Bookmark and Share

PRICE TO CASH FLOW is a measure of the markets expectations of a firms future financial health. It is calculated by dividing the price per share by cash flow per share.

Learn new Accounting Terms

DECLINING-BALANCE DEPRECIATION METHOD is an accelerated depreciation method in which an assets book value is multiplied by a constant depreciation rate (such as double the straight-line percentage, in the case of double-declining-balance.). This depreciation method is allowed by the U.S. tax code and gives a larger depreciation in the early years of an asset. Unlike the straight line and the sum of the digits methods, both of which use the original basis to calculate the depreciation each year, the double declining balance uses a fixed percentage of the prior years basis to calculate depreciation. The percentage rate is 2/N where N is the life of the asset. With this method, the basis never becomes zero. Consequently, it is standard practice to switch to another depreciation method as the basis decreases. Usually the taxpayer will convert to the straight line method when the annual depreciation from the declining balance becomes less than the straight line.

HYPOTHECATION, in securities, is the pledging of securities to brokers as collateral for loans made to cover short sales or purchase securities. In banking, it is the pledging of property to secure a loan.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.