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Free-on-Board (FOB) Shipping Point

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Definition of Free-on-Board (FOB) Shipping Point

Free-on-Board (FOB) Shipping Point Image 1

Free-on-Board (FOB) Shipping Point

A shipping arrangement agreed to between buyer and
seller where title to the goods sold passes when the goods in question are delivered to a common
carrier. When goods are shipped fob shipping point, revenue is properly recognized when the
goods are delivered to the common carrier.



Related Terms:

Arbitrage-free option-pricing models

Yield curve option-pricing models.


Basis point

In the bond market, the smallest measure used for quoting yields is a basis point. Each percentage
point of yield in bonds equals 100 basis points. Basis points also are used for interest rates. An interest rate of
5% is 50 basis points greater than an interest rate of 4.5%.


Big Board

A nickname for the New York Stock Exchange. Also known as The Exchange. More than 2,000
common and preferred stocks are traded. Founded in 1792, the NYSE is the oldest exchange in the United
States, and the largest. It is located on Wall Street in New York City.


Bond points

A conventional unit of measure for bond prices set at $10 and equivalent to 1% of the $100 face
value of the bond. A price of 80 means that the bond is selling at 80% of its face, or par value.


Cash-flow break-even point

The point below which the firm will need either to obtain additional financing
or to liquidate some of its assets to meet its fixed costs.


Delivery points

Those points designated by futures exchanges at which the financial instrument or
commodity covered by a futures contract may be delivered in fulfillment of such contract.


Free cash flows

Cash not required for operations or for reinvestment. Often defined as earnings before
interest (often obtained from operating income line on the income statement) less capital expenditures less the
change in working capital.


Free-on-Board (FOB) Shipping Point Image 2

Free float

An exchange rate system characterized by the absence of government intervention. Also known as
clean float.


Free on board

Implies that distributive services like transport and handling performed on goods up to the
customs frontier of the economy from which the goods are classed as merchandise.


Free reserves

Excess reserves minus member bank borrowings at the Fed.


Free rider

A follower who avoids the cost and expense of finding the best course of action and by simply
mimicking the behavior of a leader who made these investments.


Point

The smallest unit of price change quoted or, one one-hundredth of a percent. Related: minimum price
fluctuation and tick.


Point and figure chart

A price-only chart that takes into account only whole integer changes in price, i.e., a
2-point change. point and figure charting disregards the element of time and is solely used to record changes
in price.


Price value of a basis point (PVBP)

Also called the dollar value of a basis point, a measure of the change in
the price of the bond if the required yield changes by one basis point.


Riskless or risk-free asset

An asset whose future return is known today with certainty. The risk free asset is
commonly defined as short-term obligations of the U.S. government.


Risk-free asset

An asset whose future return is known today with certainty.


Free-on-Board (FOB) Shipping Point Image 3

Risk-free rate

The rate earned on a riskless asset.


Tax free acquisition

A merger or consolidation in which 1) the acquirer's tax basis in each asset whose
ownership is transferred in the transaction is generally the same as the acquiree's, and 2) each seller who
receives only stock does not have to pay any tax on the gain he realizes until the shares are sold.


Breakeven point

The point at which total costs equal total revenue, i.e. where there is neither a profit nor a loss.


breakeven point

The annual sales volume level at which total contribution
margin equals total annual fixed expenses. The breakeven point is only a
point of reference, not the goal of a business, of course. It is computed by
dividing total fixed expenses by unit margin. The breakeven point is
quite useful in analyzing profit behavior and operating leverage. Also, it
gives manager a good point of reference for setting sales goals and
understanding the consequences of incurring fixed costs for a period.


free cash flow

Generally speaking, this term refers to cash flow from
profit (cash flow from operating activities, to use the more formal term).
The underlying idea is that a business is free to do what it wants with its
cash flow from profit. However, a business usually has many ongoing
commitments and demands on this cash flow, so it may not actually be
free to decide what do with this source of cash. Warning: This term is
not officially defined anywhere and different persons use the term to
mean different things. Pay particular attention to how an author or
speaker is using the term.


Basis Point

One one-hundredth of one percent


Free Cash Flow

The funds available for distribution to the capital providers of the
company after investments inside the company have been made


Risk-free Rate

The rate of return on an investment with known future benefits; a
riskless rate of return, often estimated using the return earned on
short-term U.S. Treasury securities


break-even point (BEP)

the level of activity, in units or dollars, at which total revenues equal total costs


Cost Accounting Standards Board (CASB)

a body established by Congress in 1970 to promulgate cost accounting
standards for defense contractors and federal agencies; disbanded
in 1980 and reestablished in 1988; it previously issued
pronouncements still carry the weight of law for those
organizations within its jurisdiction


North American Free Trade Agreement (NAFTA)

an agreement among Canada, Mexico, and the United States establishing the North American free Trade Zone, with a resulting reduction in trade barriers


order point

the level of inventory that triggers the placement
of an order for additional units; it is determined based
on usage, lead time, and safety stock


split-off point

the point at which the outputs of a joint process are first identifiable or can be separated as individual products


Basis point

One hundredth of one percentage point, or 0.0001.


Point and figure chart

A financial chart usually used to plot asset price data.
Upward price movements are plotted as X’s and downward price movements
are plotted as O’s.


Breakeven point

The sales level at which a company, division, or product line makes a
profit of exactly zero, and is computed by dividing all fixed costs by the average
gross margin percentage.


Split-off point

The point in a production process when clearly identifiable joint costs
can be identified within the process.


Basis Point

One one-hundredth of a percentage point, used to express variations in yields. For example, the difference between 5.36 percent and 5.38 percent is 2 basis points.


Federal Reserve Board

board of Governors of the Federal Reserve System.


Free Trade

The absence of any government restrictions, such as tariffs or quotas, on imports or exports.


Turning Point

The trough or peak of a business cycle.


Free-on-Board (FOB) Destination

A shipping arrangement agreed to between buyer and
seller where title to the goods sold passes when the goods in question reach their destination.
When goods are shipped fob destination, revenue is properly recognized when the goods reach
their destination.


Public Oversight Board

An independent private-sector body that oversees the audit practices
of certified public accountants who work with SEC-regulated companies.


Material review board

A company committee typically comprising members representing
multiple departments, which determines the disposition of inventory
items that will not be used in the normal manufacturing or distribution process.


Order penetration point

The point in the production process when a product is
reserved for a specific customer.


Outbound stock point

A designated inventory location on the shop floor between
operations where inventory is stockpiled until needed by the next operation.


Point-of-use delivery

A delivery of stock to a location in or near the shop floor
adjacent to its area of use.


Point-of-use storage

The storage of stock in a location in or near the shop floor
adjacent to its area of use.


Stockpoint

An inventory storage area used for short-term inventory staging.


Risk-Free Rate

The rate of return obtainable on government of Canada treasury bills.


point of sale (POS)

The terminal at which a customer uses his/her debit card to make a direct payment transaction. See also Interac Direct Payment.


 

 

 

 

 

 

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