Above Water

Author Topic: Above Water  (Read 381 times)

Offline Md. Al-Amin

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Above Water
« on: December 02, 2013, 11:56:31 AM »
Above Water
What It Is:
Above water is a term to describe being financially stable. In accounting, the term often refers to assets whose market value is higher than book value.
How It Works/Example:

For instance, let's say John Doe has $30,000 of credit card debt and has no savings. He gets a better job that pays him twice as much, enabling him to pay off his credit cards and start a retirement account. Finally, John is above water.

Similarly, let's say Company XYZ buys a robot for $10,000. It records the value of the asset as $10,000 on its balance sheet, and then it depreciates that asset by $1,000 a year. By the end of two years, the book value of the asset is therefore $8,000. However, the demand for these robots has skyrocketed and they are in short supply. Company XYZ could actually sell its two-year-old robot for $15,000 -- far more than its recorded value. The robot is above water.
Why It Matters:

Above water is usually a good place to be. The phrase denotes financial stability. Its opposites are "underwater" or "treading water."