Cash Charge

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.

BREAKING DOWN '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. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. One-Time Charge

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

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

    The systematic and comprehensive recording of financial transactions ...
  5. Charge-Off

    A term describing an expense on a company's income statement. ...
  6. Earnings

    The amount of profit that a company produces during a specific ...
Related Articles
  1. Retirement

    Early Out: A Realistic Plan to Retire Younger

    If you want to retire ahead of schedule, it'll take some extra planning.
  2. 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.
  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. Term

    What Is Stockholders' Equity?

    Stockholders’ equity represents the equity that shareholders own in a company.
  5. Sectors

    The Debt Report: The Telecom Sector

    Discover how America's telecommunications providers have been piling on debt since the Great Recession, and how part of the sector seems vulnerable.
  6. Fundamental Analysis

    Value Investing: 5 Tips to Consider in 2016

    Read five tips for value investors to consider in 2016, including how to look beyond traditional metrics and when to expand outside of the value zone.
  7. Economics

    Understanding Game Theory

    Game theory is a model for making decisions that weighs the benefits of a choice along with the interaction between participants.
  8. Investing Basics

    The Weighted Average Of Outstanding Shares

    The quantity of a company’s outstanding shares changes when it issues new shares, repurchases or retires existing ones, or converts others.
  9. Economics

    What Is The Difference Between Revenue And Profit?

    Think of revenue as the top line of a company’s income statement. Profit is the infamous bottom line.
  10. Investing Basics

    Comparing the P&L Statement and the Balance Sheet

    Basically, the balance sheet shows how much a company is worth, while the P&L statement reveals if a company is profitable or not.
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 ... Read Answer >>
  2. What is a good debt ratio, and what is a bad debt ratio?

    Learn about the factors that influence how investors and lenders evaluate the debt ratio for a company and why the answer ... Read 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 Answer >>
  4. What items are considered liquid assets?

    Learn what a liquid asset is, some examples of liquid assets, what a non-liquid asset is and what determines whether as asset ... Read Answer >>
  5. What is the formula for calculating EBITDA?

    Learn about EBITDA and how companies can manipulate this calculation to look more profitable. Read Answer >>
  6. What is the formula for calculating the debt-to-equity ratio?

    Find out how to use this fundamental financial ratio to help assess a company's performance. Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center