Underlying Cost

AAA

DEFINITION of 'Underlying Cost'

Any cost that can be expected within the following budget period. Underlying costs are costs that the company knows it will have to pay out throughout the budget period. Examples would include items such as rent/lease/mortgage, depreciation, utilities, etc. In the aggregate, sometimes the underlying cost can refer to the basic cost of something excluding unusual costs that occur infrequently.

INVESTOPEDIA EXPLAINS 'Underlying Cost'

For example, it might cost $1 to produce a widget but an unusal plant shutdown results in costs of $2 per widget in the period. Excluding the unusual costs, the underyling cost would be $1, which is also what the company expects the cost to be going forward.

RELATED TERMS
  1. Underlying Profit

    A term used to describe the actual reflection of a company's ...
  2. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  3. Expense

    1. The economic costs that a business incurs through its operations ...
  4. Lease

    A legal document outlining the terms under which one party agrees ...
  5. Operating Expense

    A category of expenditure that a business incurs as a result ...
  6. Underlying

    1. In derivatives, the security that must be delivered when a ...
Related Articles
  1. Options & Futures

    Bloated Budget? How To Trim The Fat

    Blood, sweat and tears should belong in the gym, but your money deserves some training time too.
  2. Budgeting

    Debunking 10 Budget Myths

    Don't let these excuses prevent you from reaching your financial goals.
  3. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  4. Options & Futures

    Capturing Profits With Position-Delta Neutral Trading

    This trading strategy will show you how to gain from a decline in implied volatility on any movement of the underlying.
  5. Options & Futures

    What happens to my call options if the underlying company is bought out?

    Typically, the announcement of a buyout offer by another company is a good thing for shareholders in the company that is being purchased. This is because the offer is generally at a premium to ...
  6. Budgeting

    How Budgeting Works For Companies

    Learn how to break down and understand a corporate budget.
  7. Fundamental Analysis

    What's a Tangible Asset?

    Tangible assets are property owned by a business that can be touched -- they physically exist. Examples include furniture and fixtures, computer hardware, delivery equipment, leasehold improvements ...
  8. Fundamental Analysis

    Cash Flow From Operating Activities

    Cash flow from operating activities is a section of the Statement of Cash Flows that is included in a company’s financial statements after the balance sheet and income statements.
  9. Fundamental Analysis

    What are the components of shareholders' equity?

    Understanding company valuation figures, such as shareholders' equity, can be a powerful tool in assessing the financial strength of a business.
  10. Fundamental Analysis

    What is the difference between the acid test ratio and working capital ratio?

    Using liquidity ratios to determine the financial stability of a company is an important tool to accounting professionals and investors.

You May Also Like

Hot Definitions
  1. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  2. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  3. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  4. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  5. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
  6. Dividend Discount Model - DDM

    A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The ...
Trading Center