ASSET EARNING POWER Definition

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ASSET EARNING POWER is a common profitability measure used to determine the profitability of a business by taking its total earning before taxes and dividing that by total assets.

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DIRECT COST is that portion of cost that is directly expended in providing a product or service for sale and is included in the calculation of COST OF GOODS SOLD, e.g. labor and inventory (it can be traced to a given cost object in an economically feasible manner). Opposite of indirect cost.

CAPITALIZED INTEREST is the accrued interest added to the principal balance of a loan while you are not making payments or your payments are insufficient to cover both the principal and interest due. When this occurs, you are paying interest on interest, sometimes called "negative amortization".

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