Acquisition Cost

Loading the player...

DEFINITION of 'Acquisition Cost'

1. The cost that a company recognizes on its books for property or equipment after adjusting for discounts, incentives, closing costs and other necessary expenditures, but before sales taxes.

2. The cost of a business to acquire a new customer. The company recognizes costs, including marketing and incentives, to introduce new customers to the company's products and services. The customer acquisition cost is calculated by dividing total acquisition costs by total new customers over a set period of time.

Also known as "cost of acquisition."

BREAKING DOWN 'Acquisition Cost'

1. Acquisition costs recognize more realistic costs on a company's financial statements. The acquisition cost of property and equipment recognizes any discounts or additional costs that the company will experience.

2. Customer acquisition costs are also important for companies to measure, as it aids in planning future capital allocations to things like marketing budgets and sales discounts. The company should also look at customer loyalty and whether the company will be able to retain customers easily.

RELATED TERMS
  1. Amalgamation

    The combination of one or more companies into a new entity. An ...
  2. Repurposing

    The use of something for a purpose other than its original intended ...
  3. Acquisition Financing

    The capital that is obtained for the purpose of buying another ...
  4. Loss Leader Strategy

    A business strategy in which a business offers a product or service ...
  5. Property, Plant And Equipment - ...

    A company asset that is vital to business operations but cannot ...
  6. Marketing

    The activities of a company associated with buying and selling ...
Related Articles
  1. Economics

    What are Acquisition Costs?

    A company can recognize acquisition costs as those costs used to buy property and equipment.
  2. Fundamental Analysis

    Great Expectations: Forecasting Sales Growth

    Predicting sales growth can be something of a black art, unless you ask the right questions.
  3. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  4. Entrepreneurship

    Tips For Boosting Your Business

    Find out how butter up new clients, build up old files and better your bottom line.
  5. Investing

    3 Healthy Financial Habits for 2016

    ”Winning” investors don't just set it and forget it. They consistently take steps to adapt their investment plan in the face of changing markets.
  6. Stock Analysis

    The Top 10 Small-Cap Stocks for 2016 (ATI, ARCB)

    Discover the top 10 small-cap stocks expected to grow in 2016, complete with summaries and growth outlooks for each company and its expected price target.
  7. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  8. Economics

    The Truth about Productivity

    Why has labor market productivity slowed sharply around the world in recent years? One of the greatest economic mysteries out there.
  9. Term

    How Market Segments Work

    A market segment is a group of people who share similar qualities.
  10. Active Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
RELATED FAQS
  1. How rapidly can expanding sales reduce a firm's earnings?

    In order to operate and make money, a company must spend money. Revenue - the dollar amount of sales - can be seen on a company's ... Read Full Answer >>
  2. What is property, plant and equipment, and what does it mean?

    Property, plant and equipment (PP&E) is a term that describes an account on the balance sheet. The PP&E account ... Read Full Answer >>
  3. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  4. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >>
  5. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
  6. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
Hot Definitions
  1. Short Selling

    Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is ...
  2. Harry Potter Stock Index

    A collection of stocks from companies related to the "Harry Potter" series franchise. Created by StockPickr, this index seeks ...
  3. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  4. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  5. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  6. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
Trading Center