What Happens If the Quick Ratio Indicates a Firm Is Not Liquid?

Response: In this case, a liquidity crisis can arise even at healthy companies—if circumstances arise that make it difficult to meet short-term obligations such as repaying their loans and paying their employees or suppliers. One example of a far-reaching liquidity crisis from recent history is the global credit crunch of 2007-08, where many companies found themselves unable to secure short-term financing to pay their immediate obligations. If new financing cannot be found, the company may be forced to liquidate assets in a fire sale or seek bankruptcy protection.


Response: To date, several heuristics have been identified by behavioral economics—or else developed to aid people in making otherwise complex decisions. In behavioral economics, representativeness, anchoring and adjustment, and availability (recency) are among the most widely cited. Heuristics may be categorized in many ways, such as cognitive vs. emotional biases or errors in judgment vs. errors in calculation.


Response: Although it didn't involve use of the internet, the Ponzi scheme run by Bernie Madoff and revealed in 2008 is very well known and remembered by the financial community (including the investors he bilked). His was a word-of-mouth investment scam that involved, among other things, secrecy, attractive returns, a lack of information about the invested funds, and false transaction records.


How Do Changes in a Country's Exchange Rate Affect the Balance of Trade?

Response: When the price of one country's currency increases, the cost of its goods and services also increases in the foreign market. For residents of that country, it will become cheaper to import goods, but domestic producers might have trouble selling their goods abroad because of the higher prices. Ultimately, this may result in lower exports and higher imports, causing a trade deficit.


Why Is Dividend Per Share (DPS) Important to Investors?

Response: DPS is an important metric to investors because the amount a firm pays out in dividends directly translates to income for the shareholder. It is the most straightforward figure an investor can use to calculate their dividend payments from owning shares of a stock over time. A consistent increase in DPS over time can also give investors confidence that the company's management believes that its earnings growth can be sustained.


How Can I Practice Risk Management in Personal Finance?

Response: There are a few different steps that individuals can take to practice risk management in their personal finances. Start by identifying your goals, and then highlight the risks associated with your objectives. Once you know what the risks are, evaluate them and research the best ways to manage these risks. You will likely have to monitor and make adjustments to ensure you stay on top of your goals.


Response: As of July 2023, the seasonally adjusted M1 money in circulation is $18.4 trillion.


Response: According to data reported to the FDIC, the total cash surrender value of all policies held by banks was $202.4 billion as of June 30, 2023.


Response: Recourse debt means that a lender can go after other assets of a borrower if the pledged collateral isn't sufficient enough to cover the outstanding debt that the borrower cannot pay. Recourse debt can be full or limited. Limited recourse debt means there is a limit to what assets a lender can seize in order to cover the outstanding loan. The assets are typically listed in the loan contract ahead of time.


Response: The consumer price index (CPI) measures the rate of change in inflation over time. The CPI is based on the prices U.S. consumers pay for goods and services. The percentage change of the CPI over a given period is inflation.


Why Do Some Investors Want to Lock in a Forward Price?

Response: Investors may want to lock in a forward price to hedge against future market fluctuations. For example, a farmer may want to use a forward wheat contract ahead of harvest to protect against a decline in grain prices caused by potential drought or flood.


Response: If a price change for a product causes a substantial change in either its supply or its demand, it is considered elastic. Generally, it means that there are acceptable substitutes for the product. Examples would be cookies, luxury automobiles, and coffee.


Why Is the Annual Percentage Rate (APR) Disclosed?

Response: Consumer protection laws require companies to disclose the APRs associated with their product offerings in order to prevent companies from misleading customers. For instance, if they were not required to disclose the APR, a company might advertise a low monthly interest rate while implying to customers that it was an annual rate. This could mislead a customer into comparing a seemingly low monthly rate against a seemingly high annual one. By requiring all companies to disclose their APRs, customers are presented with an “apples to apples” comparison.


What Is the Formula for Total Variable Cost?

Response: Because variable costs scale alongside, every unit of output will theoretically have the same amount of variable costs. Therefore, total variable costs can be calculated by multiplying the total quantity of output by the unit variable cost.


When Is the Best Time to Implement a Risk Reversal?

Response: Traders often consider factors such as upcoming events, earnings announcements, or anticipated market trends when timing the implementation of a risk reversal. Additionally, you should assess the implied volatility levels and the cost of options as both can influence the decision of when to enter into a risk reversal position.


Response: A depository institution is a financial institution whose main source of funds is deposits from customers. A commercial bank is a type of depository institution, as is a credit union or a savings and loan association.


What Are the Advantages of Demonetization?

Response: The main benefit of demonetization is to curtail criminal activity as their supply of money is no longer legal tender. This affects counterfeiters as well as they cannot exchange their "merchandise" for fear of discovery. It can prevent tax evasion as those who were evading taxes must come forward to exchange their existing currency at which time the authorities can retroactively tax them. Finally, it can usher in the digital currency age by slowing down the circulation of physical currency.


What is the Key Difference between a Reverse and Forward Skew?

Response: The key difference between a reverse and forward skew is the direction of the skew. A reverse skew reflects a market expectation of a large downward move, that is, higher IV for lower strike prices, while a forward skew reflects a market expectations of a large upward move, that is, higher IV for higher strike prices.


How Can a Home Office Benefit an Employer?

Response: An employer who allows employees to work remotely from their home office saves costs on rent, utilities, food services, and other operational expenses required to maintain a physical office.


Response: More than 100 Hong Kong- and Chinese-based corporations are structured as VIEs in the United States. These include well-known companies like Alibaba, Tencent, Baidu, JD, and NetEase, among others. The VIE structure allows these firms to get around Chinese regulations that prevent foreign capital investments in certain types of Chinese companies (e.g., those involved in telecommunications or media).


Response: Historical cost is the price paid for an asset when it was purchased. Historical cost is a fundamental basis in accounting, as it is often used in the reporting for fixed assets. It is also used to determine the basis of potential gains and losses on the disposal of fixed assets.


Response: According to U.S. government research, the business cycle in America takes, on average, around 6.33 years.


Response: The term "naked" refers to a strategy in which the seller (or writer) of the call option does not own the underlying asset that they must sell if the option is exercised. The "naked" aspect emphasizes the exposure to risk without the security of holding the underlying stock, as in being unprotected or exposed in financial terms.


How Do I Avoid Paying Taxes If I am Self-Employed?

Response: If you are self-employed you cannot avoid paying taxes; that is considered tax evasion. You can reduce the amount of taxes you pay by making tax deductions to reduce your earnings, thereby reducing your total tax bill. The IRS allows self-employed people to make many tax deductions for their business, such as on office supplies, office equipment, gasoline costs, utilities, and insurance.


Response: After a deposition has been finished, transcriptions and/or video recordings of the testimony are sent to both sides' lawyers for review and analysis. The depositions, along with other evidence collected during the discovery period, will either lead to a settlement out of court or a trial.


Response: White Papers may have developed from the use of “Blue Papers” in 19th century Britain, where a Parliamentary report cover was blue. When a topic for the government was less serious, the blue cover was discarded and published with white covers. These reports were called White Papers. In the United States, the use of government white papers often means a background report or guidance on a specific issue.


Response: The Great Depression ended in 1941. This was around the same time that the United States entered World War II. Most economists cite this as the end date, as this was the time that unemployment dropped and GDP increased.


How Do I Calculate a Capital Loss Carryover?

Response: To calculate a capital loss carryover, subtract your capital gains from your capital losses in a tax year. If losses exceed gains, the excess amount is the carryover. Then, in subsequent years, reduce this balance by the amount of the carryover loss used to offset the capital gains or ordinary income for that specific year.


What Is the Difference Between the Nasdaq 100 and the S&P 500?

Response: The Nasdaq 100 and the S&P 500 are stock market indexes that track the performance of some of the world's largest companies. Both indicate the market's performance—you'll hear their latest closing numbers in most national news summaries. The Nasdaq includes 100 companies, while the S&P includes 500 companies, but the differences between the two are greater than that. The Nasdaq 100 can include foreign companies, while the S&P 500 is only for U.S. firms. Additionally, the Nasdaq 100 excludes companies from the financial sector, though that's not the case for the S&P 500. Lastly, the Nasdaq 100 only consists of companies that trade on Nasdaq exchanges, while the S&P 500 consists of companies that trade on all U.S. exchanges.


Response: Under an irrevocable trust, legal ownership of the trust is held by a trustee. At the same time, the grantor gives up certain rights to the trust. Once an irrevocable trust is established, the grantor cannot control or change the assets once they have been transferred into the trust without the beneficiary's permission. These assets can include a business, property, financial assets, or a life insurance policy.


What Are the Main Types of Market Research?

Response: The main types of market research are primary research and secondary research. Primary research includes focus groups, polls, and surveys. Secondary research includes academic articles, infographics, and white papers.Qualitative research gives insights into how customers feel and think. Quantitative research uses data and statistics such as website views, social media engagement, and subscriber numbers.


Response: The highest-paid CFO for fiscal year 2023 was LiveNation's Joe Berchtold, whose salary was $52.4 million.


Why Do Banks Make Interbank Loans and Deposits?

Response: Banks may borrow money from other banks to ensure that they have enough liquidity for their immediate needs, or lend or deposit money when they have excess cash on hand. The interbank lending system is short-term, typically overnight, and rarely more than a week.


How Does Monopolistic Competition Function in the Short Term and Long Term?

Response: Companies aim to produce a quantity where marginal revenue equals marginal cost to maximize profit or minimize losses. When existing firms are making a profit, new firms will enter the market. The demand curve and the marginal revenue curve shift and new firms stop entering when all firms are making zero profit in the long run. If existing firms are incurring a loss, some firms will exit the market. The firms stop exiting the market until all firms start making zero profit. The market is at equilibrium in the long run only when there is no further exit or entry in the market or when all firms make zero profit in the long run.


Response: To find your personal monthly gross income, calculate the amount of money you earn each month. This will likely be different than the amount of money you take home or receive as payment directly from your employer.Your gross income can be found on a pay stub as the total amount of money you earned in a given period before any deductions or taxes are removed. You can also see your total gross income on your year-end W2 or 1099. Alternatively, you can calculate your gross income as (1) your monthly salary before taxes or (2) the number of hours you will work in a given month multiplied by your hourly pay rate.


Response: The Arab League's state purpose is to seek close cooperation among its members on matters of common interest—specifically, economics, communication, culture, nationality, social welfare, and health; to strengthen ties, improve communication, and promote common interest among Arabic-speaking nations.The Pact of the League of Arab States, the organization's founding document, identifies the mission of the League as follows: “The purpose of the League is to draw closer the relations between member States and coordinate their political activities with the aim of realizing a close collaboration between them, to safeguard their independence and sovereignty, and to consider in a general way the affairs and interests of the Arab countries."


Response: Yes, the S&P 500 Index utilizes a free-float methodology. This means that for all of the companies in the S&P 500, their market cap is free floating—only the available shares for public trading are taken into consideration for the calculation; no restricted shares.


Response: Clearing is the process of reconciling an options, futures, or securities transaction or the direct transfer of funds from one financial institution to another. The process validates the availability of the appropriate funds, records the transfer, and in the case of securities, ensures the delivery of the security or funds to the buyer.


What Is the Difference Between a Letter of Credit and a Trust Receipt?

Response: Commonly used in the trade industry, a letter of credit is issued from a bank to that guarantees the payment will be fulfilled and paid to the seller by the buyer. By contrast, a trust receipt is when the bank lends merchandise or goods to a business, but retains ownership of the goods. When the goods have been sold, and payment is made to the bank, the business then becomes owner of the goods.


Response: Economic output, employment, and consumer spending drop in a recession. Interest rates are also likely to decline as the central bank (such as the U.S. Federal Reserve Bank) cuts rates to support the economy. The government's budget deficit widens as tax revenues decline, while spending on unemployment insurance and other social programs rises.


What Does "Consumer Discretionary" Refer to?

Response: The term describes products and services that are desirable for consumers, but not essential to their daily living. In other words, rather than having to buy these products because they are necessities, they have the freedom to decide—the discretion—to purchase them, or not. Consumer discretionary purchasing usually increases when consumers have more money to spend.


Why Should Insurance Companies Have Reinsurance?

Response: Several common reasons that insurers obtain reinsurance include: expanding an insurance company's capacity, stabilizing its underwriting results, financing, gaining catastrophe protection, spreading an insurer's risk, and acquiring expertise.


Response: The definition of morbidity as used by the medical community often refers to having a disease, a chronic health problem, or the amount of disease and illness within a population.


Response: Once a developer learns of a zero-day attack, the exploit is usually quickly identified and fixed via a software patch or upgrade.


What Are the Similarities Between Bar Charts and Candlestick Charts?

Response: Bar charts and candlestick charts are popular tools used by traders and investors to visualize price changes over a specified period. They have key information about the open, close, high, and low prices for the selected time frame. The primary components of both are vertical lines representing the price range, with horizontal notches or specific shapes (like the body of a candle) indicating open and close prices. While the main distinction lies in the presentation—with bar charts using single bars and candlestick charts using “candles” to signify bullish or bearish price trends—both charts enable you to identify trends, reversals, and potential signals to buy or sell.


Response: Return of capital distributions are not subject to tax. However, once the adjusted costbasis of the stock is reduced to zero, any non-dividend distributions are considered to be a taxable capital gain.


Response: Fungible means that an item, asset, or commodity can be replaced with something of like kind when fulfilling a contract or paying a debt. Interchangeable goods are fungible; unique goods are non-fungible.


Response: The CFA Level I exam is entirely multiple-choice, with 180 questions. The Level II exam consists of 22 item set questions and 88 multiple-choice questions. Level III consists of 11 constructed response (essay) questions and 11 item set questions. Constructed response items typically have several parts related to a case study that describes one or a series of investment challenges.


Response: The glass ceiling still exists across various industries for different groups of people. Men still occupy most of the executive positions in corporations and other positions of power. Although there is more attention given to breaking down these barriers, they are still very much present in the workforce.


Is a General Partnership the Same As an LLP?

Response: Not exactly. A general partnership and a limited liability partnership are both partnerships and pass-through entities. However, a general partnership involves the potential for the unlimited personal liability of partners for financial and legal obligations. A limited liability partnership (like a limited liability company) limits liability to just what the partner has invested in the business. Their personal assets are protected from seizure.


How Do Rating Agencies Assign Credit Ratings?

Response: Rating agencies assign credit ratings based on their methodologies, which consider factors like financial indicators, industry analysis, and macroeconomic conditions. They analyze an entity's financial health, industry risks, and broader economic factors to determine the likelihood of default or creditworthiness. The ratings typically range from AAA (highest) to D (default).


Response: Financial leverage is the strategic endeavor of borrowing money to invest in assets. The goal is to have the return on those assets exceed the cost of borrowing the funds. The goal of financial leverage is to increase profitability without using additional personal capital.


How Is the Nasdaq Composite Index Constructed?

Response: The Nasdaq Composite Index is a market-capitalization-weighted index. This means the index is heavily influenced by larger companies. The index is one of the most heavily-watched in the world.


How Is Statistical Significance Determined?

Response: Statistical hypothesis testing is used to determine whether the data is statistically significant. In other words, whether or not the phenomenon can be explained as a byproduct of chance alone. Statistical significance is a determination about the null hypothesis, which posits that the results are due to chance alone. The rejection of the null hypothesis is needed for the data to be deemed statistically significant.


What Is the Difference Between Cash and Cash Equivalents?

Response: Cash is the direct ownership of a government-issued currency. This may take the form of physical cash (bills and coins) or digital cash (i.e. bank account balances).Cash equivalents are short-term investments that can be easily liquidate, carry low risk of loss, and have active marketplaces to ensure quick transacting. These instruments can easily be converted to cash but are classified differently because they are not actual claims of ownership of cash.


How Does an Equity-Linked Note (ELN) Work?

Response: ELNs are purchased at a strike price, which is a discount to the spot price. The ELN issuer delivers the stock to the investor when or if the strike price is reached.


Response: UDAAP is an acronym that stands for unfair, deceptive, or abusive acts or practices by the providers of financial products and services. They are illegal as per the Dodd-Frank Act. The law gives authority to the Consumer Financial Protection Bureau to come up with rules surrounding these illegal acts. The CFPB and the Federal Trade Commission are both tasked with enforcing these regulations to ensure consumers are protected from unscrupulous lenders and financial institutions.


What Is the Difference Between NBFCs and NBFIs?

Response: Generally, none. These are alternative names for the same type of company.


What Education Does a Hedge Fund Manager Need?

Response: Normally, hedge fund managers need, at minimum, a college degree in a relevant area of study, such as finance, as well as work experience in the investment field. Undergraduate experience, for example, as an intern at a financial firm, is beneficial. An advanced degree, e.g., a Master of Finance, can also be an advantage for such job seekers. They'll require a business license to operate, and earning credentials are also valuable.


What Is the Penalty for Insider Trading?

Response: When insider trading is done illegally, through the possession of material nonpublic information, the punishment can be civil or criminal, constituting fines and/or prison time.


Response: An unquoted public company is an unlisted company. It may trade over-the-counter or it may have ceased trading altogether.Unquoted public companies do not qualify for an exchange listing or have been delisted from an exchange.Unquoted public companies are less heavily regulated than listed companies but more regulated than private companies.


How Can a Company Improve Its Times Interest Earned Ratio?

Response: To improve its times interest earned ratio, a company can increase earnings, reduce expenses, pay off debt, and refinance current debt at lower rates.


Why Was Ring-Fencing Introduced in the United Kingdom?

Response: Ring-fencing was introduced by the British government in January 2019. The goal is to strengthen the country's banking and financial system by requiring banks to divide their core retail banking from other divisions, such as international and investment activities. Doing this helps protect the retail banking sector from the bank's riskier ventures.


How Can I Get Hired to Work for a Social Enterprise?

Response: If you want to get hired by a social enterprise, you should understand both the for-profit and the social benefits that it provides. Many employees of social enterprises are from diverse backgrounds and some may come from at-risk communities. Like any job, the qualifications will likely be based on experience and education, as well.


Response: A lump-sum distribution is a cash disbursement that is paid out all at once, as opposed to being paid out in steady installments. Lump-sum distributions can come from retirement plans, earned commissions, or certain debt instruments.


Response: The risks of a bailout include the possibility of moral hazard, where companies may become reckless and take on too much risk knowing that they will be bailed out if they do fail. Another risk is the cost to taxpayers or other investors who may have to foot the bill for the bailout without seeing much upside.


What Is the Difference Between a Traditional IRA and a Roth IRA?

Response: The primary difference between a traditional and a Roth IRA is the tax treatment of each account. Traditional IRA contributions are deductible from taxable income when the contributions are made; however, earnings are taxable. Alternatively, Roth contributions are not deductible but can grow tax-free.In addition, there are differences in the mechanisms of each IRA. Roth IRA contributions can be withdrawn for no penalty, while traditional IRAs cannot. In addition, some Roth earnings may be able to be withdrawn for no penalties for specific uses (i.e. the down payment for one's first home).


What Is the Significance of Higher Highs and Higher Lows in an Uptrend?

Response: Higher highs and higher lows in an uptrend signify a consistent and robust upward movement. Higher highs represent peak price levels attained during the trend, reflecting sustained buying pressure. Higher lows demonstrate that buyers are stepping in at progressively higher levels during retracements, underscoring the resilience of the uptrend.


Response: When calculating future values, one component of the calculation is called the future value factor. The future value factor is simply the aggregated growth that a lump sum or series of cash flow will entail. For example, if the future value of $1,000 is $1,100, the future value factor must have been 1.1. A future value factor of 1.0 means the value of the series will be equal to the value today.


Response: ERM is a company's approach to managing risk. It is the practices, policies, and framework for how a company handles a variety of risks its business faces. ERM is important because it helps prevent losses or unexpected negative outcomes. ERM is also important because it helps a company set the plans in place to strategically approach risk and garner employee buy-in.


What If My Spouse is Enrolled In a Different Health Insurance Plan?

Response: You can use funds from your healthcare FSA to pay for eligible medical costs for both your spouse and tax dependents, regardless of the medical insurance in which they are enrolled. To use funds for your dependents, they must be claimed on your tax return, and dependents can't file their own return.


Response: In most cases, the lender is responsible for paying taxes on the imputed interest on a loan. This means that if the IRS determines that a loan should have been made at a higher interest rate than the actual rate charged by the lender, the lender may be required to pay taxes on the difference between the two rates and is responsible for reporting the imputed interest on their tax return. In some cases, the borrower may also be required to report the imputed interest and pay taxes on it, depending on the specific circumstances of the loan.


Why Do Exchanges Set Minimum Tick Sizes?

Response: Tick sizes help maintain an orderly market. By standardizing the minimum price increments, tick sizes reduce price volatility caused by too many price movements in tiny increments.A well-chosen tick size can balance liquidity and price discovery. If the tick size is too large, it can lead to a wider bid-ask spread, making trading more costly for investors. Meanwhile, a tiny tick size can result in a cluttered order book with minimal meaningful price differentiation, obstructing efficient price discovery.


Why Would Central Banks Adopt NIRPs to Stimulate the Economy?

Response: Monetary policymakers are often afraid of falling into a deflationary spiral. In harsh economic times, such as deep economic recessions or depressions, people and businesses tend to hold on to their cash while they wait for the economy to improve.This behavior, however, can weaken the economy further as a lack of spending causes further job losses, lower profits, and price drops—all of which reinforce people’s fears, giving them even more incentive to hoard. As spending slows even more, prices drop again, creating another incentive for people to wait as prices fall further, and so on. When central banks have already lowered interest rates to zero, the NIRP is a way to incentivize corporate borrowing and investment and discourage hoarding of cash.


Response: Although not customarily acquired through formal training, soft skills can be learned. To improve soft skills, an individual must be open to feedback and willing to change behaviors. Training can provide tips and strategies for developing better practices, such as active listening and empathizing with others. And practicing can strengthen areas where deficiencies exist.


How Can a Company Improve Its Asset Turnover Ratio?

Response: A company may attempt to raise a low asset turnover ratio by stocking its shelves with highly salable items, replenishing inventory only when necessary, and augmenting its hours of operation to increase customer foot traffic and spike sales. Just-in-time (JIT) inventory management, for instance, is a system whereby a firm receives inputs as close as possible to when they are actually needed. So, if a car assembly plant needs to install airbags, it does not keep a stock of airbags on its shelves, but receives them as those cars come onto the assembly line.


Response: If the laptop is being used in a company's operations to generate income, such as by an employee who uses it to perform their job, it may be considered a fixed asset. In this case, the laptop would be recorded on the company's balance sheet as property, plant, and equipment (PP&E). However, if the laptop is being used for personal use, it would not be considered a fixed asset and would not be recorded on the company's balance sheet.


Response: Noninterest income is income generated by sources that do not create interest. For example, this could be fees, commissions, investment gains, and other operational income.


What Are the Main Types of Financial Statements?

Response: The three main types of financial statements are the balance sheet, the income statement, and the cash flow statement. These three statements together show the assets and liabilities of a business, its revenues, and costs, as well as its cash flows from operating, investing, and financing activities.


What Is Something That Is Inelastic to Changes in Income?

Response: Inelastic goods tend to have the same demand regardless of income. Certain staples and basics such as gasoline or milk would not change with income—you'll still only need one gallon a week even if your income doubles.


What Do Hawks and Doves Mean in Politics?

Response: Hawks and doves is a way to categorize how government officials view foreign policy. Those who seek an aggressive policy based on strong military power and other means are known as hawks, whereas doves seek a less aggressive foreign policy with reduced military power.


Response: Rehypothecation is legal because it is often agreed to by clients. Clients may have to agree to terms in order to use a service. For example, when they deposit shares into a specific brokerage account, they may have agreed that the broker may do certain things to those shares. Second, rehypothecation. The same may be said about bank deposits; in order to open a bank account at an institution, the fine print may state that the firm is allowed to manage your funds as they see fit.


What Are Leading and Lagging Indicators?

Response: Leading indicators are measurable pieces or sets of data that may suggest future economic, business, or investment trends. A lagging indicator is a measurable figure or set of data that changes at some point after an economic or business trend occurs.


Response: The annual fee on a credit card is the fee charged by the card issuer to extend the credit card to you. Some cards don’t charge an annual fee, but others—most often cards that offer rewards or incentives like cash back—can charge annual fees ranging from $50 to $700.


What Is Return on Average Capital Employed?

Response: Return on average capital employed (ROACE) is a ratio that measures a company's profitability versus the investments it has made in itself. To calculate ROACE, divide earnings before interest and taxes (EBIT) by the average total assets minus the average current liabilities. ROACE differs from the return on capital employed (ROCE) because it takes into account the averages of assets and liabilities over a period of time.


Response: An example of a duopoly is the dominance that Apple and Samsung have over the smartphone market.


Does Open-End Credit Help Your Credit Score?

Response: Open-end credit can either help or hurt your credit score, depending on how you use it. If you have a credit card, for example, and reliably make at least the minimum required payment each month, that can help your credit score. However, if you max out your card, or get too close to its credit limit, that will affect your credit utilization ratio, which can lower your score.


Is a Batch Order the Same As a Market Order?

Response: A batch order is not the same as a market order, but it is made up of multiple market orders. These orders are sent between the close of one day's session and the start of the next. A batch order is placed by a brokerage, combining multiple orders for the same stock as if they were one single transaction. This type of order is only executed for orders placed between trading sessions and happens at the opening of the market for the day.


What Is a Balance Sheet, and How Does It Relate to Percentage Changes?

Response: A balance sheet is a financial statement that companies use to report assets, liabilities, and shareholder equity. Balance sheets provide a snapshot of a company’s finances for a specific period of time, such as a quarter or a fiscal year.Many companies choose to analyze their balance sheet by seeing the percentage change in specific account balances from one period to the next. For example, a company can check its immediate liquidity trend by seeing the percentage change in cash on hand across the last several years.


When Is It Appropriate to Use Absorption Costing?

Response: Absorption costing is typically used in situations where a company wants to understand the full cost of producing a product or providing a service. This includes cases where a company is required to report its financial results to external stakeholders, such as shareholders or regulatory agencies.Absorption costing is also often used for internal decision-making purposes, such as determining the selling price of a product or deciding whether to continue producing a particular product. In these cases, the company may use absorption costing to understand the full cost of producing the product and to determine whether the product is generating sufficient profits to justify its continued production.


What Is the Difference Between DTC and DTCC?

Response: The DTCC is the parent institution of the Depository Trust Company (DTC), a securities depository. A member of the U.S. Federal Reserve System, the DTC provides settlement services, asset servicing, and clearing services.


How Many People Live in Poverty in the U.S.?

Response: According to the Census Bureau's most recent data, the official poverty rate in 2022 was 11.5%. That translates to 37.9 million people in poverty.


How Do You Input Odds Into the Kelly Criterion?

Response: In order to enter odds into the Kelly Criterion, one first needs to determine W, the probability of a favorable return, and R, the size of the average win divided by the size of the average loss. For investing purposes, the easiest way to estimate these percentages is from the investor's recent investment returns. These figures are then entered into the formulaK= W- (1-W) / R—where K represents the percentage of the investor's bankroll that they should invest.


Response: Private companies are owned by their shareholders. This may include the owner(s), the company's management, and any other people who have a stake in the company. Unlike private companies, ownership isn't divided into shares that trade on a stock exchange and isn't diluted.


What are the advantages of financial statement analysis?

Response: The main point of financial statement analysis is to evaluate a company’s performance or value through a company’s balance sheet, income statement, or statement of cash flows. By using a number of techniques, such as horizontal, vertical, or ratio analysis, investors may develop a more nuanced picture of a company’s financial profile.


Can You Deny Access to Landlocked Property?

Response: No, you cannot deny access to landlocked property. There are federal and state laws in place that allow access to landlocked property even though direct access is not possible. One of the best ways to allow access to landlocked property is through an easement or easement by necessity.


What Was the Purpose of the Dodd-Frank Act?

Response: Dodd-Frank is intended to curb the extremely risky financial industry activities that led to the financial crisis of 2007–2008. Its goal was, and still is, to protect consumers and taxpayers from egregious practices like predatory lending.


What Are Some Examples of Good Customer Service?

Response: Some of the ways to provide effective customer service include providing a friendly and warm experience, listening, and empathizing. It's also important for customers to feel as though their concerns and problems are valid and that they're being accommodated. Being proactive, not taking anything personally, and following up are also some examples of good customer service.


Are Tax Credits Better Than Tax Deductions?

Response: Many tax credits may yield better favorable results compared to tax deductions, especially if those tax credits are refundable. Refundable tax credits can reduce a taxpayer's liability below $0 and result in a refund. While tax deductions can only limit the taxability of an individual's income, some tax credits actually return a refund.


What Is the Difference Between Cum Laude, Magna Cum Laude, and Summa Cum Laude?

Response: While cum laude represents a distinguished level of achievement, magna cum laude is one level above. Meaning “with great praise” in Latin, magna cum laude differs from summa cum laude, which in turn means “highest praise” or “highest honor.” Summa cum laude represents the highest level of academic distinction. These designations may be awarded due to different factors such as GPA, class ranking, or additional academic achievements.


Response: The study considers the feasibility of four aspects of a project:Technical: A list of the hardware and software needed, and the skilled labor required to make them work.Financial: An estimate of the cost of the overall project and its expected return.Market: An analysis of the market for the product or service, the industry, competition, consumer demand, sales forecasts, and growth projectionsOrganizational: An outline of the business structure and the management team that will be needed.


What Are Some Examples of Foreign Direct Investment?

Response: One of the most sweeping examples of FDI in the world today is the Chinese initiative known as One Belt One Road (OBOR). This program, sometimes referred to as the Belt and Road Initiative, involves a commitment by China to substantial FDI in a range of infrastructure programs throughout Africa, Asia, and even parts of Europe. The program is typically funded by Chinese state-owned enterprises and organizations with deep ties to the Chinese government. Similar programs are undertaken by other nations and international bodies, including Japan, the United States, and the European Union.


Response: In 2023, unearned income under $1,250 qualifies for the standard deduction. The next $1,250 is then taxed at the child's marginal tax rate, and then all amounts over $2,500 are taxed at the parent's tax rate, which can vary from 10% to 37%.


Response: Many people consider the term "ghetto" offensive because it evokes a long history of racial segregation and discrimination. In the United States, many such communities were created through deliberate policies that denied housing and financial services to ethnic minority groups. Some celebrities have stirred controversy by using the word in public.


What Is the Difference Between a Residence and a Domicile?

Response: A residence is a location where you may live part-time or full-time. A domicile is your legal address, and your domicile is located in the state where you pay taxes.


What Did Markowitz Call His “A-ha” Moment?

Response: Markowitz’s “a-ha” moment came when he was reading a book on mathematical probability—and he had his famous brainstorm about risk correlation: "that the volatility of the portfolio depends not only on the volatility of the constituents but to what extent they go up and down together.”


Why Does Trading Volume Tend to Spike During the Witching Hour?

Response: The concentration of expiring contracts simultaneously across asset classes encourages a spike in trading activity from those closing or rolling over positions, those speculating on last-minute volatility or dynamically hedging, and those taking advantage of fleeting mispricing. This combination inevitably leads to the surge during the witching hour.


Where Does Section 1231 Gain Get Reported?

Response: IRS Form 4797, Sales of Business Property, is used to report the section 1231 gains on a sold property.


Response: There is no universal way to define a first world country. They are often characterized as industrialized and democratic nations. These features are typically accompanied by stable currencies, sound financial markets, and modern infrastructure. Due to these factors, first world countries often attract foreign direct investment and capital inflows.


How Much Money Do You Need to Trade E-mini Futures?

Response: There is no legal minimum on what balance you must maintain to day trade futures, although you must have enough in the account to cover all day trading margins and fluctuations which result from your positions. These can vary by broker however some require as little as $500 to open an account.


What Is the Difference Between Superannuation and Retirement?

Response: Superannuation is a retirement account that Australians can use to fund their retirement. Retirement means building enough wealth not to need to work again.


Response: Quotas in economics refer to the time-bound restrictions governments impose on trade. This is generally done to protect and encourage domestic business and balance trade. Governments implement quotas by placing limits on the value or number of goods exported or imported. For example, a nation may restrict another from importing a maximum of 100 barrels of crude oil.


What's the Purpose of the Capital Adequacy Ratio?

Response: The capital adequacy ratio is intended to ensure that banks have enough funds available to handle a reasonable amount of losses and prevent insolvency.


Can an LLC Operating Agreement Be Amended?

Response: Yes, LLC operating agreements can generally be amended, but the procedures for doing so will vary. In most cases, the process of amending an operating agreement should be spelled out in the agreement itself: some LLCs might specify that they can only be amended by a unanimous vote of the members, or that they can only be amended in the fourth quarter of the year. It is even possible for an LLC to have an operating agreement that cannot be amended. If it is not clearly stated, the process for amending an operating agreement is determined by the default rules for LLCs in that state.


Why Do Some States Differentiate Between RECs and SRECs?

Response: States differentiate between RECs and SRECs for different reasons. Some states may require that a specific amount of an electric company's power come from solar rather than other forms of renewable energy. They hope to encourage the adoption of solar energy, especially among homeowners and businesses.


Response: You can choose to make withdrawals or a lump sum payout. If you choose a lump sum, you can roll it into an IRA or other retirement plan if allowed.


Response: Risk parity is an asset management process that evaluates risk based on asset classes rather than the allocation of capital. Tradition asset allocation strategy divides assets between stocks, bonds, and cash. The goal is to provide diversification and reduce risk by using these types of investments. Risk parity, on the other hand, allocates dollars based on four components: equities, credit, interest rates, and commodities.


How Can Beginners Start Analyzing Stocks?

Response: Analyzing your first stock does not need to be difficult. First, gather as much public information related to the company as available. This includes recent news articles associated with the company as well as the most recent set of financial statements. Then, filter down this information to the most relevant information, Consider leveraging industry averages or data from competitors to set benchmarks. Then, decide whether the company is outperforming or underperforming compared to current prices and stock activity.


What Can I Do If I'm Having Trouble Repaying a Loan?

Response: If you cannot afford your loan payments, you may have choices other than simply not paying. You can start by reaching out to your lender to explain why you're having difficulties. Many lenders offer forbearance or deferment choices for borrowers going through temporary financial hardship. You can also consider refinancing, consolidating your debts, or seeking support from a debt relief program or credit counseling agency. Declaring bankruptcy should generally be a last resort to resolve insurmountable debts, given it will have a significant, negative impact on your ability to borrow in the future.


Response: The Bank of England manages and operates the Sterling Overnight Interbank Average rate. It took control of SONIA in 2016 and made changes to its methodology two years later. But it was established by Wholesale Markets Brokers’ Association in 1997. Prior to this, there was no such rate. As such, there was a greater degree of volatility in the overnight interest rate environment in the United Kingdom. SONIA, though, brought more stability to these rates. It is now used as a broad benchmark for different types of unsecured financial transactions.


Why Do Cryptocurrencies Need Proof of Work?

Response: Because they are decentralized and peer-to-peer by design, blockchains such as cryptocurrency networks require some way of achieving both consensus and security. Proof of work is one method that makes it too resource-intensive to overtake the network. Other proof mechanisms also exist that are less resource-intensive. Without a proof mechanism, the network and the data stored within it would be vulnerable to attack or theft.


What Is Another Name for a Hold Harmless Agreement?

Response: Hold harmless agreements go by many names. They may also be called hold harmless clauses, hold harmless provisions, or indemnity agreements.


What Is the Difference Between Weighted Average Maturity (WAM) and Weighted Average Life (WAL)?

Response: WAM and WAL are mainly used when evaluating money market funds. The difference between WAM and WAL is that WAM takes into account interest rate resets and WAL does not. The SEC limits the WAL for money market mutual funds to 120 days.


Response: Who's allowed access to your credit report is governed by the Fair Credit Reporting Act. According to the Consumer Financial Protection Bureau, "A consumer reporting agency may provide information about you only to people with a valid need — usually to consider an application with a creditor, insurer, employer, landlord, or other business." Employers must typically obtain your permission in writing.


What Is an Initial Public Offering (IPO)?

Response: An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors. Companies must meet requirements set by exchanges and the SEC to hold an IPO. Companies hire investment banks to underwrite their IPOs. The underwriters are involved in every aspect of the IPO due diligence, document preparation, filing, marketing, and issuance.


What Are the Different Types of Contra Accounts?

Response: There are four key types of contra accounts—contra asset, contra liability, contra equity, and contra revenue. Contra assets decrease the balance of a fixed or capital asset, carrying a credit balance. Contra liabilities reduce liability accounts and carry a debit balance. Contra equity accounts carry a debit balance and reduce equity accounts. Contra revenue accounts reduce revenue accounts and have a debit balance.


What Is a Lagging vs. a Leading Indicator?

Response: Leading indicators are forward-looking. They provide information about likely future outcomes. Lagging indicators are backward-looking and provide information about the effects of past inputs.


Response: The key feature of a PLC is that it's based in the U.K. and is publicly traded. The company must also have the PLC or "public limited company" designation after its name.


Response: The classical theory of money states that the amount of money that a household requires at a given point in time is proportional to the dollar value of its demand for commodities. Purchasing a higher value of goods will require a household to keep more cash on hand. This is known as the propensity to hold money.


How Can I Tell if a Decline in an Uptrend is Just a Pullback or Something More?

Response: The first place to look is at the fundamental story behind the uptrend. Has fresh, negative news hit the particular security and precipitated the pullback? Or is the pullback part of an overall, general market decline (e.g., Wall Street had a bad day)? You can also monitor key technical support levels to see if they hold. In case they fail, you might be looking at a more significant correction or even a reversal.


Response: A confidence interval is a range of values, bounded above and below the statistic's mean, that likely would contain an unknown population parameter. Confidence level refers to the percentage of probability, or certainty, that the confidence interval would contain the true population parameter when you draw a random sample many times.


Response: Due diligence is primarily a way to reduce exposure to risk. The process ensures that a party is aware of all the details of a transaction before they agree to it. For example, a broker-dealer will give an investor the results of a due diligence report so that the investor is fully informed and cannot hold the broker-dealer responsible for any losses.


What Are Some Examples of Word-of-Mouth Marketing?

Response: Word-of-mouth marketing includes the marketing tactics companies use to prompt their consumers to talk about their levels of satisfaction with the company's service or product. These strategies include brand loyalty programs, which reward customers for repeated business and provide them platforms to provide user feedback; giveaways, contests, and sponsored influencers.


Response: Downside is the opposite of upside. It refers to the drop or negative movement in the price of a financial asset, such as a stock. It can also refer to the downward movement of a financial portfolio, company, sector, or market. Like upside, downside is expressed in a dollar value or percentage terms.


Response: Almost every major insurance company provides an HMO plan. For instance, Cigna and Humana provide their own versions of the HMO. Aetna offers individuals two options: the Aetna HMO and the Aetna Health Network Only plan.


What Is an Example of Research and Development?

Response: Alphabet allocated over $16 billion annually to R&D in 2018. Under its R&D arm X, the moonshot factory, it has developed Waymo self-driving cars. Meanwhile, Amazon has spent even more on R&D projects, with key developments in cloud computing and its cashier-less store Amazon Go. At the same time, R&D can take the approach of a merger & acquisition, where a company will leverage the talent and intel of another company to create a competitive edge. The same can be said with company investment in accelerators and incubators, whose developments it could later leverage.


Response: The Kyoto Protocol was created in response to concerns surrounding climate change. The treaty was an agreement between developed nations to reduce carbon dioxide emissions and greenhouse gases. The framework implemented the United Nations' target of reducing global warming consequences including a general rise in sea levels, disappearance of some island states, melting of glaciers, and an increase in extreme climate-related events.


Response: Lenders can put almost any loan into nonaccrual status if payments are 90 days behind, with the exception of secured loans backed by solid collateral (e.g., a mortgage backed by a house). If a secured loan goes into default, the lending institution can seize the collateral and liquidate it to recover the unpaid balance.


Response: Investors can use the yield curve to make predictions about the economy to make investment decisions. If the bond yield curve indicates an economic slowdown, investors might move their money into defensive assets that traditionally do well during a recession. If the yield curve becomes steep, this might signal future inflation. In this scenario, investors might avoid long-term bonds with a yield that will erode against increased prices.


Response: When you're making trades in the forex market, you're buying the currency of one nation and simultaneously selling the currency of another nation.There's no physical exchange of money. Traders are taking a position in a specific currency, with the hope that it will gain in value relative to the other currency.


What Loan Refinancing Options Does the USDA Offer?

Response: The USDA offers direct loans and guarantees loans from private mortgage lenders to low- and moderate-income borrowers in rural areas. It oversees two programs to refinance these loans—streamlined-assist and standard streamlined.


Response: Negative amortization is when the size of a debt increases with each payment, even if you pay on time. This happens because the interest on the loan is greater than the amount of each payment. Negative amortization is particularly dangerous with credit cards, whose interest rates can be as high as 20% or even 30%. In order to avoid owing more money later, it is important to avoid over-borrowing and to pay off your debts as quickly as possible.


Response: Everyone benefits. The supplier has its risk in spending capital to produce its commodity reduced because it knows it will get at least a certain amount of money for it. The buyer benefits because it is free to search for a lower price for the commodity elsewhere. The economy benefits because the provision facilitates trade and reduces transaction costs.


Response: In general, caveat venditor has replaced caveat emptor. It means that sellers now need to be sure that their products and services function as advertised. Unless they're told otherwise, buyers expect that items have an implied warranty and can be returned for a refund.


How Many People Do You Need to Set Up a Family Limited Partnership?

Response: A family limited partnership like a holding company or business must have at least two members.


How Much Does an Investment Banker Make?

Response: An investment banking analyst, which is the lowest level of investment banker, can expect an average annual pay of $137,000 to $235,000 in 2024. More experienced investment bankers can earn much higher salaries, depending on their firm and clients. Many investment bankers receive bonuses, tips, or profit-sharing as part of their pay.


What Is the Difference Between a Tax Credit and a Tax Deduction?

Response: A tax credit lowers the amount of tax you owe on a dollar-by-dollar basis. For example, a $1,000 tax credit means that you owe $1,000 less in taxes. By contrast, a tax deduction lowers your taxable income. If your taxable income drops by $1,000 and you're in the 24% tax bracket, you'd save $240 in taxes.


How Do Companies Manage Their Operational Risk?

Response: Operational risk is any risk associated with the day-to-day operations of a business. Companies can manage it by identifying and assessing potential risks, measuring them, and putting controls in place to either mitigate or eliminate them altogether. It's also important that corporations monitor their operations and risk management techniques to see if they are working and make changes whenever necessary.


Response: Thrift banks include savings banks, private development banks, and stock savings and loan associations.


Response: Upside risk refers to the uncertain upward potential for a financial instrument, market, sector, or economy. Upside risk is positive, which means it can work to an investor or company's favor. It is the opposite of downside risk, which allows observers to determine how much they may lose.


What Are the Types of Damages in the Legal Context?

Response: There are three general types of compensatory damages that the plaintiff can seek and which may be awarded by a court:Economic damages to recover money or other financial lossesNon-economic damages to make a party whole for non-monetary losses such as bodily or emotional harmPunitive damages to impose an additional punishment on the guilty party


How Do You Become a Registered Representative?

Response: In order to become a registered representative, you must be sponsored by a FINRA-registered brokerage firm and also be licensed to sell securities. In order to gain the General Securities License, you must pass the SIE exam and the FINRA Series 7 exam.


Should You Go to an Open House Before Making an Offer?

Response: You don't have to go to an open house before making an offer, but it is usually a good idea to a property in person before making an offer. However, during the 2020 COVID-19 crisis, many realtors ended up selling homes to eager buyers based solely on photographs and information available on online listings.


Response: Form 1099-INT is a tax form issued by interest-paying entities, such as banks, investment firms, and other financial institutions, to taxpayers who receive interest income of $10 or more. The information recorded on the form must be reported to the IRS.


Response: When done properly, zoning allows cities to grow sustainably for generations. By setting aside areas near schools or airports or hospitals for future expansion, cities are able to build their communities responsibly.


Who Offers High-Deductible Health Plans?

Response: You can get coverage under an HDHP through your employer. These plans are also available through government health care exchanges.


What Are the Stages of the Business Cycle?

Response: In general, the business cycle consists of four distinct phases: expansion, peak, contraction, and trough.


Response: Stated loans, or loans where you do not need to provide proof of your income, are illegal today. A stated loan is a loan in which you only state your income on your loan application.


Response: Technical analysis evaluates investments and trading prospects by examining statistical trends in past trading activity, such as price moves and volume. The assumption behind technical analysis is that future prices for an asset are better discerned through its historical value in the market, its level of volatility, and volume traded than fundamental analyses related to a company's financials and industry conditions. While few traders rely wholly on technical or fundamental analysis tools, these are two different ways of evaluating the value of an asset, industry, or market.


Response: A CUSIP will tell you the exact type of security it references and who issued it. The unique identifier will also tell you what type of security it is (e.g., a corporate bond or common stock).


How Can I Tell if Interest Is Compounded?

Response: The Truth in Lending Act (TILA) requires that lenders disclose loan terms to potential borrowers, including the total dollar amount of interest to be repaid over the life of the loan and whether interest accrues simply or is compounded.


Response: E&P is short for exploration and production, which is the early stage of energy production that consists of looking for oil and gas and then extracting it.


Response: Yes. To pay off an amortized loan early, you can make payments more frequently or make principal-only payments. Since the interest is charged on the principal, making extra payments on the principal lowers the amount that can accrue interest. Check your loan agreement to see if you will be charged early payoff penalty fees before attempting this.


What Is the Difference Between a Stop-Loss Order and A Stop-Limit Order?

Response: A stop-loss order assures execution, while a stop-limit order ensures a fill at the desired price. The decision regarding which type of order to use depends on a number of factors.A stop-loss order will get triggered at the market price once the stop-loss level has been breached. An investor with a long position in a security whose price is plunging swiftly may find that the price at which the stop-loss order got filled is well below the level at which the stop-loss was set. This can be a major risk when a stock gaps down—say, after an earnings report—for a long position; conversely, a gap up can be a risk for a short position.A stop-limit order combines the features of a stop-loss order and a limit order. The investor specifies the limit price, thus ensuring that the stop-limit order will only be filled at the limit price or better. However, as with any limit order, the risk here is that the order may not get filled at all, leaving the investor stuck with a money-losing position.


What Are the Components of a Gantt Chart?

Response: A Gantt chart can vary in complexity and depth, but will always have three key components: activities or tasks that are to be done, running along the y-axis; milestones or progress stages indicated along the x-axis (either on the top or bottom of the chart); and progress bars, denoted as horizontal bars, denoting how far along each task is at any given point.


How Do I Make an Argument for a Higher Wage?

Response: One of the key considerations when an employer sets a justified wage is the person's contribution to the bottom line. When you're asking for a raise, be prepared to discuss how you've contributed to the company's success.If you can, cite numbers. Does the competition pay better than your company? Is the average pay for your job position higher? Look for hard numbers to strengthen your case.


Is Financial Accounting the Same As Managerial Accounting?

Response: While they often perform similar tasks, financial accounting is the process of preparing and presenting official quarterly or annual financial information for external use. Such reports may include audited financial statements that help investors and analysts decide whether to buy or sell shares of the company.Managerial accounting, in contrast, uses pro forma measures that describe and measure the financial information tracked internally by corporate managers.


What Is the Difference Between an ARM and a Hybrid ARM?

Response: An ARM is an adjustable-rate mortgage whereby the rate resets periodically. A hybrid ARM has a fixed rate for the initial period and typically adjusts annually afterward. The initial period can vary and be three, five, or seven years.


Response: American investors can invest in the Nikkei 225 index, Japan's primary equity index, via an ETF. These include:iShares Core Nikkei 225 ETFXtrackers Nikkei 225 UCITS ETF


Response: Explicit costs are tangible expenses that appear in a company’s general ledger and are used to determine profitability. Examples include wages, lease payments, utilities, and raw materials.


What Is the Difference Between Tax Credits and Tax Deductions?

Response: Tax credits reduce the tax you owe, while tax deductions lower your taxable income. While both save you money, credits are more valuable because they reduce your tax bill. A $1,000 tax credit reduces your tax bill by $1,000. Conversely, a $1,000 tax deduction lowers your taxable income. If you're in the 22% tax bracket, a $1,000 deduction saves $220 on your tax bill.


Response: The phrase “American dream” was often used by Progressive-era reformers of the 1900s. Rather than exalting the pursuit of wealth, they sought to tame monopoly capitalism and protect workers and communities from robber barons. This concept was popularized by writer and historian James Truslow Adams in his best-selling 1931 book Epic of America. He described it as "that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement."


Response: Greatest generation (b. ~1900-1925)Silent generation (~1925-1945)Baby boomers (~ 1945-1965)Generation X (~1965-1980)Millennials (~1980-1995)Generation Z (~1995-2010)Generation Alpha (~2010- )


What Is the Difference Between F and Y-Shares?

Response: Y-shares are an institutional share class issued by mutual funds, not to be confused with Y stocks. Y-stocks, which are sometimes called Y-shares, are American depositary receipts (ADRs) trading in the U.S. market but represent a foreign stock. F-stocks are foreign stocks trading in the local foreign market.


Response: It depends. The cost to directly manufacture products is included in COGS. This includes salaries such as manufacturing line supervisors. Other salaries, such as accounting staff, are included in SG&A.


Response: A run rate can be helpful in the creation of performance estimates for companies that have been operating for short periods of time, such as less than a year, as well as newly created departments or profit centers. Additionally, the run rate can be helpful in cases where a fundamental business operation was changed in some way that was anticipated to affect all future performances of the associated business.


How Can the D/E Ratio Be Used to Measure a Company’s Riskiness?

Response: A steadily rising D/E ratio may make it harder for a company to obtain financing in the future. The growing reliance on debt could eventually lead to difficulties in servicing the company’s current loan obligations. Very high D/E ratios may eventually result in a loan default or bankruptcy.


Response: The proponents of cap and trade argue that well-designed cap and trade systems have proven to be environmentally effective and cost-effective. When a company has effective emissions monitoring systems and complies with regulations, a cap trade initiative can be beneficial not only for the environment for also for the economy, since banking the excess allowances can reduce significantly a company's costs.


What Are the Main Elements of Neoclassical Economics?

Response: The main assumptions of neoclassical economics are that consumers make rational decisions to maximize utility, that businesses aim to maximize profits, that people act independently based on having all the relevant information related to a choice or action, and that markets will self-regulate in response to supply and demand.


Response: Once you sell your option, you generally can't buy it back. But there is a way to eliminate your short position. You can do this by buying a call option with similar details for the same underlying asset, including the strike price and expiry date.


What Is the Difference Between Scenario Analysis and Sensitivity Analysis?

Response: Scenario analysis looks at a wide range of possible outcomes, but it analyzes the effect of manipulating all variables at the same time. The result is typically a base-case scenario, a best-case scenario, and a worst-case scenario.On the other hand, sensitivity analysis assesses the impact of changing just one variable at a time.


How to Calculate Earnings Before Tax (EBT)?

Response: EBT can be calculated in the following ways:Revenue – all operating expenses, including the cost of goods sold, selling, general and administrative expenses, and depreciation and amortizationEBIT – interest expenseNet income + taxes


How Do I Calculate Section 1250 Recapture?

Response: Section 1250 is calculated as the lesser of two amounts. The first amount is the excess of accelerated depreciation claimed on real property over what would have been the allowable amount under a straight-line method. The second amount is the gain realized upon disposition.


What Types of Insurance Are Sold at Banks?

Response: Depending on the country and the particular bank, consumers can buy a wide variety of insurance at their local banks, including life, health, and property and casualty insurance. However, life insurance is the dominant product in the U.S. and most of the world. In 2018, for example, about 29% of life insurance globally was sold through bancassurance, while only about 2% of property and casualty insurance was, according to McKinsey & Company.


Response: Residual value and a lease buyout are two different things. A lease buyout is an option that is contained in some lease agreements that give you the option to buy your leased vehicle at the end of your lease. The price you will pay for a lease buyout will be based on the residual value of the car.


What's the Difference Between a Discount and Full-Service Broker?

Response: Traditionally, a discount broker would only buy and sell on customers' behalf. In contrast, a full-service broker would provide a broader breadth of financial services such as research, advice, portfolio management, and more. Today, as online brokerages have forced commissions down to zero, discount brokers have distinguished themselves by providing research and other services in addition to pure execution.


Are the Secondary and Stock Market the Same?

Response: Most people consider the stock market to be the secondary market. This is where securities are traded after they are issued for the first time on the primary market. For instance, Company X would conduct its initial public offering on the primary market. Once complete, its shares are available to trade on the secondary market. Major stock exchanges like the NYSE and Nasdaq are secondary markets.


What's the Difference Between an Interest Rate and an Annual Percentage Rate?

Response: In the case of credit cards, interest rates must be stated as an annual percentage rate, or APR, so they are basically the same thing. With other types of loans (such as mortgages or car loans) the interest rate and APR can be different because the APR will include both the basic interest rate and any additional fees.


Response: Yes. Whether you're an employee claiming reimbursement from an employer or a business owner claiming a tax deduction, you need to prepare to prove your expenditures. Keep a running log of your expenses and file away the receipts as backup.


Response: This depends on which method you think is best for ranking ESG firms against one another. Morningstar takes its analysis from Sustainalytics, Morningstar’s ESG and corporate governance research, ratings, and analytics firm, to publish its list of the top-rated ESG companies. U.S. firms in the 2024 global top-50 list include the Inter-American Development Bank, Keysight Technologies, and Universal Display.


Response: Elastic demand is demand that rises or falls based on the price of the service or product, state of the economy, or financial health of the person. Inelastic demand is demand that is, to an extent, impervious to price fluctuations, the state of the economy, tax incidence or any other financial consideration. It is the difference between something like entertainment or self-care purchases versus food and medicine.


Can You Go to Jail for Tax Evasion in the U.S.?

Response: Yes, you can. Tax evasion is a felony that is punishable by up to five years in prions or a fine of up to $250,000 (or $500,000 for corporations) or both.


Response: Nonrenewable resources are derived from the Earth— in a finite supply that can take billions of years to replenish. Historically, many nonrenewables have been relatively cheap to extract. But as their supply continues to diminish, the cost of this extraction may rise in price, leading customers to use alternative sources, such as solar and wind energy.


Does the Parent or Student Claim the 1098-T?

Response: Either can do so (but not both). Generally, it depends on who is actually paying the educational expenses and if the student is still being listed and taken as a dependent on the parent's tax return. If they are, the parent usually claims the education credit based on the Form 1098-T info.


Response: The simple answer to this question is yes. Tax avoidance can be a legal way to avoid paying taxes. For instance, you can avoid paying taxes by using tax credits, deductions, exclusions, and loopholes to your advantage. For instance, corporations often use different legal strategies to avoid paying taxes. These include offshoring their profits, using accelerated depreciation, and taking deductions for employee stock options.Tax avoidance can be illegal, though, when taxpayers make it a point to ignore tax laws as they apply to them deliberately. Doing so can result in fines, penalties, levies, and even legal action.


Response: By definition a line is always straight, so a best fit line is linear. However, a curve may also be used to describe the best fit in a set of data. Indeed, a best fit curve may be squared (x2), cubic (x3), quadratic (x4), logarithmic (ln), a square root (√), or anything else that can be described mathematically with an equation. Note, however, that simpler explanations of fit are often preferred.


Which Activist Investor Generates the Largest Share-Price Gains at the Outset?

Response: It is difficult to know for sure which activist investors have been the more successful dollar-for-dollar and what other factors may cause particular stocks to rise in addition to an activist taking on a stake, but we can look to SEC disclosures and public statements made by these investors. Elliott Investment Management, for one, claims that its investments receive an average rise of 8% in the shares of the target company on the day the firm made its stake public. According to Elliot, its activist engagements have increased the market values of the targeted companies by an aggregate of more $30 billion.


What Is the Institute for New Economic Thinking?

Response: Since the 2008 financial crisis, Stiglitz has played an important role in the creation of the Institute for New Economic Thinking (INET), which seeks to reform the economic discipline so it is better equipped to find solutions to the great challenges of the 21st century.


How Do You Calculate the Production Possibility Frontier?

Response: The simplest method is to use Excel or Google Sheets. Fill two columns with two variable values, highlight the data, and use the chart wizard. Create an XY scatter plot chart and label the X and Y axes.


Response: An impact-investing strategy is an investment strategy that targets companies or industries that produce social or environmental benefits. For example, some impact investors seek to support renewable energy, electric cars, microfinance, sustainable agriculture, or other causes that they believe to be worthwhile.


Response: Stop options contracts expire monthly, while index futures and options typically settle on the third Friday of March, June, September, and December.


Where Are Engels' Published Works Written as Pseudonym Friedrich Oswald?

Response: Thirty literary works that were published under Engels' pseudonym were found in Bremen after Engels' passing and are preserved. His pseudonym was not revealed until after his death.


What Recourse Do I Have Against a Home Builder?

Response: If a home builder has done a poor job in building your home, such as faulty floorboards, cracked ceilings, or other issues, as a homeowner you do have some recourse. The first step is to check your contracts and warranties. Most house builds will have warranties on the different areas of your home. If the warranties expire or do not cover a certain issue, depending on the issue, the builder may be in breach of contract or negligence given the work they have done. You can register complaints with the Better Business Bureau and the Federal Trade Commission (FTC) and speak to a lawyer to determine your options.


Response: Musharakah is used in Islamic financing around the world. Its system of partnership is used by Islamic banks, as well as by debt and equity markets. Countries where it is common include Sudan, Kuwait, the United Arab Emirates, and Malaysia.


Response: Operating leases allow companies greater flexibility to upgrade assets, like equipment, which reduces the risk of obsolescence. There is no ownership risk and payments are considered to be operating expenses and tax-deductible. Finally, the risks and benefits remain with the lessor as the lessee is only liable for the maintenance costs.


What Is the Structure of the Federal Reserve System?

Response: The Federal Reserve System comprises the Board of Governors in Washington, D.C., and 12 regional Federal Reserve Banks located across the country. These regional banks serve as operational and financial centers, supporting the central banking functions.


What's the Most Miserable Country in the World?

Response: According to the Misery Index for 2021, Cuba was the most miserable country in the world with a misery index score of 1,227.6, followed by Venezuela (774.3) and Sudan (397.2).


Response: No. The Fed is responsible only for monetary policy and banking system oversight. Federal taxes are approved and collected exclusively by Congress—via the Internal Revenue Service (IRS), a federal agency)—which is an instance of fiscal policy. State and local taxes are collected by individual states or municipalities.


Response: The annualized real GDP growth rate for the United States in the fourth quarter of 2023 was 3.2%.


What Were the Major Parts of Reaganomics?

Response: The four main pillars of Reaganomics were tax cuts, deregulation, cuts to domestic social spending, and reducing inflation.


Response: The main risk for a CMBS investor is the possibility of a default in the underlying loans. Because these are non-recourse loans, the borrower cannot be held personally responsible if the loan defaults.


Response: Virtual currencies are digital representations of value whose transactions are conducted only through electronic networks or the internet. They do not have a physical incarnation.


What Are the Disadvantages of Transfer Pricing?

Response: One of the key disadvantages is that the seller is at risk of selling for less, netting them less revenue. The practice also give multinational corporations a tax loophole.


How Do You Calculate Incidence Rates in Market Research?

Response: In market research, incidence rate refers to the frequency of people who are able to take part in a particular study. This is calculated by taking the total number of people who are qualified to participate by the total number of those who responded to the call for the study, including those who didn't qualify to take part.


Response: A broad market index tracks the performance of a large group of stocks. This large group is chosen to represent the entire stock market. A broad market index adds significant diversification to any portfolio. Examples of broad-based indexes include the S&P 500 Index and the Russell 3000 Index.


Is fire insurance different from homeowners insurance?

Response: Fire insurance provides coverage for costs related to a fire, whereas homeowners insurance protects against many other types of risks. A homeowners insurance policy typically includes coverage for damage caused by a fire, but a stand-alone fire insurance policy may provide more extensive coverage.


Is Accumulated Depreciation a Current Liability?

Response: Accumulated depreciation is not a liability. A liability is a future financial obligation (i.e., debt) the company must pay.


Response: The step-up feature provides a larger guaranteed benefit each year if the cash value from the annuity’s subaccounts has grown. The annuity issuer compares the original benefit base amount with the current cash value every few years. If the latter is bigger, it will use that figure as the basis for future guaranteed benefits.


Response: Only a handful of countries have 0% income tax. These include Saudi Arabia, United Arab Emirates, Oman, Kuwait, Qatar, Bahrain, the Bahamas, Bermuda, and the Cayman Islands. Many of these are Arab oil-producing nations that subsidize their budgets with exports rather than taxes. These nations also feature relatively high sales taxes and/or corporate tax rates.


What Is Health Insurance and Why Do You Need It?

Response: Health insurance is an agreement in which an insurance company agrees to pay for some or all of your medical expenses in exchange for a monthly premium payment. You need it to ensure you can pay for any medical bills while staying in good financial health.


Response: The gas fee is calculated using Gas Limit * Gas Price per Unit. So if the gas limit was 20,000 and the price per unit was 200 gwei, the calculation would be 20,000 * 200 = 4,000,000 gwei or 0.004 ETH.


Response: Tax shields result in tax savings. Tax shields allow for taxpayers to make deductions to their taxable income, which reduces their taxable income. The lower the taxable income, the lower the amount of taxes owed to the government, hence, tax savings for the taxpayer.


What Are the Benefits of a Depository Institution?

Response: There are several advantages to using a depository institution such as a bank. First, depositories provide safekeeping for assets, cash, and valuables, eliminating the risk of theft and loss. They typically pay interest on your deposits, which will grow your balance. Depositories also create liquidity by lending out money.


Response: Several cloud computing applications are used by businesses and individuals, such as streaming platforms for audio or video, where the actual media files are stored remotely. Another would be data storage platforms like Google Drive, Dropbox, OneDrive, or Box.


What Is the Difference Between an ETF and an Index Fund?

Response: An ETF can be bought and sold on an exchange like a stock at any point whereas an index fund can only be traded at the end of the day at the set price point. ETFs provide greater flexibility than index funds.


Response: RESPA was passed as part of an effort to limit the use of escrow accounts and to prohibit abusive practices in the real estate industry, such as kickbacks and referral fees.


Why Does the Stock Market Ring the Bell Every Opening and Closing?

Response: The opening and closing bells on the stock market tell traders when they are allowed to start or stop trading. In early stock markets, this role was played by a gavel. In today's world of automated markets, the bell is less important, but it still plays a symbolic role.


What Strategies Are Used to Gain Market Share?

Response: To gain greater market share, a company may apply one of many strategies. First, it may introduce new technology to attract customers that may have otherwise purchased from its competitor. Second, nurturing customer loyalty is a tactic that can result in both a solid existing customer base and expansion through word of mouth. Third, hiring talented employees prevents costly employee turnover expenses, allowing the company to prioritize its core competencies instead. Finally, with an acquisition, a company can reduce the number of competitors and acquire their base of customers.


Which Earns More: Variable or Fixed Annuities?

Response: There is no clear answer to this. While variable annuities have greater potential for earnings, since their interest rate rises and falls with their underlying investments, they can lose money. They are also riddled with fees, which can cut into profits. Fixed annuities typically earn at a lower, stable rate. Carefully look at your options when choosing an annuity.


Response: Line graphs can be highly customizable in terms of title, labels, markers, style of line, and other non-essential features. However, all line graphs must have an x-axis (independent variable), a y-axis (quantity of dependent variable), and input data (dependent variables). The data points for each dependent variable are marked on the graph are connected by a line.


Response: The future value of an annuity is the value of recurring payments at a certain date in the future, assuming a particular rate of return, or discount rate. The higher the discount rate, the greater the annuity's future value. FV of an annuity, if the payments are made at the end of the period (i.e., end of the month or year) is calculated as FV = PMT x [(1+r)n - 1)]/r, where FV = future value of an annuity stream, PMT = dollar amount of each annuity payment, r = the discount (interest) rate, and n = number of periods in which payments will be made.


Why Are Arm’s Length Transactions Important?

Response: The question of whether or not a transaction is arm’s length matters because it can have legal and tax implications. For example, when a multinational corporation engages in transactions with its affiliated companies throughout the world, it must ensure that those transactions are made at fair market values to ensure that the correct taxes are paid in each jurisdiction.Similarly, conglomerates and holding companies can potentially run into legal and regulatory challenges if the companies within their organization do not transact with one another at arm’s length. Ultimately, Arm’s Length Transactions are intended to encourage fair and reasonable business practices and to protect the public at large.


What Is an Example of a Government-Sponsored Enterprise (GSE)?

Response: The Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corp. (Freddie Mac), and the Federal Home Loan Bank (FHLB) system are government-sponsored enterprises (GSEs) in the housing finance market. SLM Corp. (Sallie Mae) is a student loan GSE. And the Farm Credit System (FCS) and the Federal Agricultural Mortgage Corp. (Farmer Mac) are agricultural GSEs.


What Is the Par Value Method of Accounting for Treasury Stock?

Response: The par value method is an alternative way to value the stock acquired in a buyback. Under this method, shares are valued according to their par value at the time of repurchase. This sum is debited from the treasury stock account, to decrease total shareholders' equity. The common stock APIC account is also debited by the amount originally paid in excess of par value by the shareholders. The cash account is credited by the total cost of the share repurchase. The net amount is recorded as either a debit or a credit, depending on whether the company paid more or less than the shareholders did originally.


Response: Yes, if the counteroffer is agreeable and will close the deal. However, a counteroffer that doesn't live up to all of your requirements may not be the best course of action. Moreover, taking a counteroffer can tarnish your reputation with your current employer.


Response: Brand identity matters because without it, customers are not able to recognize a brand easily. A strong master brand may help sell a company to consumers and impart strength to all sub-brands.


Response: If you find yourself facing a quiet title action, you can fight it by producing a deed and other information proving that you have superior title and that their claim is invalid or mistaken. This often involves showing up to a legal hearing to present your arguments defending your title. Hiring a skilled and knowledgeable attorney to help with the defense is recommended.


Can a Sale Involve Something Other Than an Exchange of Goods?

Response: The word "sale" is commonly used to advertise a reduction in the price of goods or services to make them more attractive to potential buyers.


Response: Among the largest ISPs in the United States are Comcast, Charter, AT&T, and Verizon.


Response: Line graphs are useful in finance because they are very effective at creating visual representations of trends over time. For this reason, they are often used to depict how a stock is performing over a specific period of time.


Response: The loan tenor is typically between 5 and 25 years, with a maximum of 30 years, depending on the type of project and its debt servicing capability.


What Is the Difference Between a Loan and a Credit Facility?

Response: A loan is often a more rigid agreement between a bank and a borrower. The borrower usually receives the funds upfront and then repays it with interest. A credit facility is more flexible, as the agreement allows a borrower to take on debt only when they need the funds.


Response: A unitized investment is a type of pooled investment structure that allows investors to purchase units in a pooled investment vehicle, such as an investment fund. Each investor owns a portion of the investment vehicle through their units. Unitized investments typically have a specific investment concentration or strategy.


Response: Most people will not incur estate taxes, commonly called the death tax. But if you have $12.92 million or more in assets in 2023 or $13.61 million in 2024, you can avoid paying taxes by donating to charity, giving enough of your estate away to reduce its value, or placing it in special trust funds.


Response: To get a letter of guarantee, you need to apply for one from a financial institution, such as a bank. While you can get one from any bank, the issuer will want to examine your finances closely before offering the letter. For this reason, you'll likely find it much easier to work with a bank with which you already have a relationship.


What Obligations Does the Federal Government Have to the States?

Response: The federal government is obligated to guarantee each state a republican form of government, protect each state from invasion, and, when expressly asked by the state's legislature or executive, to protect the state against "domestic violence."


Response: The IRS defines a wash sale as one that happens within 30 days of the purchase of the same security and generates a loss.


Response: You can research the different kinds of ETFs through the website of any major brokerage, such as Fidelity or Charles Schwab. Simply look for a section titled "ETF Screener" and select the characteristics that you are looking for in an ETF.


Response: Incoterms are a set of rules for international trade. They are set up by the International Chamber of Commerce and outline the responsibilities of buyers and sellers of financial contracts in domestic and international markets. As such, they provide clarity when it comes to financial contracts between parties, especially when they are in different countries. Established in 1936, Incoterms are updated periodically. Examples of Incoterms include delivered-at-place, carriage and insurance paid to, and delivered duty paid.


Response: Full retirement age (FRA) is the age you must reach to be eligible to receive full retirement benefits from Social Security. Your FRA varies depending on when you were born. It's 66 years and two months for those born in 1955 and it gradually increases to age 67 for those born in 1960 and after.


What Is the Difference Between Spoofing and Phishing?

Response: The terms “spoofing” and “phishing” are often used interchangeably, but they mean different things. Spoofing uses a fake email address, display name, phone number, or web address to trick people into believing that they are interacting with a known, trusted source. Phishing tricks you into providing personal data that can be used for identity theft. Many phishers use spoofing tactics to trick their victims into believing they are providing personal information to a legitimate, trusted source.


Response: Stakeholders are important for a number of reasons. For internal stakeholders, they are important because the business’s operations rely on their ability to work together toward the business’s goals. External stakeholders on the other hand can affect the business indirectly.For instance, customers can change their buying habits, suppliers can change their manufacturing and distribution practices, and governments can modify laws and regulations. Ultimately, managing relationships with internal and external stakeholders is key to a business’s long-term success.


Response: Some examples of indirect taxes in the U.S. include taxes like sales taxes that are not paid directly to the government, but paid to a business that pays taxes to the government. Import taxes are also levied on goods coming into the U.S. The U.S. does not have a national sales tax.


What Is the Difference Between a Pigovian Tax and a Sin Tax?

Response: Pigovian taxes and sin taxes are quite similar and a specific levy may satisfy both definitions. The key difference is that a Pigovian tax seeks primarily to minimize negative externalities (i.e., harms to others or society as a whole), while sin taxes typically seek to reduce negative internalities (i.e., harms to oneself). In the case of cigarettes and alcohol, for example, there are both potential negative internalities and externalities.


Response: To become a lawyer, you'll need to earn a Juris Doctor (JD) degree. Once you graduate, you are entitled to take the bar exam and begin the practice of law. Obtaining a JD degree alone does not permit you to practice law. You must also pass the bar exam. Every state (and the District of Columbia) has its own bar exam.


Response: Companies issue warrants in order to raise capital. When a company sells a warrant it receives payment. If stocks are purchased using the warrant at a later date then the company also receives money.


Do You Need CFA for Investment Management?

Response: Certification as a Chartered Financial Analyst (CFA) is not a legal requirement for investment managers, but clients may likely prefer to work with an adviser that holds an industry-specific certification such as CFA, CFP, or Chartered Investment Counselor (CIC).


Response: The most common reasons include encouraging trade between nations, reducing the risks associated with expanding into broader markets and stabilizing the economy.


How Can a Shareholder Profit From Contingent Value Rights?

Response: To profit from a CVR, investors must hold stock in the acquired company before it is delisted from the stock exchange. Companies tend to prefer non-transferable CVRs because it doesn't require listing the shares on an exchange. This costs less money and regulatory hurdles.


Can Individuals Invest Directly in an Index?

Response: Investors cannot invest directly in a stock index, such as the Russell 3000 or the S&P 500 but can invest in an index fund or ETF that tracks the performance of the target index.


Response: Banks can manage credit risk with several strategies. They can set specific standards for lending, including requiring a certain credit score from borrowers. Then, they can regularly monitor their loan portfolios, assess any changes in borrowers' creditworthiness, and make any adjustments.


What Are Examples of Variable Interest Entities (VIEs)?

Response: VIEs can come in many forms and will be organized depending on the needs of the beneficiary company. Some examples may include operating leases, subcontracting arrangements, and offshore companies, among others.


How Does the RBI Regulate Banks and Financial Institutions in India?

Response: The RBI regulates banks and financial institutions in India through various measures such as licensing and supervision, setting capital adequacy norms, and conducting inspections and audits. The RBI is also the governing body responsible for issuing regulatory guidelines and directives.


Response: Inventory refers to a company’s goods and products that are ready to sell, along with the raw materials that are used to produce them. Inventory can be categorized in three different ways, including raw materials, work-in-progress, and finished goods.In accounting, inventory is considered a current asset because a company typically plans to sell the finished products within a year.Methods to value the inventory include last-in, first-out, first-in, first-out, and the weighted average method.


Response: Both options and futures are types of derivatives contracts that are based on some underlying asset or security. The main difference is that options contracts grant the right but not the obligation to buy or sell the underlying in the future. Futures contracts have this obligation.


Response: Predicting a Minsky moment is inherently difficult because of the complexity of market forces, investor psychology, and external economic factors or shocks. While economists and analysts can try to identify speculative bubbles and overleveraging as warning signs, the precise timing and trigger of a Minsky moment are often unpredictable.


Response: Michael Bloomberg is a billionaire whose fortune is estimated to be worth $82 billion.


Do Banks Try to Contact Customers About Inactive Accounts?

Response: Usually, they're required to do so. If that effort fails to locate an owner, a bank will contact the relevant state government's unclaimed property office.


What Is the Difference Between Universal and Whole Life Insurance?

Response: Universal life insurance and whole life insurance are types of permanent life insurance that offer guaranteed death benefits for the life of the insured. However, a universal life policy allows the policyholder to adjust the death benefit as well as the premiums. Higher death benefits require higher premiums. Whole life insurance, on the other hand, does not allow for changes to the death benefit or premiums, which are set upon issue.


Response: Prior probability is the probability of an event occurring before any data has been gathered. It is the probability as determined by a prior belief. Prior probability is a part of Bayesian statistical inference since you can revise these beliefs and arrive mathematically at a posterior probability.