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. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  4. Accounting

    The systematic and comprehensive recording of financial transactions ...
  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 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

    What is the difference between early retirement and full retirement as it applies to Social Security ...

    If you were born in 1929 or later, you'll need forty Social Security credits to be eligible for Social Security retirement benefits. You can earn up to four credits per year, which means that ...
  4. 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.
  5. Fundamental Analysis

    How do I calculate dividend payout ratio from a balance sheet?

    Understand what the dividend payout ratio indicates and learn how it can be calculated using the figures from a company's balance sheet statement.
  6. Credit & Loans

    When is it necessary to get a letter of credit?

    Capitalize on assets and negate risks by using a letter of credit. Letters of credit are often requested for buying, selling or trading.
  7. Fundamental Analysis

    Can entities other than banks issue letters of credit?

    Obtaining a letter of credit from a non-bank is legally acceptable according to the ICC, but companies tend to prefer to receive them from banks.
  8. Fundamental Analysis

    What is the affect of the invisible hand on consumers?

    Discover how consumers help initiate and benefit from the invisible hand of the market, which naturally coordinates trade in an exchange economy.
  9. Economics

    How does the invisible hand phenomenon affect investment markets?

    Read about how the invisible hand of the market coordinates investment markets and provides social benefit and why its effects are distorted along the way.
  10. Investing Basics

    What is the difference between a fixed asset and a current asset?

    Discover the difference between fixed assets and current assets and the value of each to a company. Learn the category and where to record each asset.

You May Also Like

Hot Definitions
  1. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  2. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  3. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  4. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  5. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  6. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
Trading Center