Write-down.
In plain English
A write-down reduces the carrying value of an asset to its lower current value and records the difference as a loss on the income statement. Companies write down inventory that will not sell at full price, receivables that will not be collected, and long-lived assets or goodwill whose expected cash flows have fallen. A write-off is the same idea taken all the way to zero. The charge is non-cash: the money was spent earlier, and the entry is an admission that some of it will not come back. Because it hits reported profit without touching cash, management often points to results excluding the charge, which is worth reading with care.
01Why it matters
A write-down is the moment a company admits in its own ledger that an earlier decision did not work, and the size of it tells you how much value that decision destroyed.
02The math, step by step
Say a retailer holds 200,000 dollars of seasonal inventory it now expects to clear for 120,000 dollars. It writes the inventory down by 80,000 dollars, records an 80,000 dollar loss, and leaves 120,000 dollars on the balance sheet. No cash moved on the day of the entry.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
A write-down does not drain the bank account when it is recorded. The cash left when the inventory was bought or the acquisition was paid for. What changes now is the reported value and this period's profit, which is why cash flow statements add the charge back.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice