REVENUE RECOGNITION Definition

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REVENUE RECOGNITION is the process of recording revenue, under one of the various acceptable methods, in the accounting period. In each period of revenue recognition, all related expenses should be matched to revenue. The most common method of recognizing revenue is at the time of sale or provisioning of service.

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INVENTORY SHRINK, as used in retail, is reduction in physical inventory caused primarily by shoplifting and employee theft.

COST OF DEBT is interest rate times 1 minus the marginal tax rate (because interest is a tax deduction). An increase in the tax rate decreases the cost of debt.

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