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Financial Terms | |
True interest cost |
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Definition of True interest costTrue interest costFor a security such as commercial paper that is sold on a discount basis, the coupon rate
Related Terms:Coupon equivalent yieldtrue interest cost expressed on the basis of a 365-day year. Absorption costingA method of costing in which all fixed and variable production costs are charged to products or services using an allocation base. absorption costinga cost accumulation and reporting Absorption costingA methodology under which all manufacturing costs are assigned Accelerated cost recovery system (ACRS)Schedule of depreciation rates allowed for tax purposes. Accrued interestThe accumulated coupon interest earned but not yet paid to the seller of a bond by the Accrued InterestThe amount of interest accumulated on a debt security between ![]() Accrued InterestThe amount of interest owing but not paid. Activity-based costingA method of costing that uses cost pools to accumulate the cost of significant business activities and then assigns the costs from the cost pools to products or services based on cost drivers. activity based costing (ABC)A relatively new method advocated for the activity-based costing (ABC)a process using multiple cost drivers to predict and allocate costs to products and services; Activity-based costing (ABC)A cost allocation system that compiles costs and assigns Actual costThe actual expenditure made to acquire an asset, which includes the supplierinvoiced actual cost systema valuation method that uses actual direct Agency cost viewThe argument that specifies that the various agency costs create a complex environment in Agency costsThe incremental costs of having an agent make decisions for a principal. ![]() Aggressive Cost Capitalizationcost capitalization that stretches the flexibility within generally All-in costTotal costs, explicit and implicit. Amortized Costcost of a security adjusted for the amortization of any purchase premium or Amortizing interest rate swapSwap in which the principal or national amount rises (falls) as interest rates appraisal costa quality control cost incurred for monitoring attribute-based costing (ABC II)an extension of activitybased costing using cost-benefit analysis (based on increased customer utility) to choose the product attribute Average-Cost Inventory MethodThe inventory cost-flow assumption that assigns the average Average cost of capitalA firm's required payout to the bondholders and to the stockholders expressed as a Avoidable costscosts that are identifiable with and able to be influenced by decisions made at the business backflush costinga streamlined cost accounting method that speeds up, simplifies, and reduces accounting effort in an environment that minimizes inventory balances, requires Bankruptcy cost viewThe argument that expected indirect and direct bankruptcy costs offset the other ![]() Base interest rateRelated: Benchmark interest rate. Batch costA cost that is incurred when a group of products or services are produced, batch-level costa cost that is caused by a group of things Benchmark interest rateAlso called the base interest rate, it is the minimum interest rate investors will Best-interests-of-creditors testThe requirement that a claim holder voting against a plan of reorganization budgeted costa planned expenditure Capital Cost Allowance (CCA)The annual depreciation expense allowed by the Canadian Income Tax Act. capitalization of costsWhen a cost is recorded originally as an increase Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized againstfuture-period revenue. Capitalized interestinterest that is not immediately expensed, but rather is considered as an asset and is then Capitalized Interestinterest incurred during the construction period on monies invested in Carring costscosts that increase with increases in the level of investment in current assets. carrying costthe total variable cost of carrying one unit of Carrying costThe cost of holding inventory, which can include insurance, carrying costscosts of maintaining current assets, including opportunity cost of capital. Cash costThe amount of cash expended. Cash flow after interest and taxesNet income plus depreciation. committed costa cost related either to the long-term investment company cost of capitalExpected rate of return demanded by investors in a company, determined by the average risk of the company’s assets and operations. Compound interestinterest paid on previously earned interest as well as on the principal. Compound Interestinterest paid on principal and on interest earned in previous compound interesta method of determining interest in which interest that was earned in prior periods is added to the original investment so that, in each successive period, interest is earned on both principal and interest compound interestinterest earned on interest. Compound Interestinterest earned on an investment at periodic intervals and added to principal and previous interest earned. Each time new interest earned is calculated it is on a combined total of principal and previous interest earned. Essentially, interest is paid on top of interest. controllable costa cost over which a manager has the ability to authorize incurrence or directly influence magnitude conversion costRefers to the sum of manufacturing direct labor and overhead conversion costthe total of direct labor and overhead cost; CostA resource sacrificed or forgone to achieve a specific objective (Horngren et al.), defined costthe cash or cash equivalent value necessary to attain an CostThe expense incurred to create and sell a product or service. If a product is not cost accountinga discipline that focuses on techniques or Cost Accounting Standards Board (CASB)a body established by Congress in 1970 to promulgate cost accounting cost accumulationthe approach to product costing that determines cost allocationthe assignment, using some reasonable basis, cost avoidancethe practice of finding acceptable alternatives Cost basisAn asset’s purchase price, plus costs associated with the purchase, like installation fees, taxes, etc. Cost behaviourThe idea that fixed costs and variable costs react differently to changes in the volume of Cost-Benefit AnalysisThe calculation and comparison of the costs and benefits of a policy or project. cost-benefit analysis the analytical process of comparing therelative costs and benefits that result from a specific course Cost-benefit ratioThe net present value of an investment divided by the investment's initial cost. Also called cost centera responsibility center in which the manager has Cost centreA division or unit of an organization that is responsible for controlling costs. Cost company arrangementArrangement whereby the shareholders of a project receive output free of cost consciousnessa company-wide attitude about the topics cost containmentthe practice of minimizing, to the extent Cost controlThe process of either reducing costs while maintaining the same level of productivity or maintaining costs while increasing productivity. cost control systema logical structure of formal and/or informal Cost depletionA method of expensing the cost of a resource consumed by first determining Cost driverThe most significant cause of the cost of an activity, a measure of the demand for an activity cost drivera factor that has a direct cause-effect relationship Cost driverA factor that directly impacts the incidence of a cost, and which is generally cost driver analysisthe process of investigating, quantifying, cost leadership strategya plan to achieve the position in a cost management system (CMS)a set of formal methods Cost objectAnything for which a measurement of cost is required – inputs, processes, outputs or responsibility centres. Cost objectAn item for which a cost is compiled. For example, this can be a product, Cost of capitalThe required return for a capital budgeting project. Cost of capitalThe costs incurred by an organization to fund all its investments, comprising the risk-adjusted cost of capitalRefers to the interest cost of debt capital used by a business Cost of CapitalThe minimum rate of return a company must earn in order to meet Cost of capitalThe blended cost of a company’s currently outstanding debt instruments Cost of CapitalThe discount rate that should be used in the capital budgeting process. cost of capital (COC)the weighted average cost of the Cost of carryRelated: Net financing cost Cost of Common StockThe rate of return required by the investors in the common stock of Cost of DebtThe cost of debt (bonds, loans, etc.) that a company is charged for Cost of EquitySame as the cost of common stock. Sometimes viewed as the Cost of fundsinterest rate associated with borrowing money. cost of goods manufactured (CGM)the total cost of the Cost of goods soldThe cost of merchandise that a company sold this year. For manufacturing companies, the cost of raw Cost of goods soldSee cost of sales. Cost of goods soldThe cost of the items that were sold during the current period. Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |