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Tip of the Day Don't Be Afraid of Stock

Don't Be Afraid of Stock - Today, two-thirds or more of 401(k) money is invested into low-yielding bonds, because bonds are a much safer investment with lower risk than stocks,...

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Depreciation

Definition: Long-term assets are depreciated to account for the reduction in economic value over time. 

For example, if you bought a car for $20,000 and intended to keep it for 5 years, it wouldn't make much sense to have it valued at $20,000 on the books at year five.  Instead, you would depreciate it over its useful life.  In year 5, it may only be worth $6,000.

Advice: Depreciation is a figure that many companies may try fidgeting with.  By simply extending the useful life of their assets, this will reduce depreciation expense.  Or some companies will try to reduce the useful life to increase depreciation expense and reduce their taxes.

Depreciation expense is also more important in some industries than others.  For example, it's not very important in real estate because buildings tend to increase in value.

 

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Definition of the Day Dot-Com

Dot-Com - This is a term that is related to any business that does most of its activity on the internet. And the maintain a web site domain where the address in with a “dot” and then com. It is very common these days for any company to create a...

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