Intangible Cost

AAA

DEFINITION of 'Intangible Cost'

An unquantifiable cost relating to an identifiable source. Intangible costs represent a variety of expenses such as losses in productivity, customer goodwill or drops in employee morale. While these costs do not have a firm value, managers often attempt to estimate the impact of the intangibles.

INVESTOPEDIA EXPLAINS 'Intangible Cost'

Ignoring intangible costs can have a significant effect on a company's performance. For example, let's examine a potential decision for a widget company to cut back on employee benefits. To improve profits, the firm wants to cut back $100,000 in employee benefits. When news reaches the employees of the cut-back, worker morale will likely drop. The widget production will likely be diminished, as employees focus on losing benefits instead of making products. The loss in production represents an intangible cost, which may be great enough to offset the gain in profits created by reducing employee benefits.

RELATED TERMS
  1. Goodwill

    An account that can be found in the assets portion of a company's ...
  2. Nonmonetary Assets

    Assets in which the right to receive a fixed or determinable ...
  3. Cost-Volume Profit Analysis

    A method of cost accounting used in managerial economics. Cost-volume ...
  4. Intangible Asset

    An asset that is not physical in nature. Corporate intellectual ...
  5. Tangible Asset

    Assets that have a physical form. Tangible assets include both ...
  6. Hard Asset

    A tangible and physical item or object of worth that is owned ...
Related Articles
  1. Economics

    Economics Basics

    Learn economics principles such as the relationship of supply and demand, elasticity, utility, and more!
  2. Bonds & Fixed Income

    Passing The Buck: The Hidden Costs Of Annuities

    These may look like good retirement vehicles, but beware of the fees buried in the fine print.
  3. Personal Finance

    Can You Count On Goodwill?

    Carefully examine goodwill and its sources before considering the value of your investment.
  4. Investing Basics

    How To Evaluate A Company's Balance Sheet

    Asset performance shows how what a company owes and owns affects its investment quality.
  5. Markets

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  6. Stock Analysis

    Freeport-McMoRan Is Seeking A Helping Hand

    Freeport-McMoRan doesn't have the cash to invest in its planned oil and gas developments, which is forcing it to look for help in funding these projects.
  7. Fundamental Analysis

    What's Fair Value?

    Fair value has three different meanings depending on the context.
  8. Investing

    Understanding Accumulated Depreciation

    Depreciation is a rough approximation, in dollar terms, of the wear and tear on an asset. So the accumulated depreciation is the aggregate of the wear and tear on the asset from all prior time ...
  9. Stock Analysis

    Chesapeake Energy Sees History Repeating Itself

    Chesapeake was on the wrong side of natural gas when its price plunged in 2012, and it appears to be repeating itself after the price of oil plummeted.
  10. Investing Basics

    What are Financial Statements?

    Financial statements are a picture of a company’s financial health for a given period of time at a given point in time. The statements provide a collection of data about a company’s financial ...

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center