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Real Income |
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Definition of Real IncomeReal Incomeincome expressed in base-year dollars, calculated by dividing nominal income by a price index.
Related Terms:After-tax real rate of returnMoney after-tax rate of return minus the inflation rate. Economic incomeCash flow plus change in present value. Fixed-income equivalentAlso called a busted convertible, a convertible security that is trading like a straight Fixed-income instrumentsAssets that pay a fixed-dollar amount, such as bonds and preferred stock. Fixed-income marketThe market for trading bonds and preferred stock. Income beneficiaryOne who receives income from a trust. Income bondA bond on which the payment of interest is contingent on sufficient earnings. These bonds are Income fundA mutual fund providing for liberal current income from investments. Income statement (statement of operations)A statement showing the revenues, expenses, and income (the Income stockCommon stock with a high dividend yield and few profitable investment opportunities. Investment incomeThe revenue from a portfolio of invested assets. Monthly income preferred security (MIP)Preferred stock issued by a subsidiary located in a tax haven. Net incomeThe company's total earnings, reflecting revenues adjusted for costs of doing business, Real assetsIdentifiable assets, such as buildings, equipment, patents, and trademarks, as distinguished from a Real capitalWealth that can be represented in financial terms, such as savings account balances, financial Real cash flowA cash flow is expressed in real terms if the current, or date 0, purchasing power of the cash Real exchange ratesExchange rates that have been adjusted for the inflation differential between two countries. Real interest rateThe rate of interest excluding the effect of inflation; that is, the rate that is earned in terms Real marketThe bid and offer prices at which a dealer could do "size." Quotes in the brokers market may Real timeA real time stock or bond quote is one that states a security's most recent offer to sell or bid (buy). Realized compound yieldYield assuming that coupon payments are invested at the going market interest Realized returnThe return that is actually earned over a given time period. REIT (real estate investment trust)real estate investment trust, which is similar to a closed-end mutual REMIC (real estate mortgage investment conduit)A pass-through tax entity that can hold mortgages Spread incomeAlso called margin income, the difference between income and cost. For a depository Taxable incomeGross income less a set of deductions. Underwriting incomeFor an insurance company, the difference between the premiums earned and the costs INCOME STATEMENTAn accounting statement that summarizes information about a company in the following format: INCOME TAXWhat the business paid to the IRS. NET INCOMEThe profit a company makes after cost of goods sold, expenses, and taxes are subtracted from net sales. RATIO OF NET INCOME TO NET SALESA ratio that shows how much net income (profit) a company made on each dollar of net sales. Here’s the formula: RATIO OF NET SALES TO NET INCOMEA ratio that shows how much a company had to collect in net sales to make a dollar of profit. Figure it this way: Residual income (RI)The profit remaining after deducting from profit a notional cost of capital on the investment in a business or division of a business. Dividend incomeincome that a company receives in the form of dividends on stock in other companies that it holds. Income StatementOne of the basic financial statements; it lists the revenue and expense accounts of the company. Interest incomeincome that a company receives in the form of interest, usually as the result of keeping money in interest-bearing accounts at financial institutions and the lending of money to other companies. Net incomeThe last line of the income Statement; it represents the amount that the company earned during a specified period. earnings before interest and income tax (EBIT)A measure of profit that income statementFinancial statement that summarizes sales revenue net income (also called the bottom line, earnings, net earnings, and netoperating earnings) Real Interest RateThe rate of interest paid on an investment adjusted for inflation approximated net realizable value at split-off allocationa method of allocating joint cost to joint products using a net realizable value approacha method of accounting for by-products or scrap that requires that the net realizable value of these products be treated as a reduction in the cost of the primary products; primary product cost may be reduced by decreasing either net realizable value at split-off allocationa method of allocating joint cost to joint products that uses, as the proration base, sales value at split-off minus all costs necessary real microprofit centera center whose output has a market value realized value approacha method of accounting for byproducts or scrap that does not recognize any value for these products until they are sold; the value recognized residual incomethe profit earned by a responsibility center that exceeds an amount "charged" for funds committed to that center tax-deferred incomecurrent compensation that is taxed at a future date tax-exempt incomecurrent compensation that is never taxed Fixed-income securityA security that pays a specified cash flow over a IncomeNet earnings after all expenses for an accounting period are subtracted from all Income statementA financial report that summarizes a company’s revenue, cost of Income taxA government tax on the income earned by an individual or corporation. Net incomeThe excess of revenues over expenses, including the impact of income taxes. Net realizeable valueThe expected revenue to be gained from the sale of an item or Operating incomeThe net income of a business, less the impact of any financial activity, common-size income statementincome statement that presents items as a percentage of revenues. income statementFinancial statement that shows the revenues, expenses, and net income of a firm over a period of time. real assetsAssets used to produce goods and services. real interest rateRate at which the purchasing power of an investment increases. real optionsOptions embedded in real assets. real value of $1Purchasing power–adjusted value of a dollar. residual incomeAlso called economic value added. Profit minus cost of capital employed. Disposable Incomeincome less income tax. Exchange Rate, RealThe nominal exchange rate corrected for price level differences. Incomes PolicyA policy designed to lower inflation without reducing aggregate demand. Wage/price controls are an example. Interest Rate, RealNominal interest rate less expected inflation. National IncomeGDP with some adjustments to remove items that do not make it into anyone's hands as income, such as indirect taxes and depreciation. Loosely speaking, it is interpreted as being equal to GDP. National Income and Product AccountsThe national accounting system that records economic activity such as GDP and related measures. Permanent Income HypothesisTheory that individuals base current consumption spending on their perceived long-run average income rather than their current income. RealMeasured in base year, or constant, dollars. Contrast with nominal. Real Business Cycle TheoryBelief that business cycles arise from real shocks to the economy, such as technology advances and natural resource discoveries, and have little to do with monetary policy. Real Exchange RateExchange rate adjusted for relative price levels. Real GDPGDP expressed in base-year dollars, calculated by dividing nominal GDP by a price index. Real Money SupplyMoney supply expressed in base-year dollars, calculated by dividing the money supply by a price index. Real Rate of InterestSee interest rate, real. Real WageWage expressed in base-year dollars, calculated by dividing the money wage by a price index. Tax-Related Incomes Policy (TIP)Tax incentives for labor and business to induce them to conform to wage/price guidelines. Employee Retirement Income Security Act of 1974 (ERISA)A federal Act that sets minimum operational and funding standards for employee benefit Accumulated Other Comprehensive IncomeCumulative gains or losses reported in shareholders' Adjusted Income from ContinuingOperations Reported income from continuing operations Book IncomePretax income reported on the income statement. Cash Flow–to–Income Ratio (CFI)Adjusted cash flow provided by continuing operations Current Income Tax ExpenseThat portion of the total income tax provision that is based on Deferred Income Tax ExpenseThat portion of the total income tax provision that is the result Income from Continuing OperationsAfter-tax net income before discontinued operations, Income SmoothingA form of earnings management designed to remove peaks and valleys Income Tax ExpenseSee income tax provision. Income Tax ProvisionThe expense deduction from pretax book income reported on the Operating IncomeA measure of results produced by the core operations of a firm. It is common Real Actions (Earnings) ManagementInvolves operational steps and not simply acceleration Realized Gains and LossesIncreases or decreases in the fair value of an asset or a liability that Realizable Revenue A revenue transaction where assets received in exchange for goods andservices are readily convertible into known amounts of cash or claims to cash. Realized RevenueA revenue transaction where goods and services are exchanged for cash or Taxable Incomeincome subject to income tax as reported on the tax return. Accrued Incomeincome that has been earned but not yet received. For instance, if you have a non-registered Guaranteed Investment Certificate (GIC), Mutual Fund or Segregated Equity Fund, growth accrues annually or semi-annually and is taxable annually even though the gain is only paid at maturity of your investment. Income SplittingThis is a tax planning strategy of arranging for income to be transferred to family members who are in lower tax brackets than the one earning the income, thus reducing taxes. Even though attribution rules limit income splitting, there are still a number of legitimate ways to do so, such as through the use of spousal RRSPs. Life Income FundCommonly known as a LIF, this is one of the options available to locked in Registered Pension Plan (RPP) holders for income payout as opposed to Registered Retirement Savings Plan (RRSP) holders choice of payout through Registered Retirement income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80. Registered Retirement Income Fund (Canada)Commonly referred to as a RRIF, this is one of the options available to RRSP holders to convert their tax sheltered savings into taxable income. 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