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Definition of Sales Tax
A tax levied as a percentage of retail sales.
taxes paid by consumers when they buy goods and services. A sales tax is an example.
The ratio of net income to net sales.
Money after-tax rate of return minus the inflation rate.
A situation wherein participants in a transaction have different net tax rates.
taxes as a fraction of income; total taxes divided by total taxable income.
The ratio of net income before taxes to net sales.
The tax rate at which a party to a prospective transaction is indifferent between entering
Net income plus depreciation.
Similar to equipment trust certificates except that the lender is either the
The formal name for the load of a back-end load fund.
The argument that double (corporate and individual) taxation of equity returns makes
Rate of return required on a par bond to produce the same after-tax yield to
The average number of days' worth of sales that is held in inventory.
Average collection period.
A non-cash expense that provides a source of free cash flow. Amount allocated during the
Depreciation tax shield
The value of the tax write-off on depreciation of plant and equipment.
Domestic International Sales Corporation (DISC)
A U.S. corporation that receives a tax incentive for
Agreement between two countries that taxes paid abroad can be offset against
Earnings before interest and taxes (EBIT)
A financial measure defined as revenues less cost of goods sold
Equivalent taxable yield
The yield that must be offered on a taxable bond issue to give the same after-tax
Foreign Sales Corporation (FSC)
A special type of corporation created by the tax Reform Act of 1984 that
Foreign tax credit
Home country credit against domestic income tax for foreign taxes paid on foreign
Imputation tax system
Arrangement by which investors who receive a dividend also receive a tax credit for
Interest equalization tax
tax on foreign investment by residents of the U.S. which was abolished in 1974.
Interest tax shield
The reduction in income taxes that results from the tax-deductibility of interest payments.
Investment tax credit
Proportion of new capital investment that can be used to reduce a company's tax bill
Limited-tax general obligation bond
A general obligation bond that is limited as to revenue sources.
Marginal tax rate
The tax rate that would have to be paid on any additional dollars of taxable income earned.
Personal tax view (of capital structure)
The argument that the difference in personal tax rates between
Price/sales ratio (PS Ratio)
Determined by dividing current stock price by revenue per share (adjusted for stock splits).
Progressive tax system
A tax system wherein the average tax rate increases for some increases in income but
The fee charged by a mutual fund when purchasing shares, usually payable as a commission to
A key input to a firm's financial planning process. External sales forecasts are based on
An arrangement whereby a firm leases its own equipment, such as IBM leasing its own
Short-term tax exempts
Short-term securities issued by states, municipalities, local housing agencies, and
Split-rate tax system
A tax system that taxes retained earnings at a higher rate than earnings that are
TANs (tax anticipation notes)
tax anticipation notes issued by states or municipalities to finance current
Tax anticipation bills (TABs)
Special bills that the Treasury occasionally issues that mature on corporate
Set of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's
Tax clawback agreement
An agreement to contribute as equity to a project the value of all previously
Tax differential view ( of dividend policy)
The view that shareholders prefer capital gains over dividends,
The municipal bond market where state and local governments raise funds. Bonds issued
Tax free acquisition
A merger or consolidation in which 1) the acquirer's tax basis in each asset whose
A nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific
Tax Reform Act of 1986
A 1986 law involving a major overhaul of the U.S. tax code.
The reduction in income taxes that results from taking an allowable deduction from taxable income.
Swapping two similar bonds to receive a tax benefit.
Tax deferral option
The feature of the U.S. Internal Revenue Code that the capital gains tax on an asset is
Tax-deferred retirement plans
Employer-sponsored and other plans that allow contributions and earnings to
The option to sell an asset and claim a loss for tax purposes or not to sell the asset and
A merger or consolidation that is not a tax-fee acquisition. The selling shareholders are
Gross income less a set of deductions.
Any transaction that is not tax-free to the parties involved, such as a taxable acquisition.
Two-tier tax system
A method of taxation in which the income going to shareholders is taxed twice.
Method of indirect taxation whereby a tax is levied at each stage of production on the value
A tax levied by a country of source on income paid, usually on dividends remitted to the
What the business paid to the IRS.
NET SALES (revenue)
The amount sold after customers’ returns, sales discounts, and other allowances are taken away from
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.
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:
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:
Cost of sales
The manufacture or purchase price of goods sold in a period or the cost of providing a service.
Earnings before interest and taxes (EBIT)
The operating profit before deducting interest and tax.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
The operating profit before deducting interest, tax, depreciation and amortization.
Profit before interest and taxes (PBIT)
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.
Payroll tax expense
The amount of tax associated with salaries that an employer pays to governments (federal, state, and local).
Payroll taxes payable
The amount of payroll taxes owed to the various governments at the end of a period.
Amounts earned by the company from the sale of merchandise or services; often used interchangeably with the term revenue.
A contra account that offsets revenue. It represents the amount of the discounts for early payment allowed on sales.
A journal used to record the transactions that result in a credit to sales.
A contra account that offsets revenue. It represents the amount of sales made that were later returned.
earnings before interest and income tax (EBIT)
A measure of profit that
return on sales
This ratio equals net income divided by sales revenue.
the relative combination of quantities of sales of the various products that make up the total sales of a company
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
tax benefit (of depreciation)
the amount of depreciation deductible for tax purposes multiplied by the tax rate;
postponing taxation of an amount until a future date
a tax treatment where income is never subject to income taxation
current compensation that is taxed at a future date
current compensation that is never taxed
tax shield (of depreciation)
the amount of depreciation deductible
The total sales recorded prior to sales discounts and returns.
A government tax on the income earned by an individual or corporation.
Total revenue, less the cost of sales returns, allowances, and discounts.
A reduction in a price that is allowed by the seller, due to a problem
A reduction in the price of a product or service that is offered by the
Sales value at split-off
A cost allocation methodology that allocates joint costs to joint
average tax rate
Total taxes owed divided by total income.
depreciation tax shield
Reduction in taxes attributable to the depreciation allowance.
interest tax shield
tax savings resulting from deductibility of interest payments.
marginal tax rate
Additional taxes owed per dollar of additional income.
percentage of sales models
Planning model in which sales forecasts are the driving variables and most other variables are
The loss in purchasing power due to inflation eroding the real value of financial assets such as cash.
Investment Tax Credit
A reduction in taxes offered to firms to induce them to increase investment spending.
Marginal Tax Rate
Percent of an increase in income paid in tax.
A tax in which the rich pay a larger percentage of income than the poor. Contrast with regressive tax.
A tax taking the same percentage of income regardless of the level of income.
A tax in which the poor pay a larger percentage of income than the rich. Contrast with progressive tax.
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