Research & Development (R&D)
What is Research & Development?
Research & Development represents all direct and indirect costs associated with the creation and development of new processes, applications, and products. Research & Development shows how much money a company is spending on innovation.
Why is Research & Development important?
Research & Development plays an important role by showing how much money a company is spending to innovate. It can also show how focused a company is on its future, revealing the amount of money spent on new processes, applications, and products.
How is Research & Development calculated?
It’s calculated by including the following expenses:
- Amortization of software
- Design and development
- Customer or government sponsored research
- For oil, gas, coal, drilling and mining companies, purchase of mineral rights
- Engineering expense
- Contributions by government, customers, or other corporations to the company's research and development expenses are excluded if the amount is available.