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Sales charge

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Definition of Sales charge

Sales Charge Image 1

Sales charge

The fee charged by a mutual fund when purchasing shares, usually payable as a commission to
marketing agent, such as a financial advisor, who is thus compensated for his assistance to a purchaser. It
represents the difference, if any, between the share purchase price and the share net asset value.



Related Terms:

Contingent deferred sales charge (CDSC)

The formal name for the load of a back-end load fund.


12B-1 fees

The percent of a mutual fund's assets used to defray marketing and distribution expenses. The
amount of the fee is stated in the fund's prospectus. The SEC has recently proposed that 12B-1 fees in excess
of 0.25% be classed as a load. A true " no load" fund has neither a sales charge nor 12b-1 fee.


Back office

Brokerage house clerical operations that support, but do not include, the trading of stocks and
other securities. Includes all written confirmation and settlement of trades, record keeping and regulatory
compliance.
Back-end loan fund
A mutual fund that charges investors a fee to sell (redeem) shares, often ranging from
4% to 6%. Some back-end load funds impose a full commission if the shares are redeemed within a
designated time, such as one year. The commission decreases the longer the investor holds the shares. The
formal name for the back-end load is the contingent deferred sales charge, or CDSC.


Dividend yield (Funds)

Indicated yield represents return on a share of a mutual fund held over the past 12
months. Assumes fund was purchased 1 year ago. Reflects effect of sales charges (at current rates), but not
redemption charges.


Load fund

A mutual fund with shares sold at a price including a large sales charge -- typically 4% to 8% of
the net amount indicated. Some "no-load" funds have distribution fees permitted by article 12b-1 of the
Investment Company Act; these are typically 0. 25%. A "true no-load" fund has neither a sales charge nor
Freddie Mac program, the aggregation that the fund purchaser receives some investment advice or other
service worthy of the charge.



Mutual fund

Mutual funds are pools of money that are managed by an investment company. They offer
investors a variety of goals, depending on the fund and its investment charter. Some funds, for example, seek
to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest
in companies that are growing at a rapid pace. Funds can impose a sales charge, or load, on investors when
they buy or sell shares. Many funds these days are no load and impose no sales charge. Mutual funds are
investment companies regulated by the Investment Company Act of 1940.
Related: open-end fund, closed-end fund.


No load mutual fund

An open-end investment company, shares of which are sold without a sales charge.
There can be other distribution charges, however, such as Article 12B-1 fees. A true "no load" fund will have
neither a sales charge nor a distribution fee.


Sales Charge Image 2

charge-back system

a system using transfer prices; see transfer
price


Conditional sales contracts

Similar to equipment trust certificates except that the lender is either the
equipment manufacturer or a bank or finance company to whom the manufacturer has sold the conditional
sales contract.


Cost of sales

The manufacture or purchase price of goods sold in a period or the cost of providing a service.


Days' sales in inventory ratio

The average number of days' worth of sales that is held in inventory.


Days' sales outstanding

Average collection period.


Domestic International Sales Corporation (DISC)

A U.S. corporation that receives a tax incentive for
export activities.


Fixed-charge coverage ratio

A measure of a firm's ability to meet its fixed-charge obligations: the ratio of
(net earnings before taxes plus interest charges paid plus long-term lease payments) to (interest charges paid
plus long-term lease payments).


Fixed Charge Coverage Ratio

A measure of how well a company is able to meet its fixed
charges (interest and lease payments) based on the cash
generated by its operations. It is calculated by dividing the
earnings before interest and taxes by the total interest charges
and lease payments incurred by the firm.


Floating Charge

charge or assignment on a company's total assets as security for a loan on total assets without specifying specific assets.


Foreign Sales Corporation (FSC)

A special type of corporation created by the Tax Reform Act of 1984 that
is designed to provide a tax incentive for exporting U.S.-produced goods.


Gross sales

The total sales recorded prior to sales discounts and returns.



Net sales

Total revenue, less the cost of sales returns, allowances, and discounts.


NET SALES (revenue)

The amount sold after customers’ returns, sales discounts, and other allowances are taken away from
gross sales. (Companies usually just show the net sales amount on their income statements, omitting returns, allowances, and the like.)


Noncash charge

A cost, such as depreciation, depletion, and amortization, that does not involve any cash outflow.


NUMBER OF DAYS SALES IN RECEIVABLES

(also called average collection period). The number of days of net sales that are tied up in credit sales (accounts receivable) that haven’t been collected yet.


percentage of sales models

Planning model in which sales forecasts are the driving variables and most other variables are
proportional to sales.


Price/sales ratio (PS Ratio)

Determined by dividing current stock price by revenue per share (adjusted for stock splits).
Revenue per share for the P/S ratio is determined by dividing revenue for past 12 months by number of shares
outstanding.


RATIO OF NET INCOME TO NET SALES

A ratio that shows how much net income (profit) a company made on each dollar of net sales. Here’s the formula:
(Net income) / (Net sales)


RATIO OF NET SALES TO NET INCOME

A ratio that shows how much a company had to collect in net sales to make a dollar of profit. Figure it this way:
(Net sales) / (Net income)


Redemption charge

The commission charged by a mutual fund when redeeming shares. For example, a 2%
redemption charge (also called a "back end load") on the sale of shares valued at $1000 will result in payment of $980 (or 98% of the value) to the investor. This charge may decrease or be eliminated as shares are held for
longer time periods.


Restructuring Charge

A special, nonrecurring charge taken in conjunction with a consolidation
or relocation of operations, or the disposition or abandonment of operations or productive
assets. Such charges may include impairment losses as well as other expenses, such as writedowns
of other assets including accounts receivable and inventory, and accruals of liabilities for
so-called exit costs, including such expenses as lease terminations, closure costs, severance pay,
benefits, and retraining.



Restructuring Charges

Costs associated with restructuring activities, including the consolidation and/or relocation of operations or the disposition or abandonment of operations or productive assets.
Such charges may be incurred in connection with a business combination, a change in an enterprise's strategic plan, or a managerial response to declines in demand, increasing costs, or other environmental factors.


return on sales

This ratio equals net income divided by sales revenue.


Sales

Amounts earned by the company from the sale of merchandise or services; often used interchangeably with the term revenue.


Sales allowance

A reduction in a price that is allowed by the seller, due to a problem
with the sold product or service.


Sales discount

A reduction in the price of a product or service that is offered by the
seller in exchange for early payment by the buyer.


Sales discounts

A contra account that offsets revenue. It represents the amount of the discounts for early payment allowed on sales.


Sales forecast

A key input to a firm's financial planning process. External sales forecasts are based on
historical experience, statistical analysis, and consideration of various macroeconomic factors.


Sales journal

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


Sales mix

The mix of product/services offered by the business, each of which may be aimed at different customers, with each product/service having different prices and costs.


sales mix

the relative combination of quantities of sales of the various products that make up the total sales of a company


Sales returns

A contra account that offsets revenue. It represents the amount of sales made that were later returned.


Sales Revenue Revenue recognized from the sales of products as opposed to the provision of

services.


Sales Tax

A tax levied as a percentage of retail sales.


Sales-type lease

An arrangement whereby a firm leases its own equipment, such as IBM leasing its own
computers, thereby competing with an independent leasing company.


Sales-type Lease

Lease accounting used by a manufacturer who is also a lessor. Up-front gross
profit is recorded for the excess of the present value of the lease payments to be received across
a lease term over the cost to manufacture the leased equipment. Interest income also is recognized
on the lease receivable as it is earned over the lease term.


Sales value at split-off

A cost allocation methodology that allocates joint costs to joint
products in proportion to their relative sales values at the split-off point.


sales value at split-off allocation

a method of assigning joint cost to joint products that uses the relative sales values of the products at the split-off point as the proration basis; use of this method requires that all joint products
are salable at the split-off point


Special Charges

Nonrecurring losses or expenses resulting from transactions or events which,
in the view of management, are not representative of normal business activities of the period and
which affect comparability of earnings.


Surrender Charge

Expense charges applied when the owner of a policy surrenders a policy for its cash value.


annual return

The fund return, for any 12-month period, including changes in unit value and the reinvestment of distributions, but not taking into account sales, redemption, distribution or other optional charges or income taxes payable by any unitholder that would reduce returns.


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.


loads

Loads are sales fees (or commissions) that are charged when you buy a mutual fund.


Net asset value (NAV)

The value of a fund's investments. For a mutual fund, the net asset value per share
usually represents the fund's market price, subject to a possible sales or redemption charge. For a closed end
fund, the market price may vary significantly from the net asset value.


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
leverage.
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
charge.


special order decision

a situation in which management must determine a sales price to charge for manufacturing or service jobs outside the company’s normal production/service market



 

 

 

 

 

 

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