ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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BASIC EARNINGS POWER Definition
BASIC EARNINGS POWER (BEP) is useful for comparing firms in different tax situations and with different degrees of financial leverage. This ratio is often used as a measure of the effectiveness of operations. Basic Earning Power measures the basic profitability of Assets because it excludes consideration of interest and tax. This ratio should be examined in conjunction with turnover ratios to help pinpoint potential problems regarding asset management. Formula: EBIT / Total Assets
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CONTANGO is the commission paid by a buyer for the postponement of a transaction on a stock exchange when prices for future delivery are higher than those for cash or spot transactions. The opposite is backwardation.
DEPRECIATION AND AMORTIZATION is the standard line item in an income statement that sums: Depreciation, the non-cash expense of a tangible investment over time and Amortization, the non-cash expenses of an intangible investment over time.