Indexation

AAA

DEFINITION of 'Indexation'

Linking adjustments made to the value of a good, service or other metric, to a predetermined index. Indexation requires the identification of a price index and whether a linking the value to the price index, will accomplish the organization's goals. Indexation is most commonly used with wages in a high inflation environment.

INVESTOPEDIA EXPLAINS 'Indexation'

Businesses may use indexation to match an employee's salary to the inflation rate, meaning that an increase in the inflation rate over a period of time, will lead to an increase in salary. This particular type of indexation is called a cost of living increase (COLA). Indexation is a pre-specified process, meaning that all parties involved are typically aware of how the link works.

RELATED TERMS
  1. Consumer Price Index - CPI

    A measure that examines the weighted average of prices of a basket ...
  2. Index

    A statistical measure of change in an economy or a securities ...
  3. Index Fund

    A type of mutual fund with a portfolio constructed to match or ...
  4. Inflation

    The rate at which the general level of prices for goods and services ...
  5. Cost Of Living Adjustment - COLA

    An adjustment made to Social Security and supplemental security ...
  6. Insurance Inflation Protection

    Insurance inflation protection is designed to allow policyholders ...
Related Articles
  1. An Introduction To Stock Market Indexes
    Investing Basics

    An Introduction To Stock Market Indexes

  2. Maximize Your Social Security Benefits
    Retirement

    Maximize Your Social Security Benefits

  3. What You Should Know About Inflation
    Economics

    What You Should Know About Inflation

  4. How To Save More For Your Retirement
    Taxes

    How To Save More For Your Retirement

comments powered by Disqus
Hot Definitions
  1. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  2. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  3. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  4. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  5. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  6. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
Trading Center