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what is the vasicek interest rate model | the term vasicek interest rate model refers to a mathematical method of modeling the movement and evolution of interest rates it is a single factor short rate model that is based on market risk the vasicek interest model is commonly used in economics to determine where interest rates will move in the future put simply it estimates where interest rates will move in a given period of time and can be used to help analysts and investors figure out how the economy and investments will fare in the future | |
how the vasicek interest rate model works | predicting how interest rates evolve can be difficult investors and analysts have many tools available to help them figure out how they ll change over time in order to make well informed decisions about how their investments and the economy the vasicek interest rate model is among the models that can be used to help estimate where interest rates will go as noted above the vasicek interest rate model which is commonly referred to as the vasicek model is a mathematical model used in financial economics to estimate potential pathways for future interest rate changes as such it s considered a stochastic model which is a form of modeling that helps make investment decisions it outlines the movement of an interest rate as a factor composed of market risk time and equilibrium value the rate tends to revert toward the mean of these factors over time the model shows where interest rates will end up at the end of a given period of time by considering current market volatility the long run mean interest rate value and a given market risk factor 1the vasicek interest rate model values the instantaneous interest rate using the following equation drt a b rt dt dwtwhere w random market risk represented bya wiener process t time perioda b rt expected change in the interest rateat time t the drift factor a speed of the reversion to the meanb long term level of the mean volatility at time t begin aligned dr t a b r t dt sigma dw t textbf where w text random market risk represented by text a wiener process t text time period a b r t text expected change in the interest rate text at time t text the drift factor a text speed of the reversion to the mean b text long term level of the mean sigma text volatility at time t end aligned drt a b rt dt dwt where w random market risk represented bya wiener process t time perioda b rt expected change in the interest rateat time t the drift factor a speed of the reversion to the meanb long term level of the mean volatility at time t the model specifies that the instantaneous interest rate follows the stochastic differential equation where d refers to the derivative of the variable following it in the absence of market shocks i e when dwt 0 the interest rate remains constant rt b when rt b the drift factor becomes positive which indicates that the interest rate will increase toward equilibrium the vasicek model is often used in the valuation of interest rate futures and may also be used in solving for the price of various hard to value bonds special considerationsas mentioned earlier the vasicek model is a one or single factor short rate model a single factor model is one that only recognizes one factor that affects market returns by accounting for interest rates in this case market risk is what affects interest rate changes this model also accounts for negative interest rates 2 rates that dip below zero can help central bank authorities during times of economic uncertainty although negative rates aren t commonplace they have been proven to help central banks manage their economies for instance denmark s central banks lowered interest rates below zero in 2012 european banks followed two years later followed by the bank of japan boj which pushed its interest rate into negative territory in 2016 3vasicek interest rate model vs other modelsthe vasicek interest rate model isn t the only one factor model that exists the following are some of the other common models | |
what is a vault receipt | a vault receipt is a legal document given to the owner of a futures contract whose underlying asset is stored in a vault they are usually used for precious metals such as gold and silver which are valuable enough to justify storing them in a secured facility vault receipts are an important component of the modern futures markets because they allow the buyers and sellers of precious metals to avoid making costly physical deliveries instead they can transfer ownership simply by exchanging the vault receipt | |
how vault receipts work | commodities futures markets offer a convenient way for buyers and sellers to access commodities in an efficient manner offering advantages such as liquidity speed of execution and reduced counterparty risk although some buyers wish to take physical delivery of the commodities they buy others are content to own the commodities while keeping them stored in a vault or warehouse that is authorized by the commodities exchange this approach to owning commodities can prove more cost effective because it allows buyers to avoid additional transportation and insurance costs this is especially common in the case of precious metals where new owners either have the option of keeping the metals stored at their current facility or else transferring them to a facility of their choice if they continue using the current facility they will need to continue paying the storage fees and other costs however transferring to a new facility is usually more expensive because it involves additional transportation most of the time precious metals are kept in their original exchange approved warehouse aside from the added expense of relocation another important reason for this is that metals which are removed from the approved warehouse may no longer be eligible to be traded on the futures exchange if a buyer wants to then reintroduce their bars into the exchange s warehouse and use them for futures trading purposes they may need to send the bars back to a refiner to ensure that the bars meet the exchange s quality standards once the metal is back in the warehouse the exchange would then issue a new vault receipt as you can imagine however these added steps can substantially increase the costs of the precious metals investment real world example of a vault receipta standard vault receipt will include important details such as the location of the metals their reference numbers the name of their owner any ongoing storage fees associated with the metals and the date of the receipt by holding this vault receipt the designated owner is entitled to withdraw or relocate the metals to another facility although doing so may prevent them from selling those metals on the exchange oftentimes the vault receipt will in fact be held by the broker who was responsible for purchasing the futures contract on behalf of the end buyer the buyer themselves would typically not receive a physical copy of the receipt unless they specifically request one from their broker this system is similar to the way in which stock brokers often hold shares on behalf of their clients in street name | |
what is a veblen good | a veblen good is a good for which demand increases as the price increases due to its exclusive nature and appeal as a status symbol this runs counter to the prevailing circumstance of demand falling as prices rise thus a veblen good has an upward sloping demand curve rather than the typical downward sloping curve a veblen good is generally a high quality coveted product 1 this stands in contrast to a giffen good which also has an upward sloping curve but is a non luxury product with no easily available substitutes 2understanding a veblen goodthe increase in demand for a veblen good reflects consumer tastes and preferences with the higher demand directly attributable to the price increase the term is named after american economist thorstein veblen who is best known for introducing the term conspicuous consumption veblen goods are fairly commonplace unlike giffen goods which are elusive and quite difficult to identify very expensive products that are marketed as being exclusive or convey the appearance of success such as designer jewelry pricey watches yachts and luxury cars can be classified as veblen goods veblen goods are generally targeted at affluent individuals have a very strong brand identity that is synonymous with luxury and are far more likely to be sold in upscale boutiques than in common department stores for all intents and purposes a veblen good is a luxury item that a majority of the population will not or cannot purchase contradiction to conventional market forcesveblen goods contradict the basic law of demand which states that quantity demanded has an inverse relationship with price 3 this is due to the appeal of their exclusivity if the price of a coveted and expensive product is increased it may actually enhance its attraction to those for whom status is important as it is now farther out of reach for the average consumer however if the price of such a product is lowered its reduced exclusivity may result in diminished appeal this can result in it being shunned by status conscious consumers while remaining too expensive for the mass market overall demand would therefore decline with lower prices instead of increasing while no specific price point can be identified as the dividing line between a veblen good and a normal product it may be safe to assume that a veblen good is generally priced exponentially higher than a basic product in the same category take the case of watches good quality watches are widely available for less than 100 but to qualify as a veblen good a watch would probably carry a four five or six digit price tag veblen goods vs giffen goodsas noted above both veblen and giffen goods have an upward sloping demand curve this means that demand for them increases when their price increases their main difference is in the type of good there are numerous examples of veblen goods giffen goods on the other hand are relatively rare some economists even debate whether they exist at all 4causes of the veblen effectstudies indicate that people are happier and receive more utility with the purchase of a veblen good 5 this is a result of the good making the individual feel more exclusive and important secure in the knowledge that they re purchasing something of high quality that is out of reach for others many individuals believe this is worth the premium they pay | |
when a good is priced high consumers generally assume it to be of better quality even when that is not the case many companies source or produce their goods in the same regions or factories but because of marketing and brand identity some are sold at a premium if the price is increased on the same good consumers may then perceive this as improved quality and be willing to pay the higher price | similarly when a good is perceived as difficult to purchase an affluent consumer is willing to pay more for it this is commonly seen in the art world paintings from deceased artists such as picasso or monet fetch millions of dollars because a limited quantity exists the price does not necessarily reflect the quality of the art rather it arises because the artist s paintings are not readily available | |
what is the difference between veblen and giffen goods | the main difference between veblen and giffen goods is that the former are luxury items such as cars yachts and designer jewelry while the latter are non luxury essentials such as potatoes rice and wheat in both cases demand will stay high when prices rise for veblen goods that is about exclusivity for giffen goods it is because they are essentials with no ready substitute | |
are veblen goods always expensive | yes veblen goods are always expensive because price is part of their appeal the purchasers feel that owning them confers high societal status in effect they buy them to show them off a practice known as conspicuous consumption | |
are veblen goods high or low utility goods | veblen goods have high utility because people are purchasing them to feel good about themselves they are paying a premium for the privilege of owning something of high quality that is out of reach for ordinary people the bottom lineveblen goods are high quality luxury items that people purchase to inflate their self esteem the high price is the point which is why demand for them increases as their price increases human nature being what it is there probably will always be a thriving market for veblen goods | |
what is vechain | vechain is a blockchain platform designed to enhance supply chain management and business processes its goal is to streamline these processes and information flow for complex supply chains through the use of distributed ledger technology dlt the vechain platform contains two distinct tokens vechain token vet and vechainthor energy vtho the former is used to transfer value across vechain s network and the latter is used as energy or gas to power smart contract transactions understanding vechainvechain states that its goal is to build a trust free and distributed business ecosystem platform to enable transparent information flow efficient collaboration and high speed value transfers 1supply chain data for business processes are currently compartmentalized in silos among multiple stakeholders this affects information flow which is again divided among stakeholders according to vechain s white paper blockchain technology can break this asymmetric information problem and allow ownership of data to return to and empower its owner the vechain platform claims to provide a 360 degree view of necessary information linked to a product and its business processes such as storage transportation and supply to authorized stakeholders and create greater market transparency 1for example the platform can be used to track quality authenticity storage temperature transportation medium and last mile delivery of a medicine pack or an alcohol bottle right from the manufacturing facility through to the final delivery to the end customer to accomplish this goal vechain uses smart chips or radio frequency identification rfid tags and sensors that broadcast key information onto the blockchain network that can be accessed in real time by authorized stakeholders the application of sensors means that all parameters related to the product can be constantly monitored and problems if any can be communicated back to the relevant stakeholders manufacturers and customers are informed if a drug packet is stored outside a prescribed temperature range allowing for service improvements and better quality control in another example the vechain platform can enable automobile owners to own their data and use it to negotiate better terms and policies with their insurance companies history of vechainvechain was founded in 2015 by sunny lu the former chief information officer cio of louis vuitton china it started as a subsidiary of bitse one of china s largest blockchain companies and is among the few blockchains that already have a substantial customer base among established companies initially the ven token functioned on the ethereum blockchain vechain transitioned onto its own blockchain and rebranded itself in 2018 as part of the rebrand the ven blockchain became the vechainthor vet blockchain goals for the vechain blockchain platform are outlined in its white paper its initial target was to disrupt the supply chain industry by making data actionable and transparent it also plans to be a leader in dapps and initial coin offerings icos made using vechain as well as being an internet of things iot intermediary vechain has inked strategic partnerships over the years with several companies in order to help achieve this goal among them is an agreement with pricewaterhousecoopers pwc for vechain s blockchain powered solutions to be used by the accounting firm s client base to improve product verification and traceability vechain has also partnered with renault creating in conjunction with microsoft and viseo a digital car maintenance book that cannot be tampered with and is the government technology partner for gui an an economic development zone for the central chinese government vechain s blockchain platformthe vechainthor blockchain platform is a public blockchain intended for mass business adoption it has two tokens vet and vtho vet is the vechain token that is used to carry value or smart money from smart contracts in other words transactions on decentralized applications occurring on vechain s blockchain will use vet it is available for investing by the general public the vtho token stands for vechainthor energy and is also known as vethor energy it is used to power transactions on vechain and is equal to the cost of conducting transactions on its blockchain the concept is similar to that of ethereum s ether and neo s gas in that developers need to budget for a certain number of underlying tokens which are not exposed to the public in order to conduct transactions for their decentralized applications per vechain s white paper the two token system was devised for effective governance and to have a predictable economic model for decentralized applications developers in its current form ethereum lacks such a model because the price of ether its native gas token is volatile as such developers have to estimate the amount of ether required for a transaction the transaction fails if their estimate turns out to be incorrect vechain s white paper outlines several technical enhancements that its platform has made to overcome this problem for example the vet blockchain allows proof of work pow to be conducted for every transaction this means that the people conducting a transaction can mine more vtho if their initial estimate was wrong the vechainthor blockchain uses proof of authority as a consensus protocol per this protocol votes are disbursed based on vet holdings and disclosure vet holders without know your customer kyc credentials and with 1 million tokens in their account are assigned 20 of all votes while vet holders with kyc and the same amount in their accounts are responsible for 30 there are 101 master nodes responsible for reaching consensus on transactions in vechain s blockchain this system is different from bitcoin which requires all nodes to vote on a transaction before reaching consensus anonymous nodes are not allowed and disclosure of identity is an essential pre requisite to becoming an authority master node according to vechain s white paper this system uses less power and does not require a minimum number of validators to reach consensus the other type of master node in vechain is the economic master node these do not produce blocks or ledger records and are used as a check on power this is done by allocating a certain number of votes to each economic master node based on their vet holdings each 10 000 vet held by an economic master node gets it a single vote the system of master nodes centralizes voting rights in a decentralized system but the founders of vechain have said that their aim in designing this protocol is to achieve a balance between centralization and decentralization | |
what is vega | vega is the measurement of an option s price sensitivity to changes in the volatility of the underlying asset vega represents the amount that an option contract s price changes in reaction to a 1 change in the implied volatility of the underlying asset investopedia michela buttignolbasics of vegavolatility measures the amount and speed at which price moves up and down and can be based on recent changes in price historical price changes and expected price moves in a trading instrument future dated options have positive vega while options that are expiring immediately have negative vega the reason for these values is fairly obvious option holders tend to assign greater premiums for options expiring in the future than to those that expire immediately vega changes when there are large price movements increased volatility in the underlying asset and falls as the option approaches expiration vega is one of the groups of greeks used in options analysis they are also used by some traders to hedge against implied volatility if the vega of an option is greater than the bid ask spread then the option is said to offer a competitive spread the opposite is also true vega also lets us know how much the price of the option could swing based on changes in the underlying asset s volatility implied volatilityvega measures the theoretical price change for each percentage point move in implied volatility implied volatility is calculated using an option pricing model that determines what the current market prices are estimating an underlying asset s future volatility to be since implied volatility is a projection it may deviate from actual future volatility traders can build a vega neutral strategy with hedges to manage risk they do this if they believe volatility can risk their profit just as price moves are not always uniform neither is vega vega changes over time therefore the traders who use it monitor it regularly as mentioned options approaching expiration tend to have lower vegas compared to similar options that are further away from expiration example of vegaif the vega of an option is greater than the bid ask spread then the option is said to offer a competitive spread the opposite is also true vega also lets us know how much the price of the option could swing based on changes in the underlying asset s volatility assume hypothetical stock abc is trading at 50 per share in january and a february 52 50 call option has a bid price of 1 50 and an asking price of 1 55 assume that the vega of the option is 0 25 and the implied volatility is 30 the call options are offering a competitive spread the spread is smaller than the vega that does not mean the option is a good trade or that it will make the option buyer money this is just one consideration as too high of a spread could make getting into and out of trades more difficult or costly if the implied volatility increases to 31 then the option s bid price and ask price should increase to 1 75 and 1 80 respectively 1 x 0 25 added to the bid ask spread if the implied volatility decreased by 5 then the bid price and ask price should theoretically drop to 0 25 by 0 30 5 x 0 25 1 25 which is subtracted from 1 50 and 1 55 increased volatility makes option prices move expensive while decreasing volatility makes options drop in price | |
what is vega neutral | vega neutral is a method of managing risk in options trading by establishing a hedge against the implied volatility of the underlying asset vega is one of the options greeks along with delta gamma rho and theta vega is the greek that corresponds with the black scholes price factor for volatility but it represents the sensitivity of the price of an option to volatility and not volatility itself options traders will use a vega neutral strategy when they believe that volatility presents a risk to the profits | |
how vega neutral works | vega neutral is not as popular as the neutral positions for the other greeks vega essentially tells traders how a 1 change in the implied volatility iv of an option affects the price so vega is a measure of how sensitive the option premium itself is to volatility a vega neutral position is a way for options traders to remove that sensitivity from their calculations if a position is vega neutral it doesn t make or lose money when the implied volatility changes building a vega neutral portfoliothe vega of a single position is displayed on all the major trading platforms to calculate the vega of an options portfolio you simply sum up the vegas of all the positions the vega on short positions should be subtracted by the vega on long positions all weighted by the lots in a vega neutral portfolio total vega of all the positions will be zero example of vega neutralfor example if an options trader has 100 lots of 100 strike calls that have a vega of 10 each the trader will look to short the same underlying product to eliminate 1 000 worth of vega say 200 lots of 110 strike calls with a vega of 5 this is oversimplifying it however as it doesn t take into account different expirations or any other complexities in fact if the the options have different expiry dates it becomes difficult to achieve true vega neutrality because implied volatility will generally not move by the same amount in options with different terms the implied volatility term structure shows that most options have a fluctuating iv depending on the expiration month to deal with the expiration issue a time weighted vega can be used with the caveat that it is making a big assumption in that the iv is mainly influenced by the time to expiry similarly if a trader is seeking to create a vega neutral position with options on different underlying products they have to be very confident in the degree of correlation between the two underlying products iv vega neutral strategies are usually attempting to profit from the bid ask spread in implied volatility or the skew between the implied volatility in puts and calls that said vega neutral is more often used in combination with other greeks as in a delta neutral vega neutral trade or a long gamma vega neutral trade 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 vehicle excise duty | vehicle excise duty ved is a tax paid for most uk driven and parked vehicles ved does not fit the standard definition of a tax levied at the point of manufacture for cars registered from april 2017 onwards rates paid in the first year are related to the vehicle s carbon dioxide emissions though subsequent payments are not 1breaking down vehicle excise dutyorigins of vehicle excise dutythe first uk vehicle tax originated from the 1888 customs and inland revenue act the tax limited and controlled the use of cars the british government introduced the requirement to number and register cars in 1904 and in 1906 the focus shifted to the condition of the roads in 1909 a new tax based on the power of the car engine was introduced and its proceeds were used to improve road infrastructure the road board a governing body tasked with creating and revising road infrastructure policies was created in 1910 in 1920 the road fund created by the british government to pay for the building and maintenance of uk roads replaced the road board however the revenue collected from the road fund was often appropriated for other uses the misappropriation was so vast that the chancellor of the exchequer winston churchill called it the raid fund from 1937 vehicle excise duties ved were paid into the new consolidated fund and the road fund served only as an administrator until it closed in 1956 in the late 1970s there were discussions about abolishing the ved and increasing fuel tax to cover the shortfall however in 1980 the decision was made to retain the vehicle tax the changing structure of vehicle excise dutyin 1997 the government discussed estimating ved on a car s level of carbon dioxide emission in the 1999 uk budget new cars registered in subsequent years would be classified into one of four vehicle excise duty bands based on their emissions some incentives were given within each band for cars using cleaner fuel the tax on new cars was significantly lower than that on older cars encouraging the motoring public to purchase newer models in 2002 2003 and 2006 they introduced 5th 6th and 7th bands in the 2009 uk budget an overhaul of the system was announced introducing 13 ved bands in which all new cars will be categorized in most recent developments in vedin 2014 the government abolished the previously used paper tax disc which was required to be displayed on a vehicle s windscreen the government announced that there was no need for the discs and that the electronic vehicle register and automatic number plate recognition could ensure that vehicles were correctly licensed and that ved had been paid 2017 saw a major overhaul of the vehicle excise duty band and rate configuration which has resulted in the car tax being substantially higher or lower for certain types of new cars | |
what is the velocity of money | the velocity of money is a measurement of the rate at which money is exchanged in an economy it is the number of times that money moves from one entity to another the velocity of money also refers to how much a unit of currency is used in a given period of time simply put it s the rate at which consumers and businesses in an economy collectively spend money the velocity of money is usually measured as a ratio of gross domestic product gdp to a country s m1 or m2 money supply the word velocity is used here to reference the speed at which money changes hands understanding the velocity of moneythe velocity of money is important for measuring the rate at which money in circulation is being used for purchasing goods and services it is used to help economists and investors gauge the health and vitality of an economy high money velocity is usually associated with a healthy expanding economy low money velocity is usually associated with recessions and contractions economists use the velocity of money to measure the rate at which money is used for goods and services in an economy while it is not necessarily a key economic indicator it can be followed alongside other key indicators that help determine economic health like gdp unemployment and inflation gdp and the money supply are the two components of the velocity of money formula economies that exhibit a higher velocity of money relative to others tend to be more developed the velocity of money is also known to fluctuate with business cycles when an economy is in an expansion consumers and businesses tend to more readily spend money causing the velocity of money to increase when an economy is contracting consumers and businesses are usually more reluctant to spend and the velocity of money is lower since the velocity of money is typically correlated with business cycles it can also be correlated with key indicators therefore the velocity of money will usually rise with gdp and inflation alternatively it is usually expected to fall when key economic indicators like gdp and inflation are falling in a contracting economy example of velocity of moneyconsider an economy consisting of two individuals a and b who each have 100 of money in cash individual a buys a car from individual b for 100 now b has 200 in cash money then b purchases a home from a for 100 and b enlists a s help in adding new construction to their home and for their efforts b pays a another 100 individual a now has 200 in cash individual b then sells a car to a for 100 and both a and b end up with 100 in cash thus both parties in the economy have made transactions worth 400 even though they only possessed 100 each in this economy the velocity of money would be two 2 resulting from the 400 in transactions divided by the 200 in money supply this multiplication in the value of goods and services exchanged is made possible through the velocity of money in an economy the velocity of money formulawhile the above provides a simplified example of the velocity of money the velocity of money is used on a much larger scale as a measure of transactional activity for an entire country s population in general this measure can be thought of as the turnover of the money supply for an entire economy for this application economists typically use gdp and either m1 or m2 for the money supply therefore the velocity of money equation is written as gdp divided by money supply velocity of money gdp money supply text velocity of money frac text gdp text money supply velocity of money money supplygdp gdp is usually used as the numerator in the velocity of money formula though gross national product gnp may also be used as well gdp represents the total amount of goods and services in an economy that are available for purchase in the denominator economists will typically identify money velocity for both m1 and m2 m1 is defined by the federal reserve as the sum of all currency held by the public and transaction deposits at depository institutions m2 is a broader measure of money supply adding in savings deposits time deposits and real money market mutual funds 1 as well the st louis federal reserve tracks the quarterly velocity of money using both m1 and m2 2velocity of money and the economythere are differing views among economists as to whether the velocity of money is a useful indicator of the health of an economy or more specifically inflationary pressures the monetarists who subscribe to the quantity theory of money argue that money velocity should be stable absent changing expectations but a change in money supply can alter expectations and therefore money velocity and inflation for example an increase in the money supply should theoretically lead to a commensurate increase in prices because there is more money chasing the same level of goods and services in the economy the opposite should happen with a decrease in money supply critics on the other hand argue that in the short term the velocity of money is highly variable and prices are resistant to change resulting in a weak and indirect link between money supply and inflation empirically data suggests that the velocity of money is indeed variable moreover the relationship between money velocity and inflation is also variable for example from 1959 through the end of 2007 the velocity of m2 money stock averaged approximately 1 9x with a maximum of 2 198x in 1997 and a minimum of 1 653x in 1964 3st louis federal reserve banksince 2007 the velocity of money has fallen dramatically as the federal reserve greatly expanded its balance sheet in an effort to combat the global financial crisis and deflationary pressures money velocity appeared to have bottomed out at 1 435 in the second quarter of 2017 and was gradually rising until the global recession triggered by the covid 19 pandemic spurred massive u s federal economic stimulus at the end of the second quarter of 2020 the m2v was 1 100 the lowest reading of m2 money velocity in history 3factors affecting the velocity of moneythere are several factors that can affect the velocity of money in an economy these include | |
why is the velocity of money slowing down | the velocity of the m1 money supply has steadily decreased since the recession of 2008 according to figures from the federal reserve bank of st louis 4much of that decline has been attributed to demographic changes and the effects of the great recession with baby boomers approaching retirement and household wealth greatly reduced many consumers were more incentivized towards saving than before federal regulations may have also played a role as the dodd frank act increased the reserve requirements and leverage ratios for banks because these institutions were required to keep more of their assets rather than lend or spend them there was less money to move in the economy one factor in the slowing velocity of money is not a mystery the covid 19 pandemic the velocity of money fell sharply in 2020 likely due to the increased economic uncertainty combined with the influx of stimulus payments | |
what does velocity of money measure | the velocity of money estimates the movement of money in an economy in other words the number of times the average dollar changes hands over a single year a high velocity of money indicates a bustling economy with strong economic activity while a low velocity indicates a general reluctance to spend money | |
how do you calculate the velocity of money | the velocity of money is calculated by dividing a country s gross domestic product by the total supply of money this calculation can use either the m1 money supply which includes physical currency checkable deposits and certain other figures or the m2 supply which also includes savings deposits and money market funds | |
why is the velocity of money so low | the velocity of money in the united states fell sharply during the first and second quarters of 2020 as calculated by the st louis federal reserve bank while there is no definitive explanation the fall is likely due to the diminished activity incurred during the covid 19 pandemic as well as an increase in consumer savings due to economic uncertainty the bottom linethe velocity of money represents the heartbeat of an economy it measures how quickly money changes hands from one transaction to another during times of prosperity the velocity of money tends to be high indicating bustling activity and frequent transactions during an economic downturn the velocity slows indicating that consumers are less willing to spend money or make transactions | |
what is a vendor | a vendor is a party in the supply chain that makes goods and services available to companies or consumers the term vendor is typically used to describe the entity that is paid for goods provided rather than the manufacturer of the goods itself however a vendor can operate as both a supplier or seller of goods and a manufacturer | |
how vendors work | a vendor also known as a supplier is a person or a business entity that sells something a vendor generally finds somewhere to purchase their goods and services after acquiring the necessary items the vendor markets and sells their wares through whichever method works best for them for example if it is a food truck the vendor ensures there are enough supplies to make items on the menu and feed an expected number of customers then drives to a target area and begins selling food some large retail store chains such as target and walmart generally have a list of vendors from which they purchase goods at wholesale prices in turn they then sell the goods at retail prices to their customers a vendor that supplies one of these large stores would need a much larger operation to plan for acquire and provide the goods and services they are contracted for many vendors act as business to business b2b sales organizations that provide parts of a product to another business to make an end product for example if your small business made widgets out of gadgets you d need to find vendors with all the gadgets you need you might find one vendor that has them all or would need to find multiple vendors to assemble your widgets in turn you could sell your widgets on an online retailer platform becoming a vendor yourself some vendors provide services for entities of all sizes and levels for example a human resources department of a large company might plan a holiday party for its employees many hire outside vendors to supply goods and services for the event sometimes the event is too large to be held in buildings owned by the business so the department must choose a location in which case the event space owner becomes a vendor when the area is reserved and the contract signed states require most vendors to be licensed if you re considering becoming a vendor or using one ensure you check with your state licensing office to learn about the requirements 2after that the human resources department reaches out to decorators which become vendors when they are hired to transform the event space into a themed party after the theme is implemented a catering company is contracted to provide food and beverages for the party when the company delivers its service it becomes a vendor to the company hosting the party types of vendorsthere are several types of vendors but in general they all fall into one or two of four categories special considerationsvendors are found throughout the supply chain which is the sum of all individuals organizations resources activities and technologies used to manufacture and sell a product or service the supply chain starts with the production and delivery of raw source materials it ends with the sale and final delivery of the product manufacturers and retailers try to eliminate as much of the supply chain as possible as they know that the final cost of a product increases with each link in the supply chain typically the supply chain consists of three parts a manufacturer a seller and a reseller or as they are more commonly known a retailer vendors can be cheaper than a traditional supply chain because some of the links in the chain are bypassed | |
what is a vendor | a vendor is an entity that sells something it can sell services products or a combination of the two to businesses and consumers | |
what is an example of a vendor | amazon while primarily known for being an online retailer is also a web service provider it provides web hosting database storage and many more services businesses need which are too expensive for many small businesses to buy and maintain | |
what is a vendor vs supplier | suppliers are generally the first supply chain entity where products and services originate a vendor purchases products and services and resells them to clients the bottom linevendors are entities that purchase goods and services and resell them to business clients and consumers you find vendors throughout many business models because paying a vendor is sometimes cheaper than buying directly from a supplier vendors can be businesses of any size from a one person hotdog stand on the sidewalk to a large vendor that stocks warehouse retailers | |
what is vendor financing | vendor financing is a financial term that describes the lending of money by a vendor to a customer who uses that capital to purchase that specific vendor s product or service offerings sometimes called trade credit vendor financing usually takes the form of deferred loans from the vendor it may also include a transfer of stock shares from the borrowing company to the vendor such loans typically carry higher interest rates than those associated with traditional bank loans understanding vendor financingvendor financing helps business owners purchase essential goods or services without requiring those owners to secure traditional bank loans or pledge their personal assets as collateral vendor financing offers numerous other advantages not only does it help loan recipients cultivate strong credit histories but it also allows them to table the use of bank financing until it becomes abundantly necessary to make revenue boosting capital improvements vendor financing most commonly occurs when a vendor sees a higher value in a customer s business than a traditional lending institution does consequently a healthy trusting relationship between the borrower and the vendor sits at the heart of the vendor financing dynamic from the perspective of the vendor while it s certainly not an ideal situation to provide products or services without immediately receiving payment making a sale with delayed payment is better than making no sale at all on the upside the vendor collects interest on the deferred payments furthermore by offering vendor financing programs a vendor can win a competitive advantage over rival firms this arm or unit of the vendor s business is known as an investment center and is regularly reviewed to ensure it is profitable vendor financing typesvendor financing can be structured with either debt or equity instruments in debt vendor financing the borrower agrees to pay a particular price for inventory with an agreed upon interest charge the sum is either repaid over time or written off as a bad debt with equity vendor financing the vendor can provide goods in exchange for an agreed upon amount of company stock equity vendor financing is more common with startup businesses which often use a form of vendor supplied financing known as inventory financing which essentially uses inventory as collateral to back lines of credit or short term loans in business the use of credit in vendor finance is called an open account vendor financing can also be used when individuals lack the capital needed to buy a business outright a vendor may rely on the sales it makes to a particular business to make its own financial targets and by providing financing in the form of a loan it can secure the business while strengthening the relationship with the business owner to make sure it thrives over the long haul various vendor typesvendors can take many forms including payroll management outfits security firms maintenance organizations and other service providers business to business suppliers such as office equipment manufacturers are common providers of vendor financing materials and parts suppliers likewise frequently engage in vendor financing activities | |
what is a vendor note | a vendor note is a short term loan a vendor makes to a customer that is secured by goods the customer buys from the vendor a vendor note is classified as a form of vendor finance or vendor financing which is a type of lending that usually takes the form of a deferred loan made by a vendor vendor notes are most likely to be employed when a vendor has more confidence in a customer s business prospects than a traditional lender a bank would understanding vendor notesvendor notes can be a useful and convenient form of financing particularly when well established vendors with diverse customer bases are taking on new smaller buyers who typically have small amounts of working capital with which to purchase inventory or essential goods in some cases customers may be entirely dependent on vendor note financing to secure vital inventory or equipment the use of such vendor financing can make it easier for a company to increase sales volume and revenue but in doing so it also incurs the risk of the buyers it finances not paying back their loans vendor note loans are often secured by the inventory being sold to the buyer but may also be backed by pledges of the buyer s business assets or cash flow the use of a vendor note will generally denote a good relationship between vendor and customer terms of vendor notesvendor notes vary in terms of their time to maturity but notes with time horizons in the range of three to five years are considered common many different types of terms and conditions can be built into a vendor note such as limitations on the types of business practices the buyer can engage in restrictions on acquiring other inventory or business assets and requirements that specific financial ratios or benchmarks be maintained while vendor notes tend to amount to deferred loans sometimes there may be an interest charge on the borrowed sum the value of goods that has changed hands while vendors would doubtlessly prefer to be paid immediately for goods or services they render maintaining a relationship by helping with financing and being paid back over time sometimes with interest is better than no sale at all advantages and disadvantages of vendor notesdepending on the inventory or equipment you plan on buying vendor notes or vendor financing in general come with some advantages and disadvantages it s important to make sure whether vendor financing or a traditional bank loan will be a better option for your business one of the primary advantages of a vendor note is purchasing equipment at a good value many vendors have in house financing departments that offer customers discounts on the items they need for their business as the product and financing are coming directly from the manufacturer the deal you receive may be better than you d find elsewhere making it an attractive option another strong selling point of a vendor note is the ease of obtaining the purchase and financing simultaneously a manufacturer wants to make the sale and understands the product provided the financing for them is straightforward a bank on the other hand will have to evaluate the manufacturer the product being sold and the buyer which is a much longer process there are generally two types of vendor financing debt financing such as a vendor note and equity financing where the vendor receives stock or equity in the business obtaining financing directly from the vendor also typically comes with lower upfront costs and it is easier to update your equipment over time since you are dealing directly with the manufacturer one of the main disadvantages of vendor notes is if the vendor does not have an in house financing department and you have to deal with a third party non bank financing entity if this entity is not familiar with the vendor or the equipment it may charge a higher interest rate or finance only a small portion of the cost in addition if you are purchasing used equipment the costs may also be higher because the manufacturer incentives no longer apply and the vendor will take that into consideration when pricing the financing lastly some vendors will only provide financing for the equipment but not include any other terms that may benefit your business including transportation and training costs discounts on purchasesease of obtaining purchase and financing simultaneouslylower upfront costssimpler to update equipmenthigher costs via third party financingpurchasing old equipment may be more costlyless coverage in financing termsexample of a vendor notea new medical office buyer wants to acquire a laser device used for special outpatient surgeries at a cost of 1 000 000 it has just 100 000 to spend rather than going to a lender to ask for a business loan a medical device vendor will offer the piece of equipment to the customer under the agreement that the medical office buyer pays back the 900 000 balance of the medical device over a period of five years at an interest rate of 2 as such the vendor will carry a note until the 900 000 is repaid the buyer gets the device which will add a revenue stream the seller gets a sale and pockets the interest on the loan it may also get follow on business from the buyer | |
what is vendor financing | vendor financing is financing that a business obtains directly from the vendor when purchasing inventory or equipment vendor financing stands in contrast to traditional methods of financing such as obtaining a loan from a bank vendor financing is often a deferred loan and can lead to building a strong relationship between a vendor and a customer | |
are vendor notes subordinated debt | vendor notes are subordinated debt meaning they sit below senior debt in the repayment waterfall in the event of bankruptcy holders of subordinated debt are always paid after holders of senior debt are paid off | |
what is a vendor loan agreement | a vendor loan agreement is a financing agreement between a vendor and a buyer in which the vendor agrees to provide capital to the buyer for the purchase of the vendor s product the buyer will pay an upfront cost and the remainder of the cost plus interest will be paid over time or at a later date in the future the vendor loan agreement lays out all of the terms of the financing arrangement such as the parties to the agreement the amount financed the time to maturity and the interest rate | |
what happens if you default on a vendor note | the repercussions of defaulting on a vendor note can vary depending on the arrangement and the terms of the vendor loan agreement the vendor can repossess the inventory or equipment that was sold as well as other assets of the business to recoup its losses the vendor may also be entitled to future cash flows of the business the bottom linea vendor note can be a good option for a business seeking to obtain inventory or equipment it is a particularly good option for a new business that does not have significant levels of cash or credit history to obtain a traditional bank loan vendor notes also establish a relationship between the vendor and a business that could be profitable to both in the future choosing a vendor note or traditional bank loan will depend on what is best for your business so it is important to weigh the pros and cons of each before making a commitment | |
what is a vendor take back mortgage | a vendor take back mortgage is a unique kind of mortgage where the seller of the home extends a loan to the buyer to secure the sale of the property sometimes referred to as a seller take back mortgage this type of loan can benefit both the buyer and the seller the buyer might be able to purchase property above their bank determined financing limit and the seller can get their property sold understanding vendor take back mortgagesmost buyers already have a primary source of funding through a financial institution when they enter into this type of arrangement so a vendor take back mortgage is often a second lien on the property the seller retains equity in the home and continues to own a percentage of its value equal to the amount of the loan this dual possession continues until the buyer pays off the original amount plus interest the second lien serves to guarantee the repayment of the loan the seller can seize the property that s the subject of the lien if the obligation isn t satisfied sellers benefit from vendor take back mortgages because they can generate extra income from the interest on the loan vendor take back mortgage vs traditional mortgagea vendor take back mortgage most often occurs in conjunction with a traditional mortgage in which a homebuyer pledges their house to the bank as collateral for the loan the bank then has a claim on the house should the homebuyer default on the mortgage in the case of a foreclosure the bank can evict the home s occupants and sell the house using the income from the sale to clear the mortgage debt as can the seller or second lienholder in the case of a vendor take back mortgage the most common form of traditional mortgage is the fixed rate mortgage in which the borrower pays the same interest rate for the life of the loan most fixed rate mortgages have between a 10 year and 30 year term during which the borrower s payment including interest won t change if market interest rates rise the borrower might be able to secure a lower rate by refinancing the mortgage if market interest rates drop significantly after the time of purchase in order to get the lowest interest rate it is important to shop around and find the best mortgage lender several factors can affect your interest rate on a traditional mortgage from your credit history to how much of a down payment you put down to where your property is located likewise several factors will affect the interest rate you ll pay on a vendor take back mortgage including how much of a loan you re asking the seller to carry the rate will often be higher when the seller s mortgage is the second lien on the property compensating them for the risk they re taking example of a vendor take back mortgagejane is purchasing her first home for 400 000 she s required to make a down payment to a fixed rate mortgage lender of 20 or 80 000 but she accepts a vendor take back mortgage instead of paying this amount herself the seller lends jane 40 000 toward the mortgage down payment and agrees to pay 40 000 himself this single property now has two separate loans one is the fixed rate mortgage with the financial institution for 320 000 the second is the vendor take back mortgage for 80 000 the fixed rate mortgage is secured with the home as collateral while the take back mortgage is collateralized by a lien on the home in the event of default the bank can foreclose on the home and use proceeds from the sale to satisfy the unpaid debts | |
what s the difference between a vendor take back mortgage and a regular mortgage | a vendor take back mortgage is borrowed from the original owner of a property rather than a bank or other mortgage lender this means that the seller retains partial ownership of the home or property until the loan is paid off | |
what are the advantages of a vendor take back mortgage | a vendor take back mortgage allows people to buy property that they would not otherwise be able to afford a transaction that works to the benefit of both buyer and seller | |
what are the disadvantages of a vendor take back mortgage | for buyers the main disadvantage of a vendor take back mortgage is that the interest rates tend to be higher than a traditional mortgage because the seller s lien is subordinate to the primary lender the seller typically charges a higher interest rate to compensate for their greater level of risk the bottom linea vendor take back mortgage is a lending vehicle where the owner of a property lends a buyer part of the purchase cost this allows people to buy homes that they would not otherwise afford but it does come with a degree of risk for the seller and higher interest rates for the buyer | |
what is a venn diagram | a venn diagram is an illustration that uses overlapping circles to show the logical relation between two or more sets of items circles that overlap have a commonality while circles that do not overlap do not share those traits the venn diagram was popularized by john venn in the 1880s venn diagrams help to visually represent the similarities and differences between two concepts they have long been recognized for their usefulness as educational tools since the mid 20th century venn diagrams have been used as part of the introductory logic curriculum and in elementary level educational plans around the world understanding venn diagramsvenn diagrams are useful for illustrating how different concepts or factors intersect with one another they can show at a glance how things are similar or different and where and how they overlap often the center of a venn diagram the intersection of two or more circles represents some nexus or main idea that can be decomposed into the various other circles with labels on the outer portions more distinct than those toward the center the overlapping areas can also be used to show where two otherwise disparate contexts share commonalities for instance in the example diagram below we see that while the urban and rural contexts are distinct with their own set of activities they also share sporting events while there are many ways to organize a venn diagram they most often consist of overlapping circles each circle by itself represents a set which may include ideas concepts numbers or objects | |
when circles overlap or intersect those sub sets that are shared are known as a union or intersection areas that don t overlap show differences between sets and a complement set refers to everything not shared by a particular set or sub set 1 | the history and origin of venn diagramsthe english logician john venn popularized the diagram in the 1880s he called them eulerian circles after the swiss mathematician leonard euler who created similar diagrams in the 1700s 2the term venn diagram did not appear until 1918 when clarence lewis an american academic philosopher and the eventual founder of conceptual pragmatism referred to the circular depiction as the venn diagram in his book a survey of symbolic logic 3venn studied and taught logic and probability theory at cambridge university where he developed his method of using diagrams to illustrate the branch of mathematics known as set theory 4 he published a precedent setting work the logic of chance which explained the frequency theory of probability in it he argued that probability contrary to popular assumption should be established based on the regularity with which something is predicted to occur 5 in another book symbolic logic venn built on and developed mathematician george boole s theories on algebra 6 this work helped him develop the venn diagram venn diagrams have been used since the mid 20th century in classrooms from the elementary school level to introductory logic applications for venn diagramsvenn diagrams are used to depict how items relate to each other against an overall backdrop universe data set or environment a venn diagram could be used for example to compare two companies within the same industry by illustrating the products both companies offer where circles overlap and the products that are exclusive to each company outer circles venn diagrams are at a basic level simple pictorial representations of the relationship that exists between two sets of things however they can be much more complex still the streamlined purpose of the venn diagram to illustrate concepts and groups has led to their popularized use in many fields including statistics linguistics logic education computer science and business examples of venn diagramsa venn diagram could be drawn to illustrate fruits that come in red or orange colors below we can see that there are orange fruits circle b such as persimmons and tangerines while apples and cherries circle a come in red colors peppers and tomatoes come in both red and orange colors as represented by the overlapping area of the two circles you might also draw a venn diagram to help decide which of two cars to purchase the venn diagram shows the features that are exclusive to each car and the features that both cars have below we see that car a is a sedan that s powered by gasoline and gets 20 miles per gallon while car b is a hybrid gets 40 miles per gallon and is a hatchback the shaded region where the two circles overlap shows the features that both cars have in common which include a radio four doors bluetooth capability and airbags the venn diagram graphically conveys the similarities and differences between the two cars to help decide which to purchase | |
what is a venn diagram in math | a venn diagram in math is used in logic theory and set theory to show various sets or data and their relationship with each other | |
how do you read a venn diagram | a venn diagram is read by observing all of the circles that make up the entire diagram each circle is its own item or data set the portions of the circles that overlap indicate the areas that are in common amongst the different items whereas the parts that do not overlap indicate unique traits among the item or data set represented by the circle | |
why are they called venn diagrams | they are called venn diagrams because the diagram was developed by john venn an english logician | |
what is the middle of a venn diagram called | the middle of a venn diagram where two or more sets overlap is known as the intersection | |
does a venn diagram always use 2 or 3 circles | while often employing a pair or triplet of circles venn diagram can use any number of circles or any other shape to show the differences and intersections of different sets the bottom linevenn diagrams are an efficient way to express the relationship between items and which attributes they have in common since they help visualize the similarities and differences between limited sets of things they are widely used in education probability logic statistics linguistics and computer science | |
what is venture capital vc | venture capital vc is a form of private equity and a type of financing for startup companies and small businesses with long term growth potential venture capital generally comes from investors investment banks and financial institutions venture capital can also be provided as technical or managerial expertise investopedia michela buttignolunderstanding venture capital vc vc provides financing to startups and small companies that investors believe have great growth potential financing typically comes in the form of private equity pe ownership positions are sold to a few investors through independent limited partnerships lps venture capital tends to focus on emerging companies while pe tends to fund established companies seeking an equity infusion vc is an essential source for raising money especially if start ups lack access to capital markets bank loans or other debt instruments 1harvard business school professor georges doriot is generally considered the father of venture capital he started the american research and development corporation in 1946 and raised a 3 58 million fund to invest in companies that commercialized technologies developed during wwii 23 the corporation s first investment was in a company that had ambitions to use x ray technology for cancer treatment the 200 000 that doriot invested turned into 1 8 million when the company went public in 1955 3vc became synonymous with the growth of technology companies in silicon valley on the west coast by 1992 48 of all investment dollars went into west coast companies northeast coast industries accounted for just 20 4 during 2022 west coast companies accounted for more than 37 of all deals while the mid atlantic region saw just around 24 of all deals 5types of venture capitalthe amount global vc backed companies raised in 2023 6 | |
how to secure vc funding | many venture capitalists have had prior investment experience often as equity research analysts vc professionals tend to concentrate on a particular industry a venture capitalist who specializes in healthcare for example may have had prior experience as a healthcare industry analyst advantages and disadvantages of venture capitalventure capital provides funding to new businesses that do not have enough cash flow to take on debts this arrangement can be mutually beneficial because businesses get the capital they need to bootstrap their operations and investors gain equity in promising companies vcs often provide mentoring and networking services to help them find talent and advisors a strong vc backing can be leveraged into further investments however a business that accepts venture capital support can lose creative control over its future direction vc investors are likely to demand a large share of company equity and they may make demands of the company s management many vcs are only seeking to make a fast high return payoff and may pressure the company for a quick exit provides early stage companies with capital to bootstrap operationscompanies don t need cash flow or assets to secure vc fundingvc backed mentoring and networking services help new companies secure talent and growthdemand a large share of company equitycompanies may find themselves losing creative control as investors demand immediate returnsvcs may pressure companies to exit investments rather than pursue long term growthangel investorsventure capital can be provided by high net worth individuals hnwis also often known as angel investors or venture capital firms the national venture capital association is an organization composed of venture capital firms that fund innovative enterprises 7angel investors are typically a diverse group of individuals who have amassed their wealth through a variety of sources however they tend to be entrepreneurs themselves or recently retired executives from business empires the majority look to invest in well managed companies that have a fully developed business plan and are poised for substantial growth these investors are also likely to offer to fund ventures that are involved in the same or similar industries or business sectors with which they are familiar another common occurrence among angel investors is co investing in which one angel investor funds a venture alongside a trusted friend or associate often another angel investor venture capital successdue to the industry s proximity to silicon valley the overwhelming majority of deals financed by venture capitalists occurred in the technology industry the internet healthcare computer hardware and services and mobile and telecommunications in 2023 san francisco still ranked highest among vc investments 8 other industries have benefited from vc funding including staples and starbucks sbux google and intel have venture funds to invest in emerging technology 910 in 2019 starbucks also announced a 100 million venture fund to invest in food startups 11 vc has matured over time and the industry comprises an assortment of players and investor types who invest in different stages of a startup s evolution | |
why is venture capital important | new businesses are often highly risky and cost intensive ventures as a result external capital is often sought to spread the risk of failure in return for taking on this risk through investment investors in new companies can obtain equity and voting rights for cents on the potential dollar venture capital therefore allows startups to get off the ground and founders to fulfill their vision | |
what is late stage investing | late stage financing has become more popular because institutional investors prefer to invest in less risky ventures as opposed to early stage companies where the risk of failure is higher 12 | |
how have regulatory changes boosted vc | the small business investment act sbic in 1958 boosted the vc industry by providing tax breaks to investors in 1978 the revenue act was amended to reduce the capital gains tax from 49 to 28 13 in 1979 a change in the employee retirement income security act erisa allowed pension funds to invest up to 10 of their assets in small or new businesses 14 the capital gains tax was reduced to 20 in 1981 15 these developments catalyzed growth in vc and the 1980s turned into a boom period for venture capital with funding levels reaching 4 9 billion in 1987 16the bottom lineventure capital represents a central part of the lifecycle of a new business before a company can start earning revenue it needs start up capital to hire employees rent facilities and begin designing a product this funding is provided by vcs in exchange for a share of the new company s equity | |
what is a venture capital backed ipo | the term venture capital backed ipo refers to the initial public offering of a company that was previously financed by private investors these offerings are considered a strategic plan by venture capitalists to recover their investments in the company investors normally wait for an opportune time to issue this type of initial public offering in order to maximize their return on investment roi understanding venture capital backed iposventure capital is a type of private equity this kind of financing is provided by investors and firms to companies with high growth potential or to those that demonstrate high growth venture capital firms or funds invest in early stage companies in exchange for an equity stake taking on any of the associated risks in the hopes that some of the startups they support will become successful the typical venture capital investment occurs after an initial round of seed funding the first round of institutional venture capital to fund growth is called the series a round venture capitalists provide seed capital so they can maximize their return through an exit strategy such as a venture capital backed ipo and because they provide new companies with a great deal of their initial financing they have certain rights and responsibilities including how and when a company goes public venture capitalists look and wait for the most optimal time to conduct an ipo this is to make sure they re able to exit their position in a company while making the best possible return the alternative to an ipo for a venture capital backed company is being acquired getting purchased by another company the acquisition of a venture capital backed company is known as a trade sale both options are known as exit strategies because they allow venture capitalists and entrepreneurs to get money out of their investments the alternative to a venture capital backed ipo is an acquisition multiple sources regularly report on both venture capital backed ipos along with the volume of mergers and acquisitions m a in lean economic times there tend to be fewer venture capital backed ipos because of low investor confidence as a result of the financial crisis 2008 and 2009 saw record low numbers of venture capital backed ipos special considerationsventure capital just like angel investing and crowdfunding options is an attractive option for new companies this is especially true for entities that have limited operating histories and are too small to raise capital in the public markets companies that fall into this category may not be at the point where they can secure a bank loan or complete a debt offering attracting venture capital is very different from raising debt or a loan while lenders have a legal right to interest on a loan and repayment of the capital irrespective of the success or failure of a business venture capital invested in exchange for an equity stake in the business carries no such legal protection and is speculative in nature the return on a venture capitalist s investment depends entirely on the growth and profitability of the business this means that a venture capitalist takes a risk of loss along with the expectation of a return on their investment example of venture capital backed ipotesla and open table both went public in venture capital based ipos another great example of a venture capital backed ipo is uber uber the ridesharing company was founded in 2009 raising nearly 20 billion from venture capitalists including morgan stanley softbank and g squared the company s final round of financing took place in 2018 when it raised 500 million uber went public in a venture capital backed ipo in may 2019 shares were priced at 45 each allowing the company to raise roughly 8 billion 1 | |
what are venture capital funds | venture capital funds are pooled investment funds that manage the money of investors who seek private equity stakes in startups and small to medium sized enterprises with strong growth potential these investments are generally characterized as very high risk high return opportunities in the past venture capital vc investments were only accessible to professional venture capitalists but now accredited investors have a greater ability to take part in venture capital investments still vc funds remain largely out of reach to ordinary investors understanding venture capital fundsventure capital vc is a type of equity financing that gives entrepreneurial or other small companies the ability to raise funding before they have begun operations or started earning revenues or profits venture capital funds are private equity investment vehicles that seek to invest in firms that have high risk high return profiles based on a company s size assets and stage of product development venture capital funds differ fundamentally from mutual funds and hedge funds in that they focus on a very specific type of early stage investment all firms that receive venture capital investments have high growth potential are risky and have a long investment horizon venture capital funds take a more active role in their investments by providing guidance and often holding a board seat vc funds therefore play an active and hands on role in the management and operations of the companies in their portfolio venture capital funds have portfolio returns that tend to resemble a barbell approach to investing many of these funds make small bets on a wide variety of young startups believing that at least one will achieve high growth and reward the fund with a comparatively large payout at the end this allows the fund to mitigate the risk that some investments will fold operating a venture capital fundventure capital investments are considered either seed capital early stage capital or expansion stage financing depending on the maturity of the business at the time of the investment however regardless of the investment stage all venture capital funds operate and are regulated in much the same way like all pooled investment funds venture capital funds must raise money from outside investors prior to making any investments of their own a prospectus is given to potential investors of the fund who then commit money to that fund all potential investors who make a commitment are called by the fund s operators and individual investment amounts are finalized from there the venture capital fund seeks private equity investments that have the potential of generating large positive returns for its investors this normally means the fund s manager or managers review hundreds of business plans in search of potentially high growth companies the fund managers make investment decisions based on the prospectus mandates and the expectations of the fund s investors after an investment is made the fund charges an annual management fee usually around 2 of assets under management aum but some funds may not charge a fee except as a percentage of returns earned the management fees help pay for the salaries and expenses of the general partner sometimes fees for large funds may only be charged on invested capital or decline after a certain number of years venture capital fund returnsinvestors of a venture capital fund make returns when a portfolio company exits either in an ipo or a merger and acquisition two and twenty or 2 and 20 is a common fee arrangement that is standard in venture capital and private equity the two means 2 of aum and twenty refers to the standard performance or incentive fee of 20 of profits made by the fund above a certain predefined benchmark if a profit is made off the exit the fund also keeps a percentage of the profits typically around 20 in addition to the annual management fee though the expected return varies based on industry and risk profile venture capital funds typically aim for a gross internal rate of return around 30 venture capital firms and fundsventure capitalists and venture capital firms fund several different types of businesses from dotcom companies to biotech and peer to peer finance companies they generally open up a fund take in money from high net worth individuals companies seeking alternative investments exposure and other venture funds then invest that money into a number of smaller startups known as the vc fund s portfolio companies venture capital funds are raising more money than ever before according to financial data and software company pitchbook the venture capital industry invested a record 136 5 billion in american startups by the end of 2019 1 the total number of venture capital deals for the year totaled nearly 11 000 an all time high pitchbook reported two recent deals included a 1 3 billion investment round into epic games as well as instacart s 871 0 million series f pitchbook also cited an increase in the size of funds with the median fund size rounding out to about 82 million while 11 funds closed out the year with 1 billion in commitments including those from tiger global bessemer partners and ggv | |
what is a venture capital trust vct | the term venture capital trust vct refers to an investment vehicle that operates in the united kingdom the vct is a closed end fund that was created by the u k government in the 1990s to help direct investment into local private businesses these funds are tax efficient and allow individual investors to access venture capital investments via capital markets vcts seek out potential venture capital investments in small unlisted firms that are in their early stages to generate higher than average risk adjusted returns vcts are commonly listed on the london stock exchange lse | |
how venture capital trusts vcts work | the british government introduced a series of venture capital schemes in 1995 these include the enterprise investment scheme seed enterprise investment scheme and venture capital trust scheme all three of these programs were designed to encourage the nation s private sector growth and generate investment from individual investors 1retail investors can purchase shares in venture capital trusts that are traded on major exchanges like the lse this allows investors to take part in the growth of smaller private up and coming businesses indirectly vcts fall under the purview of fund managers who work for investment firms the money from investors is pooled together and distributed to these businesses to help them grow 21certain criteria must be met in order for a fund to be classified as vct some of the main qualifications include the government exempts these trusts from corporate taxes on capital gains that arise from their investments they also provide investors with certain tax benefits including income tax relief for 30 for annual investments of up to 200 000 as long as they are held for a minimum of five years and a tax exemption on income derived from vct investment dividends investors can t defer capital gains taxes though 3although there is no direct stock exchange equivalent to vcts in the united states they are similar to business development companies which are corporations that invest in small and mid size companies as well as distressed businesses special considerationsinvestors who are interested in purchasing shares in vcts can do so directly through fund managers in new offerings shares can also be purchased on the secondary market on public exchanges in the united kingdom such as the lse fund managers usually charge fees that are higher than other investments that s because vcts can be fairly complex and often require more attention upfront fees can be as high as 5 while the annual management fees can be in the neighborhood of 2 2investors should be aware of the risks involved with vcts because of the nature and size of the companies involved investing in these funds may result in significant losses types of venture capital trustsvcts invest in different types of companies across various industries for fixed periods of time evergreen vcts invest indefinitely whereas certain short term venture capital trusts called limited life vcts are only designed to bring income for a few years there are also generalist vcts which are trusts that diversify across multiple sectors and industries and specialist vcts which focus on one sector at a time 2investors with a particular interest or background in technology can choose to hedge their bets on a specialist technology focused vct the final type of vct is called an aim venture capitalist trust it focuses on companies that are already public or are on the verge of becoming public on the lse s alternative investment market aim 32real world example of venture capital trustthe octopus titan venture capital trust is one of the country s largest vcts the fund is invested in more than 90 tech enabled companies with strong growth potential that are in the development stage including these companies comprise a variety of sectors the firm aims for dividends of around five pence per year additional dividends may also be allocated if businesses within the portfolio are sold at a high profit the fund returned 32 8 to investors in the year up to june 30 2021 4 | |
what is a venture capitalist | a venture capitalist vc is a private equity investor who provides capital to companies with high growth potential in exchange for an equity stake vc investments typically involve funding startup ventures or small companies that wish to expand but don t have access to the equities markets | |
what is venture philanthropy | venture philanthropy is the application or redirection of principles of traditional venture capital vc financing to achieve philanthropic endeavors often it is exercised in the context of charitable startups green companies or b corporations as the venture capitalists offering funding to these types of firms will have the greatest breadth of experience in these areas understanding venture philanthropyventure philanthropy applies most of the same principles of venture capital funding to invest in start up growth or risk taking social ventures it is not explicitly interested in profit but rather in making investments that promote some sort of social good like socially responsible investments sri to meet environmental social and governance esg criteria it is an umbrella term that can be used to refer shorthand to many different kinds of philanthropic investing but notably it is distinct from impact investing which places more emphasis on turning a profit while nevertheless investing in ventures that address social concerns venture philanthropy is characterized by a high degree of investor oversight and engagement in addition to financing plans which are tailored very specifically to a company or organization s capacity building needs oftentimes major donors will sit on the boards of organizations they support and they generally have intimate involvement in operational or managerial aspects of the business venture philanthropy ventures generally focus on building capital and scaleother considerationssuch vcs will also provide non financial support like offering executive advice marketing the initiatives using their own platforms and measuring performance strategically most of these practices are drawn from successful venture capital initiatives but judge the efficacy of the organization on standards like overall social impact which depart from the usual standards of a successful venture capital investment being focused only on economic profit this kind of investment takes many forms these include private foundations owned or supported by wealthy individuals like the bill melinda gates foundation government or university grants designed to support philanthropic endeavors philanthropic investing arms of major investing institutions or charities which encourage large or institutional donations in the united states most investment is grant based this usually results in selective carefully chosen multi year grants the high competition for which is said to encourage innovation origins of venture philanthropythe term venture philosophy is often attributed to john d rockefeller iii in 1969 who described it as an adventurous approach to funding unpopular social causes 1 the rockefeller foundation remains a leading outlet for socially attuned investing venture philanthropy arose largely as a result of a growing public impression that traditional financing mechanisms investments government or university grants etc rarely assisted non profit organizations or other socially beneficial industries build capital venture philanthropy showed an increase as awareness of climate change and environmental degradation rose to the forefront of public concern however it has shown signs of ceding dominance in the philanthropic investment sphere to impact investing which is concerned with making a profit while being socially responsible cap and trade carbon emissions markets or subsidies granted to sustainable businesses have attempted to bridge the gap between the market s drive for profit and the philanthropic concern for socially responsible business practices | |
what is verge xvg | verge xvg is an open source decentralized cryptocurrency that claims to offer completely anonymous transactions by obfuscating the location and the internet protocol ip address of the transacting participants verge trades on leading cryptocurrency exchanges with the symbol xvg verge uses proof of work consensus that supports five different algorithms scrypt x17 lyra2rev2 myr groestl and blake2s this allows users to choose from different mining devices history of verge xvg verge was announced in 2014 under the name dogecoindark in the bitcointalk forum where many cryptocurrencies were announced in the past it was created by justin sunerok valo a software engineer and developer who felt there was not enough anonymity in the existing blockchains dogecoindark is rumored to be a fork of dogecoin but some in the community believe it to be a bitcoin fork in 2016 dogecoindark was rebranded to verge to prevent affiliation with dogecoin the verge xvg network apparently suffered a 51 attack in april 2018 with the attacker reportedly taking about 1 1 million in xvg another attack on the blockchain occurred in may 2018 resulting in the attacker taking about 800 000 in xvg 1 this was followed in february 2021 by a third attack on the network 2verge has a storied past but the team continues developing and growing its footprint in the blockchain and cryptocurrency space it is listed on several decentralized exchanges and in 2023 an erc 20 token xvgeth was released allowing users to swap xvg and xvgeth 3the total number of xvg is 16 55 million and about 16 51 million were in circulation as of june 27 2028 4concerns about vergeverge focuses on anonymity by obscuring users ip addresses an ip address is an identifying number associated with a connected device using an ip address it is possible to trace the user and the online activities they performed on the connected device obfuscating ip addresses makes transactions completely untraceable verge ensures anonymity through the use of multiple anonymity centric networks such as the onion router tor and invisible internet project i2p tor protects users identities by bouncing their communications over a distributed network of relays and tunnels this network is run by volunteers spread across the globe i2p encrypts user data and sends it through a volunteer run anonymous peer to peer globally distributed network 5while anyone can view the various transactions occurring on the verge public ledger the use of tor and i2p network layers hide the location as well as the ip addresses of the transacting participants because verge provides its users with this level of anonymity it is subject to emerging regulations for privacy coins in some jurisdictions centralized and regulated exchanges have removed privacy coins from their listings to avoid clashing with regulators making it more difficult for users in certain areas to access these coins or convert them to fiat currencies verge vs bitcoinboth verge and bitcoin are decentralized digital currencies however verge was created with a special emphasis on privacy as a virtual currency verge has a significantly smaller market capitalization than bitcoin 6while the supply of bitcoin is limited to 21 000 000 the total number of verge tokens is greater it is limited to a total supply of 16 555 000 000 both verge and bitcoin use a proof of work pow system to verify transactions on the blockchain but verge is altered to accept five different mining algorithms which is believed to have been how the blockchain was attacked in the past verge also has a halving schedule where the mining rewards are cut in half at specific intervals the bitcoin block reward halves every 210 000 blocks but verge uses a 500 000 block schedule | |
what happened to verge crypto | verge xvg is still available on many decentralized exchanges and developers continue to post improvements or updates to the blockchain and ecosystem | |
is it worth it to buy xvg | there is no way to tell what will happen to xvg in the future so whether it is worth it or not depends on your preferences market outlook and what you believe will happen to the cryptocurrency who is behind the verge coin justin valo is the software developer who originally created the idea behind verge the bottom lineverge xvg is a privacy oriented cryptocurrency that uses proof of work and five different algorithms it also uses the tor network and i2p to hide users addresses the comments opinions and analyses expressed on investopedia are for informational purposes only read our warranty and liability disclaimer for more info as of the date this article was written the author does not own xvg | |
what is versioning | versioning also known as quality discrimination is a business practice in which a company produces different models of essentially the same product and then charges different prices for each model versioning a product gives the consumer the option of purchasing a higher valued model for more money or a lower valued model for less money in this way the business is attempting to attract higher prices based on the value a customer perceives versioning explainedversioning is usually done when a product has large fixed costs of production and small variable costs for example in software packages features are added or taken away to give different versions and price points because generally speaking having different options will accommodate different utilities of consumers this idea is based on a customer s willingness to pay a higher willingness to pay will result in the purchase of a higher quality product and a lower willingness to pay will result in the purchase of a lower quality product versioning can be found in a wide variety of industries in the consumer technology market tablets and smartphones often are released in different versions that may feature varied tiers of data storage capacity and other options for instance a higher end version of a smartphone may include a higher resolution screen for playing back video as well as control features not found on the other phones in the product line often versions will include a low cost or budget model with no frills and only basic functionality as well as a high end or luxury model with all the bells and whistles and higher quality trim which comes at the highest price point examples of versioningsoftware suites frequently see versioning options that allow customers to choose the features they want to pay to access for example microsoft sells its office suite of programs in different versions in home personal and student variations the company also offers the software suite in different tiers for business users with each iteration including different software titles as well as services depending on the version purchased subscription television providers which can be cable or satellite can also offer customers different versions of their services typically offered as packages set at different prices as more channels are added the price increases with premium channels often reserved for the more costly package offerings the auto industry applies versioning to its products as well the base model of most any vehicle can be equipped with optional features such as premium sound systems connectivity with internet and data services and onboard roadside services the vehicle may have engine options allowing for faster models seating options can also increase or decrease the passenger capacity across different models | |
what is vertical analysis | vertical analysis is a method of financial statement analysis in which each line item is listed as a percentage of a base figure within the statement thus line items on an income statement can be stated as a percentage of gross sales while line items on a balance sheet can be stated as a percentage of total assets or total liabilities and vertical analysis of a cash flow statement shows each cash inflow or outflow as a percentage of the total cash inflows investopedia michela buttignol | |
how vertical analysis works | vertical analysis makes it much easier to compare the financial statements of one company with another and across industries this is because one can see the relative proportions of account balances it also makes it easier to compare previous periods for time series analysis in which quarterly and annual figures are compared over a number of years in order to gain a picture of whether performance metrics are improving or deteriorating for example by showing the various expense line items in the income statement as a percentage of sales one can see how these are contributing to profit margins and whether profitability is improving over time it thus becomes easier to compare the profitability of a company with its peers financial statements that include vertical analysis clearly show line item percentages in a separate column these types of financial statements including detailed vertical analysis are also known as common size financial statements and are used by many companies to provide greater detail on a company s financial position common size financial statements often incorporate comparative financial statements that include columns comparing each line item to a previously reported period vertical analysis is used in order to gain a picture of whether performance metrics are improving or deteriorating vertical vs horizontal analysisanother form of financial statement analysis used in ratio analysis is horizontal analysis or trend analysis this is where ratios or line items in a company s financial statements are compared over a certain period of time by choosing one year s worth of entries as a baseline while every other year represents percentage differences in terms of changes to that baseline for example the amount of cash reported on the balance sheet on dec 31 of 2024 2023 2022 2021 and 2020 will be expressed as a percentage of the dec 31 2020 amount instead of dollar amounts you might see 141 135 126 118 and 100 this shows that the amount of cash at the end of 2024 is 141 of the amount it was at the end of 2020 by doing the same analysis for each item on the balance sheet and income statement one can see how each item has changed in relationship to the other items example of vertical analysisfor example suppose xyz corporation has gross sales of 5 million cost of goods sold of 1 million general and administrative expenses of 2 million and a 25 tax rate its income statement will look like this if vertical analysis is used | |
what is the difference between horizontal analysis and vertical analysis | horizontal analysis also known as trend analysis compares historical data on a financial statement over different accounting periods there is a baseline period and numbers from succeeding periods are calculated as a percentage of the base period vertical analysis looks at numbers in financial statements in the same period and calculates each line item as a percentage of the base figure in that section horizontal analysis indicates long term trends and highlights areas of strength and those that need improvement vertical analysis indicates the relative importance of each line item in a certain period | |
what is an example of vertical analysis | a company sold 40 000 units of products 14 000 of which were sneakers and 26 000 of which were boxing gloves vertical analysis would show that sneakers made up 35 of sales 14 000 40 000 and boxing gloves made up 65 of sales 26 000 40 000 | |
what are the pros and cons of vertical analysis | one of the pros of vertical analysis is that it allows for the comparison of financial statements from one accounting period to the next as well as for comparisons among different companies one of its cons is that it doesn t take into consideration absolute numbers so if you are comparing two companies looking at percentages will give a different result than absolute numbers the bottom linevertical analysis looks at the contributing percentage of each line item to the total base figure it can provide information on what metrics are improving and which are worsening it can be used to compare different components of companies and the same company in different time periods | |
what is vertical equity | vertical equity is a method of collecting income tax in which the taxes paid increase with the amount of earned income the driving principle behind vertical equity is that those who have the ability to pay more taxes should contribute more than those who are not this can be contrasted with horizontal equity whereby individuals with similar income and assets should pay the same amount in taxes understanding vertical equitythe equity of a tax system speaks to whether the tax burden is distributed fairly among the population the ability to pay principle states that the amount of tax an individual pays should be dependent on the level of burden the tax will create relative to the wealth of the individual the ability to pay principle gives rise to two notions of fairness and equity vertical and horizontal equity vertical equity drives the principle that people with higher incomes should pay more tax through proportional or progressive tax rates in proportional taxation the amount of taxes paid increases directly with income everyone pays the same proportion of their income in tax since the effective average tax rate does not change with income example of vertical equityfor example of vertical equity consider a taxpayer that earns 100 000 per annum and another that earns 50 000 per annum if the tax rate is flat and proportional at 15 the higher income earner will pay 15 000 tax for the given tax year while the taxpayer with the lower income will have a tax liability of 7 500 with the same rate applied across all income amounts the individuals with more resources or higher income levels will always pay more tax in dollars than lower earners progressive taxationprogressive taxation includes tax brackets in which people pay taxes based on the tax bracket that their income places them each tax bracket will have a different tax rate with higher income brackets paying the highest percentages under this taxation system effective average tax rates increase with income so that the rich pay a higher share of their income in taxes than people whose self reported incomes were in the lowest income bracket for example in the united states a single taxpayer that earns 100 000 has a top marginal tax rate of 24 as of 2019 1 their tax liability would be 18 174 50 for an effective tax rate of 18 17 the top marginal tax rate for a single taxpayer whose annual income is 50 000 is 22 1 in this case this taxpayer would pay 6 864 for an effective tax rate of 13 73 the other yardstick that is used to measure equity in a taxation system is the horizontal equity which states that people with similar abilities to pay should contribute the same amount in taxes to the economy the basis behind this notion is that people in the same income group are equal in their contribution capacity to society and thus should be treated the same by imposing the same level of income tax for example if two taxpayers earn 50 000 they should both be taxed the same rate since they both have the same wealth or fall within the same income bracket however horizontal equity is hard to achieve in a tax system with loopholes deductions and incentives because the provision of any tax break means that similar individuals effectively do not pay the same rate | |
what is vertical integration | vertical integration is a strategy that helps a company streamline its operations by taking ownership of various stages of its production process companies achieve vertical integration through mergers or acquisitions or establishing suppliers manufacturers distributors or retail locations rather than outsourcing them vertical integration often requires significant initial capital investment mira norian investopedia | |
how companies use vertical integration | a company can broaden its footprint across the supply chain or manufacturing process with vertical integration allowing for more self reliance on aspects of the process vertical integration lets manufacturers directly source raw materials or sell products to consumers the supply chain or sales process typically begins with raw materials from a supplier and ends with the final product to the customer vertical integration requires a company to buy or recreate a part of the production distribution or retail sales process that was previously outsourced companies can vertically integrate by purchasing their suppliers to reduce manufacturing costs they can invest in the retail end of the process by opening websites and physical stores they can invest in warehouses and fleets of vans to control the distribution process as a company engages in more activities along a single supply chain it may result in a market monopoly a monopoly that occurs due to vertical integration is also called a vertical monopoly types of vertical integrationalthough vertical integration can reduce costs and create a more efficient supply chain the capital expenditures involved can be significant advantages and disadvantages of vertical integrationvertical integration helps companies gain greater control over the supply chain and manufacturing process leading to lower costs economies of scale and less reliance on external parties through vertical integration companies can circumnavigate external monopolies companies that vertically integrate begin a long term process that requires widespread buy in this also includes heavy upfront capital expenditure requirements to acquire the proper company integrate new and existing systems and ensure that staff is trained across the manufacturing or delivery process because companies commit capital to a specific process or product instead of an external vendor a company will likely have committed money that cannot be easily recovered in addition a company may lose the opportunity to gain unique knowledge through different external vendors long term cost saving due to favorable pricing and minimal supply chain disruptionseconomies of scale which increase efficiencyreduces or eliminates the need to rely on external parties suppliersgreater control over the product inputs and process which may lead to superior productsrequires large upfront capital requirements to implementreduces a company s long term flexibilityloss of focus on a company s primary objective or customerdispleased customer base that would prefer to work with smaller retailervertical integration vs horizontal integrationvertical integration involves acquiring a key component of the supply chain that the company has previously contracted for it may reduce the company s costs and give it greater control of its products ultimately it can increase the company s profits horizontal integration on the other hand involves the acquisition of a competitor or related business a company may do this to eliminate a rival diversify its core business expand into new markets or increase its overall sales while a vertical integration strategy stretches a company along a single process horizontal integration is a more pointed approach that causes a company to become more specific or niche within a certain market examples of vertical integrationnetflix nflx is an example of vertical integration the company started as a dvd rental business before moving into online streaming of films and movies licensed from major studios as of 2024 the company uses its distribution model to promote its original content alongside programming licensed by studios 1the merger of live nation and ticketmaster in 2010 created a vertically integrated entertainment company that manages and represents artists produces shows and sells event tickets the combined entity manages and owns concert venues while also selling tickets to the events at those venues 2the fossil fuel industry is a case study in vertical integration british petroleum bp and shell shel have exploration divisions that seek new sources of oil and subsidiaries that are devoted to extracting and refining it their transportation divisions transport the finished product their retail divisions operate the gas stations that deliver their product 34 | |
when is an acquisition considered vertical integration | an acquisition is an example of vertical integration if it results in the company s direct control over a key piece of its production or distribution process that had previously been outsourced | |
is vertical integration good for a company | whether vertical integration makes sense for a company depends on what s good for it in the long run if a company makes clothing with buttons it can buy the buttons or make them making them eliminates the markup charged by the button maker it may give the company greater flexibility to change styles or colors while eliminating the frustrations of dealing with a supplier | |
why do companies use vertical integration | companies use vertical integration to gain control over the supply chain of a manufacturing or distribution process by taking certain steps in house the manufacturer can control the timing process and aspects of additional stages of development owning more of the process may also result in long term cost savings the bottom linevertical integration is the business arrangement in which a company controls different stages along the supply chain instead of relying on external suppliers the company strives to bring production processes in house though vertical integration may result in increased upfront capital outlays the goal is to streamline processes for more efficient and controlled operations in the long term | |
what is vertical line charting | vertical line charting is a technique used by technical traders and market technicians to track the price moves of a security in vertical line charting the price action over a specified period is summarized by a vertical bar the security s high and low prices for the period are denoted by the top and bottom of the line respectively while its opening and closing prices are indicated by short horizontal bars to the left and right of the vertical bar respectively vertical line charts are more commonly called bar charts | |
what does vertical line charting tell you | a vertical line chart provides information via its high and low points and small horizontal lines to the left and right of the line when all these prices are shown for each period it is typically called a bar chart a trader could also opt to only see the high and low or only the open or close or any combination of the four data points if the vertical bar is long it signifies strong movement there was a large difference between the high and low if the close line on right and open line on left were similar the buyers and sellers were in balance or are indecisive if there is a large difference between the open and close it signals that the buyers or sellers overpowered the other if the close is well below the open sellers dominated the time period if the close is way above the open buyers dominated the period if the price moved only a small amount during the period it is possible that there was little interest in the security or that buyers and sellers were evenly matched but not aggressive in their trades charting platforms often allow traders to color code the vertical line depending on whether the price rose or declined over the period more advanced forms of analyzing price charts including looking for support and resistance levels and highlighting chart patterns which may present trading opportunities example of a vertical line chartthe following chart of alphabet goog shows daily vertical lines since the lines include information on the low high open and close this would typically be called a bar chart or a ohlc chart the chart shows an overall upward ascent of the price over this three month period this is an uptrend even though there were days or sequences of days where the price dropped temporarily | |
what is the difference between a vertical line chart and a line chart | a line chart only marks the close for each period then the closing prices for the period is connected to the prior closing prices and then it is connects to the next closing price the price appears as a line oscillating up and down over time limitations of vertical line chartingtraders have the option of customizing the type of information the vertical line shows it can include the high open low close including more of these data points provides more information on how the price moved over the period most single time periods are not important in and of themselves it s how the price moves over multiple time periods that matters for some traders more information is better while for others less is better vertical line charts show the historical record of how an asset moved interpretations of the chart are subjective and should be thoroughly tested for validity before attempting to rely on historical price movements to forecast future movements trading only based on the price is chart is called price action trading many traders also opt to include technical indicators and fundamental analysis into their trading | |
what is a vertical market | a vertical market is a market encompassing a group of companies and customers that are all interconnected around a specific niche companies in a vertical market are attuned to that market s specialized needs and generally do not serve a broader market as such vertical markets typically have their own set of business standards they may also have high barriers to entry for new companies understanding a vertical marketthe global business market provides a multitude of opportunities for all types of businesses vertical market providers are focused on specific goods and services that meet the needs of a niche customer group these markets are the opposite of horizontal markets that sell their products and services across multiple industries with a broader association among a variety of businesses and business segments a company operating or seeking to work in a vertical market will generally need to take somewhat of a different strategic approach than a horizontal market company vertical market businesses may be industry specific or demographic specific regardless they seek to target a narrow market that has its own idiosyncrasies in some cases business managers in a vertical market may find certain advantages over operating in a broader horizontal market advantages of a vertical marketoperators in a vertical market can target a particular segment where they have a comparative advantage as these operators grow within a specified vertical market environment they also gain expertise in their market s trends terminology regulations and an increased level of competitiveness some of the most considerable advantages for vertical market businesses come in the savings from marketing expenses vertical market businesses have the benefit of targeting a narrower customer base this narrow focus can lead to more streamlined and focused marketing campaigns which are less costly than those seeking to reach a wider mass audience overall a company that specializes in a vertical can provide targeted insight and specialized services to clients becoming an integral component of their business over the long term with specialized products and services a vertical company can justify charging higher rates that can result in higher profits from a narrowed market focus the practicalities of a vertical marketwhile vertical markets concentrate on a specific industry or demographic these concentrated markets can still have a wide customer base a wide vertical market customer base is advantageous because the higher the demand for a specific product is the greater the revenue opportunity becomes in a vertical market customers usually have a high level of spending power which often leads to requiring more attention in each customer relationship this relationship building is often crucial because of the market s narrow focus customers within a vertical market typically rely on a single service provider to meet their long term needs vertical market companies are also usually better positioned to understand market trends and how events affect their clients real world examplein some cases a particular market may be very specific which leads to a unique vertical market in isolation generally however industries may include several market verticals comprehensively with some potential overlap grocery stores provide an example of one industry a company like walmart could be considered part of a horizontal market walmart serves nearly every market demographic and partners with a wide range of retailers in comparison a company like whole foods focuses on organic grocery products whole foods therefore has operations in the organic grocery vertical market dealing primarily with organic grocery consumers and organic grocery wholesalers companies in the organic grocery vertical set their own business standards and create a specific market environment conversely walmart deals with a wide range of customers and suppliers leading to more broadly varied business activities | |
what is a vertical merger | a vertical merger is the merger of two or more companies that provide different supply chain functions for a common good or service most often the merger is effected to increase synergies gain more control of the supply chain process and ramp up business a vertical merger often results in reduced costs and increased productivity and efficiency sanjeri getty imagesunderstanding vertical mergersvertical mergers help businesses control the earlier stages of their supply chain such as a supplier that provides raw materials to a manufacturer the two companies involved in a vertical merger each provide a different product or service but are at different stages of the production process however both companies are needed for the production of the finished good 1vertical mergers reduce competition and can provide the new single entity with a larger share of the market the success of the merger is based on whether the combined entity has more value than each firm separately benefits of a vertical mergervertical mergers are helpful because they can help improve operational efficiency increase revenue and reduce production costs synergies can be created with vertical mergers since the combined entity typically has a higher value than the two individual companies the synergies can include operational synergies which can be improvements in the operational process of the two companies such as a supplier and a producer if a producer had difficulty obtaining supplies for its products or if the raw materials needed for production were expensive a vertical merger would eliminate the need for delays and reduce costs a car manufacturer that purchases a tire company is a vertical merger which could reduce the cost of tires for the automaker the merger could also expand its business by allowing the manufacturer to supply tires to competing automakers thus boosting revenue financial synergies can be realized which might involve access to credit or capital by one of the companies for example a supplier might have debt on its balance sheet leading to reduced access to a borrowing credit facility from a bank as a result the supplier might experience a shortage of cash flow on the other hand the producer could have less debt more cash or access to credit such as a bank the producer could help the supplier by paying down debt providing access to cash and a borrowing facility that the supplier needs to run more efficiently improvements could include a consolidation or reduction of the executive management team of the combined companies by eliminating the poorly performing managers and replacing them the company can improve the communication and overall effectiveness of the combined entity vertical merger vs vertical integrationalthough the terms vertical merger and vertical integration are often used interchangeably they are not exactly the same vertical integration the expansion of operations into other stages of the supply chain process can occur without merging two businesses 2 for example with vertical integration a ladder manufacturing company could decide to produce its own aluminum for the end product instead of purchasing it from suppliers a vertical merger on the other hand would result in the manufacturing company and the supplier merging the opposite of a vertical merger is a horizontal merger which involves the merger of two competing companies that produce at the same stage in the supply chain process 3the vertical merger controversyvertical mergers are not without controversy anti trust violations are often cited when vertical mergers are planned or occur because of the probability of reduced market competition vertical mergers could be used to block competitors from accessing raw materials or completing certain stages within the supply chain 4consider the earlier example of the car manufacturer purchasing a tire manufacturer suppose this same car manufacturer purchased most of the tire manufacturers in the industry it then could control the supply to the market as well as the price thus destroying fair or perfect competition moreover some economists believe that vertical mergers can promote collusion among upstream firms which are companies involved in the early stages of production real world example of a vertical mergera notable vertical merger was the 1996 merger of time warner inc a major cable company and the turner corporation a major media company responsible for cnn tnt cartoon network and tbs channels 5 in 2018 a merger between time warner and at t t was finalized but not without intense scrutiny 6as of february 2019 as reported by the associated press the federal appeals court cleared at t s takeover of time warner rejecting the trump administration s claims that the 81 billion deal will harm consumers and reduce competition in the tv industry 7according to the acquisition s financial details the combined entity will realize increased financial synergies of 2 5 billion cost synergies of 1 5 billion and revenue synergies of 1 billion are expected by the end of three years following the close of the deal 6 | |
what is a vertical spread | a vertical spread involves the simultaneous buying and selling of options of the same type i e either puts or calls and expiry but at different strike prices the term vertical comes from the position of the strike prices this is in contrast to a horizontal or calendar spread which is the simultaneous purchase and sale of the same option type with the same strike price but with different expiration dates shapecharge getty imagesunderstanding vertical spreadstraders will use a vertical spread when they expect a moderate move in the price of the underlying asset vertical spreads are mainly directional plays and can be tailored to reflect the trader s view bearish or bullish on the underlying asset depending on the type of vertical spread deployed the trader s account can either be credited or debited since a vertical spread involves both a purchase and a sale the proceeds from writing an option will partially or even fully offset the premium required to purchase the other leg of this strategy namely buying the option the result is often a lower cost lower risk trade than a naked options position however in return for lower risk a vertical spread strategy will cap the profit potential as well if an investor expects a substantial trend like move in the price of the underlying asset then a vertical spread is not an appropriate strategy types of vertical spreadsthere are several varieties of vertical spreads bullish traders will use bull call spreads and bull put spreads for both strategies the trader buys the option with the lower strike price and sells the options with the higher strike price aside from the difference in the option types the main variation is in the timing of the cash flows the bull call spread results in a net debit while the bull put spread results in a net credit at the outset bearish traders utilize bear call spreads or bear put spreads for these strategies the trader sells the option with the lower strike price and buys the option with the higher strike price here the bear put spread results in a net debit while the bear call spread results in a net credit to the trader s account image by sabrina jiang investopedia 2020calculating vertical spread profit and lossall examples do not include commissions bull call spread premiums result in a net debit bear call spread premiums result in a net credit bull put spread premiums result in a net credit bear put spread premiums result in a net debit real world example of a bull vertical spreadan investor looking to bet on a stock moving higher may embark on a bull vertical call spread the investor buys an option on company abc whose stock is trading at 50 per share the investor buys an in the money itm option with a strike price of 45 for 4 and sells an out of the money otm call with a strike price of 55 for 3 at expiration company abc s stock trades at 49 in this case the investor would exercise their call paying 45 and then selling for 49 netting a 4 profit the call they sold expires worthless the 4 profit from the stock sale plus the 3 premium and less the 4 premium paid leaves a net profit of 3 for the spread | |
what is a vertical well | a vertical well is a technique for accessing an underground reserve of oil or natural gas that involves drilling vertically into the ground drilling wells vertically is a traditional method of oil extraction as compared to their more modern counterpart directional drilling | |
how vertical wells work | vertical wells function by aiming a borehole under the surface well and into a reserve located beneath it in the past vertical wells were the only method available because directional drilling techniques were not available the primary benefit of a vertical well is its simplicity which can result in cost savings both in terms of equipment and labor as well as reduce the time required to extract available reserves in some cases however vertical wells can prove relatively inefficient for instance when the underground reserve extends horizontally across a wide area a company would need to drill multiple vertical wells to access the oil efficiently in those situations directional drilling techniques could be far more cost effective which involves installing a vertical well that drills down into the reservoir and then drilling horizontally or at an angle to extend the borehole into the adjacent sections of the reserve with this the oil from the entire underground reserve could be extracted from a single vertical well vertical well vs horizontal welllike the name horizontal wells are drilled from the side vertical wells drill downward but horizontal well is drilled off of a vertical borehole specifically a well is horizontal if it s dug at an angle of at least eighty degrees to a vertical wellbore the number of horizontal wells surpassed vertical wells for the first time in 2017 however there were still over 88 000 active vertical wells at the end of 2018 although the actual production of those wells was well behind production by horizontal wells at the end of 2018 horizontal drilling in u s shale plays made up 96 of crude oil production and 97 of natural gas production 1 example of vertical wellsas conventional sources of oil and easy to access reserves dwindle purely vertical wells are becoming less common of course vertical wells continue to play an essential role in the oil extraction process as all directional drilling projects must begin with the drilling of a vertical well engineers routinely use vertical wells to examine rock fragments at different degrees of depth by analyzing these samples the engineers can determine where the oil reserves are likely to be found thereby informing the direction of the drilling in some cases samples collected through vertical wells have allowed companies to extract oil from multiple distinct reserves using directional drilling techniques the ability to efficiently extract oil from multiple reservoirs using a single vertical well can yield substantial cost savings over the life of the project while also reducing surface level disruption due to the relative lack of heavy equipment and personnel involved another area in which vertical wells continue to play an important role is in offshore oil extraction in the sea vertical wells are still the more common method where drilling from an offshore platform is already quite complex offshore directional drilling although technically possible is still prohibitively expensive in most cases | |
what is a very small aperture terminal vsat | a very small aperture terminal vsat is a two way ground station that transmits and receives data from satellites a vsat is less than three meters tall and is capable of both narrow and broadband data to satellites in orbit in real time the data can then be redirected to other remote terminals or hubs around the planet | |
how a very small aperture terminal vsat works | vsat networks have a number of commercial applications including perhaps most notably enterprise resource planning erp the use of vsat to track inventory was one of the many innovations walmart pioneered in retail to effectively manage its vast inventory in real time and reduce delivery costs between the warehouse and stores combined with the hub system of inventory storage vsat allowed walmart to stock its stores more precisely and reduce how many times a product had to move between locations before being sold other manufacturers use vsat to relay orders check production figures in real time as well as other functions that are otherwise handled over a wired network the national stock exchange nse of india has one of the largest vsat networks in the world and offers it as one of its connectivity options vsat provided the nse with a way to offer access in areas where wired options are limited with the exception of the occasional sun outage due to solar radiation distorting signals from the satellite the vsat network has held up advantages and disadvantages of a very small aperture terminal vsat vsat networks have a big advantage when it comes to deployment because the ground station is communicating with satellites there is less infrastructure required to service remote locations this was one of the reasons walmart chose vsat as it started out heavily leveraged to rural america where telecommunications infrastructure was less dense than in the cities this has made vsat networks an ideal choice for providing connectivity to remote work sites such as exploratory drilling sites that need to relay daily drill logs back to headquarters vsat is also independent of local telecommunications networks making it an ideal system to back up wired systems and reduce business recovery risk if the wired network goes down a business can still go on using the vsat network however vsat does have limitations the most obvious is latency as it takes time for information to reach the dish and the station due to one part of the system being way up in geosynchronous orbit above the earth in other words protocols that require a lot of back and forth communication rather than one way data transfer experience lag the signal quality can also be affected by the weather and other buildings getting in the way | |
what is a vested benefit | a vested benefit is a financial package granted to employees who have met the term of service required to receive a full instead of partial benefit as an incentive to stay with a company employers sometimes offer their employees benefits whereby they acquire the full amount gradually or suddenly as they accumulate more time with the company this process is called graduated vesting or cliff vesting when the employee has earned full rights to the incentive after a predetermined number of years of service those benefits are called fully vested the employee retirement income security act erisa sets rules that protect americans retirement assets including minimum standards for participation vesting benefit accrual and funding erisa also guarantees that workers can access the benefits that have vested once they have worked at a job for the prescribed period 1 the precise structure of a vested benefits program might be negotiated as part of a labor union s collective bargaining agreement or during the process of recruiting and hiring new employees understanding vested benefitsvested benefits may consist of various types of financial awards including cash employee stock options eso health insurance 401 k plans retirement plans and pensions shares of the company s stock is an example of a type of benefit that might vest gradually for example an employee might be awarded 100 shares of stock as a performance bonus after year one of employment under a graduated vesting plan the employee might acquire full ownership of 20 of the shares after year two 40 after year three 60 after year four 80 after year five and 100 after year six the stock bonus would be a partially vested benefit in years two to five and a fully vested benefit after year six depending on the type of benefit the time required to be fully vested can vary for example a 401 k plan vests as soon as an employee begins to participate which means that they will be able to access the full amount of money they put into that account whenever they leave the company 2 if the benefits program includes matching contributions by the company in an employer sponsored retirement plan there may be a minimum required amount of time that the employee must work before that portion of the funding becomes vested the precise structure of a vested benefits program might be negotiated as part of a labor union s collective bargaining agreement or during the process of recruiting and hiring new employees as more employees earn vested benefits the amount of funding that an organization is required to put toward these benefits can create potential liabilities for companies for accounting purposes a company may be required to report the amount of the obligation being carried on the books for such vested benefits | |
definition of vested benefit obligation vbo | vested benefit obligation vbo refers to the actuarial present value of the pension plan that has been earned by employees and is one measure of a firm s pension fund liability understanding vested benefit obligation vbo vested benefit obligation vbo is one of three approaches firms use to measure and disclose pension obligations as well as the performance and financial condition of their plans at the end of each accounting period as they are required to under fasb statement of financial accounting standards no 87 1 the other two measures are the firm s accumulated benefit obligation and projected benefit obligation the vbo is the portion of the accumulated benefit obligation that employees will receive regardless of their continued participation in the company s pension plan this is the benefit that has vested in employees as opposed to the accumulated benefit obligation which represents the present value of any benefits whether vested or not the employee retirement income security act erisa of 1974 requires companies to vest benefits using one of the following two approaches since minimum vesting requirements are generally five years the values of the vested benefit obligation and accumulated benefit obligation are very close in most pension plans while the abo and vbo values are required to be disclosed at fiscal year end in cases where the values are almost similar companies financial statements show the abo value and state that the vbo and abo values are not materially different | |
what is a vested interest | a vested interest generally refers to a personal stake or involvement in a project investment or outcome in finance a vested interest is the lawful right of an individual or entity to gain access to tangible or intangible property such as money stocks bonds mutual funds and other securities at some point in the future there is usually a vesting period or time span before the claimant may gain access to the asset or property understanding vested interestthe term vested interest can mean many different things depending on the context a vested interest exists for individuals who have a claim or a right to ownership of a piece of property without any reliance on anything else even if the person doesn t possess the asset right away so an interest becomes vested if the asset s title or right can be transferred in the present or the future to another party this means a person or other entity can have a vested interest in a tangible or intangible asset if there are no conditions to its ownership the time during which a person or entity is required to wait before exercising ownership of the asset is known as the vesting period this period is normally prescribed by the company or person who holds the title to the asset for instance some companies may set up vesting periods of three to five years for employees in profit sharing plans in some instances there is no vesting period meaning the interest is transferred immediately vesting periods dictate when an individual can exercise his or her vested interest in the property or funds vested interests can exist in numerous entities throughout the financial landscape including pension plans and 401 k plans as well as stocks and options contributions within an employee pension plan often come with special conditions surrounding when the funds can be cashed out these plans are under the stipulation that the participant is entitled to make withdrawals from the balance at some point in the future in this case the participant or investor has a vested right to the earnings the vesting period varies by pension plan before the participant gains access to funds there may also be restrictions on withdrawal amounts to a specific percent per vested year for example after waiting the five year vesting period peter was allowed to withdraw 20 from his retirement fund each consecutive year special considerationsan employee who contributes money toward a 401 k plan may also have a vested interest in the company match if the employer offers one companies that match their employee s 401 k contributions typically have distinct vesting schedules set up these schedules dictate the amount of the company match an employee is entitled to based on their years of service for example a company may designate a 20 entitlement of matched funds for employees after one year of service if peter contributes to a 401 k with a company match he would be fully vested or entitled to the entire company match after five years of service but if he leaves the company in three years he would be allowed to take only 60 of the company match with him some companies have vesting cycles that don t break the match down into portions in other words an employee is fully vested after working at the company for a set amount of time say peter works for a firm in which eligible employees become fully vested in the company match after working for five years if peter leaves this firm after three years he takes home none of the company match funds therefore it s crucial for 401 k participants to pay attention to their companies vesting schedules vested interest vs vested in interestvested interest should not be confused with vested in interest this term unlike vested interest applies to entities such as trusts the beneficiary of a trust is vested in interest if they do not have to meet any condition for their interest to take effect in this case the recipient has a present right to future enjoyment such as a right to property when another beneficiary s interest ends in this case that beneficiary has access to the property when the primary beneficiary becomes deceased | |
what is vesting | vesting or a vesting schedule requires employees to fulfill a specified term of employment to gain access to benefits such as retirement funds vesting is a way for employers to keep top performing employees at the company when an employee is vested in employer matching retirement funds like a 401 k or stock options they have nonforfeitable rights to those assets investopedia sydney saporito | |
how vesting works | employees commonly save a percentage of their paycheck into their 401 k s and their employer may match part or all of that contribution employees are always 100 vested in their salary deferral contributions to their retirement plans and sep and simple employer contributions employer contributions to a 401 k plan may vest immediately however a company may set up a vesting schedule to determine when employees acquire full ownership of the contributed portion matched dollars usually take several years to vest meaning an employee must stay with the company long enough to be eligible to receive them vesting within stock bonuses offers employers a valuable employee retention tool for example an employee might receive 100 restricted stock units as an annual bonus to entice this valued employee to remain with the company for five years the stock may vest according to the following schedule 25 units in the second year after the bonus 25 units in year three 25 units in year four and 25 units in year five if the employee leaves the company after year three only 50 units would be vested and the other 50 would be forfeited employee contributions to an employer sponsored retirement plan are always considered 100 vested types of vestingtraditional pension plans might have a five year cliff vesting schedule or a three to seven year graded vesting schedule although an employee may be fully vested in their employer s contributions it does not mean they can withdraw that money whenever they want employees are still subject to the plan s rules which generally require them to reach retirement age before making penalty free withdrawals | |
where is vesting used besides retirement plans | vesting is common in wills and bequests and often takes the form of a set waiting period to finalize bequests following the testator s death | |
what is a common vesting period | a common vesting period is three to five years but the period is chosen by the employer | |
why would employers offer stock options on a vested schedule | startup companies often offer grants of common stock or access to an employee stock option plan to employees service providers vendors board members or other parties as part of their compensation to encourage loyalty among employees and keep them engaged and focused on the company s success such grants or options are subject to a vesting period during which they cannot be sold the bottom line | |
what was the veterans administration | the term veterans administration refers to the previous name of a u s cabinet level department founded at the height of the great depression the veterans administration was formerly an independent government agency it was elevated to a cabinet department in 1989 and underwent a change in title to the u s department of veterans affairs the organization provided and continues to provide medical care benefits and essential services to veterans of the u s armed forces and their families 1understanding the veterans administrationthe veterans administration was established in 1930 after then president herbert hoover signed an executive order making it a federal administration 21 prior to this veterans benefits were handled by three different agencies hoover consolidated them into a single agency to provide medical care benefits and a variety of essential services to veterans of the u s armed forces and their families it also provided burial and memorial benefits to eligible veterans and family members in 1988 president ronald reagan elevated the veterans administration to a u s cabinet level department the change took effect in 1989 and the va was renamed the u s department of veterans affairs 1 as such the u s department of veterans affairs performs all of these functions the department continues to provide some of the provides near comprehensive health care services as well as disability compensation vocational rehabilitation education assistance home loans and life insurance it has three administrations the nca runs 155 national cemeteries throughout the united states and puerto rico providing benefits for all eligible service members and family members burial and memorial benefits include opening and closing of the grave perpetual care a burial flag a headstone marker and a presidential memorial certificate 3the vha is the largest integrated health care system in the united states 4special considerationsthe primary criteria for receiving health care benefits through the va require that you be a military veteran or former member of the national guard or reserve who served on active duty you cannot have been dishonorably discharged specific eligibility depends on when you served and for how long the vha includes 1 298 health care facilities 171 va medical centers and 1 113 outpatient sites it serves more than nine million veterans enrolled in the va health care program vha medical centers provide a wide range of medical services to eligible veterans in addition to medical care the vha also provides specialty services such as dermatology dental care neurology podiatry and vision care 4the veterans benefits administration makes available a variety of benefits and services that provide financial assistance and other forms of help to service members their dependents and survivors the list includes disability compensation education and training life insurance vocational rehabilitation and job placement assistance 5the vba also provides federal guarantees of home loans for qualified applicants to be eligible for a va guaranteed home loan veterans must have served on active duty in the army navy air force coast guard or marines the specific service requirements vary depending on the time period when a veteran served a certificate of eligibility is required to obtain a va loan and the loan can be obtained through any mortgage lender who participates in the va home loan program the va guaranteed home loan is one of the very few 0 down payment loans available in the united states the u s department of agriculture usda rural housing loan is another 6the rules for eligibility for veterans benefits can be fairly complicated but they are well explained on the va s eligibility web page history of the veterans administrationthe roots of the veterans administration date back to 1636 when the pilgrims of plymouth colony voted that the colony would support soldiers disabled by its war with the pequot a native american tribe the continental congress of 1776 enacted pensions for disabled soldiers during the revolutionary war in the 19th century support was extended to widows and dependents of veterans 1veterans benefits expanded during world war i with the first consolidation of world war i veterans programs occurring in 1921 when congress created the veterans bureau in 1930 president herbert hoover elevated the veterans bureau to a federal administration creating the veterans administration 1 | |
what is veterans group life insurance vgli | veterans group life insurance vgli is for former members of the armed forces who wish to continue the group life coverage they had while in active military service 1 a renewable term policy this insurance pays cash to the beneficiaries of the veteran upon death 2understanding veterans group life insurance vgli by opting for veterans group life insurance vgli an ex service person is technically carrying over their servicemembers group life insurance sgli policy a type of term life insurance offered to members of the military during active service they have one year and 120 days from the date they become veterans to exercise this option veterans group life insurance offers many benefits not available in the private life insurance market premium rates are age based only and do not consider gender tobacco use job or recreational activities all factors that can increase premiums with private insurance policies in addition the policy does not terminate at a certain age such as 65 it remains in force for as long as the policyholder pays the premiums vgli offers 10 000 to 400 000 in life insurance benefits based on the amount of sgli coverage the veteran had upon leaving the military the maximum amount of coverage a veteran may initially qualify for is the same amount of coverage they had under their servicemembers group life insurance veterans may opt for lower levels of coverage reducing them in 10 000 increments coverage can also be increased after enrollment by 25 000 every five years however the maximum benefit is capped at 400 000 until the veteran reaches 60 1eligibility for veterans group life insurancethere are certain eligibility requirements for veterans who want to apply for vgli along with holding an sgli policy the applicant must be within one year and 120 days from veterans are also able to apply for vgli coverage even if they had part time servicemembers group life insurance as a member of the national guard or reserves and they suffered an injury or disability while on duty including direct traveling to and from duty that disqualified them for standard premium insurance rates 1veterans who apply to convert their sgli to vgli within the first 240 days after completing their service are not subject to any sort of health review or exam approval of the policy is not contingent upon being in good physical or mental health in other words if they sign up after the initial 240 day period they need to submit evidence that they re in good health 3special considerationsvgli offers numerous benefits chief among them being its relatively low premiums rates which were lowered even further as of april 1 2021 still as is the case with most types of life insurance it s important for each veteran to compare potential plans in order to determine what is the best life insurance policy for their unique circumstances within 120 days of leaving service you have the option to convert your current sgli policy into a civilian one several commercial insurance carriers have special policies for ex members of the armed forces you can also convert a vgli policy to a commercial individual policy however the conversion policy must be a permanent policy such as a whole life policy and offered by a select group of carriers 1 | |
what is vetting | vetting is the process of thoroughly investigating an individual company or other entity before deciding to go forward with a joint project a background review is an example of a vetting process for a potential employee once the vetting process is concluded a well informed hiring decision can be made managers investors and analysts use such a process to identify worthwhile investments through a process known as due diligence due diligence requires a close examination of a firm s financial records key personnel and growth potential before entering into an investment or proposed transaction with that party once fully vetted the investment or deal may proceed understanding vettingthe verb to vet has its origins in 19th century british slang a horse was thoroughly vetted by a veterinarian before being allowed to race so a patient undergoing an examination could be said to be vetted by a medical doctor in modern business usage vetting has come to mean the process of examining a person or company for soundness and integrity while vetting may be time and cost intensive the price paid for not vetting could be even higher in the long run examples of vettingexamples of vetting appear frequently in the context of business and investing for instance a company s board of directors will thoroughly vet a candidate for company ceo or other top management positions before making a hiring decision or a business will properly vet a potential major supplier in order to determine whether it has conducted its business efficiently and honestly in the past as part of doing their due diligence an investment adviser will vet a potential investment for its track record management quality and growth potential before recommending it to clients the word vetting is also used informally in many other situations outside of finance a refugee seeking asylum is vetted as part of their application process candidates for government security clearance are vetted to make sure they don t have checkered pasts a lawyer vets a contract to find any potential pitfalls in the fine print these are just a few examples of vetting vetting processa vetting process might begin with a confirmation of facts is the job candidate s resume accurate in describing all the skills and experience that are claimed does a contractor called worldwide shipping have actual experience shipping worldwide the process continues with the verification of information every degree award or certification claimed by a candidate is checked for accuracy whether it is a person a company or an investment that is being vetted the process gets deeper and potentially more intrusive from this point on credit history checks criminal background checks and personal interviews with past and current associates are all fair game in the vetting process the high cost of vettingwhile vetting is important to make sure quality options are chosen and poor options are discarded the process can also be time consuming and expensive as such a balance must often be struck between the costs and benefits of vetting the average organization in the u s spends about 4 700 and 36 to 42 days to fill a position with a fully vetted and qualified candidate 1heavy reliance on vetting by governments around the world has raised some concerns related to both the high cost and the long delays they can cause in 2018 the u s government launched trusted workforce 2 0 which seeks to reform the federal government s personnel vetting system it is the most far reaching reform to date and one of its key aims is to reduce the time it takes to bring new hires on board 2some brokerages provide an approved list of pre vetted investments or funds that they may recommend to clients | |
how to vet an investment | vetting a potential investment is known as due diligence this vetting process involves collecting data and facts about a firm or issuer of securities and reviewing available financial records past company performance is also considered and should be referenced against competitors anything else deemed material should be reviewed such as key personnel and the names of other large investors due diligence is primarily a way to reduce risk exposure and to ensure good decisions are made with available funds the process ensures that investors are aware of all the details of a transaction before they agree to it including potential risks or downsides for individual investors doing due diligence on a potential stock investment is recommended but voluntary for a venture capitalist vc firm making a professional investment in a startup company on the other hand due diligence is essential especially when it comes to understanding the startup s growth potential and exit strategy due diligence can be categorized as hard which is concerned with taking a deep dive into the numbers on financial statements and soft which is more concerned with the people within the company its brand image and its customer base | |
what is a vetted credit check | a credit check is a form of vetting performed when evaluating the creditworthiness of a potential borrower a person seeking credit whether it be for a mortgage auto loan or a new credit card will be subject to a credit check to vet their ability to repay the interest and principal of the loan or line of credit loc as such the credit check will analyze data such as income assets job security and the number of other debts held | |
what does vetted mean in immigration | new entrants to a country or those applying for citizenship undergo vetting via a background check to ensure that they will be upstanding citizens this process may look at things like criminal activity outstanding debts employment prospects status of other family members health and more | |
what does fully vetted mean | fully vetted suggests that an option has undergone a complete analysis with an objective decision made upon its completion | |
what does vetted mean in politics | political candidates and appointees are often vetted by their sponsoring political party or legislative body this is done to ensure that they have the appropriate skills or aptitude and that there are no skeletons in their closet that can come back to haunt them the bottom linethe process of vetting allows any individual or company to make the best assessment possible for their needs based on a critical evaluation the vetting process can be done through interviews research checking databases and more to come up with a full picture of details before making a decision | |
what is a viager | a viager is a real estate transaction popular in france where the buyer makes a down payment and then a series of payments for as long as the seller is alive understanding viageressentially a viager is a reverse annuity for homebuyers viagers are gambles while for home sellers they offer the security of regular cash installments a viager is sometimes called a reverse annuity mortgage or a charitable remainder trust in a viager agreement a person agrees to sell their property to a purchaser in exchange for a down payment known in france as the bouquet and regular cash installments for the rest of their life additionally the seller continues to live in the house for the remainder of their life it is only when the seller dies that the purchaser is free to take over the property in essence the buyer in a viager is wagering on the remaining lifespan of the seller in france two private parties often negotiate a viager with the help of a lawyer and without the participation of banks or insurance companies the deal can potentially benefit both parties for example sellers receive significant tax breaks what s more cash payments are strongly guaranteed if the buyer defaults the seller retains the down payment all of the monthly payments up to that point and ownership of the property sellers are often widows or widowers who are in need of a regular source of income after the death of a spouse for buyers viagers offer the draw of a home purchase at reduced rates viagers use the occupied value rather than the market value which is often much higher in addition buyers pay no interest on the property and if the seller dies earlier than expected buyers get an even bigger discount the risk is that the seller lives longer than expected in which case the buyer must pay more the typical viager buyer is a middle aged person looking to secure a home for retirement viager calculationthe value of a property in a viager is calculated based on the age of the seller and it is known as the occupied value the occupied value of a home owned by someone 50 years old will be more than that of a home owned by someone 70 years old the down payment tends to land at about 30 of the occupied value participants calculate the cash installments based on the average life expectancy of the seller because of these guidelines very old sellers would often be better off selling their homes outright and receiving the full market value | |
what is a viatical settlement | a viatical settlement is an arrangement in which someone who is terminally or chronically ill sells their life insurance policy at a discount from its face value for ready cash in exchange for the cash the seller of the life insurance policy relinquishes the right to leave the policy s death benefit to a beneficiary of their choice the buyer of a viatical settlement pays the seller a lump sum cash payout and pays all future premiums left on the life insurance policy the buyer becomes the sole beneficiary and cashes in the full amount of the policy when the original owner dies understanding a viatical settlementviatical settlements enable owners of life insurance policies to sell their policies to investors investors buy the full policy or a portion of it at a cost that is less than the policy s death benefit the investor s rate of return depends upon when the seller dies the rate of return will be lower if the seller outlives their estimated life expectancy conversely the rate of return will be greater if the seller dies sooner than estimated for someone who is terminally ill a viatical settlement enables them to obtain immediate cash they can use to pay for their care and comfort in their final days a viatical settlement can be a financial management tool that enables individuals to preserve their estate s other assets such as a home which they may not want to sell before their death criticism of viatical settlementsfrom an investment perspective a viatical settlement can be extremely risky the rate of return is unknown because it s impossible to know when someone will die if you invest in a viatical settlement you are speculating on death therefore the longer the life expectancy the cheaper the policy however because of the time value of money tvm the longer the person lives the lower your rate of return in many states in the u s companies that buy viatical settlements to sell to investors are licensed by state insurance commissioners for more information and a list of state insurance regulators visit the national association of insurance commissioners naic viatical settlement vs life settlementindividuals not facing a health crisis may also choose to sell their life insurance policies to get cash which is more typically referred to as a life settlement a life settlement differs from a viatical settlement in that the insured has a longer life expectancy in a viatical settlement the life expectancy of the insured is generally two years or less if a life insurance policyholder is considering a life settlement they should first consider all available options for obtaining the needed cash there might be a better way to utilize a life insurance policy for instance a life insurance policyholder may be able to access some of the cash value to meet their immediate needs while keeping the policy in force for beneficiaries it might also be possible to use the cash value as security for a loan from a financial institution an accelerated death benefit adb is also an option an accelerated death benefit usually pays some of a policy s death benefit before the insured dies this could provide the holder of the life insurance policy with the cash needed without having to sell the policy to a third party special considerationsthere are various points to consider before deciding on either a viatical settlement or a life settlement | |
what is a viator | a viator is a person who has been diagnosed with a life threatening illness and decides to sell their life insurance policy so they can receive a portion of their death benefit while they are still alive often viators are motivated by the desire to fund costly or experimental therapies that might prolong their life if these therapies are not included in their health insurance coverage they may need to sell their policy in order to afford the treatments out of pocket understanding viatorsa viator is a person who is insured under a life insurance policy and sells their contract to an outside party this transaction is known as a viatical settlement the viator receives a percentage of the policy s death benefit while still alive the proceeds from a viatical settlement are tax free 1 after selling the policy the viator gives up life insurance protection their heirs will no longer receive a death benefit payout many jurisdictions define a viator as a person with a terminal or life threatening illness 2 other states allow viators who are not seriously ill to sell their policies within specific guidelines 3reasons for a viatical settlementviators often turn to a settlement to pay for healthcare treatment a life insurance policyholder may not be satisfied with the extent of the coverage they receive from their health insurance provider for example a person suffering from an expensive illness may feel their provider only covers basic treatment options they may believe the insurer is failing to take advantage of newer or more experimental treatments that might reduce their symptoms or even extend their lifespan in this situation the policyholder may wish to take their treatment options into their own hands they forfeit their life insurance policy in favor of a lump sum they can use today for their own medical expenses viators may be terminally ill life expectancy less than two years or critically ill unable to perform typical functions of daily living 4viatical settlement providersto complete a sale viators need to find a counterparty known as a viatical settlement provider vsp who is willing to purchase their life insurance policy in order to generate a profit the vsp purchases the life insurance policy at a discount paying the viator less than its face value the typical viatical settlement is around 50 to 70 of your death benefit 5 if you have a 1 million policy you likely would receive 500 000 to 700 000 for a viatical settlement the vsp is then responsible for making the policy s premium payments for the duration of the viator s life upon the death of the viator the vsp receives the full death benefit of the insurance policy 6viatical settlements are not without risk for investors a viator may experience remission or take advantage of an experimental procedure that prolongs their life or cures them completely in that case the vsp may be responsible for many more years of premium payments than they had budgeted for reducing their eventual profit on the transaction and potentially leaving them with an overall loss because of this some vsps will purchase policies from multiple viators at once in order to have policies paying out at different times offsetting their risks real world example of a viatorted smith was recently told that his cancer prognosis has worsened and that he has only six months to live when ted s children were younger and still lived at home he took out a life insurance policy so that his family would be taken care of if something should happen to him over the years his business and investments did well and he was able to save up a substantial amount because of this he is now financially secure and his family will not need to rely on a life insurance payout after his death with this in mind ted decides to try an experimental procedure he heard is having great success in curing cancers like the one that he has been diagnosed with after raising this issue with his medical insurance provider however he is told that they are not willing to cover this expensive new procedure for this reason ted decides to sell his life insurance policy and become a viator ted seeks out a viatical settlement provider and together they negotiate a settlement on the policy as the policy s beneficiary ted s wife would have received a payout of 500 000 upon his death now ted is selling the policy to the vsp for 250 000 ted will receive approximately 50 percent of what his original payout would have been and the vsp will make a profit of 250 000 minus any monthly premiums it makes until the time of ted s death thankfully the treatment ted obtained works as intended and his cancer goes into remission the vsp is now responsible for making the monthly premium payments on the policy for the remainder of ted s life that could be many years from now reducing the vsp s estimated profit from the transaction | |
what types of life insurance can be sold by viators | vsps buy virtually any type of policy including term whole life or universal since viators are terminally ill with a life expectancy vsps are willing to buy even temporary term life insurance policies 7 | |
how much do vsps pay for a policy | the typical payout for a viator ranges from 50 to 70 of the face amount 5 the main variable in the calculation is your life expectancy | |
how do i find a viatical settlement provider | check with your state s insurance regulator to find an approved vsp many states keep a list of active vsps on their websites your life insurance company may also have a list of vsps with whom they work regularly the bottom lineviators are most commonly people with life threatening diseases who sell their life insurance policies to pay for expensive medical treatments if you are considering seeking a viatical settlement be sure to consider all your options before selling your policy to ensure you get the best outcome possible you should also consider whether your heirs can manage without receiving the death benefit payout from your life insurance | |
what is vicarious liability | vicarious liability is liability that arises when an individual or entity is held partially responsible for the unlawful actions of another party even though the latter carried out the actions alone vicarious liability can arise in situations where one party is responsible for and has control over someone such as an employee and is deemed negligent in carrying out their responsibility and exercising their control for example in a company a supervisor could bear responsibility for the actions of a subordinate or associate based on their employment relationship |
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