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. Fixed Charge

    Any type of fixed expense that recurs on a regular basis. Fixed ...
  2. Finance Charge

    A fee charged for the use of credit or the extension of existing ...
  3. Net Cash

    A company's total cash minus total liabilities when discussing ...
  4. Sales Charge

    A commission paid by an investor on his or her investment in ...
  5. Cash Flow

    The net amount of cash and cash-equivalents moving into and out ...
  6. Cash Ratio

    The ratio of a company's total cash and cash equivalents to its ...
Related Articles
  1. Investing

    Detecting Accounting Manipulation

    "One-time charges" and "investment gains" are two strategies companies can use to distort their numbers.
  2. Retirement

    The Essentials Of Corporate Cash Flow

    Tune out the accounting noise and see whether a company is generating the stuff it needs to sustain itself.
  3. Investing

    Understanding Cash and Cash Equivalents

    Cash and cash equivalents are items that are either physical currency or liquid investments that can be immediately converted into cash.
  4. Investing

    Analyze Cash Flow The Easy Way

    Find out how to analyze the way a company spends its money to determine whether there will be any money left for investors.
  5. Investing

    Fundamental Analysis: The Cash Flow Statement

    By Ben McClureThe cash flow statement shows how much cash comes in and goes out of the company over the quarter or the year. At first glance, that sounds a lot like the income statement in that ...
  6. Investing

    Why Cash Management Is Key To Business Success

    Businesses need to generate a healthy cash flow to survive, but not hold too much so that inventory suffers or investment opportunities are missed.
  7. Investing

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  8. Trading

    The Most Expensive Brokerage Accounts For Traders

    A peek into the brokers whose brokerage charges are higher than average in the stock market world.
  9. Investing

    Operating Cash Flow: Better Than Net Income?

    Differences between accrual accounting and cash flows show why net income is easier to manipulate.
  10. Investing

    Cash Flow Statement and Financial Health

    A cash flow statement records the amounts of cash and cash equivalents entering and leaving a company.
RELATED FAQS
  1. Is there a time frame where B and C shares do not have back end fees? And do you ...

  2. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Discover how the fixed charge coverage ratio is useful to investors and analysts, and when it suggests that a company should ... Read Answer >>
  3. How can I prevent commissions and fees from eating up my trading profits?

    First off, understand that there is no universal system regarding trading commissions charged by brokerage firms. Some charge ... Read Answer >>
  4. Are 'gray' credit card charges legal?

    Read the fine print and all credit card statements carefully to avoid misleading charges that often go unnoticed on credit ... Read Answer >>
  5. What does the cash ratio of a company measure, and how does it affect decision making?

    Learn what the cash ratio of a company measures, and understand why its an important liquidity ratio for a company to use ... Read Answer >>
  6. What are some examples of 'gray' charges on my credit card statement?

    Read credit card statements carefully to avoid gray charges. Find the fine print before making online purchases, and remember ... Read Answer >>
Hot Definitions
  1. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  2. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  3. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  4. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  5. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
Trading Center