ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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OUT-OF-P0CKET are expenses requiring an outlay of cash in a given time period, e.g., payroll, advertising and other operating expenses, but not depreciation.
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FEDERAL RESERVE SYSTEM (The Fed) is the central bank of the United States created by Congress, consisting of a seven-member Board of Governors in Washington, D.C., 12 regional Federal Reserve Banks and depository institutions that are subject to reserve requirements. All national banks are members; state-chartered banks may elect to become members and state members are supervised by the Board of Governors and the Reserve Banks. Reserve requirements established by the Fed apply to nonmember depository institutions as well as member banks. Both classes of institutions share equal access to Federal Reserve discount borrowing privileges and Federal Reserve services.
DAYS INVENTORY shows the average length of time items are in inventory, i.e., how many days a business could continue selling using only its existing inventory. The goal, in most cases, is to demonstrate efficiency through having a high turnover rate and therefore a low days' inventory. However, realize that this ratio can be unfavorable if either too high or too low. A company must balance the cost of carrying inventory with its unit and acquisition costs. The cost of carrying inventory can be 25% to 35%. These costs include warehousing, material handling, taxes, insurance, depreciation, interest and obsolescence. Formula: Inventory / (Net Revenue / 365).