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what s an actuary do | actuaries say they are risk managers and experts in evaluating the likelihood of future events | |
what are the two kinds of actuarial tables | the two tables are the period life table to determine mortality rates for a specific time period of a defined population and the cohort life table used to represent the overall mortality rates of a certain population s entire lifetime | |
what is actuarial science | actuarial science is a discipline that assesses financial risks in the insurance and finance fields using mathematical and statistical methods actuarial science applies the mathematics of probability and statistics to define analyze and solve the financial implications of uncertain future events traditional actuarial science largely revolves around the analysis of mortality and the production of life tables and the application of compound interest understanding actuarial scienceactuarial science attempts to quantify the risk of an event occurring using probability analysis so that its financial impact can be determined actuarial science is typically used in the insurance industry by actuaries actuaries analyze mathematical models to predict or forecast the reasonableness of an event occurring so that an insurance company can allocate funds to pay out any claims that might result from the event 2 for example studying the mortality rates of individuals of a certain age would help insurance companies understand the likelihood or timeframe of paying out a life insurance policy actuarial science became a formal mathematical discipline in the late 17th century with the increased demand for long term insurance coverage actuarial science spans several interrelated subjects including mathematics probability theory statistics finance economics and computer science 3 historically actuarial science used deterministic models in the construction of tables and premiums in the last 30 years science has undergone revolutionary changes due to the proliferation of high speed computers and the union of stochastic actuarial models with modern financial theory applications of actuarial sciencelife insurance and pension plans are the two main applications of actuarial science however actuarial science is also applied in the study of financial organizations to analyze their liabilities and improve financial decision making actuaries employ this specialty science to evaluate the financial economic and other business applications of future events in traditional life insurance actuarial science focuses on the analysis of mortality the production of life tables and the application of compound interest which is the accumulated interest from previous periods plus the interest on the principal investment as a result actuarial science can help develop policies for financial products such as annuities which are investments that pay a fixed income stream actuarial science is also used to determine the various financial outcomes for investable assets held by non profit corporations as a result of endowments in health insurance including employer provided plans and social insurance actuarial science includes analyzing rates offor example disability rates are determined for veterans that may have been wounded in the line of duty certain percentages are assigned to the extent of the disability to determine the payout from disability insurance actuarial science is also applied to property casualty liability and general insurance instances in which coverage is generally provided on a renewable period such as yearly coverage can be canceled at the end of the period by either party in the pension industry actuarial science compares the costs of alternative strategies with regard to the design funding accounting administration and maintenance or redesign of pension plans a pension plan is a defined benefit plan which is a type of retirement plan involving contributions from the employer to be set aside and paid out to the employees upon retirement short term and long term bond rates greatly influence pension plans and their investment strategies bonds are debt instruments issued by governments and corporations that typically pay a periodic interest rate for example in a low interest rate environment a pension plan might have difficulty earning income from the bonds that it has invested in which increases the probability that the pension plan could run out of money other factors impacting a pension plan s viability include benefit arrangements collective bargaining the employer s competitors and changing demographics of the workforce tax laws and the policies of the internal revenue service irs regarding the calculation of pension surpluses also impact the finances of a pension plan additionally economic conditions and trends in the financial markets can impact the probability of a pension plan remaining funded actuaries may also work in the public sector to assist with proposed changes to social security medicare or other programs universities and professional certificationsaccording to the bureau of labor statistics the number of actuaries employed is expected to grow 23 from 2022 to 2032 4 for this reason many universities offer educational degrees and courses on actuarial science in addition there are professional designations for those interested in pursuing the field the society of actuaries identifies and reports colleges that meet one of three levels of recognition as of december 2022 there are roughly 25 center of actuarial excellence schools across the united states canada australia singapore the united kingdom and china within the u s these schools include but are not limited to brigham young georgia state purdue connecticut and michigan 5according to the latest bls wage data the median annual wage for actuaries in 2021 was 113 990 1there are a number of different professional designations an actuary can pursue to further gain credibility and proficiency in their field the casualty actuarial society offers the associate acas and fellow fcas membership levels each of the two with escalating requirements for example the acas credential can be achieved after passing six exams while the fcas is earned after nine exams areas of focus for the fcas exam include 6the society of actuaries promotes several different actuarial exams to demonstrate competency in the field 7 | |
is actuarial science difficult | actuarial science is a difficult profession actuarial exams usually last between 3 and 5 hours and each requires rigorous preparation candidates must often have a bachelor s degree and it make take up to a decade for a candidate to complete all training and exams 6 | |
what type of math do actuaries use | actuaries often have a background in probability statistics and financial mathematics most often an actuary will assess the probability of an event happening then apply statistical methods to determine what the financial impact of that outcome will be 6 actuaries usually do not use calculus at work though calculus may be a prerequisite to meeting other course requirements | |
how long does it take to become an actuary | for most it may take up to a decade or longer to become an actuary a bachelor s degree in actuarial science may take between 3 to 5 years and it may take at least another several years to pass rigorous professional actuarial exams the bottom lineactuarial science is the study of mathematically predicting the probability of something happening in the future and assigning that outcome a financial value companies pension funds and insurance agencies rely on actuaries to develop models to assess areas of risk and devise policies to mitigate potential future challenges | |
what is an ad valorem tax | an ad valorem tax is a tax based on the assessed value of an item such as real estate or personal property the most common ad valorem taxes are property taxes levied on real estate however ad valorem taxes may also extend to a number of tax applications such as import duty taxes on goods from abroad | |
how ad valorem tax works | the latin phrase ad valorem means according to value all ad valorem taxes are levied based on the determined value of the item being taxed in the most common application of ad valorem taxes which are municipal property taxes the real estate of property owners is periodically assessed by a public tax assessor to determine its current value the assessed value of the property is used to compute a tax annually levied on the property owner by a municipality or other government entity 1ad valorem taxes which are based on ownership of a real asset can be looked at in contrast to transactional taxes such as sales taxes while ad valorem taxes are determined and levied annually transactional taxes are only levied at the time of a transaction | |
how ad valorem taxes are levied | property ad valorem taxes are usually levied by a municipality but may also be levied by other local government entities such as counties school districts or special taxing districts also known as special purpose districts property owners may be subject to ad valorem taxes levied by more than one entity for example both a municipality and a county ad valorem property taxes are typically a major if not the primary revenue source for both state and municipal governments and municipal property ad valorem taxes are commonly referred to as simply property taxes investopedia ryan oakleydetermining tax valuestax assessments for the purpose of determining ad valorem taxes are typically calculated as of january 1 each year ad valorem taxes represent a percentage of the assessed property value which is commonly the property s fair market value 1fair market value is the estimated sales price of the property assuming a transaction between a willing buyer and a willing seller who both have reasonable knowledge of all pertinent facts about the property and in a situation where neither party has a compulsion to complete the transaction fair market value can be more simply understood as just a reasonable price property subject to ad valorem taxesad valorem taxes are generally levied on both real property and personal property real property includes land buildings and other structures and any improvements to the property 2an example of an improvement is a garage added to a single family home or a road built on a parcel of land personal property ad valorem taxes are most commonly levied only on major personal property holdings such as a car or boat 3 incidental personal property such as household appliances or clothing is not usually subject to personal property taxes | |
what are ad valorem taxes used for | ad valorem taxes are levied for different purposes with property taxes the income is generally used to fund local government projects such as schools and parks | |
what are types of ad valorem taxes | the main types of ad valorem taxes include property taxes and sales tax an ad valorem tax is a tax that is calculated based on an assessed value and a tax rate it can also be applied as duties to imports | |
how are ad valorem taxes assessed | there are several types of ad valorem taxes with property taxes the most common ad valorem tax taxes are assessed based on the value of your property then specific tax rates are applied according in the u s property taxes are generally assessed with a county tax rate the value of the property is typically must be certified such as by a state department of assessments and taxation 4the bottom linead valorem taxes can come in various forms but they all are based on the concept that you pay a certain amount of tax based on an assessed value and a tax rate you ll most likely face ad valorem taxes with sales tax when you purchased goods and with property tax if you own a home | |
what is add on interest | add on interest is a method of calculating the interest to be paid on a loan by combining the total principal amount borrowed and the total interest due into a single figure then multiplying that figure by the number of years to repayment the total is then divided by the number of monthly payments to be made the result is a loan that combines interest and principal into one amount due this method of calculating the payment on a loan is substantially more expensive for the borrower than the traditional simple interest calculation and is rarely used in consumer loans most loans use simple interest where the interest charged is based on the amount of principal that is owed after each payment is made add on interest loans may occasionally be used in short term installment loans and in loans to subprime borrowers understanding add on interestin simple interest loans where the interest charged is based on the amount of principal that is owed after each payment is made the payments may be identical in size from month to month but that is because the principal paid increases over time while the interest paid decreases if the consumer pays off a simple interest loan early the savings can be substantial the number of interest payments that would have been attached to future monthly payments has been effectively erased but in an add on interest loan the amount owed is calculated upfront as a total of the principal borrowed plus annual interest at the stated rate multiplied by the number of years until the loan is fully repaid that total owed is then divided by the number of months of payments due in order to arrive at a monthly payment figure this means that the interest owed each month remains constant throughout the life of the loan the interest owed is much higher and even if the borrower pays off the loan early the interest charged will be the same example of add on interestsay a borrower obtains a 25 000 loan at an 8 add on interest rate that is to be repaid over four years using a simple interest loan payment calculator the same borrower with the same 8 interest rate on a 25 000 loan over four years would have required monthly payments of 610 32 the total interest due would be 3 586 62 the borrower would pay 4 413 38 more for the add on interest loan compared to the simple interest loan that is if the borrower did not pay off the loan early reducing the total interest even more | |
what is the additional child tax credit | the additional child tax credit is the refundable portion of the child tax credit it can be claimed by families who owe the irs less than their qualified child tax credit amount since the child tax credit is non refundable the additional child tax credit refunds the unused portion of the child tax credit to the taxpayer up to a limit that changes with inflation the tax cuts and jobs act tcja increased the amount of the child tax credit to 2 000 and put a new limit on the refundable portion understanding the additional child tax credita tax credit is a benefit given to eligible taxpayers to help reduce their tax liabilities it reduces what you owe dollar for dollar for example if susan s tax bill is 5 550 but she qualifies for a 2 500 tax credit she will only have to pay 3 050 5 500 2 500 3 050 some tax credits are refundable meaning that you will receive a refund if the tax credit amounts to more than what you owe as tax so if susan s tax credit is 6 050 and is refundable she will be given a check for 500 6 050 5 550 500 depending on what tax group a taxpayer falls in they may be eligible to claim a tax credit for example taxpayers with children may qualify for the child tax credit which helps to offset the costs of raising kids for tax years through 2025 the child tax credit allows eligible tax filers to reduce their tax liability by up to 2 000 per child to be eligible for the child tax credit the child or dependent must child tax credit vs additional child tax creditthe child tax credit is non refundable which means the credit could reduce your bill to zero but any excess from the credit would not be refunded families who want to keep the unused portion of the child tax credit may be able to claim another available tax credit called the additional child tax credit the additional child tax credit is a refundable tax credit that families may qualify for in 2023 up to 1 600 of the child tax credit can be refundable for each qualifying child if certain conditions are met this refundable portion increases to 1 700 in 2024 to claim a refund filers must complete schedule 8812 example of the additional child tax creditbefore the tcja the irs allowed families with an annual income of more than 3 000 to claim a refund using the additional child tax credit the tax credit depended on how much the taxpayer earned and was calculated by taking 15 of the taxpayer s taxable earned income over 3 000 up to the maximum amount of the credit which was then 1 000 per child the total amount above 3 000 subject to annual adjustments for inflation was refundable for example say a taxpayer with two dependents qualified for the child tax credit their earned income was 28 000 which means income over 3 000 is 25 000 since 15 x 25 000 3 750 and 3 750 is greater than the maximum credit of 2 000 for two kids they would have received the full portion of any unused credit so if the taxpayer received an 800 child tax credit they would be refunded a 1 200 additional child tax credit however if the taxable earned income was 12 000 instead 15 of this amount over 3 000 is 1 350 15 x 9 000 1 350 because the refundable portion of the credit could not exceed 15 of earned income above 3 000 the taxpayer would receive a maximum refund of 1 350 not 2 000 the tax cuts and jobs act changed some aspects of the child tax credit by increasing the total credit amount from 1 000 to 2 000 and allowing the full credit for taxpayers with up to 200 000 in income 400 000 for married taxpayers filing jointly previously the credit began to phase out when income topped 75 000 for individuals or 110 000 for married couples filing jointly instead of allowing a refund of the full credit amount the tcja capped the refundable portion and indexed that limit to inflation refundable credits are limited to 15 of earnings above 2 500 the refundable portion of the additional child tax credit is 1 600 in 2023 and 1 700 in 2024 taxpayers who were residents of puerto rico with income below 3 000 were eligible before the tcja if they had at least three qualifying dependents and paid social security tax in excess of the amount of their earned income credit for the year now residents of puerto rico can be eligible with one qualifying dependent | |
what is the difference between child tax credit and additional child tax credit | the child tax credit is a non refundable tax credit that may reduce the tax liability of certain taxpayers down to 0 the additional child tax credit is a refundable credit that returns a portion of the unused credit amount up to a set limit indexed to inflation who qualifies for the additional child tax credit married couples with income over 2 500 and up to 400 000 when filing jointly may be eligible to receive the additional child tax credit single taxpayers or heads of household with income less than 200 000 are eligible as well taxpayers with incomes over that limit may be able to claim a partial credit | |
is the additional child tax credit refundable | yes the additional child tax credit is refundable this means that even if your tax liability is reduced to 0 you may receive a part of the additional child tax credit as a tax refund this portion is limited to 1 600 in 2023 and 1 700 in 2024 | |
how long will the child tax credit be higher | the higher child tax credit that was enacted during the pandemic has since expired the child tax credit dropped from 3 000 3 600 per child depending on age back to 2 000 per eligible child at the end of 2021 the bottom linethe additional child tax credit is considered the refundable portion of the child tax credit by filing schedule 8812 a taxpayer may be able to not only reduce their tax liability down to 0 using the non refundable child tax credit but also possibly receive a refund via the refundable additional child tax credit | |
what is additional paid in capital apic | additional paid in capital apic is an accounting term referring to money an investor pays above and beyond the par value price of a stock often referred to as contributed capital in excess of par apic occurs when an investor buys newly issued shares directly from a company during its initial public offering ipo stage apic which is itemized under the shareholder equity se section of a balance sheet is viewed as a profit opportunity for companies as it results in them receiving excess cash from stockholders investopedia zoe hansen | |
how additional paid in capital apic works | during its ipo a firm is entitled to set any price for its stock that it sees fit meanwhile investors may elect to pay any amount above this declared par value of a share price which generates the apic this apic is also known as contributed surplus let us assume that during its ipo phase the xyz widget company issues one million shares of stock with a par value of 1 per share and that investors bid on shares for 2 4 and 10 above the par value let us further assume that those shares ultimately sell for 11 consequently making the company 11 million in this instance the apic is 10 million 11 million minus the par value of 1 million therefore the company s balance sheet itemizes 1 million as paid in capital and 10 million as additional paid in capital once a stock trades in the secondary market an investor may pay whatever the market will bear when investors buy shares directly from a given company that corporation receives and retains the funds as paid in capital but after that time when investors buy shares in the open market the generated funds go directly into the pockets of the investors selling off their positions apic is recorded at the initial public offering ipo only the transactions that occur after the ipo do not increase the apic account special considerationsapic is generally booked in the se section of the balance sheet when a company issues stock there are two entries that take place in the equity section common stock and apic the total cash generated by the ipo is recorded as a debit and the common stock and apic are recorded as credits note that the cash recorded is reported in the asset section of the balance sheet while common stock and apic are reported in the equity section of the balance sheet the apic formula is due to the fact that apic represents money paid to the company above the par value of a security it is essential to understand what par actually means simply put par signifies the value a company assigns to stock at the time of its ipo before there is even a market for the security issuers traditionally set stock par values deliberately low in some cases as little as a penny per share in order to preemptively avoid any potential legal liability which might occur if the stock dips below its par value market value is the actual price a financial instrument is worth at any given time the stock market determines the real value of a stock which shifts continuously as shares are bought and sold throughout the trading day thus investors make money on the changing value of a stock over time based on company performance and investor sentiment additional paid in capital vs paid in capitalpaid in capital or contributed capital is the full amount of cash or other assets that shareholders have given a company in exchange for stock paid in capital includes the par value of both common and preferred stock plus any amount paid in excess additional paid in capital as the name implies includes only the amount paid in excess of the par value of stock issued during a company s ipo both of these items are included next to one another in the se section of the balance sheet benefits of additional paid in capitalfor common stock paid in capital consists of a stock s par value and apic the latter of which may provide a substantial portion of a company s equity capital before retained earnings begin to accumulate this capital provides a layer of defense against potential losses in the event that retained earnings begin to show a deficit another huge advantage for a company issuing shares is that it does not raise the fixed cost of the company the company doesn t have to make any payment to the investor even dividends are not required furthermore investors do not have any claim on the company s existing assets after issuing stock to shareholders the company is free to use the funds generated any way it chooses whether that means paying off loans purchasing an asset or any other action that may benefit the company | |
why is additional paid in capital useful | apic is a great way for companies to generate cash without having to give any collateral in return furthermore purchasing shares at a company s ipo can be incredibly profitable for some investors | |
is additional paid in capital an asset | apic is recorded under the equity section of a company s balance sheet it is recorded as a credit under shareholders equity and refers to the money an investor pays above the par value price of a stock the total cash generated from apic is classified as a debit to the asset section of the balance sheet with the corresponding credits for apic and regular paid in capital located in the equity section | |
how do you calculate additional paid in capital | the apic formula is apic issue price par value x number of shares acquired by investors | |
how does paid in capital increase or decrease | any new issuance of preferred or common shares may increase the paid in capital as the excess value is recorded paid in capital can be reduced with share repurchases the bottom lineadditional paid in capital represents the amount of money investors contribute to a company above the stated par value of its stock it is the equity portion of a company s balance sheet that includes funds received from issuing stock at a premium this capital reflects the difference between the issue price of the shares and their par value allowing companies to generate additional funds for expansion research or other business activities correction may 13 2023 a previous version of this article incorrectly stated cash is recorded to the equity section of the balance sheet as opposed to the asset section | |
what is the addition rule for probabilities | the addition rule for probabilities describes two formulas one for the probability for either of two mutually exclusive events happening and the other for the probability of two non mutually exclusive events happening the first formula is just the sum of the probabilities of the two events the second formula is the sum of the probabilities of the two events minus the probability that both will occur the formulas for the addition rules for probabilities ismathematically the probability of two mutually exclusive events is denoted by p y or z p y p z p y text or z p y p z p y or z p y p z mathematically the probability of two non mutually exclusive events is denoted by p y or z p y p z p y and z p y text or z p y p z p y text and z p y or z p y p z p y and z | |
what does the addition rule for probabilities tell you | to illustrate the first rule in the addition rule for probabilities consider a die with six sides and the chances of rolling either a 3 or a 6 since the chances of rolling a 3 are 1 in 6 and the chances of rolling a 6 are also 1 in 6 the chance of rolling either a 3 or a 6 is to illustrate the second rule consider a class in which there are 9 boys and 11 girls at the end of the term 5 girls and 4 boys receive a grade of b if a student is selected by chance what are the odds that the student will be either a girl or a b student since the chances of selecting a girl are 11 in 20 the chances of selecting a b student are 9 in 20 and the chances of selecting a girl who is a b student are 5 20 the chances of picking a girl or a b student are in reality the two rules simplify to just one rule the second one that s because in the first case the probability of two mutually exclusive events both happening is 0 in the example with the die it s impossible to roll both a 3 and a 6 on one roll of a single die so the two events are mutually exclusive mutual exclusivitymutually exclusive is a statistical term describing two or more events that cannot coincide it is commonly used to describe a situation where the occurrence of one outcome supersedes the other for a basic example consider the rolling of dice you cannot roll both a five and a three simultaneously on a single die furthermore getting a three on an initial roll has no impact on whether or not a subsequent roll yields a five all rolls of a die are independent events | |
what is an adhesion contract | an adhesion contract is an agreement that usually has non negotiable terms and conditions generally it s prepared by a party to a potential transaction that has the product or service sought by another party the consumer the former has the stronger bargaining position the latter must accept the adhesion contract to obtain the product or service adhesion contracts are also known as standard standardized or boilerplate contracts understanding adhesion contractsadhesion contracts are often used for insurance leases vehicle purchases mortgages and other transactions where there is a high volume of customers who fit a standard form of agreement for instance with an insurance contract the company and its agent have the power to draft the contract while the potential policyholder only has the right of refusal in other words the customer cannot counter the offer or create their own new contract to which the insurer could agree it is important for consumers to read an adhesion contract carefully as all the information and rules have been written by the other party 1adhesion contracts are usually enforceable in the united states according to the uniform commercial code ucc the ucc helps to ensure that commercial transactions take place under a similar set of laws across the country although the ucc is followed by most u s states it has not been fully adopted by some jurisdictions such as american samoa and puerto rico 2 louisiana stands alone among the 50 states in adopting only parts of the ucc 3the ucc has specific provisions relating to adhesion contracts for the sale or lease of goods contracts of adhesion are however subject to additional scrutiny and interpretation under state law history of adhesion contractsadhesion contracts started to become part of the u s legal system only after the harvard law review published an article on life insurance contracts by edwin w patterson in 1919 subsequently most courts accepted the idea of contract adhesion due in large part to a supreme court of california case that supported adhesion analysis in 1962 45the specifics of the legality and enforceability of adhesion contracts have changed over time the case law and interpretation may vary from state to state but it is generally agreed that adhesion contracts are an efficient way to handle standardized transactions | |
when used properly adhesion contracts save companies and customers time and the expense relating to obtaining contract advice from attorneys however soome aspects of adhesion contracts pose problems | for example in certain cases electronic adhesion contracts signed online have been challenged in court because contract details were so difficult to access and review as a result electronic adhesion contracts must provide the accessibility of contracts that a consumer would receive and read offline 61often courts won t enforce browse wrap electronic contracts that require consumers to click through a number of links to find and read the various terms of a contract and agree to it however click wrap electronic contracts that simplify this process by efficiently providing all the text and a click to accept method in one place typically are upheld by courts 1enforceability of adhesion contractsfor a contract to be treated as an adhesion contract it must be presented as a take it or leave it deal this means that one party has no ability to negotiate with the party offering the contract adhesion contracts are subject to scrutiny that usually comes in one of two forms courts have traditionally used the doctrine of reasonable expectations to test whether an adhesion contract is enforceable under this doctrine specific parts of an adhesion contract or the whole contract may be deemed unenforceable if the contract terms go beyond or don t match what the weaker party would have reasonably expected whether a contract is reasonable depends on the prominence of its terms the purpose of the terms and the circumstances surrounding acceptance of the contract the doctrine of unconscionability has also been used in contract law to challenge certain adhesion contracts it is a fact specific doctrine arising from again equitable principles and specifically the idea of bargaining in good faith unconscionability shifts the focus from what the customer might reasonably expect to the motive of the supplier unconscionability in adhesion contracts usually comes up if there is an absence of meaningful choice on the part of one party due to one sided contract provisions combined with unreasonably oppressive terms that no one would or should accept 1simply put if the contract is exceptionally unfair to the signing party it can be declared unenforceable in court 7unconscionability is easier to argue if the supplier is making a significant profit from the agreement especially if the amount of profit is tied to the weaker party s lack of bargaining power some legal experts have pushed back on this approach as it has implications concerning the freedom of contract that s the legal concept that people can freely determine the provisions of a contract without government interference | |
where are adhesion contracts used | you usually encounter them when you re arranging for airline tickets insurance policies mortgage loans health care or the purchase of an automobile | |
do consumers benefit from adhesion contracts | yes generally speaking because it standardizes contracts and makes transactions faster and easier to conduct if consumers had to read every contract for every purchase they make or hire a lawyer to review them on their behalf it s possible that far fewer transactions would take place despite that it s important to understand the terms of any adhesion contract provided to you | |
what happens if i don t agree to an adhesion contract | while you can t make changes to an adhesion contract if you don t like what it states you can turn it down and go elsewhere to make your purchase the bottom lineadhesion or standardized contracts require that one party to a transaction e g the consumer who wishes to purchase a product or service agree to all terms and conditions prepared by the other party to the transaction e g the supplier of the product or service they are typical in many types of consumer transactions nonetheless be sure to read the adhesion contract that s offered to you carefully before signing it | |
what is an adjudication | an adjudication is a legal ruling or judgment usually final but can also refer to the process of settling a legal case or claim through the court or justice system such as a decree in the bankruptcy process between the defendant and the creditors normally an adjudication represents the final judgment or pronouncement in a case that will determine the course of action taken regarding the issue presented outside of a legal process adjudication can also more generally refer to other formal processes of judgment or ruling that render a final decision such as the process of validating an insurance claim investopedia yurle villegasunderstanding adjudicationadjudication describes the legal process that helps expedite and deliver a court s resolution regarding an issue between two parties the result of the process is a judgment and court opinion that is legally binding most adjudication hearings center on disputes that involve money or nonviolent infractions and result in the distribution of rights and obligations for all parties involved this legal process differs from other justice seeking or evidence based court cases it is instead used to settle disputes between private parties political officials and a private party and public bodies and public officials in the healthcare industry for example adjudication can determine a carrier s liability for monetary claims submitted by an insured person adjudication specifically refers to the process and decision issued by a government appointed or elected judge as opposed to a decision issued by an arbitrator in a private proceeding or arbitration while both judges and arbitrators are expected and required to follow the law judges adjudications also must take into account the interests of the government and general public interest arbitration meanwhile only needs to consider the interests of the parties involved adjudication disputesthe types of disputes handled or resolved through adjudication include the following requirements for full adjudication include requisite notice to all interested parties all legally interested parties or those with a legal right affected by the disagreements and an opportunity for all parties to have their evidence and arguments heard the adjudication processformal rules of evidence and procedure govern the process where the initiating party or trier gives a notice establishing the facts in controversy and defines any applicable laws the notice also sometimes outlines the nature of the dispute between the parties and recounts where and when the dispute occurred and the desired result based on law however there are no specific requirements regarding the notice of adjudication an adjudicator is then appointed and a notice is sent to the defending party who responds by submitting a defense to the claim of adjudication by the plaintiff the adjudicator gives the plaintiff and defendant a chance to present their arguments at a hearing and makes a final ruling this is not too dissimilar from an arbitrator in an arbitration hearing settling a business dispute | |
what is an example of adjudication | an adjudication results from any sort of official judgment or decision for instance when a judge levies a penalty or sentence against a defendant in court | |
where does the word adjudicate come from | adjudicate comes from the latin word judicare meaning judge | |
what is the purpose of the adjudication process | adjudication is a formalized remedy for efficiently resolving disputes settling legal claims or deciding a case | |
what is adjustable life insurance | adjustable life insurance is a policy that allows you to change features after signing up including the premium payment and the death benefit also known as universal life adjustable life policies include an interest bearing savings component the cash value account which you can tap into while alive adjustable life insurance policies take more work to plan and manage in exchange for offering much more flexibility versus other options here s what to know if you re considering an adjustable life insurance policy understanding adjustable life insuranceadjustable life insurance is a type of permanent life insurance that can last your entire life provided you keep paying the premiums 1it differs from other products like whole life because you have a lot more flexibility to change the policy terms after signing up for example whole life always charges the same monthly premium whereas adjustable life lets you change how much you pay each year provided you at least cover the underlying cost of insurance 2 you could pay more into adjustable life during years when you re earning a lot and decrease the premium while on a restricted budget like after a job loss as with other permanent life insurance adjustable life insurance has a cash value savings component that earns interest the cash value grows based on market interest rates the return can go up and down each year 3you can take out the cash value through a withdrawal or loan 4 you can also save the cash value to cover the future premiums on adjustable life insurance adjustable life insurance is the most flexible type of insurance available it is attractive if you want the protection and cash value benefits of permanent life insurance yet need or want some flexibility with policy features changing the death benefit may require additional underwriting or possibly an updated medical exam factors that can be adjustedthree factors can be changed in an adjustable life insurance policy these are the premium cash value and death benefit 5 all three elements can be adjusted because this policy is a permanent life insurance policy and does not expire as a term life policy does first premiums can be changed by frequency or amount of payments as long as you pay the policy s minimum cost for the life insurance second the policy s cash value can be increased by upping your premium payments you can decrease your cash amount if you withdraw funds or use the cash in the policy to pay the premiums however if you use up all the cash value your policy might lapse so check with your agent to make sure you have enough value to keep your coverage in force 1third you can adjust your death benefit by increasing or decreasing that amount for example you might use adjustable life insurance to increase the death benefit due to a life event like the birth of another child your premiums would go up for a larger death benefit in some cases your policy will have to undergo additional medical underwriting decreasing the face amount is done upon request or in writing and doesn t require underwriting advantages and disadvantages of adjustable life insuranceadjustable life insurance gives you much more flexibility than other insurance options you can adjust your premium payments and death benefit to meet your evolving needs adjustable life also earns cash value which is another source of savings while you re alive an adjustable life insurance policy can last your entire life these policies do not have an expiration date so long as you cover the underlying insurance cost however adjustable life insurance takes more work to manage than a policy that always charges the same premium like whole life if you don t pay enough into your adjustable life insurance to cover the insurance costs your future premiums will go up if you can t cover the rising costs yourself your policy will lapse and you ll lose coverage 2adjustable life insurance is more expensive than a temporary term life insurance policy 1 finally while the cash value does grow over time the interest rates are modest you might earn a higher return investing outside of a life insurance policy premiums can be changedyou can decrease or increase your death benefitpossible lifelong coverage | |
what is an adjustable rate mortgage arm | the term adjustable rate mortgage arm refers to a home loan with a variable interest rate with an arm the initial interest rate is fixed for a period of time after that the interest rate applied on the outstanding balance resets periodically at yearly or even monthly intervals arms are also called variable rate mortgages or floating mortgages the interest rate for arms is reset based on a benchmark or index plus an additional spread called an arm margin the london interbank offered rate libor was the typical index used in arms until october 2020 when it was replaced by the secured overnight financing rate sofr in an effort to increase long term liquidity understanding adjustable rate mortgages arms mortgages allow homeowners to finance the purchase of a home or other piece of property when you get a mortgage you ll need to repay the borrowed sum over a set number of years as well as pay the lender something extra to compensate them for their troubles and the likelihood that inflation will erode the value of the balance by the time the funds are reimbursed in most cases you can choose the type of mortgage loan that best suits your needs a fixed rate mortgage comes with a fixed interest rate for the entirety of the loan as such your payments remain the same an arm where the rate fluctuates based on market conditions this means that you benefit from falling rates and also run the risk if rates increase there are two different periods to an arm one is the fixed period and the other is the adjusted period here s how the two differ another key characteristic of arms is whether they are conforming or nonconforming loans conforming loans are those that meet the standards of government sponsored enterprises gses like fannie mae and freddie mac they are packaged and sold off on the secondary market to investors nonconforming loans on the other hand aren t up to the standards of these entities and aren t sold as investments rates are capped on arms this means that there are limits on the highest possible rate a borrower must pay keep in mind though that your credit score plays an important role in determining how much you ll pay so the better your score the lower your rate the initial borrowing costs of an arm are fixed at a lower rate than what you d be offered on a comparable fixed rate mortgage but after that point the interest rate that affects your monthly payments could move higher or lower depending on the state of the economy and the general cost of borrowing types of armsarms generally come in three forms hybrid interest only io and payment option here s a quick breakdown of each hybrid arms offer a mix of a fixed and adjustable rate period with this type of loan the interest rate will be fixed at the beginning and then begin to float at a predetermined time 2this information is typically expressed in two numbers in most cases the first number indicates the length of time that the fixed rate is applied to the loan while the second refers to the duration or adjustment frequency of the variable rate 2for example a 2 28 arm features a fixed rate for two years followed by a floating rate for the remaining 28 years in comparison a 5 1 arm has a fixed rate for the first five years followed by a variable rate that adjusts every year as indicated by the number one after the slash likewise a 5 5 arm would start with a fixed rate for five years and then adjust every five years 2you can compare different types of arms using a mortgage calculator it s also possible to secure an interest only i o arm which essentially would mean only paying interest on the mortgage for a specific time frame typically three to 10 years once this period expires you are then required to pay both interest and the principal on the loan 3these types of plans appeal to those keen to spend less on their mortgage in the first few years so that they can free up funds for something else such as purchasing furniture for their new home of course this advantage comes at a cost the longer the i o period the higher your payments will be when it ends 3a payment option arm is as the name implies an arm with several payment options these options typically include payments covering principal and interest paying down just the interest or paying a minimum amount that does not even cover the interest 4opting to pay the minimum amount or just the interest might sound appealing however it s worth remembering that you will have to pay the lender back everything by the date specified in the contract and that interest charges are higher when the principal isn t getting paid off if you persist with paying off little then you ll find your debt keeps growing perhaps to unmanageable levels 4advantages and disadvantages of armsadjustable rate mortgages come with many benefits and drawbacks we ve listed some of the most common ones below the most obvious advantage is that a low rate especially the intro or teaser rate will save you money not only will your monthly payment be lower than most traditional fixed rate mortgages but you may also be able to put more down toward your principal balance just ensure your lender doesn t charge you a prepayment fee if you do arms are great for people who want to finance a short term purchase such as a starter home or you may want to borrow using an arm to finance the purchase of a home that you intend to flip this allows you to pay lower monthly payments until you decide to sell again more money in your pocket with an arm also means you have more in your pocket to put toward savings or other goals such as a vacation or a new car unlike fixed rate borrowers you won t have to make a trip to the bank or your lender to refinance when interest rates drop that s because you re probably already getting the best deal available one of the major cons of arms is that the interest rate will change this means that if market conditions lead to a rate hike you ll end up spending more on your monthly mortgage payment and that can put a dent in your monthly budget arms may offer you flexibility but they don t provide you with any predictability as fixed rate loans do borrowers with fixed rate loans know what their payments will be throughout the life of the loan because the interest rate never changes but because the rate changes with arms you ll have to keep juggling your budget with every rate change these mortgages can often be very complicated to understand even for the most seasoned borrower there are various features that come with these loans that you should be aware of before you sign your mortgage contracts such as caps indexes and margins saves you moneyideal for short term borrowinglets you put money aside for other goalsno need to refinancepayments may increase due to rate hikesnot as predictable as fixed rate mortgagescomplicated | |
how the variable rate on arms is determined | at the end of the initial fixed rate period arm interest rates will become variable adjustable and will fluctuate based on some reference interest rate the arm index plus a set amount of interest above that index rate the arm margin the arm index is often a benchmark rate such as the prime rate the libor the secured overnight financing rate sofr or the rate on short term u s treasuries 56although the index rate can change the margin stays the same for example if the index is 5 and the margin is 2 the interest rate on the mortgage adjusts to 7 however if the index is at only 2 the next time that the interest rate adjusts the rate falls to 4 based on the loan s 2 margin 6the interest rate on arms is determined by a fluctuating benchmark rate that usually reflects the general state of the economy and an additional fixed margin charged by the lender 6adjustable rate mortgage vs fixed interest mortgageunlike arms traditional or fixed rate mortgages carry the same interest rate for the life of the loan which might be 10 20 30 or more years they generally have higher interest rates at the outset than arms which can make arms more attractive and affordable at least in the short term however fixed rate loans provide the assurance that the borrower s rate will never shoot up to a point where loan payments may become unmanageable with a fixed rate mortgage monthly payments remain the same although the amounts that go to pay interest or principal will change over time according to the loan s amortization schedule if interest rates in general fall then homeowners with fixed rate mortgages can refinance paying off their old loan with one at a new lower rate lenders are required to put in writing all terms and conditions relating to the arm in which you re interested that includes information about the index and margin how your rate will be calculated and how often it can be changed whether there are any caps in place the maximum amount that you may have to pay and other important considerations such as negative amortization 7 | |
is an arm right for you | an arm can be a smart financial choice if you are planning to keep the loan for a limited period of time and will be able to handle any rate increases in the meantime put simply an adjustable rate mortgage is well suited for the following types of borrowers in many cases arms come with rate caps that limit how much the rate can rise at any given time or in total periodic rate caps limit how much the interest rate can change from one year to the next while lifetime rate caps set limits on how much the interest rate can increase over the life of the loan 1notably some arms have payment caps that limit how much the monthly mortgage payment can increase in dollar terms that can lead to a problem called negative amortization if your monthly payments aren t sufficient to cover the interest rate that your lender is changing with negative amortization the amount that you owe can continue to increase even as you make the required monthly payments 8 | |
why is an adjustable rate mortgage a bad idea | adjustable rate mortgages aren t for everyone yes their favorable introductory rates are appealing and an arm could help you to get a larger loan for a home however it s hard to budget when payments can fluctuate wildly and you could end up in big financial trouble if interest rates spike particularly if there are no caps in place | |
how are arms calculated | once the initial fixed rate period ends borrowing costs will fluctuate based on a reference interest rate such as the prime rate the london interbank offered rate libor the secured overnight financing rate sofr or the rate on short term u s treasuries on top of that the lender will also add its own fixed amount of interest to pay which is known as the arm margin 65 | |
when were arms first offered to homebuyers | arms have been around for several decades with the option to take out a long term house loan with fluctuating interest rates first becoming available to americans in the early 1980s 9previous attempts to introduce such loans in the 1970s were thwarted by congress due to fears that they would leave borrowers with unmanageable mortgage payments however the deterioration of the thrift industry later that decade prompted authorities to reconsider their initial resistance and become more flexible 9 | |
what is the adjusted closing price | the adjusted closing price amends a stock s closing price to reflect that stock s value after accounting for any corporate actions it is often used when examining historical returns or doing a detailed analysis of past performance understanding the adjusted closing pricestock values are stated in terms of the closing price and the adjusted closing price the closing price is the raw price which is just the cash value of the last transacted price before the market closes the adjusted closing price factors in anything that might affect the stock price after the market closes a stock s price is typically affected by the supply and demand of market participants however some corporate actions such as stock splits dividends and rights offerings affect a stock s price adjustments allow investors to obtain an accurate record of the stock s performance investors should understand how corporate actions are accounted for in a stock s adjusted closing price it is especially useful when examining historical returns because it gives analysts an accurate representation of the firm s equity value types of adjustmentsa stock split is a corporate action intended to make the firm s shares more affordable for average investors a stock split does not change a company s total market capitalization but it does affect the company s stock price for example a company s board of directors may decide to split the company s stock 3 for 1 therefore the company s shares outstanding increase by a multiple of three while its share price is divided by three suppose a stock closed at 300 the day before its stock split in this case the closing price is adjusted to 100 300 divided by 3 per share to maintain a consistent standard of comparison similarly all other previous closing prices for that company would be divided by three to obtain the adjusted closing prices common distributions that affect a stock s price include cash dividends and stock dividends the difference between cash dividends and stock dividends is that shareholders are entitled to a predetermined price per share and additional shares respectively for example assume a company declared a 1 cash dividend and was trading at 51 per share before then all other things being equal the stock price would fall to 50 because that 1 per share is no longer part of the company s assets however the dividends are still part of the investor s returns by subtracting dividends from previous stock prices we obtain the adjusted closing prices and a better picture of returns a stock s adjusted closing price also reflects rights offerings that may occur a rights offering is an issue of rights given to existing shareholders which entitles the shareholders to subscribe to the rights issue in proportion to their shares that will lower the value of existing shares because supply increases have a dilutive effect on the existing shares for example assume a company declares a rights offering in which existing shareholders are entitled to one additional share for every two shares owned assume the stock is trading at 50 and existing shareholders can purchase additional shares at a subscription price of 45 after the rights offering the adjusted closing price is calculated based on the adjusting factor and the closing price benefits of the adjusted closing pricethe main advantage of adjusted closing prices is that they make it easier to evaluate stock performance firstly the adjusted closing price helps investors understand how much they would have made by investing in a given asset most obviously a 2 for 1 stock split does not cause investors to lose half their money since successful stocks often split repeatedly graphs of their performance would be hard to interpret without adjusted closing prices secondly the adjusted closing price allows investors to compare the performance of two or more assets aside from the clear issues with stock splits failing to account for dividends tends to understate the profitability of value stocks and dividend growth stocks using the adjusted closing price is also essential when comparing the returns of different asset classes over the long term for example the prices of high yield bonds tend to fall in the long run that does not mean these bonds are necessarily poor investments their high yields offset the losses and more which can be seen by looking at the adjusted closing prices of high yield bond funds the adjusted closing price provides the most accurate record of returns for long term investors looking to design asset allocations criticism of the adjusted closing pricethe nominal closing price of a stock or other asset can convey useful information this information is destroyed by converting that price into an adjusted closing price in actual practice many speculators place buy and sell orders at certain prices such as 100 as a result a sort of tug of war can take place between bulls and bears at these key prices if the bulls win a breakout may occur and send the asset price soaring similarly a win for the bears can lead to a breakdown and further losses the adjusted close stock price obscures these events by looking at the actual closing price at the time investors can get a better idea of what was going on and understand contemporary accounts if investors look at historical records they will find many examples of tremendous public interest in nominal levels perhaps the most famous is the role that dow 1 000 played in the 1966 to 1982 secular bear market during that period the dow jones industrial average djia repeatedly hit 1 000 only to fall back shortly after that the breakout finally took place in 1982 and the dow never dropped below 1 000 again 1 this phenomenon is covered up somewhat by adding dividends to obtain the adjusted closing prices in general adjusted closing prices are less useful for more speculative stocks jesse livermore provided an excellent account of the impact of key nominal prices such as 100 and 300 on anaconda copper in the early 20th century in the early 21st century similar patterns occurred with netflix nflx and tesla tsla william j o neil gave examples where stock splits far from being irrelevant marked the beginnings of real declines in the stock price 2 while arguably irrational the impact of nominal prices on stocks could be an example of a self fulfilling prophecy | |
what is adjusted ebitda | adjusted ebitda earnings before interest taxes depreciation and amortization is a measure computed for a company that takes its earnings and adds back interest expenses taxes and depreciation charges plus other adjustments to the metric standardizing ebitda by removing anomalies means the resulting adjusted or normalized ebitda is more accurately and easily comparable to the ebitda of other companies and to the ebitda of a company s industry as a whole the formula for adjusted ebitda is n i i t d a e b i t d a e b i t d a a adjusted e b i t d a where n i net income i t interest taxes d a depreciation amortization begin aligned it da ebitda ebitda a text adjusted ebitda textbf where text net income it text interest taxes da text depreciation amortization a text adjustments end aligned ni it da ebitdaebitda a adjusted ebitdawhere ni net incomeit interest taxesda depreciation amortization | |
how to calculate adjusted ebitda | start by calculating earnings before income taxes depreciation and amortization i e ebitda which begins with a company s net income to this figure add back interest expense income taxes and all non cash charges including depreciation and amortization next either add back non routine expenses such as excessive owner s compensation or deduct any additional typical expenses that would be present in peer companies but may not be present in the company under analysis this could include salaries for necessary headcount in a company that is under staffed for example | |
what does adjusted ebitda tell you | adjusted ebitda is used to assess and compare related companies for valuation analysis and for other purposes adjusted ebitda differs from the standard ebitda measure in that a company s adjusted ebitda is used to normalize its income and expenses since different companies may have several types of expense items that are unique to them adjusted ebitda as opposed to the non adjusted version will attempt to normalize income standardize cash flows and eliminate abnormalities or idiosyncrasies such as redundant assets bonuses paid to owners rentals above or below fair market value etc which makes it easier to compare multiple business units or companies in a given industry for smaller firms owners personal expenses are often run through the business and must be adjusted out the adjustment for reasonable compensation to owners is defined by treasury regulation 1 162 7 b 3 as the amount that would ordinarily be paid for like services by like organizations in like circumstances 1other times one time expenses need to be added back such as legal fees real estate expenses such as repairs or maintenance or insurance claims non recurring income and expenses such as one time startup costs that usually reduce ebitda should also be added back when computing the adjusted ebitda adjusted ebitda should not be used in isolation and makes more sense as part of a suite of analytical tools used to value a company or companies ratios that rely on adjusted ebitda can also be used to compare companies of different sizes and in different industries such as the enterprise value adjusted ebitda ratio example of how to use adjusted ebitdathe adjusted ebitda metric is most helpful when used in determining the value of a company for transactions such as mergers acquisitions or raising capital for example if a company is valued using a multiple of ebitda the value could change significantly after add backs assume a company is being valued for a sale transaction using an ebitda multiple of 6x to arrive at the purchase price estimate if the company has just 1 million of non recurring or unusual expenses to add back as ebitda adjustments this adds 6 million 1 million times the 6x multiple to its purchase price for this reason ebitda adjustments come under much scrutiny from equity analysts and investment bankers during these types of transactions the adjustments made to a company s ebitda can vary quite a bit from one company to the next but the goal is the same adjusting the ebitda metric aims to normalize the figure so that it is somewhat generic meaning it contains essentially the same line item expenses that any other similar company in its industry would contain the bulk of the adjustments are often different types of expenses that are added back to ebitda the resulting adjusted ebitda often reflects a higher earnings level because of the reduced expenses ebitda adjustmentscommon ebitda adjustments include this metric is typically calculated on an annual basis for a valuation analysis but many companies will look at adjusted ebitda on a quarterly or even monthly basis though it may be for internal use only analysts often use a three year or five year average adjusted ebitda to smooth out the data the higher the adjusted ebitda margin the better different firms or analysts may arrive at slightly different adjusted ebitda due to differences in their methodology and assumptions in making the adjustments these figures are often not made available to the public while non normalized ebitda is typically public information it is important to note that adjusted ebitda is not a generally accepted accounting principles gaap standard line item on a company s income statement 2 | |
what are adjusted funds from operations affo | adjusted funds from operations affo refers to the financial performance measure primarily used in the analysis of real estate investment trusts reits the affo of a reit though subject to varying methods of computation is generally equal to the trust s funds from operations ffo with adjustments made for recurring capital expenditures used to maintain the quality of the reit s underlying assets the calculation takes in the adjustment to gaap straight lining of rent leasing costs and other material factors 1understanding adjusted funds from operations afforegardless of how industry professionals choose to compute adjusted funds from operations affo it is considered to be a more accurate measure of residual cash flow for shareholders than simple ffo though ffo is commonly used it does not deduct for capital expenditures required to maintain the existing portfolio of properties so it doesn t quite measure the true residual cash flow professional analysts prefer affo because it takes into consideration additional costs incurred by the reit and additional income sources too like rent increases thus it provides for a more accurate base number when estimating present values and a better predictor of the reit s future ability to pay dividends this is a non gaap measure 2calculating adjusted funds from operations affobefore calculating the affo an analyst must first determine the reit s funds from operations ffo the ffo measures cash flow from a specified list of activities ffo reflects the impact from the reit s leasing and acquisition activity as well as interest costs ffo takes into account the reit s net income including amortization and depreciation but it excludes the capital gains from property sales the reason these gains are not included is that they are one time events and generally do not have a long term effect on the reit s future earnings potential 3the formula for ffo is 4ffo net income amortization depreciation capital gains from property salesonce the ffo is determined the affo can be calculated though there is no one official formula calculations for affo typically would be something like affo ffo rent increases capital expenditures routine maintenance amountstraditional metrics used in evaluating equities such as earnings per share eps and price to earnings ratio p e are not reliable in estimating the value of a reit example of an adjusted funds from operations affo calculationas an example of the affo calculation assume the following a reit had 2 million in net income over the last reporting period during that time it earned 400 000 from the sale of one of its properties and lost 100 000 from the sale of another it reported 35 000 of amortization and 50 000 of depreciation during the period net rent increases were 40 000 capital expenditures were 75 000 and routine maintenance amounted to 30 000 given this information the ffo can be calculated as ffo 2 000 000 35 000 50 000 400 000 100 000 1 785 000from this the affo is calculated as affo ffo 40 000 75 000 30 000 1 720 000 | |
what is adjusted gross income agi | adjusted gross income agi is the number that the internal revenue service irs uses to determine your income taxes owed for the year the number is your total taxable income for the year minus certain adjustments that you may qualify for adjustments are made for business expenses student loan interest payments and contributions to retirement accounts for example these are subtracted from gross income to arrive at adjusted gross income a different number modified agi magi is used to determine a taxpayer s eligibility for specific programs and retirement accounts investopedia jiaqi zhouunderstanding adjusted gross income agi gross income is the sum of all the money you earn in a year which may include wages dividends capital gains interest income royalties rental income and retirement distributions before tax or deductions agi makes certain adjustments to your gross income to reach the figure on which your tax liability will be calculated 4many u s states also use the agi number from federal returns to calculate how much individuals owe in state income taxes states may modify this number further with state specific deductions and credits agi is an important figure because it determines your eligibility for certain deductions and tax credits the items subtracted from your gross income to calculate your agi are referred to as adjustments to income and you report them on schedule 1 when you file your annual tax return 5 some of the most common adjustments include | |
how to calculate adjusted gross income | if you use software to prepare your tax return it will calculate your agi after you ve input your income numbers if you calculate it yourself you ll tally your total reported income for the year that might include job income as reported to the irs by your employer on a w 2 form plus other income such as dividends self employment income and miscellaneous income reported on 1099 forms 6next add any taxable income from other sources such as profit on the sale of a property unemployment compensation pensions social security payments and ira contributions many of these items are also listed on irs schedule 1 5the next step is to subtract the adjustments that apply to you the resulting figure is your agi then to determine your taxable income subtract either the standard deduction or your total itemized deductions from your agi 7the standard deduction for tax returns for married couples filing jointly is 29 200 for the 2024 tax year or 14 600 for single filers 8 taxpayers whose itemized deductions exceed that amount would generally opt to itemize while others would take the standard deduction the irs provides a list of itemized deductions and the requirements for claiming them on its website 7 your agi also affects your eligibility for many of these deductions and tax credits the lower your agi the more significant the number of deductions and credits you ll generally be eligible to claim and the more you ll be able to reduce your tax bill an example of agi affecting deductionslet s say you had some significant dental expenses during the year that weren t reimbursed by insurance and you ve decided to itemize your deductions you re allowed to claim an itemized deduction for the portion of those expenses that exceed 7 5 of your agi 9this means that you can deduct the amount that exceeds 7 500 or 4 500 if you report 12 000 in unreimbursed dental expenses and have an agi of 100 000 but the 7 5 reduction is just 3 750 if your agi is 50 000 and you d be entitled to deduct a larger amount 8 250 in this case adjusted gross income agi vs modified adjusted gross income magi some tax calculations and government programs are based on your modified adjusted gross income or magi this figure starts with your agi then it adds back certain items such as any deductions you take for student loan interest or tuition and fees 10your magi determines how much if anything you can contribute to a roth individual retirement account roth ira in any given year pre tax contributions to traditional 401 k funds help to reduce your agi and magi taxable income roth ira contributions are made with after tax dollars and won t further reduce your agi or magi it s also used to calculate your income if you apply for marketplace health insurance under the affordable care act aca 3many people with relatively uncomplicated financial lives find that their agi and magi are the same if you file electronically the irs form will ask you for your previous year s agi as a way of verifying your identity 11adjusted gross income vs gross income vs taxable incomeyour gross income is all the money you ve earned in a year that isn t exempt from taxation this income can be in the form of salary wages self employment income interest dividends or capital gains your adjusted gross income is that amount minus certain qualified expenses and adjustments you then subtract either the standard deduction or the total of your itemized deductions for the year you can t take both itemized deductions and the standard deduction the result is your taxable income 7you report your agi on line 11 of irs form 1040 the form you use to file your income taxes for the year 6keep that number handy after completing your taxes because you ll need it again if you e file your taxes next year the irs uses it as a way to verify your identity 11 | |
what does adjusted gross income agi mean on my tax return | adjusted gross income agi is your taxable income for the year after accounting for all applicable tax deductions it s an important number that s used by the irs to determine how much you owe in taxes agi is calculated by taking your gross income from the year and subtracting any deductions that you re eligible to claim your agi will always be less than or equal to your gross income 4 | |
what are some common adjustments used when determining agi | most are tax breaks that reduce your taxable income one big one is an adjustment for student loan interest others are more specialized such as an adjustment for moving expenses incurred by military personnel and an adjustment for teachers who buy classroom supplies 12you may qualify for none of these adjustments in which case your adjustable gross income will be identical to your gross income | |
what is the difference between agi and modified adjusted gross income magi | agi and modified adjusted gross income magi are very similar except that magi adds back certain deductions magi will always be larger than or equal to agi for this reason common examples of deductions that are added back to calculate magi include foreign earned income income earned on u s savings bonds and losses arising from a publicly traded partnership 10the bottom lineadjusted gross income or agi reduces your taxable income for the year if you qualify for any of a list of qualified deductions you can still take the standard deduction or itemize deductions if you wish the agi allows you to take certain deductions up front without filing a schedule a however many of the adjustments allowed for agi are specific for particular circumstances that don t apply to everyone don t be surprised if your gross income and your adjusted gross income are the same number correction nov 8 2023 a previous version of this article omitted the ira deduction as one of the common adjustments to calculate agi | |
what is adjusted present value apv | the adjusted present value is the net present value npv of a project or company if financed solely by equity plus the present value pv of any financing benefits which are the additional effects of debt by taking into account financing benefits apv includes tax shields such as those provided by deductible interest the formula for apv is adjusted present value unlevered firm value ne where ne net effect of debt begin aligned text adjusted present value unlevered firm value ne textbf where text ne net effect of debt end aligned adjusted present value unlevered firm value newhere ne net effect of debt the net effect of debt includes tax benefits that are created when the interest on a company s debt is tax deductible this benefit is calculated as the interest expense times the tax rate and it only applies to one year of interest and tax the present value of the interest tax shield is therefore calculated as tax rate debt load interest rate interest rate | |
how to calculate adjusted present value apv | to determine the adjusted present value | |
how to calculate apv in excel | an investor can use excel to build out a model to calculate the net present value of the firm and the present value of the debt | |
what does adjusted present value tell you | the adjusted present value helps to show an investor the benefits of tax shields resulting from one or more tax deductions of interest payments or a subsidized loan at below market rates for leveraged transactions apv is preferred in particular leveraged buyout situations are the most effective situations in which to use the adjusted present value methodology the value of a debt financed project can be higher than just an equity financed project as the cost of capital falls when leverage is used using debt can actually turn a negative npv project into one that s positive npv uses the weighted average cost of capital as the discount rate while apv uses the cost of equity as the discount rate example of how to use adjusted present value apv in a financial projection where a base case npv is calculated the sum of the present value of the interest tax shield is added to obtain the adjusted present value for example assume a multi year projection calculation finds that the present value of company abc s free cash flow fcf plus terminal value is 100 000 the tax rate for the company is 30 and the interest rate is 7 its 50 000 debt load has an interest tax shield of 15 000 or 50 000 30 7 7 thus the adjusted present value is 115 000 or 100 000 15 000 the difference between apv and discounted cash flow dcf while the adjusted present value method is similar to the discounted cash flow dcf methodology adjusted present cash flow does not capture taxes or other financing effects in a weighted average cost of capital wacc or other adjusted discount rates unlike wacc used in discounted cash flow the adjusted present value seeks to value the effects of the cost of equity and cost of debt separately the adjusted present value isn t as prevalent as the discounted cash flow method limitations of using adjusted present value apv in practice the adjusted present value is not used as much as the discounted cash flow method it is more of an academic calculation but is often considered to result in more accurate valuations | |
what is an adjusting journal entry | an adjusting journal entry is an entry in a company s general ledger that occurs at the end of an accounting period to record any unrecognized income or expenses for the period when a transaction is started in one accounting period and ended in a later period an adjusting journal entry is required to properly account for the transaction adjusting journal entries can also refer to financial reporting that corrects a mistake made previously in the accounting period understanding adjusting journal entriesthe purpose of adjusting entries is to convert cash transactions into the accrual accounting method accrual accounting is based on the revenue recognition principle that seeks to recognize revenue in the period in which it was earned rather than the period in which cash is received as an example assume a construction company begins construction in one period but does not invoice the customer until the work is complete in six months the construction company will need to do an adjusting journal entry at the end of each of the months to recognize revenue for 1 6 of the amount that will be invoiced at the six month point an adjusting journal entry involves an income statement account revenue or expense along with a balance sheet account asset or liability it typically relates to the balance sheet accounts for accumulated depreciation allowance for doubtful accounts accrued expenses accrued income prepaid expenses deferred revenue and unearned revenue income statement accounts that may need to be adjusted include interest expense insurance expense depreciation expense and revenue the entries are made in accordance with the matching principle to match expenses to the related revenue in the same accounting period the adjustments made in journal entries are carried over to the general ledger that flows through to the financial statements types of adjusting journal entriesin summary adjusting journal entries are most commonly accruals deferrals and estimates accruals are revenues and expenses that have not been received or paid respectively and have not yet been recorded through a standard accounting transaction for instance an accrued expense may be rent that is paid at the end of the month even though a firm is able to occupy the space at the beginning of the month that has not yet been paid deferrals refer to revenues and expenses that have been received or paid in advance respectively and have been recorded but have not yet been earned or used unearned revenue for instance accounts for money received for goods not yet delivered estimates are adjusting entries that record non cash items such as depreciation expense allowance for doubtful accounts or the inventory obsolescence reserve not all journal entries recorded at the end of an accounting period are adjusting entries for example an entry to record a purchase of equipment on the last day of an accounting period is not an adjusting entry | |
why are adjusting journal entries important | because many companies operate where actual delivery of goods may be made at a different time than payment either beforehand in the case of credit or afterward in the case of pre payment there are times when one accounting period will end with such a situation still pending in such a case the adjusting journal entries are used to reconcile these differences in the timing of payments as well as expenses without adjusting entries to the journal there would remain unresolved transactions that are yet to close example of an adjusting journal entryfor example a company that has a fiscal year ending december 31 takes out a loan from the bank on december 1 the terms of the loan indicate that interest payments are to be made every three months in this case the company s first interest payment is to be made march 1 however the company still needs to accrue interest expenses for the months of december january and february since the firm is set to release its year end financial statements in january an adjusting entry is needed to reflect the accrued interest expense for december to accurately report the company s operations and profitability the accrued interest expense must be recorded on the december income statement and the liability for the interest payable must be reported on the december balance sheet the adjusting entry will debit interest expense and credit interest payable for the amount of interest from december 1 to december 31 | |
what is the purpose of adjusting journal entries | adjusting journal entries are used to reconcile transactions that have not yet closed but which straddle accounting periods these can be either payments or expenses whereby the payment does not occur at the same time as delivery | |
what are the types of adjusting journal entries | the main two types are accruals and deferrals accruals refer to payments or expenses on credit that are still owed while deferrals refer to prepayments where the products have not yet been delivered | |
what is the difference between cash accounting and accrual accounting | the primary distinction between cash and accrual accounting is in the timing of when expenses and revenues are recognized with cash accounting this occurs only when money is received for goods or services accrual accounting instead allows for a lag between payment and product e g with purchases made on credit who needs to make adjusting journal entries companies that use accrual accounting and find themselves in a position where one accounting period transitions to the next must see if any open transactions exist if so adjusting journal entries must be made accordingly | |
what are administrative expenses | administrative expenses are expenses incurred by an organization that are not directly tied to a specific core function such as manufacturing production or sales these overhead expenses are related to the organization as a whole rather than to individual departments or business units understanding administrative expensesadministrative expenses may include the salaries of senior management and the costs associated with general services or supplies such as legal accounting clerical work and information technology these costs generally aren t directly related to the production of goods or services and are usually excluded from gross margins companies incur administrative expenses to perform basic operations such as administering payroll or healthcare benefits they incur them to increase oversight and efficiency and or to comply with laws and regulations administrative expenses appear below cost of goods sold cogs on the income statement and they may be shown as an aggregate with other expenses such as general or selling expenses some administrative expenses are fixed in nature because they re incurred as part of the foundation of business operations they would exist regardless of the level of production or sales that occur other administrative expenses are semi variable a business will always use some minimum level of electricity to keep the lights on it can take measures to reduce its electric bill beyond that point a business can eliminate administrative expenses without a direct impact on the product it sells or produces so these costs are typically first in line for budget cuts management is strongly motivated to maintain low administrative expenses relative to other costs because this allows a business to use leverage more effectively the sales to administrative expense ratio helps companies measure how much sales revenue is being portioned to cover administrative costs companies can deduct administrative expenses that are reasonable ordinary and necessary for business operations on their tax returns these expenses must be incurred during the usual course of business and deducted in the year they re incurred 1other types of administrative expenseswages and benefits to certain employees such as accounting and it staff are considered to be administrative expenses all executive compensation and benefits are considered to be administrative expenses building leases insurance subscriptions utilities and office supplies may be classified as general expenses or administrative expenses depreciation expenses may be classified as general administrative or selling marketing expenses depending on the asset being depreciated organizations may choose to include consulting and legal fees as administrative expenses as well but research and development r d costs aren t considered to be administrative expenses a company may allocate administrative expenses to each of its departments based on a percentage of revenue expenses square footage or other measures this allows management to make decisions internally about expanding or reducing individual business units example of administrative expensesxyz company might allocate the cost according to the square footage each department occupies if it spends 4 000 monthly on electricity and records this as an administrative expense assume the company occupies 5 000 square feet the electric bill could be allocated as follows | |
what is gross margin | a company s gross margin is its net sales less its cost of goods sold it s what a business earns from the sale of its services or products before deducting administrative expenses 2 | |
what are some semi variable administrative expenses | semi variable administrative expenses can include salaries audit and legal fees vehicle use and commissions they can also include utility costs that charge a base amount due plus an extra expense associated with usage 3 | |
what is depreciation in accounting | depreciation records the gradual loss of value of an asset over time the asset will eventually become less usable and efficient as time goes on and will be worth less as a result depreciation is recorded as an expense typically over a period during which the business still expects to be able to earn some revenue from its use 4the bottom lineadministrative expenses are those that are incurred to allow a business to function they don t directly pay for the production of goods or services they effectively allow a business to function so they re unavoidable they re flexible however and can be tweaked when budget cuts are necessary they re also tax deductible in some cases | |
what is administrative services only aso | administrative services only aso refers to an agreement that companies use when they fund their employee benefit plan but hire an outside vendor to administer it for example an organization may hire an insurance company to evaluate and process claims under its employee health plan while maintaining the responsibility of paying the claims itself an aso arrangement contrasts with a company that purchases health insurance for its employees from an external provider understanding administrative services only aso plan specifics for administrative services only aso vary depending on the agreement a company establishes with insurance companies and third party administrators tpa in aso arrangements the insurance company provides little to no insurance protection which is in contrast to a fully insured plan sold to the employer as such an aso plan is a type of self insured or self funded plan the employer takes full responsibility for claims made to the plan for this reason many employers using aso plans also establish aggregate stop loss policies in which the insurance company takes responsibility for paying claims that exceed a certain level for example 10 000 per insured person in exchange for a premium aggregate stop loss insurance policies will protect the employer if claims are greater than expected to reduce financial risk these policies are especially advisable for companies that choose self funded benefit plans aso insurance plans typically cover short term disability health and dental benefits 1 occasionally they cover long term disability for larger employers aso services are gaining popularity as many employers particularly larger ones explore the potential financial advantages that this type of plan can provide an aso may allow an employer to take greater control of benefit costs to meet the organization s needs however aso arrangements may not be suitable for all companies and they come with certain risks traditional administrator vs administrative services only aso a traditional administrator agreement is an arrangement whereby an insurance company fully administers claims the insurance company is responsible for the services to maintain and manage plans including making decisions on and covering the costs of claims alternatively under the aso the insurance company only provides administrative services for plans the insurer serves as a third party administrator to the employer who assumes the duty to cover claim costs the percentage of employees who were covered by an aso plan in 2022 2under the traditional administrator agreement premiums are fixed and reviewed annually this arrangement makes it difficult for employers to know the impact of claims until premiums are assessed for the next year with aso arrangements employers can in real time keep track of fluctuating costs and plan accordingly considering costs when they exceed what was expected premiums increase the following year with the traditional administrator if costs are less than expected the surplus remains with the insurance company on the other hand with an aso agreement the surplus is reinvested with the employer advantages and disadvantages of administrative services only aso the costs for fully insured plans depend on an insurer s evaluation of anticipated claims for a given year for an aso however annual funding levels are based on actual paid claims if there are fewer claims than anticipated then employers keep the surplus and reinvest the reserves the surplus can translate into employers offering additional benefits many of which would not be ordinarily covered by conventional health plans the total costs for an aso are typically lower than those for a traditional administrator as the employer pays a negotiated fee to the third party rather than salaries and benefits to dedicated staff these cost savings can offset rises in claims and be used to help the company grow alternatively if claims consistently exceed forecasts the cost for aso may exceed that of a traditional administrator plan on the other hand employers would be responsible for any deficit if claims exceed budgeted amounts catastrophic claims or sudden and unexpected events are of particular concern as they can exceed projected budgets and erode profits employers often invest in a stop loss insurance policy to provide an additional level of protection in the event of these cases in some cases an aso arrangement may not be suitable for life insurance and extended healthcare benefits employers need to weigh the risks and benefits of how different aso arrangements might affect their organizations cost savings are retained by the employer additional benefits may be offered to employees stop loss insurance protects the employer from large unforeseen expenses losses erode profits deficits are realized by the employer traditional administrator plans may be more cost efficient administrative services only faqsa common stop loss level for an aso plan is 10 000 per eligible employee 1self funded healthcare and administrative services only aso are the same these terms indicate an insurance arrangement in which the employer or organization assumes full responsibility for the cost of covered claims under a fully insured plan the insurance company retains profits | |
what is the advance decline a d line | the advance decline line or a d line is a technical indicator that plots the difference between the number of advancing and declining stocks on a daily basis the indicator is cumulative with a positive number being added to the prior number or if the number is negative it is subtracted from the prior number the a d line is used to show market sentiment as it tells traders whether there are more stocks rising or falling it is used to confirm price trends in major indexes and can also warn of reversals when divergence occurs the formula for advance decline a d line is a d net advances pa if pa value exists0 if no pa valuewhere net advances difference between number of dailyascending and declining stockspa previous advancesprevious advances prior indicator reading begin aligned text a d text net advances begin cases text pa if pa value exists text 0 if no pa value end cases textbf where text net advances text difference between number of daily text ascending and declining stocks text pa text previous advances text previous advances text prior indicator reading end aligned a d net advances pa if pa value exists0 if no pa value where net advances difference between number of dailyascending and declining stockspa previous advancesprevious advances prior indicator reading | |
what does the a d line tell you | the a d line is used to confirm the strength of a current trend and its likelihood of reversing the indicator shows if the majority of stocks are participating in the direction of the market if the indexes are moving up but the a d line is sloping downwards called bearish divergence it s a sign that the markets are losing their breadth and may be about to reverse direction if the slope of the a d line is up and the market is trending upward then the market is said to be healthy conversely if the indexes are continuing to move lower and the a d line has turned upwards called bullish divergence it may be an indication that the sellers are losing their conviction if the a d line and the markets are both trending lower together there is a greater chance that declining prices will continue difference between the a d line and arms index trin the a d line is typically used as a longer term indicator showing how many stocks are rising and falling over time the arms index trin on the other hand is typically a shorter term indicator that measures the ratio of advancing stocks to the ratio of advancing volume because the calculations and the time frame they focus on are different both these indicators tell traders different pieces of information limitations of using the a d linethe a d line won t always provide accurate readings in regards to nasdaq stocks this is because the nasdaq frequently lists small speculative companies many of which eventually fail or get delisted while the stocks get delisted on the exchange they remain in the prior calculated values of the a d line this then affects future calculations which are added to the cumulative prior value because of this the a d line will sometimes fall for extended periods of time even while nasdaq related indexes are rising another thing to be aware of is that some indexes are market capitalization weighted this means that the bigger the company the more impact they have on the index s movement the a d line gives equal weight to all stocks therefore it is a better gauge of the average small to mid cap stock and not the fewer in number large or mega cap stocks investopedia does not provide tax investment or financial services and advice the information is presented without consideration of the investment objectives risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors investing involves risk including the possible loss of principal | |
what is an advance payment | advance payment is a type of payment made ahead of its normal schedule such as paying for a good or service before you actually receive it advance payments are sometimes required by sellers as protection against nonpayment or to cover the seller s out of pocket costs for supplying the service or product there are many cases where advance payments are required consumers with bad credit may be required to pay companies in advance and insurance companies generally require an advance payment in order to extend coverage to the insured party understanding advance paymentsadvance payments are amounts paid before a good or service is actually received the balance that is owed if any is paid once delivery is made these types of payments are in contrast to deferred payments or payments in arrears in these cases goods or services are delivered first then paid for later for example an employee who is paid at the end of each month for that month s work would be receiving a deferred payment advance payments are recorded as assets on a company s balance sheet as these assets are used they are expended and recorded on the income statement for the period in which they are incurred advance payments are generally made in two situations they can be applied to a sum of money provided before a contractually agreed upon due date or they may be required before the receipt of the requested goods or services advance payment guaranteesan advance payment guarantee serves as a form of insurance assuring the buyer that should the seller fail to meet the agreed upon obligation of goods or services the advance payment amount will be refunded to the buyer this protection allows the buyer to consider a contract void if the seller fails to perform reaffirming the buyer s rights to the initial funds paid governments also issue advance payments to taxpayers like social security 1special considerations advance payments to suppliersin the corporate world companies often have to make advance payments to suppliers when their orders are large enough to be burdensome to the producer this is especially true if the buyer decides to back out of the deal before delivery 2advance payments can assist producers who do not have enough capital to buy the materials to fulfill a large order as they can use part of the money to pay for the product they will be creating it can also be used as an assurance that a certain amount of revenue will be brought in by producing the large order if a corporation is required to make an advance payment it is recorded as a prepaid expense on the balance sheet under the accrual accounting method examples of advance paymentsthere are many examples of advance payments in the real world take prepaid cell phones for example service providers require payment for cell services that will be used by the customer one month in advance if the advance payment is not received the service will not be provided the same applies to payments for upcoming rent or utilities before they are contractually due another example applies to eligible u s taxpayers who received advance payments through the premium tax credit ptc offered as part of the affordable care act aca the financial assistance helps citizens that meet household income requirements pay for their health insurance 3 the money due to the taxpayer is paid to the insurance company in advance of the actual due date for the credit 4the american rescue plan signed by president biden on march 11 2021 made some changes to the aca premium tax credit 4 all taxpayers with insurance bought on the marketplace are now eligible for this credit in 2021 and 2022 previously filers were ineligible if their income exceeded 400 of the federal poverty line 5consumers with bad credit may also be required to provide creditors with advance payments before they can purchase goods or services 6 | |
what is advanced internal rating based airb | an advanced internal rating based airb approach to credit risk measurement is a method that requests that all risk components be calculated internally within a financial institution advanced internal rating based airb can help an institution reduce its capital requirements and credit risk in addition to the basic internal rating based irb approach estimations the advanced approach assesses the risk of default using loss given default lgd exposure at default ead and the probability of default pd these three elements help determine the risk weighted asset rwa that is calculated on a percentage basis for the total required capital understanding advanced internal rating based systemsimplementing the airb approach is one step in the process of becoming a basel ii compliant institution however an institution may implement the airb approach only if they comply with certain supervisory standards outlined in the basel ii accord 1basel ii is a set of international banking regulations issued by the basel committee on bank supervision in july 2006 which expand upon those outlined in basel i these regulations provided uniform rules and guidelines to level the international banking field basel ii expanded the rules for minimum capital requirements established under basel i provided a framework for regulatory review and set disclosure requirements for assessment of capital adequacy basel ii also incorporates credit risk of institutional assets advanced internal rating based systems and empirical modelsthe airb approach allows banks to estimate many internal risk components themselves while the empirical models among institutions vary one example is the jarrow turnbull model 2 originally developed and published by robert a jarrow kamakura corporation and cornell university along with stuart turnbull university of houston the jarrow turnbull model is a reduced form credit model reduced form credit models center on describing bankruptcy as a statistical process in contrast with a microeconomic model of the firm s capital structure the latter process forms the basis of common structural credit models the jarrow turnbull model employs a random interest rates framework financial institutions often work with both structural credit models and jarrow turnbull ones when determining the risk of default advanced internal rating based systems also help banks determine loss given default lgd and exposure at default ead loss given default is the amount of money to be lost in the event of a borrower default while exposure at default ead is the total value a bank is exposed to at the time of said default advanced internal rating based systems and capital requirementsset by regulatory agencies such as the bank for international settlements the federal deposit insurance corporation and the federal reserve board capital requirements set the amount of liquidity is needed to be held for a certain level of assets at many financial institutions 34 they also ensure that banks and depository institutions have enough capital to both sustain operating losses and honor withdrawals airb can help financial institutions determine these levels | |
what is adverse possession | the term adverse possession refers to a legal principle that grants title to someone who resides on or is in possession of another person s land the property s title is granted to the possessor as long as certain conditions are met including whether they infringe on the rights of the actual owner and whether they are in continuous possession of the property adverse possession is sometimes called squatter s rights although squatter s rights are a colloquial reference to the idea rather than a recorded law understanding adverse possessionas mentioned above adverse possession is a legal situation that occurs when one party is granted title to another person s property by taking possession of it this can happen intentionally or unintentionally with or without the property owner s knowledge in cases of intentional adverse possession a trespasser or squatter someone who occupies another person s land illegally knowingly comes on to another person s land to live on it and or take it over in other cases adverse possession may be unintentional for example a homeowner may build a fence separating their yard without realizing they ve crossed over and encroached on their neighbor s property line in either case the adverse possessor also referred to as the disseisor can lay claim to that property and if the claimant is successful in proving adverse possession they are not required to pay the owner for the land a disseisor who successfully proves adverse possession is not required to pay the owner for the land requirements to prove adverse possessionthe requirements to prove adverse possession tend to vary between jurisdictions in many states proof of payment for the taxes on a property and a deed is essentially required for the claimant to be successful each state has a time period during which the landowner of record can invalidate the claim at any time 1for example if the state threshold is 20 years and the landlord paints or pays for other maintenance on the house in question in the 19th year then the claimant will have a difficult time proving adverse possession that said landowners are advised to remove the possibility of adverse possession as soon as possible by having signed agreements for any use of an owned property to successfully claim land under adverse possession the claimant must demonstrate that his or her occupation of the land meets the following requirements adverse possession has been proposed as a possible solution to discourage abuses of intellectual property rights like cybersquatting excessive copyright and patent trolling applying adverse possession to intellectual property as well as physical property would force the abusers to put more resources into actively using their portfolio of trademarks patents and so on rather than just sitting on them and waiting for the actual innovators to step in their territory | |
how to prevent adverse possession | if you are a landowner you can prevent a trespasser from gaining property ownership by taking some easy measures hire a lawyer as soon as you detect signs of trespassing on your land you might need to file a lawsuit to expel the trespasser or a court order to remove an unwanted structure from your land adverse possession vs homesteadingadverse possession is similar to homesteading in practice in homesteading government owned land or property with no clear owner on record is granted to new owners provided they are using and improving it if a homesteader doesn t use the land they can lose it adverse possession can operate in a similar manner by freeing up land with an unclear title for productive use of course adverse possession can also be abused in ways homesteading cannot if there is an informal easement between two farms where one farmer s fence has an acre of the neighbors land in it for example the farmer using it can claim adverse possession to essentially bite off that chunk of land if there is no written easement agreement | |
what are the 5 requirements of adverse possession | although the requirements for adverse possession may vary significantly between jurisdictions the following are the typical requirements that need to be met | |
what states allow adverse possession | although all states allow adverse possession the requirements can vary widely from state to state the main differences involve the length of possession the payment of taxes and the presence of a document that claims to establish ownership such as a deed in general terms states in the east do not require additional documentation but they may require the payment of taxes on the property states in the west tend to allow shorter periods of possession but have some additional requirements such as the payment of taxes or a deed 1 | |
what is the time limit on adverse possession | the time limit varies by jurisdiction ranging from three years arizona to 30 years louisiana and new jersey the typical time threshold is 10 15 years 1who can claim adverse possession any person in possession of land owned by someone else may claim adverse possession and acquire valid title to it under as long as certain requirements are met like being in possession for a sufficient period of time or paying taxes on the property these requirements vary by jurisdiction | |
what is adverse selection | adverse selection refers to a situation in which sellers have information that buyers do not have or vice versa this asymmetric information can then be exploited asymmetric information also called information failure occurs when one party to a transaction has greater material knowledge than the other typically about product quality symmetric information is when both parties have equal knowledge usually the more knowledgeable party is the seller in the case of insurance adverse selection is the tendency of those in dangerous jobs or high risk lifestyles to purchase products like life insurance in these cases it is the buyer who actually has more knowledge to fight adverse selection insurance companies reduce exposure to large claims by limiting coverage or raising premiums investopedia jiaqi zhouunderstanding adverse selectionadverse selection occurs when one party in a negotiation has relevant information the other party lacks the asymmetry of information often leads to poor decisions such as the choice to do more business with less profitable or riskier market segments in the case of insurance avoiding adverse selection requires identifying groups of people more at risk than the general population and charging them more money for example life insurance companies go through underwriting when evaluating whether to give an applicant a policy and what premium to charge underwriters typically evaluate an applicant s height weight current health medical history family history occupation hobbies driving record and lifestyle risks such as smoking all these issues impact an applicant s health and the company s potential for paying a claim the insurance company then determines whether to give the applicant a policy and what premium to charge for taking on that risk consequences of adverse selectiona seller may have better information than a buyer about products and services being offered putting the buyer at a disadvantage in the transaction for example a company s managers may more willingly issue shares when they know the share price is overvalued compared to the real value buyers can end up buying overvalued shares and lose money in the secondhand car market a seller may know about a vehicle s defect and charge the buyer more without disclosing the issue the general consequence of adverse selection is that it increases costs since consumers lack information held by sellers or producers creating an asymmetry in the market this can also lower consumption as buyers may be wary of the quality of the products that are offered for sale or it may exclude certain consumers that do not have access to or cannot afford to obtain information that could lead them to make better buying decisions one indirect effect of this is a negative impact on consumers health and well being if you buy a faulty product or dangerous medication because you don t have good information consuming these products can cause physical harm similarly by refraining from buying certain healthcare products such as medicines or vaccines consumers may wrongly judge a safe intervention as overly risky adverse selection in insurancebecause of adverse selection insurers find that high risk people are more willing to take out and pay greater premiums for policies if the company charges an average premium for insurance but only high risk consumers enroll then the company takes a financial loss by paying out more in benefits or claims by increasing premiums for high risk policyholders the company has more money with which to pay those benefits for example a life insurance company charges higher premiums for race car drivers a car insurance company charges more for customers living in high crime areas a health insurance company charges higher premiums for customers who smoke in contrast customers who do not engage in risky behaviors are less likely to pay for insurance due to increasing policy costs a prime example of adverse selection in regard to life or health insurance coverage is a smoker who successfully manages to obtain insurance coverage as a nonsmoker smoking is a key identified risk factor for life insurance or health insurance so a smoker must pay higher premiums to obtain the same coverage level as a nonsmoker by concealing their behavioral choice to smoke an applicant is leading the insurance company to make decisions on coverage or premium costs that are adverse to the insurance company s management of financial risk another example of adverse selection in the case of auto insurance would be a situation where the applicant obtains insurance coverage based on providing a residence address in an area with a very low crime rate when the applicant actually lives in an area with a very high crime rate obviously the risk of the applicant s vehicle being stolen vandalized or otherwise damaged when regularly parked in a high crime area is substantially greater than if the vehicle was regularly parked in a low crime area adverse selection might occur on a smaller scale if an applicant states that the vehicle is parked in a garage every night when it is actually parked on a busy street | |
how to minimize adverse selection | both sellers and buyers can reduce adverse selection by increasing access to information thus minimizing asymmetries for consumers the internet has greatly increased access while reducing costs crowd sourced information in the form of user reviews along with more formal reviews by bloggers or specialist websites are often free and warn potential buyers about otherwise obscure issues around quality warranties and guarantees offered by sellers can also help allowing consumers to use a product risk free for a certain period to see if it has flaws or quality issues and to return them without consequence if any arise laws and regulations can also help such as lemon laws in the used car industry federal regulatory authorities such as the food and drug administration fda also help ensure that products are safe and effective for consumers insurers reduce adverse selection by requesting medical information from applicants in the form of requiring paramedical examinations querying doctors offices for medical records and looking at one s family history this gives the insurance company more information that an applicant may fail to disclose on their own moral hazard vs adverse selectionmoral hazard is the risk that one party has not entered into a contract in good faith or has previously provided false details about its assets liabilities or credit capacity like adverse selection moral hazard occurs when there is asymmetric information between two parties however adverse selection occurs when there s a lack of symmetric information prior to a deal between a buyer and a seller and moral hazard occurs after a deal is struck for instance in the investment banking sector it may become known that government regulatory bodies will bail out failing banks as a result bank employees may take on excessive amounts of risk to score lucrative bonuses knowing that if their risky bets do not pan out the bank will be saved anyhow the lemons problemthe lemons problem refers to issues that arise regarding the value of an investment or product due to asymmetric information possessed by the buyer and the seller the lemons problem was put forward in a research paper the market for lemons quality uncertainty and the market mechanism written in the late 1960s by george a akerlof an economist and professor at the university of california berkeley 1 the tag phrase identifying the problem came from the example of used cars akerlof used to illustrate the concept of asymmetric information as defective used cars are commonly referred to as lemons the takeaway is that due to adverse selection the only used cars left on the market will ultimately be lemons the lemons problem exists in the marketplace for both consumer and business products and also in the arena of investing related to the disparity in the perceived value of an investment between buyers and sellers the lemons problem is also prevalent in financial sector areas including insurance and credit markets for example in the realm of corporate finance a lender has asymmetrical and less than ideal information regarding the actual creditworthiness of a borrower | |
why is it called adverse selection | adverse means unfavorable or harmful adverse selection is therefore when certain groups are at higher risk because they lack full information of unfavorable terms in fact they are often selected to enter into a transaction precisely because they are at such a disadvantage | |
how does adverse selection impact markets | adverse selection arises from information asymmetries in economic theory markets are assumed to be efficient and that everybody has full and perfect information when some have more information than others they can take advantage of those less informed often to their detriment this creates market inefficiencies that can increase prices or prevent transactions from occurring | |
what is an example of adverse selection in trading and investing | in stock markets there are some natural information asymmetries for example companies that issue shares know more about their internal finances and earnings before the general public does this can lead to cases of insider trading where those in the know profit from stock trades before public announcements are made which is an illegal practice another asymmetry involves the inventories of market makers and some institutional traders while large holders of a company s stock are made public this information is only disseminated on a quarterly basis this means that these players in the market may have a particular axe to grind for example a strong desire or need to buy or sell that is not known by the investing public the bottom linecontrary to assumptions made by mainstream economic and financial models information is not symmetrically accessible and available to all actors in a market in particular sellers and producers often have far more information about what they are selling than do buyers this information asymmetry can lead to market inefficiencies via what is known as adverse selection in insurance markets applicants have more information about themselves than do insurers meaning that they withhold key information about being higher risk | |
what is advertising budget | an advertising budget is an estimate of a company s promotional expenditures over a certain time period more importantly it is the money a company is willing to set aside to accomplish its marketing objectives understanding advertising budgetan advertising budget is part of a company s overall sales or marketing budget that can be viewed as an investment in a company s growth the best advertising budgets and campaigns focus on customers needs and problems and on providing solutions to these issues not company problems such as an overstock reduction | |
when creating an advertising budget a company must weigh the value of spending an advertising dollar against the value of that dollar as recognized revenue before deciding on a specific amount companies should make certain determinations to ensure that the advertising budget is in line with their promotional and marketing goals | the best advertising budgets and campaigns focus on customers needs and solving their problems not company problems such as an overstock reduction advertising budget levelscompanies can determine their advertising budget levels in several different ways each of which has its positives and negatives | |
what is an affiliate | affiliate is used primarily to describe a business relationship wherein one company owns less than a majority stake in the other company s stock affiliations can also describe a type of relationship in which at least two different companies are subsidiaries of the same larger parent company affiliate is also commonly used in the retail sector in this case one company becomes affiliated with another in order to sell its products or services earning a commission for doing so this term is now used widely in partnerships among online companies in which the affiliate supports another company by channeling internet traffic and e sales understanding affiliatesthere are several definitions of the term affiliate in the corporate securities and capital markets in the first an affiliate is a company that is related to another the affiliate is generally subordinate to the other and has a minority stake i e less than 50 in the affiliate in some cases an affiliate may be owned by a third company an affiliate is thus determined by the degree of ownership a parent company holds in another for example if big corporation owns 40 of mid corporation s common stock and 75 of tiny corporation then mid and big are affiliates while tiny is a subsidiary of big mid and tiny may also refer to one another as affiliates note that for the purposes of filing consolidated tax returns irs regulations state a parent company must possess at least 80 of a company s voting stock to be considered affiliated 1in retail and particularly in e commerce a company that sells other merchants products for a commission is an affiliate company merchandise is ordered from the primary company but the sale is transacted at the affiliate s site amazon and ebay are examples of e commerce affiliates a multinational company may set up affiliates to break into international markets while protecting the parent company s name in case the affiliate fails or the parent company is not viewed favorably due to its foreign origin understanding the differences between affiliates and other company arrangements is important in covering debts and other legal obligations companies can become affiliated through mergers takeovers or spinoffs other types of affiliatesaffiliates can be found all around the business world in the corporate securities and capital markets executive officers directors large stockholders subsidiaries parent entities and sister companies are affiliates of other companies two entities may be affiliates if one owns less than a majority of voting stock in the other for instance bank of america has a number of different affiliates around the world including merrill lynch 2affiliation is defined in finance in a loan agreement as an entity other than a subsidiary directly or indirectly controlling being controlled by or under common control with an entity in commerce two parties are affiliated if either can control the other or if a third party controls both affiliates have more legal requirements and prohibitions than other company arrangements to safeguard against insider trading an affiliate network is a group of associated companies that offer compatible or complementary products and will often pass leads to each other they may offer cross promotional deals encouraging clients who have utilized their services to look into the services offered by an affiliate in banking affiliate banks are popular for underwriting securities and entering foreign markets where other banks do not have direct access affiliates vs subsidiariesunlike an affiliate a subsidiary s majority shareholder is the parent company as the majority shareholder the parent company owns more than 50 of the subsidiary and has a controlling stake the parent thus has a great deal of control over the subsidiary and is allowed to make important decisions such as the hiring and firing of executives and the appointment of directors on the board | |
what is affiliate marketing | affiliate marketing is an advertising model in which a company compensates third party publishers to generate traffic or leads to the company s products and services the third party publishers are affiliates and the commission fee incentivizes them to find ways to promote the company understanding affiliate marketingthe internet has increased the prominence of affiliate marketing amazon amzn popularized the practice by creating an affiliate marketing program whereby websites and bloggers put links to the amazon page for a reviewed or discussed product to receive advertising fees when a purchase is made in this sense affiliate marketing is essentially a pay for performance marketing program where the act of selling is outsourced across a vast network affiliate marketing predates the internet but in the world of digital marketing analytics and cookies made it a billion dollar industry a company running an affiliate marketing program can track the links that bring in leads and through internal analytics see how many convert to sales for instance an e commerce merchant wanting to reach a wider base of internet users and shoppers may hire an affiliate an affiliate could be the owner of multiple websites or email marketing lists the more websites or email lists that an affiliate has the wider its network the hired affiliate then communicates and promotes the products offered on the e commerce platform to their network the affiliate does this by running banner and text ads posting links on its websites or emailing clientele firms use advertisements in the form of articles videos and images to draw an audience s attention to a service or product visitors who click the ads or links are redirected to the e commerce site if they purchase the product or service the e commerce merchant credits the affiliate s account with the agreed upon commission which could be 5 to 10 of the sales price examples of affiliate marketingamazon s affiliate marketing program amazon associates is one of the world s largest affiliate marketing programs 1 creators publishers and bloggers sign up to have amazon products and services shared on their websites or apps and receive compensation for the sales their sites generate amazon sets strict criteria for the sites and apps hosting its ads for example sites must not contain replicated content from another site or creator and be available to the public websites must be active with fresh content and suitable according to amazon s standards for example they must not contain obscene or offensive content promote violence or illegal acts or contain any content deemed harmful to others 2approval is contingent on a thorough review by amazon staff and meeting a qualified sales quota three within 180 days of the application if an application is rejected it will not be eligible for reconsideration once approved commissions are earned as site visitors purchase products or services from amazon 3amazon associates can earn up to 10 in commissions for qualified sales rates are fixed and based on product and program categories 1 as a bonus amazon offers special commissions on certain events etsy etsy is a global online marketplace for vintage goods and other unique items it promotes its products through various channels including affiliate marketing partners applicants must submit an online application through its affiliate program portal to qualify as an etsy affiliate marketing partner eligible candidates must be at least 18 have an active unique website have a brand identity and meet other criteria 4if approved etsy pays a commission to the affiliate for sales they procure sales resulting from their site s product promotion commission rates vary and are paid on the order price etsy sellers can be affiliates but cannot earn commissions on their products without special permission etsy declares that it has the right to terminate an agreement at any time for any reason and that it can withhold compensation for any legitimate reason 5ebay s partner network is ebay s affiliate marketing program that pays partners for sharing their personal listings outside of ebay inc ebay the affiliate earns a commission and may earn credit toward their final merchant fees 6 ebay partners can also earn commissions on other sellers items commissions are earned when a buyer bids on or immediately purchases an item within 24 hours of clicking the ebay purchase link on the affiliate s site for submitted bids the commission is paid if the buyer wins the auction within 10 days of the bid 6commission rates depend on the category of items sold and range up to 4 6 gift cards items sold by charities and special promotions are generally excluded as qualifying sales because of their low revenue streams buzzfeed is a new york based digital media company known for viral news and entertainment stories quizzes and product reviews its buzzfeed shopping segment features and reviews different partners products and services visitors can read buzzfeed s product reviews and select affiliate links to purchase buzzfeed earns a commission from each sale generated from its website types of affiliate marketingthere are three main types of affiliate marketing advantages and disadvantages of affiliate marketingaffiliate marketing can yield great rewards for the advertising company and the affiliate marketer the company benefits from low cost advertising and the creative marketing efforts of its affiliates and the affiliate benefits by earning additional income and incentives the return on investment for affiliate marketing is high as the company only pays on traffic converted to sales the cost of advertising if any is borne by the affiliate the advertising company sets the terms of an affiliate marketing program early on companies largely paid the cost per click traffic or cost per mille one thousand impressions on banner advertisements as technology evolved the focus turned to commissions on actual sales or qualified leads the early affiliate marketing programs were vulnerable to fraud because clicks could be generated by software as could impressions now most affiliate programs have strict terms and conditions for generating leads there are also certain banned methods such as installing adware or spyware that redirect all search queries for a product to an affiliate s page some affiliate marketing programs go as far as to lay out how a product or service should be discussed in the content before an affiliate link can be validated an effective affiliate marketing program requires some forethought the terms and conditions must be clearly spelled out especially if the contract agreement pays for traffic rather than sales the potential for fraud in affiliate marketing is possible unscrupulous affiliates can squat on domain names with misspellings and get a commission for the redirect they can populate online registration forms with fake or stolen information purchase adwords on search terms the company already ranks high on and so on even if the terms and conditions are clear an affiliate marketing program requires that someone monitor affiliates and enforce rules in exchange however a company can access motivated creative people to help sell their products or services to the world access to a broader marketbetter accounting of qualified leadslow cost advertisingsubject to fraudless creative controlvulnerable to theftspecial considerationsthe goal of this model is to increase sales and create a win win solution for both merchant and affiliate the system is unique profitable and is becoming increasingly popular the internet and improving technologies are making the model easier to implement companies have improved how they track and pay commissions on qualified leads being better able to track leads and sales contributes to how they can improve or better position their products those interested in pursuing affiliate marketing will benefit from understanding what s involved and its advantages and disadvantages companies seeking affiliates will benefit from properly vetting and qualifying their partners overall it is a low cost effective way of advertising products and services increasing brand awareness and expanding a consumer base | |
how do affiliate marketers get paid | affiliate marketers get paid a commission for referring customers to companies where they make purchases these commissions can range from less than 1 to 20 or more depending on the product and level of referral volume for online campaigns a customized link or referral code is used to track sales in this sense it is a source of passive income since the affiliate can continue to earn money once they have set up their campaign | |
how much money can you make as an affiliate marketer | incomes for affiliate marketers vary with some making a few hundred dollars and some making six figures it depends on what is being marketed how much influence the marketer has the affiliate s reach and how much time is invested in marketing products often those spending more time marketing the company s products will earn more money can beginners do affiliate marketing becoming successful through affiliate marketing takes time skill and experience however it may suit beginners a bit better than alternative platforms since you do not have to invest in physical merchandise or inventory at the start can you start affiliate marketing with no money yes several free platforms and affiliate networks are available for little or no money instead you will need a large online following through efforts such as blogging or social media posting | |
how do i become an affiliate marketer | to become an affiliate marketer consider what platform you will use to promote products and or services blogs are an effective channel for advertising and promoting as it allows the blogger serving as an expert to express an opinion about the offering after identifying a platform find a specific category you are comfortable with or are interested in a focused segment can better help you attract a dedicated consumer base research affiliate programs and choose one or more based on your needs whether it be earning high commissions or generating more traffic lastly develop solid and interesting content around the offerings and work to increase traffic to your site the bottom linean affiliate market is a contracted entity that advertises for a business many content creators enter agreements with businesses to become affiliate marketers receiving compensation for promoting products and services to get started it helps to have a topic or category you are passionate about build an audience and keep trying if you can gain enough followers you might be contacted by marketing representatives looking for more exposure | |
what are affiliated companies | companies are affiliated when one company is a minority shareholder of another in most cases the parent company will own less than a 50 interest in its affiliated company two companies may also be affiliated if they are controlled by a separate third party in the business world affiliated companies are often simply called affiliates the term is sometimes used to refer to companies that are related to each other in some way for example bank of america has many different affiliated companies including bank of america u s trust landsafe balboa and merrill lynch companies may be affiliated with one another to get into a new market to maintain separate brand identities to raise capital without affecting the parent or other companies and to save on taxes in most cases affiliates are associates or associated companies which describes an organization whose parent has a minority stake in it understanding affiliated companiesthere are several ways that companies can become affiliated a company may decide to buy out or take over another one or it may decide to spin off a portion of its operations into a new affiliate altogether in either case the parent company generally keeps its operations separate from its affiliates since the parent company has a minority ownership its liability is limited and the two companies keep separate management teams affiliates are a common way for parent businesses to enter foreign markets while keeping a minority interest in a business this is especially important if the parent wants to shake off its majority stake in the affiliate there is no single bright line test to determine if one company is affiliated with another in fact the criteria for affiliation changes from country to country state to state and even between regulatory bodies for instance companies considered affiliates by the internal revenue service irs may not be considered affiliated by the securities and exchange commission sec affiliates vs subsidiariesan affiliate is different from a subsidiary of which the parent owns more than 50 in a subsidiary the parent is a majority shareholder which gives the parent company s management and shareholders voting rights subsidiary financials may also appear on the parent company s financial sheets but subsidiaries remain separate legal entities from their parents meaning they are liable for their own taxes liabilities and governance they are also responsible for following the laws and regulations where they are headquartered especially if they operate in a different jurisdiction from the parent company an example of a subsidiary is the relationship between the walt disney co and sports network espn disney owns an 80 interest in espn making it a majority shareholder espn is its subsidiary in ecommerce an affiliate refers to a company that sells the products of another merchant on its website sec rules surrounding affiliatessecurities markets around the world have rules that concern affiliates of the businesses they regulate here again these are complex rules that need to be analyzed by local experts on a case by case basis examples of rules enforced by the sec include tax consequences of affiliatesin nearly all jurisdictions there are important tax consequences for affiliated companies in general tax credits and deductions are limited to one affiliate in a group or a ceiling is imposed on the tax benefits that affiliates may reap under certain programs determining whether companies in a group are affiliates subsidiaries or associates is done through a case by case analysis by local tax experts | |
why do companies affiliate | reasons for companies becoming affiliated include | |
how do affiliates differ from subsidiaries | in a subsidiary the parent company owns more than 50 of the other company and is a majority shareholder this gives voting rights to the management and shareholders of the parent company the bottom line | |
what is affirmative action | affirmative action refers to a policy aimed at increasing workplace and educational opportunities for people who are underrepresented in various areas of our society it focuses on demographics with historically low representation in leadership and professional roles it is often considered a means of countering discrimination against particular groups businesses and governments commonly implement affirmative action programs by taking individuals race sex religion or national origin into account when hiring it has been widely used in education settings in the united states particularly in college admissions however in the 2023 ruling of students for fair admissions v harvard the supreme court said colleges and universities could no longer take race into consideration as a specific basis for granting admission 1 | |
how affirmative action works | the main purpose of affirmative action is to diversify various parts of society the government backed policy was developed to provide inadequately represented groups of people with access to opportunities in academia the private workforce and government jobs these opportunities have included admission to schools jobs in professional positions and access to housing and financing 2the affirmative action policy rose to prominence in the united states in the 1960s as a way to promote equal opportunity for various segments of society the policy was developed to enforce the civil rights act of 1964 which sought to eliminate discrimination 3early implementations of affirmative action largely focused on halting the continued social segregation of minorities and other disadvantaged individuals from institutions and opportunities despite legislation that outlawed discrimination practices in the u s tangible change in the status quo was not immediate 3in more recent years campaigns have expanded to make organizations and institutions even more inclusive by pushing for greater gender diversity newer policies are also aimed at providing more access to opportunities for covered veterans and people with disabilities in 2023 however the u s supreme court issued a landmark decision in students for fair admissions v harvard that held that race based affirmative action programs in college admissions violate the 14th amendment s equal protection clause 1 and in the ruling for students for fair admissions v the university of north carolina companion case the court overruled the previous precedent set in grutter v bollinger and regents of the university of california v bakke that had previously validated some affirmative action in college admissions allowed for race to hold a limited role in decision making by college administrators 45covered veterans are veterans who are disabled who served on active duty in a war or other campaign and have a campaign badge or a service medal or who are recently separated from the armed forces elements of affirmative actionefforts to stimulate change have taken the form of financial assistance such as grants scholarships and other support earmarked to help with access to higher education opportunities in addition hiring practices may be structured to require the inclusion of diverse candidates for consideration for job openings government agencies may mandate that companies and institutions populate their ranks with a minimum percentage of qualified professionals from varying ethnicities genders and cultures failure to meet such requirements could disqualify institutions from receiving government funding or being able to compete for public contracts people confuse employment equity with affirmative action there s a distinct difference between the two employment equity attempts to ensure that all individuals are treated equally while affirmative action actually supports those people in particular who historically have been denied opportunities examples of affirmative actionaffirmative action has been put to work since the 1960s despite a lack of progress at times and rulings by legal authorities such as the supreme court that have hindered it here are some examples of the policy in action advantages and disadvantages of affirmative actionthe implementation and continued use of affirmative action policies have drawn strong support as well as staunch criticism an obvious benefit of affirmative action is the opportunities it provides to people who otherwise might not have them these opportunities include access to education for students who may be disadvantaged and career advancement for employees who may be blocked from rising up the corporate ladder proponents of affirmative action say that the effort must continue because of the low percentages of diversity in positions of authority and in the media as well as limited acknowledgment of the achievements of marginalized or unrepresented groups opponents of affirmative action frequently call these efforts a collective failure they cite as evidence the tiny changes to the status quo after decades of effort the cost of such programs coupled with a belief that affirmative action forces the populace to make unwarranted accommodations drives a significant part of the opposition certain individuals believe that there is little or no bias in society they argue that affirmative action results in reverse discrimination which can often lead to qualified candidates being overlooked in academics and the workplace in favor of less qualified candidates who meet policy standards provides opportunities for minorities and people from disadvantaged groupsdiversifies societycosts to implement policies can be too highdraws focus from a person s merits or achievementsaffirmative action statisticsaffirmative action is a very controversial topic and often leads to heated debates between those who support it and people who feel it doesn t benefit society is there a way to quantify how people feel and how it s working according to a gallup poll more than half of americans 61 believe in affirmative action policies this level of support has increased since the last poll where only 47 to 50 of individuals thought affirmative action was necessary this increase in support is especially important given the active issues surrounding race and identity in the u s and elsewhere 8many americans feel positive about diversity they are comfortable with the makeup of their communities saying diversity positively impacts society as a whole there is some division when it comes to identifying race and ethnicity for purposes of hiring in fact about 74 of individuals feel that a candidate s racial or ethnic background shouldn t be considered when hiring or promoting them they believe these activities should only be based on someone s merit and qualifications 9 | |
what is the goal of affirmative action | the goal of affirmative action is to increase opportunities for individuals and groups that historically have been underrepresented or in some cases barred from certain areas of academia the government and the private sector workforce affirmative action policies provide funding in the form of grants and scholarships to these communities policies were adopted to help those with different racial backgrounds and national origins they have expanded to address gender sexual orientation and various disabilities | |
how did regents v bakke change affirmative action policies | the regents v bakke case changed affirmative action policies by striking down the use of racial quotas the case was presented by allan bakke who claimed he was denied admission to medical school at the university of california on two separate occasions because he was white the supreme court upheld affirmative action but ruled in bakke s favor saying racial quotas were unconstitutional the 2023 case students for fair admissions v the university of north carolina overturned the ruling 5 | |
which u s president first defined and used the term affirmative action | that was president john f kennedy he did so in 1961 telling federal contractors to take affirmative action to ensure that applicants are treated equally without regard to race color religion sex or national origin 6the bottom linethough affirmative action continues to be a source of controversy for some such programs are a reality for all government contracted businesses what s more many other employers choose to implement affirmative action programs as a helpful way to foster transparency in hiring and promotions and diversity in the workplace | |
what is the affordable care act aca | the affordable care act aca is the comprehensive healthcare reform signed into law by then president barack obama in march 2010 formally known as the patient protection and affordable care act and commonly referred to as obamacare the law includes a list of healthcare policies intended to expand access to health insurance to millions of uninsured americans 1the law expanded medicaid eligibility created health insurance exchanges mandated that americans purchase or otherwise obtain health insurance and prohibited insurance companies from denying coverage due to preexisting conditions 1understanding the affordable care act aca the aca was designed to reform the health insurance industry and help reduce the cost of health insurance coverage for individuals who qualify the law includes premium tax credits and cost sharing reductions to help lower expenses for lower income individuals and families the aca requires most insurance plans including those sold on the health insurance marketplace to cover a list of preventive services at no cost to policyholders that include checkups patient counseling immunizations and numerous health screenings 2all aca compliant health insurance plans must cover specific essential health benefits such as emergency services family planning maternity care hospitalization prescription medications mental health services and pediatric care 3the law allows states to extend medicaid coverage to a wider range of people as of september 2022 39 states and the district of columbia had exercised that option 4every year there is an open enrollment period on the health insurance marketplace during which people can buy or switch insurance plans enrollment outside of the open season is allowed only for those whose circumstances change such as marrying divorcing becoming a parent or losing a job that provided health insurance coverage 5the inflation reduction act of 2022 extends the expanded aca for three years through 2025 for people who need financial assistance it also allows medicare to negotiate the cost of prescription drugs and place an annual cap of 2 000 on the cost of drugs the aca extension is expected to cost an estimated 64 billion 67key features of the affordable care actprovisions included in the aca expand access to insurance increase consumer protections emphasize prevention and wellness improve quality and system performance expand the health workforce and curb rising healthcare costs 8the aca requires employers to cover their workers and provides tax credits to certain small businesses that cover specified costs of health insurance for their employees it created state or multistate based insurance exchanges to help individuals and small businesses purchase insurance the law expanded medicaid coverage for low income individuals and allows young adults to remain on parents policies until age 26 part of the aca until 2017 was the individual mandate a provision requiring all americans to have healthcare coverage either from an employer or through the aca or another source or face tax penalties 9the aca prohibits lifetime monetary caps on insurance coverage limits the use of annual caps and establishes state rate reviews for insurance premium increases it prohibits insurance plans from excluding coverage for children with preexisting conditions and canceling or rescinding coverage the prevention and public health fund established under the aca provides grants to states for prevention activities such as disease screenings and immunizations and the national prevention health promotion and public health council addresses tobacco use physical inactivity and poor nutrition the aca requires insurance plans to cover preventive care such as immunizations preventive care for children screening for certain adults for conditions such as high blood pressure high cholesterol diabetes and cancer and a public education campaign for oral health the aca requested investments in health information technology it addressed guidelines to reduce medical errors and create payment mechanisms to improve efficiency and results and improve care coordination among providers the law requires oversight of health insurance premiums and practices reducing healthcare fraud and uncompensated care to foster comparison shopping in insurance exchanges to increase competition and price transparency pros and cons of the affordable care actexpands healthcare availability to more citizensprevents insurers from making unreasonable rate increasesindividuals with preexisting health conditions cannot be deniedcoverage for additional screenings immunizations and preventive carethose already insured saw an increase in premiumstaxes were created to help supplement the aca including taxes on medical equipment and pharmaceutical salesthe enrollment period is limited for new enrolleesmany businesses curtailed employee hours to avoid providing medical insuranceupdates to the affordable care actwith his election in 2016 then president donald trump launched efforts to repeal and replace the aca stating that the united states should delay the implementation of any provision or requirement of the patient protection and affordable care act that would impose a fiscal burden on any state 10in december 2017 the tax cuts and jobs act tcja removed the penalty for individuals not having health insurance and substantially scaled back the outreach program to help americans sign up for the aca cutting the enrollment period in half by 2018 the number of americans covered under the aca had dropped to 13 8 million from 17 4 million in 2015 according to a report from the kaiser family foundation a healthcare research organization 11in 2021 president biden signed an executive order to focus on the rules and other policies that limit americans access to health care prompting federal agencies to examine five areas including preexisting conditions policies undermining the health insurance marketplace enrollment roadblocks and affordability covid 19 relief legislation the american rescue plan act arpa extended eligibility for aca health insurance subsidies to those buying their health coverage on the marketplace with incomes over 400 of poverty 12with the passage of the inflation reduction act signed into law by biden on aug 16 2022 financial assistance was extended for people enrolled in the aca through 2025 instead of 2022 it also expands eligibility allowing more middle class citizens to receive premium assistance the legislation passed in both the house of representatives and the senate 7 | |
what are common arguments for and against the affordable care act aca | opponents argue that the affordable care act aca hurts small businesses that are required to provide insurance raises healthcare costs and creates a reliance on government services by individuals proponents state that those with health insurance get medical attention quickly and live a healthier lifestyle they contend that the healthcare system will operate more efficiently when commercial insurers and their customers do not need to fund the uninsured | |
when does the yearly enrollment period on the marketplace begin | the health insurance marketplace is available for new enrollment on nov 1 and information is available on the government website | |
how many citizens use the health insurance marketplace | as of 2021 more than 13 million citizens are enrolled in coverage offered by the aca s marketplace 13the bottom linethe patient protection and affordable care act aca was passed in 2010 and is commonly known as obamacare it extended healthcare coverage to millions of previously uninsured americans the aca launched the health insurance marketplace through which eligible people may find and buy health insurance policies all aca compliant health insurance plans including those sold through the marketplace must cover several essential health benefits the aca has continued to evolve through three presidencies | |
what is the after tax real rate of return | the after tax real rate of return is the actual financial benefit of an investment after accounting for the effects of inflation and taxes it is a more accurate measure of an investor s net earnings after income taxes have been paid and the rate of inflation has been adjusted both of these factors must be accounted for because they impact the gains that an investor receives this can be contrasted with the gross rate of return and the nominal rate of return of an investment understanding the after tax real rate of returnover the course of a year an investor might earn a nominal real rate of return of 12 on his stock investment but the real rate of return the money he gets to put in his pocket at the end of the day will be less than 12 inflation might have been 3 for the year knocking his real rate of return down to 9 and since he sold his stock at a profit he will have to pay taxes on those profits taking more off his return say 2 for an after tax real rate of return of 7 the commission he paid to buy and sell the stock also diminishes his return thus to truly grow their nest eggs over time investors must focus on the after tax real rate of return not the nominal rate of return the after tax real rate of return is a more accurate measure of investment earnings and usually differs significantly from an investment s nominal gross rate of return or its return before fees inflation and taxes 1 however investments in tax advantaged securities such as municipal bonds and inflation protected securities such as treasury inflation protected securities tips as well as investments held in tax advantaged accounts such as roth individual retirement accounts roth iras will show less discrepancy between nominal rates of return and after tax real rates of return the difference between the nominal rate of return and the after tax real rate of return isn t likely to be as great on tax advantaged accounts like roth iras as it is on other investments example of the after tax real rate of returnlet s be more specific about how the after tax real rate of return is determined first the return is calculated by determining the after tax return before inflation which is calculated as nominal return 1 tax rate for example consider an investor whose nominal return on his equity investment is 17 and his applicable tax rate is 15 therefore his after tax return is 0 17 1 0 15 0 1445 14 45 0 17 times 1 0 15 0 1445 14 45 0 17 1 0 15 0 1445 14 45 let s assume that the inflation rate during this period is 2 5 to calculate the real rate of return after tax divide 1 plus the after tax return by 1 plus the inflation rate then subtract 1 dividing by inflation reflects the fact that a dollar in hand today is worth more than a dollar in hand tomorrow in other words future dollars have less purchasing power than today s dollars following our example the after tax real rate of return is 1 0 1445 1 0 025 1 1 1166 1 0 1166 11 66 frac 1 0 1445 1 0 025 1 1 1166 1 0 1166 11 66 1 0 025 1 0 1445 1 1 1166 1 0 1166 11 66 that figure is quite a bit lower than the 17 gross return received on the investment as long as the real rate of return after taxes is positive however an investor will be ahead of inflation if it s negative the return will not be sufficient to sustain an investor s standard of living in the future | |
what is the difference between the after tax real rate of return and the nominal rate of return | the after tax real rate of return is figured after accounting for fees inflation and tax rates the nominal rate of return is simply the gross rate of return before considering any outside factors that impact an investment s actual performance |
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