  standard
price); it is the amount of money spent below (favorable)
or in excess (unfavorable) of the standard price for the
quantity of materials purchased; it can be calculated based
on the actual quantity of material purchased or the actual
quantity used


material quantity variance

(actual quantity X standard price) - (standard quantity allowed  standard price);
the standard cost saved (favorable) or expended (unfavorable)
due to the difference between the actual quantity
of material used and the standard quantity of material
allowed for the goods produced during the period


Material requirements planning (MRP)

A computer-driven production methodology
that manufactures products based on an initial demand forecast. It tends to result in
more inventory of all types than a just-in-time (JIT) production system.


material requisition form

a source document that indicates
the types and quantities of material to be placed into production
or used in performing a service; it causes materials
and its cost to be released from the Raw material Inventory
warehouse and sent to Work in Process Inventory


Material review board

A company committee typically comprising members representing
multiple departments, which determines the disposition of inventory
items that will not be used in the normal manufacturing or distribution process.


material yield variance

(standard mix X actual quantity X standard price) - (standard mix X standard quantity X standard price);
it computes the difference between the
actual total quantity of input and the standard total quantity
allowed based on output and uses standard mix and
standard prices to determine variance


Materiality

The proportional size of a financial misstatement. It can be construed as
the net impact on reported profits, or the percentage or dollar change in a specific
line item.


Materiality

A characterization of the magnitude of a financial statement item's effect on a
company's overall financial condition and performance. An item is material when its size is
likely to influence decisions of investors or creditors.


Materials price variance

The difference between the actual and budgeted cost to
acquire materials, multiplied by the total number of units purchased.


Materials quantity variance

The difference between the actual and budgeted quantities
of material used in the production process, multiplied by the standard cost per
unit.


Materials requirement planning

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


materials requirements planning (MRP)

a computerbased information system that simulates the ordering and
scheduling of demand-dependent inventories; a simulation
of the parts fabrication and subassembly activities that are
required, in an appropriate time sequence, to meet a production
master schedule


Materials requisition

A document listing the quantities of specific parts to be withdrawn
from inventory.


Matrix bill of material

A bill of materials chart listing the bills for similar products,
which is useful for determining common components.


Modular bill of material

A bill of material format in which components and subassemblies
are clustered by product option, so one can more easily plan for the
assembly of finished goods with different configurations.


Multilevel bill of material

An itemization of all bill of material components, including
a nested categorization of all components used for subassemblies.


Net assets

The difference between total assets on the one hand and current liabilities and noncapitalized longterm
liabilities on the other hand.


Non-reproducible assets

A tangible asset with unique physical properties, like a parcel of land, a mine, or a
work of art.


Nonconforming material

Any inventory item that does not match its original design
specifications within approved tolerance levels.


Offal material

The waste materials resulting from a production process.


Other assets

A cluster of accounts that are listed after fixed assets on the balance sheet,
and which contain minor assets that cannot be reasonably fit into any of the other
main asset categories.


Other current assets

Value of non-cash assets, including prepaid expenses and accounts receivable, due
within 1 year.


Personal Assets

assets, the title of which are held personally rather than in the name of some other legal entity.


Phantom bill of material

A bill of materials for a subassembly that is not normally
kept in stock, because it is used at once as part of a higher-level assembly or
finished product.


planning

the process of creating the goals and objectives for
an organization and developing a strategy for achieving
them in a systematic manner


Planning horizon

The length of time a model projects into the future.


planning horizon

Time horizon for a financial plan.


Planning, programming and budgeting system (PPBS)

A method of budgeting in which budgets are allocated to projects or programmes rather than to responsibility centres.


Preferred Stock Stock that has a claim on assets and dividends of a corporation that are prior

to that of common stock. Preferred stock typically does not carry the right to vote.


Publicly traded assets

assets that can be traded in a public market, such as the stock market.


Quick assets

Current assets minus inventories.


RATE OF RETURN ON TOTAL ASSETS

The percentage return or profit that management made on each dollar of assets. The formula is:
(Net income) / (Total assets)


Raw material

Base-level items used by the manufacturing process to create either
subassemblies or finished goods.


Raw material supply agreement

As used in connection with project financing, an agreement to furnish a
specified amount per period of a specified raw material.


Raw materials

Unprocessed goods bought for manufacture, part of inventory.


Raw materials inventory

The total cost of all component parts currently in stock that
have not yet been used in work-in-process or finished goods production.


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.


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.


Repair bill of material

A special bill itemizing changes needed to refurbish an
existing product.


Reprocessed material

material that has been reworked and returned to stock.


Reproducible assets

A tangible asset with physical properties that can be reproduced, such as a building or
machinery.


Reserved material

material that has been reserved for a specific purpose.


Residual assets

assets that remain after sufficient assets are dedicated to meet all senior debtholder's claims in full.


Return on assets (ROA)

Indicator of profitability. Determined by dividing net income for the past 12 months
by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net
income/sales) multiplied by asset utilization (sales/assets).


return on assets (ROA)

Although there is no single uniform practice for
calculating this ratio, generally it equals operating profit (before interest
and income tax) for a year divided by the total assets that are used to
generate the profit. ROA is the key ratio to test whether a business is
earning enough on its assets to cover its cost of capital. ROA is used for
determining financial leverage gain (or loss).


Return on total assets

The ratio of earnings available to common stockholders to total assets.


Return on Total Assets Ratio

A measure of the percentage return earned on the value of the
assets in the company. It is calculated by dividing the net income
available for distribution to shareholders by the book value of all
assets.


Single-level bill of material

A list of all components used in a parent item.


strategic planning

the process of developing a statement of
long-range (5–10 years) goals for the organization and
defining the strategies and policies that will help the organization
achieve those goals


Summarized bill of materials

A bill of materials format showing the grand total
usage requirement for each component of a finished product.


tactical planning

the process of determining the specific
means or objectives by which the strategic plans of the
organization will be achieved; it is short-range in nature
(usually 1–18 months)


Tangible fixed assets

Physical assets that can be seen and touched, e.g. buildings, machinery, vehicles, computers etc.


Total Debt to Total Assets Ratio

See debt ratio



 

 

 

 

 

 

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