Research and Development Costs
The costs a company incurs in process of developing new goods and services to best suit the company's and consumer needs. For example, a vacuum cleaner company may spend a significant amount of money researching and developing profitable vacuum cleaner improvements. The costs decrease the company's profit in the short term but create the potential for higher profits in the medium and long term. As a result, many analysts consider it a positive sign when companies devote a large amount to their research and development costs.
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Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.