Finance Terminolgioes

Tangible assets
Tangible assets are typically physical assets or property owned by a

company, such as equipment, buildings, and inventory. Tangible assets are
the main type of assets that companies use to produce their product and
service.
Intangible assets
An intangible asset is an asset that is not physical in nature. Goodwill, brand
recognition and intellectual property, such as patents, trademarks, and
copyrights, are all intangible assets.
Amortization
Amortization is a method of spreading the cost of an intangible asset over a
specific period of time, which is usually the course of its useful life.
Intangible assets are non-physical assets that are nonetheless essential to a
company, such as patents, trademarks, and copyrights. The goal in
amortizing an asset is to match the expense of acquiring it with the revenue
it generates.
Let's say a company spends $50,000 to obtain a license, and the license in
question will expire in 10 years. Since the license is an intangible asset, it
should be amortized for the 10-year period leading up to its expiration date.
Using the straight-line method of amortization, which is a method for
charging a cost to an expense at a consistent rate over time, the company's
annual amortization expense for the license will be $5,000 (that's $50,000/10
years), meaning the asset will decline in value by $5,000 every year.
Depreciation
Like amortization, depreciation is a method of spreading the cost of an asset
over a specified period of time, typically the asset's useful life. The purpose
of depreciation is to match the expense of obtaining an asset to the income
it helps a company earn. Depreciation is used for tangible assets.
Tangible assets are physical assets such as manufacturing equipment,
business vehicles, and computers. Depreciation is a measure of how much of
an asset's value has been used up at a given point in time.
Let's say a company purchases a new piece of equipment with an estimated
useful life of 10 years for the price of $100,000. Using the straight-line
method, the company's annual depreciation expense for the equipment will
be $10,000 ($100,000/10 years). This is important because depreciation
expenses are recognized as deductions for tax purposes. It is also possible
for a company to use an accelerated depreciation method, where the
amount of depreciation it takes each year is higher during the earlier years
of an asset's life.
Differences
The key difference between amortization and depreciation is that
amortization is used for intangible assets, while depreciation is used for
tangible assets. Another major difference is that amortization is almost
always implemented using the straight-line method, whereas depreciation
can be implemented using either the straight-line or accelerated method.
Finally, because they are intangible, amortized assets do not have a salvage
value, which is the estimated resale value of an asset at the end of its useful
life. Depreciated assets, by contrast, often have a salvage value. An asset's
salvage value must be subtracted from its cost to determine the amount in
which it can be depreciated.
Salvage value
Salvage value is the book value of an asset after all depreciation has been
fully expensed. The salvage value of an asset is based on what a company
expects to receive in exchange for selling or parting out the asset at the end
of its useful life.
 Volume
Sales volume is the number of units sold within a reporting period
 Net Trade Sales
Net Trade Sales means the amount invoiced by a Party or its Affiliate for
----------------- sales of Collaboration Products to a Third Party in the Profit/Loss
Sharing Territory, less estimates which will be adjusted to actual on a periodic
basis of:
(i) discounts, including cash discounts, discounts to managed care or
similar organizations, rebates paid, credit, accrued or actually taken,
including government rebates such as Medicaid chargebacks, and retroactive
price reductions or allowances actually allowed or granted from the billed
amount, and commercially reasonable and customary fees paid to
distributors (other than to a distributor that is an Affiliate of such Party),
(ii) credits or allowances actually granted upon claims, rejections or
returns of such sales of Collaboration Products, including recalls, regardless
of the Party requesting such recalls, and
(iii) taxes, duties or other governmental charges levied on or measured by
the billing amount when included in billing, as adjusted for rebates,
chargebacks, and refunds.
 Other Sales
Other Sales
 Total Sales
Total sales refers to the total number of units you sell, regardless of how
much money you bring in or whether or not you make a profit.
 Variable COGS
Variable costs are expenses that increase or decrease according to the
number of items produced. For example, to produce 100 rocking chairs, a
company may need to purchase $2,000 worth of lumber.
 Variable FPDE
Finished Products Distribution Expense
 Other Variable
Other Variable Cost
 Total Variable Cost
Total Variable COGS
 Variable Contribution
Variable contribution, also called the variable contribution margin, is
defined as the amount of profit which would be earned from the sale of an
item based on the variable costs associated with the product such as the
cost of goods.
An example of a variable contribution is when a $10 toy produces a $6
profit when the cost of goods is $4, but only produces a $4 profit when the
cost of goods increases to $6.
 Fixed COGS
Fixed costs are expenses that do not change based on production levels.
This does not mean these expenses are written in stone—sometimes rent
goes up or insurance premiums go down.
 FPDE Fixed
Finished Products Distribution Expense
 Manufacturing Period Expense
 Other Period Expense
 Total Period Expense
 Gross Profit
 Selling Expense
 Research & Development
 Bus Mgmt/Admin/Other
 Functional Cost
 Operating Other Income / Expense
 EBIT
EBIT (earnings before interest and taxes) is a company's net income
before income tax expense and interest expenses are deducted. EBIT is
used to analyze the performance of a company's core operations without
the costs of the capital structure and tax expenses impacting profit.
 Non-Operating Other Income / Expense
 EBIT Adjustments
 Adj. EBIT
 Definition of Reclassification
In accounting, the term reclassification is often used to describe moving an
amount from one general ledger accountto another.
Examples of Reclassification
Assume that a repair bill of $5,000 was initially debited to the asset account
Equipment. Since the repair was not an improvement nor did it extend the
life of the equipment, the controller prepared a journal entry that debits
Repairs Expense for $5,000 and credits Equipment for $5,000. The
description on the controller's journal entry was, "To reclassify the XYZ Co.'s
repair bill from Equipment to Repairs Expense."
Reclassification can also be used to describe moving a note payable from a

long-term liability account to a short-term or current liability account when
the note's maturity date is less than one year away.
Another example of reclassification arises when a company stops using one
of its buildings and puts the building up for sale. In that situation, the journal
entry description might be, "To reclassify the X building from property, plant
and equipment to long-term investments."
Distribution Cost:
Distribution cost is the sum of all expenses (direct and indirect) incurred by
any company, firm, individual, or any other entity to deliver their products
from the production department to the end consumer. Distribution costs are
also known as distribution expenses.
The same as other operating expenses, distribution costs are also records in
the income statement of the entity during the period the costs are incurred.
Distribution costs mainly consist of transportation expenses like
 Fuel and toll expenses
 Any logistic expenses
 Warehouse expenses including handling of inventory
 Repair and maintenance of vehicles used for transportation purpose
From the above definition, we can say that the sum of all costs incurred in
respect of transporting of a product from the production department to the
distributor, distributor to retailer and from retailer to end consumer would be
included in total distribution costs.
Here note that distribution expenses are different from selling and marketing
expenses. It is mainly concern with logistics, shipping, and insurance while
the selling and marketing expenses are mainly concern with the
advertisement, commission, and salaries of marketing staff.
All distribution costs are considered indirect expenses and come under the
head of selling and distribution expenses in the company’s profit and loss
statement.

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Finance Terminolgioes

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Tangible assets

Tangible assets are typically physical assets or property owned by a

Reclassification can also be used to describe moving a note payable from a

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