Cash Charge

AAA

DEFINITION of 'Cash Charge'

Typically a one-time charge off that a firm makes against its earnings as part of a plan to downsize or to improve company efficiency. Cash charge requires an initial outlay of cash. Cash charges are charges that are not expected to be recurring; the company can record the cash charge as an extraordinary charge on the firm's balance sheets while taking a charge against earnings. A charge off appears as an expense on the firm's financials, thereby reducing net income.

INVESTOPEDIA EXPLAINS 'Cash Charge'

An example of a cash charge can be illustrated in a company that is making an attempt to downsize and reduce costs. The company can make a cash charge against earnings to provide early retirement packages to higher-paid employees, thereby creating an opportunity to staff these positions with lower-salaried individuals. An initial cash outlay is required to fund the retirement packages, but the expected cash savings measures implemented through reduced salary liabilities rationalize the upfront expense.

RELATED TERMS
  1. One-Time Charge

    A charge against earnings that is expected to be an isolated ...
  2. Demurrage

    A term used in currency trading to denote the cost of currency ...
  3. Accounting

    The systematic and comprehensive recording of financial transactions ...
  4. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  5. Earnings

    The amount of profit that a company produces during a specific ...
  6. Charge-Off

    A term describing an expense on a company's income statement. ...
RELATED FAQS
  1. What is the difference between early retirement and full retirement as it applies ...

    If you were born in 1929 or later, you'll need forty Social Security credits to be eligible for Social Security retirement ...
Related Articles
  1. Fundamental Analysis

    Impairment Charges: The Good, The Bad And The Ugly

    Impairment charge is a term for writing off worthless goodwill, but you need to know what its potential impact is on EPS.
  2. Retirement

    Early Out: A Realistic Plan To Retire Younger

    If you want to retire ahead of schedule, it'll take some extra planning.
  3. Retirement

    Lump Sum Versus Regular Pension Payments

    If you're about to retire, you may be facing this dilemma soon. Find out what your options are.
  4. Investing

    What's a Debit Note?

    A debit note is a document used by a seller to inform a purchaser of a dollar amount owed. As the name indicates, it is a note from the seller that a debit has been made to the purchaser’s account. ...
  5. Investing

    What's Capitalization?

    Capitalization has different meanings depending on the context.
  6. Investing

    Deferred Tax Liability

    Deferred tax liability is a tax that has been assessed or is due for the current period, but has not yet been paid. The deferral arises because of timing differences between the accrual of the ...
  7. Fundamental Analysis

    The Best 5 Online Accounting Systems For Small Business

    Running a small business can be difficult, but thanks to these online accounting services, taking care of payroll doesn't have to be.
  8. Investing

    Understanding Cost Accounting

    Cost accounting is the method of financially allocating expenses to goods that are manufactured for resale. Cost accounting is also referred to as managerial accounting, because managers use ...
  9. Investing

    What are Prepaid Expenses?

    A prepaid expense is an asset on the balance sheet. Due to accounting principles, expenses are often accrued on the balance sheet and expensed in a later period.
  10. Investing

    What's a Sunk Cost?

    A sunk cost was incurred in the past, is independent of future events and cannot be recouped. Economists teach that sunk costs should not be considered when making a financial decision. Rather, ...

You May Also Like

Hot Definitions
  1. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  2. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  3. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  4. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  5. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  6. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
Trading Center