Learning Center
Plans & pricing Sign in
Sign Out



									                Financial Terms related to Income

 This document is part of the valuable contents
   available at, a free online
glossary with more than five thousand financial
               and business terms.

 This document can be copied and distributed freely

                                                                                            Find thousands of financial terms at
 respecting its original format. It is forbidden its
 transcription, translation or change on its format
    without authorization of its author or editor.

Active business income

   • Income derived from the normal business activities of the corporation.

Adjusted gross income

   • Abbreviated AGI. Sum of Earned Income, net Passive Income, portfolio income,
   and capital gains. The IRS uses AGI to determine most limitations on credits or
   deductions in taxes.

Common size income statement

   • An income statement in which each item is expressed as a percentage of sales.

Deferred income taxes

   • On the Balance Sheet, deferred taxes are a liability that result from income already
   earned and recognized for accounting purposes, but not for tax purposes.

Disposable income                      2|Page

   • Total amount of personal income after direct taxes. See also: Personal Income.

Earned income

   • Income derived from active participation in a trade or business. Includes wages,
   salary, tips, commissions and bonuses. See also: Unearned Income.

Economic income

   • Cash flow plus change in present value.

Fixed income equivalent

                                                                                                Find thousands of financial terms at
   • Also called a busted convertible, a convertible security that is trading like a straight
   security because the optioned common stock is trading low.

Fixed income instruments

   • Assets that pay a fixed-dollar amount, such as bonds and preferred stock.

Fixed income market

   • The market for trading bonds and preferred stock.


   • The money received from the sale of merchandise or performance of a service

Income before taxes

   • See Pre-tax Income.

Income beneficiary

   • One who receives income from a trust.

Income bond

   • A bond on which the payment of interest is contingent on sufficient earnings. These
   bonds are commonly used during the reorganization of a failed or failing business.

Income bonds                     3|Page

   • Bonds that pay interest only when earnings are available.

   • Refer to securities which promise to repay the principal when due. However, these
   bonds differ from other bonds in that they promise to pay interest only when it is
   earned. This type of bond is verisimilar to many kinds of preferred stock. However,
   an advantage can be the tax deductibility of the interest charge when paid versus a
   preferred dividend payment. These bonds are sometimes known as Adjustment
   Bonds. The quality of these bonds generally is not as good as investment grade
   issues because there is an additional contingency on the payment of interest.

                                                                                            Find thousands of financial terms at
Income fund

   • A mutual fund that seeks to provide stable current income by investing in securities
   that pay interest or dividends. See also: Mutual Fund.

   • A mutual fund providing for liberal current income from investments.

Income replacement ratio

   • The percentage of pre-retirement income that a retiree would need to receive after
   retirement in order to have a post-retirement standard of living equivalent to his or
   her pre-retirement standard of living. This ratio is generally less than 100 percent
   because some expenses (i.e., taxes, commuting costs, clothing expenditures,
   savings needs) decrease after retirement. Also known as a replacement ratio or rate.

Income statement

   • Provides a financial summary of the firm's operating results during a specified

   • The financial statement that summarized sales revenue and expenses for an
   accounting period

   • Also Known as the Earnings Report. The portion of a financial report showing
   income and expenses, and comparing them the same period last year.

   • Statement of operations. A statement showing the revenues, expenses, and                      4|Page

   income (the difference between revenues and expenses) of a corporation over some
   period of time.

Income stock

   • Common stock with a high dividend yield and few profitable investment

   • A stock that pays regular and steady income, typically of well established
   companies, such as utilities and others whose businesses generate steady cash

                                                                                        Find thousands of financial terms at
Investment income

   • The revenue from a portfolio of invested assets.

Life income with refund annuity

   • An annuity that pays benefits throughout the annuitant s lifetime and guarantees
   that total benefit payments will at least equal the purchase price of the annuity.

Monthly income preferred security

   • Abbreviated MIP. Preferred stock issued by a subsidiary located in a tax haven.
   The subsidiary relends the money to the parent.

Net income

   • The company's total earnings, reflecting revenues adjusted for costs of doing
   business, depreciation, interest, taxes and other expenses.

   • Equals sales revenue less all costs and expenses for the period

   • See Net Profit.

Net income before taxes

   • See Pre-tax Income.

Operating income                     5|Page

   • The principal reason a company considers investing in a fixed asset; operating
   income may increase because sales increase, costs decrease, or both occur.

   • The income from normal company operations, after deducting all expenses except

Ordinary income

   • Income earned through the sale of a firm's goods or services.

Other income

                                                                                            Find thousands of financial terms at
   • Revenue that is not part of normal income, such as interest or sale of an asset

Passive income

   • Income derived from the property of the corporation such as royalties, rent,
   interest, or dividends.

   • Earnings derived from a rental property, limited partnership, or other enterprise in
   which the individual is not actively involved. Passive income therefore does not
   include earnings from wages or active business participation, nor does it include
   income from dividends, interest, and capital gains. See also: Passive Loss;
   Unearned Income.

Personal income

   • An individual's total earnings derived from wages, passive business enterprises
   and investments. See also: Disposable Income; Passive Income; Passive Loss.

Phantom income

   • Is a taxable event even though no cash flow was generated during the year other
   than an accounting accretion which represented interest.

Pre tax income

   • Also may be called Net Income Before Taxes, Income Before Profit, or Income
   Before Taxes. This is the profit made by the company before paying taxes. It is                     6|Page

   calculated by dividing the net income by one minus the tax rate: Net Income / (1 - tax
   rate as a decimal)

Spread income

   • Also called margin income, the difference between income and cost. For a
   depository institution, the difference between the assets it invests in (loans and
   securities) and the cost of its funds (deposits and other sources).

Taxable income

                                                                                            Find thousands of financial terms at
   • Gross income less a set of deductions.

Underwriting income

   • For an insurance company, the difference between the premiums earned and the
   costs of settling claims.

Unearned income

   • Income derived from investments and other sources not related to employment
   services. Examples of unearned income include interest from a savings account,
   bond interest, and dividends from stock. See also: Earned Income; Passive Income.

To top