Definition of SUM-OF-THE-YEARS’ DIGITS

SUM-OF-THE-YEARS’ DIGITS

An accelerated depreciation method that makes the sum of the digits in an asset’s expected
life the denominator for a series of yearly depreciation fractions.
The numerators of these fractions are the asset’s years of life in reverse order.
An increasingly smaller depreciation fraction is applied to the asset’s (cost–salvage) value each year.

Sum-of-the-years'-digits depreciation

Method of accelerated depreciation.

Consumer credit

Credit granted by a firm to consumers for the purchase of goods or services. Also called
retail credit.

Consumer Price Index (CPI)

The CPI, as it is called, measures the prices of consumer goods and services and is a
measure of the pace of U.S. inflation. The U.S.Department of Labor publishes the CPI very month.

Economic assumptions

Economic environment in which the firm expects to reside over the life of the
financial plan.

Homogenous expectations assumption

An assumption of Markowitz portfolio construction that investors
have the same expectations with respect to the inputs that are used to derive efficient portfolios: asset returns,
variances, and covariances.

Zero-sum game

A type of game wherein one player can gain only at the expense of another player.

reinvestment assumption

an assumption made about the rates of return that will be earned by intermediate cash flows from a capital project; NPV and PI assume reinvestment at the discount rate; IRR assumes reinvestment at the IRR

Average Propensity to Consume

Ratio of consumption to disposable income. See also marginal propensity to consume.

Capital Consumption Allowance

See depreciation.

Consumer Price Index (CPI)

An index calculated by tracking the cost of a typical bundle of consumer goods and services over time. It is commonly used to measure inflation.

Consumption Function

The relationship between consumption demand and disposable income. More generally, it refers to the relationship between consumption demand and all factors that affect this demand.

Marginal Propensity to Consume

Fraction of an increase in disposable income that is spent on consumption.

Consumer Credit Protection Act

A federal Act specifying the proportion of
total pay that may be garnished.

Summarized bill of materials

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

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