Underlying Cost


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.

BREAKING DOWN '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.

  1. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. Underlying Profit

    A term used to describe the actual reflection of a company's ...
  3. Operating Expense

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

    1. In derivatives, the security that must be delivered when a ...
  5. Expense

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

    A legal document outlining the terms under which one party agrees ...
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. Budgeting

    How Budgeting Works For Companies

    Learn how to break down and understand a corporate budget.
  6. Investing

    What a Family Tradition Taught Me About Investing

    We share some lessons from friends and family on saving money and planning for retirement.
  7. Professionals

    4 Must Watch Films and Documentaries for Accountants

    Learn how these must-watch movies for accountants teach about the importance of ethics in a world driven by greed and financial power.
  8. Savings

    How Parents Can Help Adult Children Buy a Home

    Owning a home isn't easy thanks to stringent lending standards. Thankfully, there's ways parents can help their kids buy a home.
  9. Credit & Loans

    HARP Loan Program: Help for Underwater Mortgages

    If you are underwater on your mortgage, this program may be just what you need to help build up equity in your home.
  10. Insurance

    6 Reasons To Avoid Private Mortgage Insurance

    This costly coverage protects your mortgage lender - not you.
  1. 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 ... Read Full Answer >>
  2. Do FHA loans have prepayment penalties?

    Unlike subprime mortgages issued by some conventional commercial lenders, Federal Housing Administration (FHA) loans do not ... Read Full Answer >>
  3. Can FHA loans be refinanced?

    Federal Housing Administration (FHA) loans can be refinanced in several ways. According to the U.S. Department of Housing ... Read Full Answer >>
  4. Can FHA loans be used for investment property?

    Federal Housing Administration (FHA) loans were created to promote homeownership. These loans have lower down payment requirements ... Read Full Answer >>
  5. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>
  6. How many FHA loans can I have?

    Generally, the Federal Housing Administration (FHA) does not insure more than one mortgage per borrower. This is to prevent ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Flier

    The slang term for a decision to invest in highly speculative investments.
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center