What Is the Cost of Equity? The cost of equity is the return that a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm’s cost of equity represents the compensation that the market demands in exchange
What Is the Cost of Funds? The term cost of funds refers to how much banks and financial institutions spend in order to acquire money to lend to their customers. Put simply, the cost of funds refers to the interest rate banks must pay when they borrow from a Federal Reserve bank. The spread between
What Is the Cost of Labor? The cost of labor is the sum of all wages paid to employees, as well as the cost of employee benefits and payroll taxes paid by an employer. The cost of labor is broken into direct and indirect (overhead) costs. Direct costs include wages for the employees that produce
What Is the Cost of Living? The cost of living is the amount of money needed to cover basic expenses such as housing, food, taxes, and healthcare in a certain place and time period. The cost of living is often used to compare how expensive it is to live in one city versus another. The
What Is Cost of Revenue? The term cost of revenue refers to the total cost of manufacturing and delivering a product or service to consumers. Cost of revenue information is found in a company’s income statement. It is designed to represent the direct costs associated with the goods and services the company provides. The service
What Is Cost of Tender? Cost of tender is the total charges associated with the delivery and certification of commodities underlying a futures contract. The cost of tender represents the total costs related to taking the physical delivery of a commodity. These costs are assessed only if the futures contract holder wishes to receive the
What Is a Cost-Plus Contract? A cost-plus contract is an agreement to reimburse a company for expenses incurred plus a specific amount of profit, usually stated as a percentage of the contract’s full price. These type of contracts are primarily used in construction where the buyer assumes some of the risk but also provides a
What Is Cost-Push Inflation? Cost-push inflation (also known as wage-push inflation) occurs when overall prices increase (inflation) due to increases in the cost of wages and raw materials. Higher costs of production can decrease the aggregate supply (the amount of total production) in the economy. Since the demand for goods hasn’t changed, the price increases from
What Are Mutual Fund Costs and Expenses? Costs and expenses are the expenses associated with running a mutual fund. Costs and expenses are among the principal criteria for judging the investment quality of a mutual fund. Funds that are passively managed tend to have lower costs and expenses compared with their actively managed counterparts. The
What Is Cost Synergy? Cost synergy is the savings in operating costs expected after the merger of two companies. Cost synergies are cost reductions due to the increased efficiencies in the combined company. Cost synergy is one of three major synergy types, with the other two being revenue and financial synergies. Key Takeaways Cost synergy
