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Tip of the Day Pay Your Bills On Time

Pay Your Bills On Time - We all get behind on our bills every once in a while, but when it becomes a constant practice it starts to cost us...

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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 Conversion Option

Conversion Option - a conversion option is a feature on certain preferred stocks and some bonds... This feature would allow the shareholder to covert their shares into common stock. Preferred stock, also known as Capital stock, provides a specific dividend that is paid before any dividends are paid to common...

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