non-cash expense

Thân thiện

A company records a non-cash expense for depreciation on its equipment.

Definition

Noun: An accounting expense that reduces reported income but does not involve an actual outflow of cash during the period. It represents the allocation of a cost over time or the recognition of a reduction in an asset's value.

Usage

This term is used primarily in accounting and financial analysis to describe costs that impact the income statement without affecting the cash flow statement in the same period. It is a key concept for understanding the difference between net income and cash flow from operations.

Examples

• The company's largest non-cash expense is the depreciation of its factory equipment.
• When analyzing the cash flow, you must add back non-cash expenses like amortization to the net income.
• A common example of a non-cash expense is the depletion of natural resources.

Advanced Usage

• In Financial Modeling: Analysts adjust for non-cash expenses to calculate metrics like EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which aims to show a company's operational cash-generating ability.
• For Tax Purposes: While a non-cash expense like depreciation reduces accounting profit, it also creates a deductible expense that can reduce taxable income, thus impacting cash flow via lower tax payments.

Variants and Related Words

• Depreciation (n): The systematic allocation of the cost of a tangible asset over its useful life. It is the most common type of non-cash expense.
• Amortization (n): The gradual write-off of the cost of an intangible asset (like a patent or trademark) over time.
• Impairment Charge (n): A non-cash expense recorded when the carrying amount of an asset exceeds its recoverable amount.
• Stock-Based Compensation (n): An expense representing the value of company shares or options granted to employees, which does not require a cash outlay at the time of the grant.

Synonyms

• Book expense
• Accounting expense (when distinguishing from a cash outlay)
• Accrued expense (in some specific contexts, though this can also imply a future cash payment)

Antonyms

• Cash expense
• Cash outlay
• Out-of-pocket expense

Học thuật

Noun

1. an expense (such as depreciation) that is not paid for in cash