salvage value

Definition

The estimated value of an asset at the end of its useful life, before you actually try to sell it and discover it's worth much less. Also called residual value by optimists who think depreciation schedules reflect reality.

Example Usage

We assumed a salvage value of $10,000 for the equipment, but the scrapyard offered us $200 and a sympathetic look.

Origin

Maritime insurance terminology dating to the 17th century, originally referring to cargo recovered from shipwrecks

Fun Fact

Tax authorities and companies often disagree wildly on salvage values, since higher estimates reduce depreciation expense and increase reported profits.

Source: Asset depreciation methodology

Related Terms

Intermediate

receivable

Money that someone owes you but hasn't paid yet, living in that optimistic space between "they said they'd pay" and "we're calling the lawyers." It's an asset on paper because theoretically you'll collect it, but in practice it's IOU notes from varying degrees of reliable sources. Also known as "accounts receivable" when accountants want to sound official.

💰 Finance / Accounting

Intermediate

depletion

The exhaustion of a resource faster than it can naturally replenish itself, whether that's oil reserves, soil nutrients, or your marketing budget by mid-quarter. In accounting, it's the method for allocating the cost of extracting natural resources. Basically, fancy terminology for "we used it all up."

💰 Finance / Accounting

Advanced

creative accounting

The art of making numbers tell whatever story you want them to tell, staying just barely on the legal side of fraud. It's lying with spreadsheets and a CPA license.

💰 Finance / Accounting

Beginner

FOMO Investing

Making investment decisions based on the fear that everyone else is getting rich without you, which historically has been the most reliable way to buy at the top. It's the financial equivalent of joining a dance floor just as the DJ switches to a slow song.

💰 Finance / Accounting

Beginner

Diversification

The investment strategy of not putting all your eggs in one basket, which is excellent advice until you have to figure out how many baskets to buy. It's how financial advisors tell you they don't know what will go up, so they're betting on everything.

💰 Finance / Accounting

Beginner

Unearned Revenue

Another term for deferred revenue—cash received for work not yet performed, sitting on the balance sheet as a liability. It's having money in hand while owing labor, the service industry's constant state.

💰 Finance / Accounting

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