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what is a chattel mortgage | a chattel mortgage is a loan to purchase movable personal property such as a manufactured home or construction equipment the property or chattel secures the loan and the lender holds an ownership interest chattel loans are commonly referred to as security agreements the terms personal property security lien on personal property or even movable hypothecation are other synonyms for a chattel mortgage types of chattel mortgagesborrowers secure chattel mortgages to purchase moveable property these loans tend to have shorter terms than regular mortgages if a borrower defaults on a chattel mortgage the creditor or lender can take possession of the financed property and sell it to pay off the loan chattel mortgages finance mobile or manufactured homes on leased land borrowers cannot opt for a traditional mortgage since the land does not belong to the homeowner instead the mobile or manufactured home is considered personal movable property and security for a chattel mortgage the financing arrangement remains in effect even if the mobile home is moved to a different location the u s department of housing and urban development hud the u s department of veterans affairs va and the u s department of agriculture s rural housing service all have programs to guarantee manufactured home loans issued by approved private lenders to eligible borrowers 12 a hud entity the federal housing administration fha manufactured home loan insurance program guarantees loans for manufactured homes without land 3businesses use chattel mortgages to purchase new or used heavy equipment for construction farming or other purposes a chattel mortgage allows the buyer to use the equipment while the lender retains an ownership interest the lender can repossess the equipment and sell it to pay off the loan balance if the buyer defaults the u s small business administration provides low cost financing for business related equipment like other government agencies it doesn t issue loans but guarantees eligible loans issued by an approved list of commercial lenders its 504 loans provide funding for long term machinery and equipment purchases 4see our picks for best equipment financing companies chattel mortgage vs traditional mortgagea chattel mortgage differs from a traditional mortgage in that the lender owns the property until the borrower has fully paid the loan with a regular mortgage the lender isn t the owner but holds a lien on the property allowing it to take possession in the event of a default with a chattel mortgage ownership transfers to the buyer at the end of the mortgage term assuming all the payments have been made chattel mortgages tend to carry higher interest rates and have fewer consumer protections than regular mortgages 5 they also have shorter terms so monthly payments may be higher examples of chattel loansvehicles airplanes boats farm equipment and manufactured homes are common examples of assets often financed with a chattel loan approximately 42 of the loans used to purchase manufactured homes are chattel loans according to the consumer financial protection bureau cfpb 5 chattel loans have specific rules which vary according to the property and state or federal law in florida chattel home loans must be listed in a public registry so that third parties can be aware of them before entering into financing agreements with potential borrowers who want to put up the property as security for another loan 6 for security agreements associated with aircraft chattel mortgages must be recorded with the aircraft registration branch of the federal aviation administration 7mortgages on personal property like chattel loans typically carry higher interest rates than traditional mortgages and come with shorter terms | |
where can borrowers get a chattel loan | chattel loans are offered in person at lending institutions and through online lenders some of which specialize in a particular type of property such as mobile homes aircraft or construction equipment | |
how much down payment is required for a chattel loan | that can depend on the loan the lender and your credit score with the fha s title i loans for example borrowers with a credit score above 500 are required to make at least a 5 down payment while those with lower scores must put down at least 10 8 | |
is interest on a chattel mortgage tax deductible | the interest paid on a chattel mortgage may be deductible just like interest paid on a conventional mortgage when financing a manufactured or modular home fixed to the ground borrowers may also be able to take advantage of property tax deductions 9the bottom linea chattel mortgage is a loan to purchase movable personal property such as construction equipment or a mobile home chattel mortgages often carry higher interest rates and have fewer consumer protections than traditional mortgages if a borrower defaults on a chattel mortgage the lender can repossess the property or equipment | |
what is cheapest to deliver | the term cheapest to deliver ctd refers to the cheapest security delivered in a futures contract to a long position to satisfy the contract specifications it is relevant only for contracts that allow a variety of slightly different securities to be delivered this is common in treasury bond futures contracts which typically specify that any treasury bond can be delivered so long as it is within a certain maturity range and has a certain coupon rate the coupon rate is the rate of interest a bond issuer pays for the entire term of the security understanding cheapest to deliver ctd a futures contract enters the buyer into an obligation to purchase a specific underlying financial instrument s specific quantity the seller must deliver the underlying security on a date agreed upon by both parties in cases where multiple financial instruments can satisfy the contract based on the fact that a particular grade was not specified the seller who holds the short position can identify which instrument will be the cheapest to deliver remember a trader generally takes a short position or a short when they sell a financial asset with the intention of repurchasing it at a lower price later on traders generally take short positions when they believe an asset s price will drop in the near future futures markets allow traders to take short positions at any time determining the cheapest to deliver security is important for the short position because there is often a disparity between a security s market price and the conversion factor used to determine the value of the security being delivered this makes it advantageous for the seller to pick specific security to deliver over another since it is assumed that the short position provides the cheapest to deliver security the market pricing of futures contracts is generally based on the cheapest to deliver security there is a general assumption that the short position provides the cheapest to deliver security special considerationsselecting the cheapest to deliver provides the investor in the short position the ability to maximize their return or profit on the chosen bond the calculation to determine the cheapest to deliver is the current bond price is determined based on the current market price with any interest due to a total additionally the calculations are more commonly based on the net amount earned from the transaction also known as the implied repo rate this is the rate of return that a trader can earn when they sell a bond or futures contract and buy the same asset at the market price with borrowed funds at the same time higher implied repo rates result in assets that are cheaper to deliver overall set by the chicago board of trade cbot and the chicago mercantile exchange cme the conversion factor is required to adjust for the varying grades that may be under consideration and is designed to limit certain advantages that may exist when selecting between multiple options the conversion factors are adjusted as necessary to provide the most useful metric when using the information for calculations | |
what is a check | a check is a written dated and signed draft that directs a bank to pay a specific sum of money to the bearer the person or entity writing the check is known as the payor or drawer while the person to whom the check is written is the payee the drawee on the other hand is the bank on which the check is drawn | |
how checks work | a check is a bill of exchange or document that guarantees a certain amount of money it is printed for the drawing bank to provide to an account holder the payor to use the payor writes the check and gives it to the payee who then takes it to their bank for cash or to deposit into an account 1checks essentially provide a way to instruct the bank to transfer funds from the payor s account to the payee or the payee s account the use of checks allows two or more parties to make a monetary transaction without using physical currency instead the amount for which the check is written is a substitute for physical currency of the same amount checks are generally written against a checking account but they can also be used to move funds from savings accounts and other types of accounts checks can be used to make bill payments as gifts or to transfer sums between two people or entities they are generally seen as a more secure way of transferring money than cash especially with large sums if a check is lost or stolen a third party is not able to cash it as the payee is the only one who can negotiate the check modern financial tools that work similarly to checks in that they provide a substitute for physical currency include debit and credit cards money orders wire transfers and internet banking history of checkschecks have been in existence in one form or another since ancient times many people believe a type of check was used among the ancient romans 2modern checks as we know them today became popular in the 20th century check usage surged in the 1950s as the check process became automated and machines were able to sort and clear checks check cards first created in the 1960s were the precursors to today s debit cards 3credit and debit cards and other forms of electronic payment have since overshadowed checks as the dominant means of paying for most goods and services checks are now somewhat uncommon but still occasionally used features of a checkwhile not all checks look alike they generally share the same key features the name and contact information of the person writing the check is located at the top left the name of the bank that holds the drawer s account appears on the check as well there are a number of lines that need to be filled in by the payor 4there is also a memo line in the bottom left corner of the check the payor may use it to make notes such as a reference number an account number or any particular reason for writing the check a series of coded numbers is found along the bottom edge of the check directly underneath the memo line and extending toward the payor s signature line these numbers are in certain countries such as canada the routing number is replaced with an institution number which represents the bank s identifying code and the transit or branch number where the account is held the back of the check has an endorsement line for the payee s signature when they are cashing or depositing the check the receiving bank often stamps the back with a deposit stamp at the time it is deposited or cashed after which it goes for clearing once the drawing bank receives the check it is stamped again and filed in some cases the check is sent back to the payor the oldest surviving american checkbook from the bank of new york dates to the 1790s 5types of checksin addition to the standard personal check types of checks include certified checks cashier s checks and payroll checks which are all used for different purposes a certified check verifies that the drawer s account has enough funds to honor the amount of the check in other words the check is guaranteed not to bounce to certify a check it must be presented at the bank from which it is drawn at which time the bank will ascertain its authenticity with the payor 6a cashier s check is guaranteed by the banking institution and signed by a bank cashier which means the bank is responsible for paying the funds this type of check is often required for large transactions such as buying a car or house 7another type is a payroll check or paycheck which an employer issues to compensate an employee for their work in recent years physical paychecks have given way to direct deposit systems and other forms of electronic transfer 8bounced checks | |
when someone writes a check for an amount larger than what is held in their checking account the check cannot be negotiated this is referred to as a bounced check | the check bounces because it cannot be processed as there are insufficient or non sufficient funds nsf in the account the two terms are interchangeable a bounced check usually results in a penalty fee for the payor in some cases the payee is also charged a fee other checking account fees can include a monthly service fee a per check fee a charge for every check you write a check printing fee and a returned deposit item fee a returned deposit item fee is charged when you deposit a check in your account that bounces 9frequently asked questions faqs | |
do banks forgive bounced checks | banks have different policies on bounced checks oftentimes banks charge overdraft fees or non sufficient funds fees on bounced checks some banks may provide a grace period such as 24 hours in which time you can deposit funds to avoid the overdraft fees 10 | |
do cashier s checks clear immediately | typically funds from a deposited cashier s check must be available the next business day however a bank may place a hold on some of those funds if the check exceeds 5 252 it can also place a hold on the entire amount if it has reason to believe the check will not clear 11 | |
what is the difference between a certified and cashier s check | both certified checks and cashier s checks are considered more secure than personal checks cashier s checks are signed by banks and drawn against a bank s account while certified checks are signed by an individual and drawn against a personal account both checks are guaranteed by the bank which makes them more secure the bottom linechecks are a useful financial tool that make payments and money transfers more convenient and potentially safer than cash different checks are designed for different purposes and for different risk levels learning how to use a check correctly including how to void a check can provide you with a secure payment method that you may need or prefer to use in certain circumstances | |
what is a checking account | a checking account is a bank account where you can make cash withdrawals or deposits you can also use a checking account for electronic transfers or online or in person purchases generally checking accounts cover everyday expenses such as rent utility and medical bills investopedia zoe hansen | |
how checking accounts work | a checking account is also known as a share draft account at a credit union these accounts serve your short term cash needs as you deposit and withdraw money you add money via paychecks cash gifts transfers or direct deposit you take money out using checks electronic transfers at an atm or using a debit card for in person or online purchases you can generally set up automatic bill payments through your checking account if you open a checking account at a bank the federal deposit insurance corporation fdic insures your money up to 250 000 per individual depositor and insured bank if your bank fails your money should be safe if your account balance isn t more than the fdic limits if you open a checking account at a credit union your money will get the same kind of protection from the national credit union association unlike savings accounts checking accounts generally don t pay interest and if they do pay interest the rate tends to be low even in a high rate environment in january 2024 the average savings account rate is roughly four times more than the average rate for an interest bearing checking account checking accounts with higher interest might impose specific requirements to score the higher rate for example you must maintain a high balance or make many debit card transactions monthly while checking accounts may not offer interest many banks and credit unions provide cash back debit cards when you pay for an item with your debit card you can earn back a percentage of the amount spent you can also earn a new customer bank account bonus of several hundred dollars if you meet certain conditions typically requiring direct deposits banks make money by charging fees for checking accounts including maintenance fees or using an atm outside the bank s network you may be able to avoid some fees for example a bank might not charge a maintenance fee if you make a certain number or amount of direct deposits types of checking accountschecking accounts come in several varieties a regular checking account typically pays little or no interest although some offer a flat interest rate regardless of your balances others pay more interest on higher balances some traditional accounts don t charge recurring fees such as monthly maintenance fees but they may require a minimum balance to avoid fees if you have a lot of cash to stash in a checking account or need personal banking services check out a premium checking account with a high balance you can avoid fees and enjoy perks such as atm fee reimbursements and higher interest earnings a joint checking account allows two or more people often spouses to write checks and make deposits the ownership of a joint account may depend on the institution state law and how you set up the account ensure you understand what happens to the money in a joint account if an account holder dies or a divorce or separation occurs you may be legally responsible for your joint owner s debts joint owners may benefit from higher fdic insurance amounts business accounts may be offered to small business owners and larger or global commercial entities authorized business officers managers and employees can use a business checking account to cover expenses a business account can only be opened by a legitimate business and you may need to provide documentation to the bank regarding your business some banks offer student checking accounts for high school students and college students these accounts feature perks such as low or no maintenance fees and no minimum balance requirements high school student accounts typically require parent involvement as a co owner or co applicant while those for college students do not sometimes known as lifeline accounts these accounts are designed for customers who can only maintain a small balance but still want access to banking services but the bank might limit the number of checks you can write or require paperless statements if a bank previously shut down your checking account you might need to get a second chance account keep an eye on potential fees and rules around keeping your account balance positive some banks offer checking accounts geared toward seniors over a specified age the benefits of these accounts include no fees and discounts on banking products and services checking account overdraft feesif you purchase something that costs more than your checking account s contents your bank might cover the difference through overdraft protection but it will charge you a fee to do so overdraft coverage is technically considered a type of loan with pros and cons for example if you have 50 in your checking account and buy a shirt for 70 using your debit card the bank might approve the purchase transaction however the bank might charge a 20 overdraft fee for that purchase or any other purchases until you add money to your account if your account remains overdrawn your bank also might charge daily interest you can avoid overdraft charges in several ways in january 2024 the consumer financial protection bureau proposed curbing overdraft fees charged by very large u s banks fees that typically run 35 checking account serviceshere are the various services that likely accompany your checking account direct deposit lets your employer electronically deposit money into your bank account this gives you quicker access to money than receiving and depositing a paper check banks also benefit from direct deposits due to the steady inflow of cash so many banks provide benefits like free checking if you set up direct deposit for your account a wire transfer is an electronic funds transfer that moves money from one bank account directly into another account even internationally it allows money to be moved securely without the need to exchange cash atms let you easily access cash or make check or cash deposits these machines can be found at branches malls airports and convenience stores before using an atm understand the fees your bank charges for using an out of network atm debit cards provide a convenient way to shop as they re accepted similarly to credit cards debit cards draw from the funds in your bank account but you can also use the cards to withdraw cash at an atm many banks offer zero liability fraud protection to help guard against identity theft if your debit card is lost or stolen you can schedule or make automatic payments for usual utility and rent bills you can even pay another person electronically or with a bank mailed paper check often at no cost checking accounts and interestchecking accounts usually pay lower interest rates than savings accounts if they pay any interest some high yield checking accounts offer higher interest rates than the average interest rates on high yield checking accounts might be three to six times higher than the rates that a regular checking account pays accounts that pay higher interest might impose specific requirements for example you must maintain a high balance or make many monthly debit card transactions checking accounts and credit scoresmost basic checking account activities such as making deposits making withdrawals and writing checks don t affect your credit score closing checking accounts in good standing also won t impact your credit score however overdrawn checking accounts may appear on your credit report if you don t repay the money you overspent your bank could send that item to collections if you don t repay an overdraft loan this could potentially harm your credit score | |
how to choose a checking account | consider these factors when choosing a checking account | |
how to open a checking account | setting up a checking account at a bank or credit union is generally easy the directions for opening a checking account differ from one financial institution to another generally here s what you can expect if you open an account in person or apply online being denied a checking accountbanks and credit unions review your credit report and checking account report before approving a new account application the bank might reject your application if you ve racked up a history of writing bad checks negative information typically stays on your report for up to five years repeatedly bouncing checks failing to pay overdraft fees committing fraud or having an account closed for cause can result in a financial institution turning down your application for a checking account if a bank has closed your checking account or you can t qualify for a new one you might turn to second chance checking accounts which many financial institutions offer after maintaining the account in good standing for a certain period you can graduate from a traditional checking account federal law lets you request a free checking account report once a year from each of the nationwide agencies including certegy chexsystems early warning services and telecheck you have the right to dispute any inaccurate information | |
what is a checking account used for | a checking account lets you store cash safely and securely while enjoying easy access to your money with debit cards electronic transfers or checks people typically use checking accounts for things like on time automatic bill payments and making purchases people also use checking accounts to cash checks and receive direct deposits | |
what is the difference between a checking account and a savings account | checking accounts are typically used to make frequent deposits and withdrawals and to cover everyday expenses meanwhile a savings account holds money for medium and long term needs a savings account typically pays higher interest rates than a checking account | |
is a debit card a check card | a debit card and a check card are essentially the same thing this card lets you make transactions using funds in your checking account including cash withdrawals from atms the bottom linea checking account can be ideal for keeping your money to meet short term deposit and spending needs you can open a checking account at a traditional bank credit union or online only bank when you re shopping for a checking account be sure to review an account s fees benefits and interest rates | |
what are checks and balances | checks and balances are rules and procedures to reduce mistakes prevent improper behavior or decrease the risk of centralization in an organization checks and balances prevent any one person or department from having absolute control over decisions and force cooperation in completing tasks the term is most commonly used in the context of government but also refers to limiting power in businesses and organizations | |
how checks and balances work | the u s government exercises checks and balances through its three branches the legislative executive and judicial branches it operates as a constitutionally limited government and is bound to the principles and actions that are authorized by the federal and corresponding state constitution checks and balances are also important in businesses and other organizations where one individual can make decisions that affect operations for example large corporations have legal departments and internal compliance officers to ensure adherence to regulations and in some factories union stewards act as a check against management checks and balances can cost more money but can be critical in helping to identify internal and external theft by separating the duties of various employees into clearly defined roles businesses and organizations are better able to ensure that rogue employees or executives cannot harm a business without the intervention of other employees having these types of internal controls in a business can help improve operational efficiency in some situations while it may seem that adding these checks on power can hurt efficiency it is possible that they boost efficiency for example if one executive has too much power and is taking on too much responsibilities forcing delegation can make things run smoother and quicker internal control systems of publicly listed businesses in the u s use checks and balances this is a requirement of the sarbanes oxley act the directors of such businesses have a legal obligation to ensure a proper system of internal control that includes checks and balances 1checks and balances in the united nationsthe united nations has six internal institutions the international court of justice the general assembly the economic and social council the trusteeship council the un secretariat and the security council 2each of these institutions has different responsibilities such as maintaining international peace policy review and recommendations on economic social and environmental issues and an international court the individuals working in these bodies and the bodies themselves cannot influence each other given that the un has a wide global influence impacting most nations around the world it s critical that different directives are handled by different groups so as to avoid a concentration of power the un s voting system and veto power policy allow individual countries to check the power of other countries example of checks and balancesthe u s constitution provides checks and balances for the u s government through the separation of powers between its three branches the legislative branch the executive branch and the judicial branch the constitution gives specific abilities to each one of these three branches to ensure that no one section of the government could obtain excessive unchecked power checks and balances are practiced by the u s government in the following ways first the legislative branch is the part of the government that makes laws but the executive branch gives veto power to the president allowing the president to keep the legislative branch in check in addition the judicial branch the part of the government that interprets the laws put into effect by the legislative branch can deem certain laws unconstitutional making them void moreover while the president has veto power the legislative branch can overturn a president s veto with a two thirds supermajority vote by both houses of congress this ensures that the president cannot use his power for personal gain 3 the executive branch can also issue executive orders ordering how certain laws should be enforced or ordering that the government take certain actions but the judicial branch can deem these orders to be unconstitutional executive orders are issued to help govern the country implement policy enforce laws and run the government historically only a small minority have been deemed unconstitutional as the president is not likely to issue one that is obviously unconstitutional however there have been some significant instances of unconstitutional executive orders in america s history they are enacted solely by the president as head of the executive branch of government still executive orders can be reversed by subsequent administrations for example when president joe biden first took office in january of 2021 he signed one of his first executive orders 13986 entitled ensuring a lawful and accurate enumeration and apportionment pursuant to the decennial census this order effectively reversed policies set forth by a prior executive order enacted by president donald trump that would have excluded non citizens from the u s census count 4 | |
what is the definition of checks and balances in the u s government | in the u s government checks and balances refers to the separation of power in the government which is ensured through the establishment of three different branches the executive branch the judicial branch and the legislative branch all hold different powers and therefore can check the power of the other branches who created the idea of checks and balances the idea of checks and balances which is a separation of power was first proposed by the greek statesman polybius in reference to the government of ancient rome during the age of enlightenment french philosopher baron de montesquieu discussed in his work the spirit of laws the need for the separation of powers to prevent despotism 5 | |
how is the system of checks and balances used in international organizations | checks and balances are used by a wide range of global organizations that seek to check the power of different nations organizations and individuals within said organizations groups such as nato the un the world trade organization wto the international criminal court icc all employ checks and balances in their organizational structures the bottom linewithout checks and balances one branch of a government or organization can grow too powerful in the u s three branches of the federal government effectively have a set of checks and balances the legislative branch as congress the house of representatives and the senate the supreme court and lower courts as the judicial branch and the president his cabinet and all federal departments and agencies as the executive branch other governments and international bodies like the united nations also have checks and balances in place | |
what is a chi square 2 statistic | a chi square 2 statistic is a test that measures how a model compares to actual observed data the data used in calculating a chi square statistic must be random raw mutually exclusive drawn from independent variables and drawn from a large enough sample for example the results of tossing a fair coin meet these criteria chi square tests are often used to test hypotheses the chi square statistic compares the size of any discrepancies between the expected results and the actual results given the size of the sample and the number of variables in the relationship for these tests degrees of freedom are used to determine if a certain null hypothesis can be rejected based on the total number of variables and samples within the experiment as with any statistic the larger the sample size the more reliable the results formula for a chi square 2 statistic c 2 o i e i 2 e i where c degrees of freedom o observed value s begin aligned chi 2 c sum frac o i e i 2 e i textbf where c text degrees of freedom o text observed value s e text expected value s end aligned c2 ei oi ei 2 where c degrees of freedomo observed value s | |
what a chi square 2 statistic can tell you | there are two main kinds of chi square tests that will provide different information chi square analysis is applied to categorical variables and is especially useful when those variables are nominal where order doesn t matter like marital status or gender | |
when considering student gender and course choice a 2 test for independence could be used to do this test the researcher would collect data on the two chosen variables gender and courses picked and then compare the frequencies at which male and female students select among the offered classes using the formula given above and a 2 statistical table | if there is no relationship between gender and course selection that is if they are independent then the actual frequencies at which male and female students select each offered course should be expected to be approximately equal or conversely the proportion of male and female students in any selected course should be approximately equal to the proportion of male and female students in the sample a 2 test for independence can tell us how likely it is that random chance can explain any observed difference between the actual frequencies in the data and these theoretical expectations in a test of independence a company may want to evaluate whether its new product an herbal supplement that promises to give people an energy boost is reaching the people who are most likely to be interested it is being advertised on websites related to sports and fitness on the assumption that active and health conscious people are most likely to buy it it does an extensive poll that is intended to evaluate interest in the product by demographic group the poll suggests no correlation between interest in this product and the most health conscious people 2 provides a way to test how well a sample of data matches the known or assumed characteristics of the larger population that the sample is intended to represent this is known as goodness of fit if the sample data does not fit the expected properties of the population in which one is interested then one would not want to use this sample to draw conclusions about the larger population as an example of a test of goodness of fit a marketing professional is considering launching a new product that the company believes will be irresistible to women over age 45 the company has conducted product testing panels of 500 potential buyers of the product the marketing professional has information about the age and gender of the test panels this allows the construction of a chi square test showing the distribution by age and gender of the people who said they would buy the product the result will show whether or not the likeliest buyer is a woman over 45 if the test shows that men over age 45 or women ages 18 to 44 are just as likely to buy the product then the marketing professional will revise the advertising promotion and placement of the product to appeal to this wider group of customers example of how to use a chi square 2 statisticfor example consider an imaginary coin with exactly a 50 50 chance of landing heads or tails and a real coin that you toss 100 times if this coin is fair then it will also have an equal probability of landing on either side and the expected result of tossing the coin 100 times is that heads will come up 50 times and tails will come up 50 times in this case 2 can tell us how well the actual results of 100 coin flips compare to the theoretical model that a fair coin will give 50 50 results the actual toss could come up 50 50 or 60 40 or even 90 10 the farther away the actual results of the 100 tosses are from 50 50 the less good the fit of this set of tosses is to the theoretical expectation of 50 50 and the more likely one might conclude that this coin is not actually a fair coin | |
when to use a chi square 2 test | a chi square test is used to help determine if observed results are in line with expected results and to rule out that observations are due to chance a chi square test is appropriate for this when the data being analyzed is from a random sample and when the variable in question is a categorical variable a categorical variable consists of selections such as type of car race educational attainment male or female or how much somebody likes a political candidate from very much to very little these types of data are often collected via survey responses or questionnaires therefore chi square analysis is often most useful in analyzing this type of data | |
how to perform a chi square 2 test | these are the basic steps whether you are performing a goodness of fit test or a test of independence limitations of a chi square 2 statisticthe chi square test is sensitive to sample size relationships may appear to be significant when they aren t simply because a very large sample is used in addition the chi square test cannot establish whether one variable has a causal relationship with another it can only establish whether two variables are related | |
what is a chi square test used for | chi square is a statistical test used to examine the differences between categorical variables from a random sample in order to judge the goodness of fit between expected and observed results who uses chi square analysis since chi square applies to categorical variables it is most used by researchers who are studying survey response data this type of research can range from demography to consumer and marketing research to political science and economics | |
is chi square analysis used when the independent variable is nominal or ordinal | a nominal variable is a categorical variable that differs by quality but whose numerical order could be irrelevant for instance asking somebody their favorite color would produce a nominal variable asking somebody s age on the other hand would produce an ordinal set of data chi square can be best applied to nominal data the bottom linea chi square statistic is used to measure the difference between the observed and expected frequencies of the outcomes of a set of variables it can be helpful for analyzing differences in categorical variables especially those nominal in nature the two different types of chi square tests test of independence and test of goodness of fit will answer different relational questions | |
what is a chief executive officer ceo | a chief executive officer ceo is the highest ranking executive in a company a ceo s primary responsibilities include making major corporate decisions driving the workforce and resources of a company toward strategic goals and acting as the main point of communication between the board of directors and corporate operations the chief executive officer serves as the public face of the company in many cases ceos are elected by the board and its shareholders they report to the chair and the board who are appointed by shareholders xiaojie liu investopediaceo s roles and responsibilitiesa ceo s role varies by company depending on its size culture and corporate structure ceos in large corporations typically deal only with very high level strategic decisions and those that direct the company s overall growth ceos may work on strategy organization and culture they may look at how capital is allocated across the firm or how to build teams to succeed they can also set the tone vision and sometimes the culture of their organizations ceos in smaller companies often are more hands on and involved with day to day functions a study from harvard business review analyzed how ceos spend their time they found that 72 of ceos working time was spent in meetings of the remaining working time 25 was spent on relationships 25 on business unit and functional reviews 21 on strategy and 16 on culture and organization the study showed that just 1 of their working time was spent on crisis management and 3 was allocated to customer relations 1a chief executive officer s roles and responsibilities also vary greatly between industries and organization sizes a ceo may generally be expected to take on some or all of these tasks ceo pay and notorietyceos also receive many other benefits based on their positions but the total compensation for the highest paid in 2023 was reportedly 161 826 161 the honor went to hock e tan ceo of broadcom inc this was an increase of 167 from the previous year 2the chief executive officers of large corporations often achieve fame or infamy because of their frequent dealings with the public examples include elon musk ceo of tesla tsla and steve jobs founder and ceo of apple aapl jobs became such a global icon that an explosion of both cinematic and documentary films about him emerged after his death in 2011 the leader of an organization may not be titled ceo although they might assume all the typical responsibilities of a ceo related chief positionscorporate america houses numerous titles of senior executives that begin with the letter c for chief this group of top senior staffers has come to be called c suite or c level in the corporate vernacular the ceo may also be serving as the chief financial officer cfo or the chief operating officer coo for small organizations or those that are still in the startup or growth phases this can lead to a lack of clarity and can overwork an executive assigning multiple titles to a single executive level individual can wreak havoc on a business s continuity and ultimately affect its long term profitability assigned titles and the functions associated with each can become muddled quickly when it comes to executive level positions within an organization the ceo directs the operational aspects of a company the board of directors oversees the company as a whole and is led by the chair of the board cob the chair of the board doesn t have the power to overrule the board but the board has the power to overrule the ceo s decisions the chair is effectively considered to be a peer of the other board members the ceo and the chair of the board can be the same person in some cases but many companies split these roles between two people this gives better governance and oversight of the work of the ceo the cfo is the chief financial officer of a company ceos manage general operations cfos focus specifically on financial matters a cfo analyzes a company s financial strengths and makes recommendations to improve financial weaknesses the cfo also tracks cash flow and oversees a company s financial planning such as investments and capital structures the cfo seeks to deliver returns to shareholders by focusing on financial discipline and driving margin and revenue growth the chief operating officer coo is often ranked second after the ceo their responsibilities fall on recruitment legal payroll and training along with administrative duties as the head of human resources the difference between ceo and other leadership titlesseveral other leadership titles may or may not overlap with a ceo the founder of a company is the individual who started it they helped bring the company into existence creating the bylaws and articles of incorporation organization structure and overall strategy from the first day a founder can be the title of an individual who s currently with a company or of an individual who started the company but has since left they can also be considered a founder and may be referred to as both simultaneously founder ceo if they helped to start the company a chairperson is a presiding officer who oversees a group or committee they may also be given the title of president they re in charge of managing the group of individuals often assigned a specific task or a set of responsibilities a board of directors often has a chairperson to oversee the management of the entire board a ceo may hold a chairperson position if they directly manage a committee an owner is a financial stakeholder of a company usually with an equity position in the business an owner may be entitled to the profits of a company in proportion to their percentage of ownership because companies can have multiple owners each individual might be referred to as a part owner if there s more than one a ceo can be an owner if they have a financial stake in the company the term director can refer to a few positions a director may be upper management or hold an executive level position depending on a company s organizational structure a director may be an individual serving on the board of an organization or a ceo might be a director level employee most companies ceos are on a higher tier employment level than directors however a ceo could also be under the direction of a director a ceo often reports to a board of directors who collectively make sure that the company is functioning well the impact of a ceo changemarkets can respond either positively or negatively to the change in company leadership during ceo transitions studies show that ceos can have a large impact on a company s performance one study found that 45 of company performance is influenced by the ceo 3 but another showed that ceos affect just 15 of variance in profitability 4the price of a company s stock could change for any number of reasons when a new ceo takes over a change in ceo generally carries more downside risk than upside particularly when it hasn t been planned a stock s price could swing up or down based on the market s perception of the new ceo s ability to lead the company other factors to consider when investing in a stock that s undergoing a management change include the incoming ceo s agenda whether there might be a shift in corporate strategy and how well the company s c suite is managing the transition phase investors tend to be more comfortable with new ceos who are already familiar with the dynamics of the company s industry and the specific challenges the company might be facing investors will typically assess a new ceo s track record for creating shareholder value a ceo s reputation could be reflected in areas like an ability to grow market share reduce costs or expand into new markets | |
what does a ceo do | ceos are responsible for managing a company this can include delegating and directing agendas driving profitability managing company organizational structure and strategy and communicating with the board | |
is the ceo the owner of the company | it depends ceos are the owners of a company in some cases or are elected by the board of directors in others | |
is ceo or cfo a higher position | ceo is the highest position to occupy in a company the cfo is responsible for the financial discipline of a company identifying its strengths and weaknesses and ultimately reporting to the ceo | |
what position is higher than ceo | a ceo often reports to a board of directors the board oversees the performance of the ceo and can elect to remove or replace them if they feel that the executive s performance isn t producing the results they want to see the bottom linethe ceo is responsible for making major corporate decisions driving the direction of the company supervising other executives and overseeing growth plans they re accountable to the board of directors or stakeholders of the company and are often the public face of the organization ceos typically have extensive experience in their industry and are tasked with guiding their company toward success and profitability | |
what is a chief financial officer cfo | the term chief financial officer cfo refers to a senior executive responsible for managing the financial actions of a company the cfo s duties include tracking cash flow and financial planning as well as analyzing the company s financial strengths and weaknesses and proposing corrective actions the role of a cfo is similar to a treasurer or controller because they are responsible for managing the finance and accounting divisions and for ensuring that the company s financial reports are accurate and completed in a timely manner investopedia zoe hansenrole and responsibilities of chief financial officers cfos the chief financial officer is a member of the c suite a term used to describe the most important executives in a company alongside the cfo these roles include the chief executive officer ceo the chief operating officer coo and the chief information officer cio becoming a cfo requires a certain degree of experience in the industry the majority of people who end up in this position have advanced degrees and certifications such as a graduate degree in finance or economics and the chartered financial analyst cfa designation it also helps to have a background in accounting investment banking or analysis 1the cfo reports to the ceo but remains one of the key personnel in any company in the financial industry it is a high ranking position and in other industries it is usually the third highest position in a company people in this role have significant input in the company s investments capital structure and how the company manages its income and expenses this corporate officer may assist the ceo with forecasting cost benefit analysis and obtaining funding for various initiatives the cfo also works with other senior managers and is a vital participant in a company s overall success especially when it comes to the long run for instance when the marketing department wants to launch a new campaign the cfo may help to ensure the campaign is feasible or give input on the funds available for the campaign a cfo can become a ceo coo or they can assume the role of company president regulations and compliance for cfosthe cfo must report accurate information because many decisions are based on the data they provide the cfo is responsible for managing the financial activities of a company and adhering to generally accepted accounting principles gaap adopted by the securities and exchange commission sec and other regulatory entities cfos must also adhere to regulations such as the sarbanes oxley act that include provisions such as fraud prevention and disclosing financial information 2local state and federal governments hire cfos to oversee taxation issues typically the cfo is the liaison between local residents and elected officials on accounting and other spending matters the cfo sets financial policy and is responsible for managing government funds the benefits of being a cfothe cfo role has emerged from focusing on compliance and quality control to business planning and process changes and they are a strategic partner to the ceo the cfo plays a vital role in influencing company strategy the united states is an international financial hub and global economic growth increases employment growth in the u s financial industry companies continue to increase profits leading to a demand for cfos the bureau of labor statistics bls predicts the job outlook for financial managers to grow 16 between 2022 and 2032 the average annual salary for a financial manager was 139 790 in 2022 latest information 3 | |
is a cfo an accountant | generally no a cfo is not the same as an accountant accountants handle bookkeeping tasks and tax filings meanwhile a cfo focuses on the company s financial future creating forecasts | |
what is the average salary of a cfo | the average salary of a cfo as of jan 2024 is roughly 437 711 a year according to salary com 4 | |
what is the highest cfo salary | the highest paid cfo for fiscal year 2023 was livenation s joe berchtold whose salary was 52 4 million 5 | |
how do you become a cfo | generally speaking the cfo position is reserved for very experienced professionals with established track records in their field cfos are generally equipped with advanced educational designations such as a master of finance or chartered financial analyst cfa designation many cfos have professional backgrounds in fields such as accounting investment banking or financial analysis for financial professionals the cfo is among the most prestigious and highly paid positions available in a firm | |
are a ceo and a cfo the same thing | no a ceo and a cfo are not the same thing however cfos are required to work closely with the other senior executives of a company such as the ceo these executives are sometimes referred to as the c suite of the company representing the company s highest level of decision making although the cfo is typically subordinate to the ceo in the corporate hierarchy cfos will generally be the foremost decision maker on all matters within the finance department of their firm the bottom linethe cfo is the top ranking executive related to managing a company s finances this includes managing all aspects of financial and cash flow planning as well as analyzing its financial position a cfo is comparable to a treasurer or controller however unlike a controller or accountant a cfo is responsible for financial planning while the other two are in charge of bookkeeping and the company s financial statements | |
what is a chief operating officer coo | the chief operating officer coo is a senior executive tasked with overseeing the day to day administrative and operational functions of a business the coo typically reports directly to the chief executive officer ceo and is considered to be second in the chain of command in some corporations the coo is known by other terms such as executive vice president of operations chief operations officer or operations director investopedia jiaqi zhouthe role of a chief operating officer coo the coo mainly focuses on executing the company s business plan according to the established business model while the ceo is more concerned with long term goals and the broader company outlook in other words the ceo devises plans while the coo implements them for instance when a company experiences a drop in market share the ceo might call for increased quality control in order to fortify its reputation among customers in this case the coo might carry out the ceo s mandate by instructing the human resources department to hire more quality control personnel the coo may also initiate the rollout of new product lines and may likewise be responsible for production research and development and marketing responsibilities of a cooa chief operating officer is responsible for the day to day operations of a company their responsibilities can include keep in mind that the role of a coo may vary from company to company according to each firm s needs depending on the ceo s preference the coo often handles a company s internal affairs while the ceo functions as the public face of the company and thereby handles all outward facing communication instead of having one or two skill sets most successful coos have multifaceted talents enabling them to adapt to different tasks and solve a range of issues in many cases a coo is specifically chosen to complement the skill sets of the sitting ceo in an entrepreneurial situation the coo often has more practical experience than the founding ceo who may have come up with an excellent concept but lacks the start up know how to launch a company and manage its early stages of development consequently coos often design operations strategies communicate policies to employees and help human resources hr build out core teams types of coosevery company is different and in a different stage of growth a new company will have very different needs than a company that has been around for 100 years and has a large market share in its industry depending on the company its needs its cycle stage and its unique characteristics the specific type of coo required to help it realize its goals will vary there are generally seven types of coos qualifications and skills of a cooa coo typically has extensive experience in the field within which a given company operates coos often work for at least 15 years climbing the corporate ladder this slow build helps prepare coos for their roles by letting them cultivate extensive experience in the practices policies and procedures of their chosen field also because they re traditionally responsible for directing multiple departments coos must be resourceful problem solvers and must possess strong leadership skills educationally coos typically hold bachelor s degrees at a minimum while often also holding master s in business administration mba degrees and other certifications | |
how to become a coo | the path to becoming a coo can be a long one just like for any c suite role it can take many years of learning on the job as well as in school others become coo much more quickly such as by joining a startup or starting a business to develop your skills with the aim of becoming a chief operating officer you ll likely focus on the following steps coo vs ceothere are some basic similarities between these two roles both ceo and coo are inside directors of a company they both are tasked with participating in daily management activities to keep the company running smoothly the difference between a coo and a ceo starts with the organizational chart the ceo is at the top of the chain of command with the coo second in command reporting to the ceo | |
where the ceo is typically outward facing the coo is typically inward facing in charge of internal operations and communications and while the ceo devises business strategy it is the coo who oversees its implementation | examples of coosoracle is a technology firm that began in 1977 it sells database software cloud technology management systems and a variety of other products 3 oracle had been performing well as a company but then hit a growth cap and couldn t increase annual revenue past 1 billion for a period of time in 1992 larry ellison then ceo and now executive chair and chief technology officer cto brought in ray lane to turn the company s fortunes around lane joined as senior vice president and president of oracle usa he became coo in 1996 4 | |
when lane came on board he integrated packaged software and high margin professional service in this aspect he was selling two products in one cycle increasing revenues from one sale and according to him because the people providing the professional service were experts on the product the company could charge a high price for it resulting in a high margin | in 1992 oracle had sales of 1 8 billion and profits of 61 5 million in 1997 it had 5 7 billion in sales and profits of 821 5 million 45in 1999 lane received a salary of 1 million and a 2 25 million bonus he was also given 1 125 million in stock options at the time valued between 11 8 million and 30 million 67the history of dell computers is quite famous with michael dell having started the company in his dorm room in 1984 it was the first company to sell personal computers directly to consumers the company had been performing well until about 1993 when business started to flounder the company s stock fell from 49 to 16 and the cfo had resigned the problems of the company were due to rapid growth that it could just not keep up with it had a planned launch of notebook computers that was eventually stopped because of poor production planning at the time the company didn t know what product lines its profits and losses were coming from in essence its operations were a mess 8with the company falling apart dell decided to bring on people with experience he chose people older than him who had the managerial chops to turn things around the key hire was mort topfer though he did not have the title of coo he was vice chair he did the job of coo and was dell s mentor and right hand man as of 2023 dell was the third largest computer company in the world with a market share of 16 18 9 | |
when topfer came onboard he implemented multi year planning opened more affordable factories overseas restructured management and encouraged dell to focus on strategy while topfer would deal with day to day operations 8 the company turned around becoming a powerhouse | topfer joined dell in 1994 and previously worked at motorola heading its land mobile products division in 2000 his salary at dell was 700 000 with a bonus of 1 2 million he also received 290 910 stock options 10 | |
what is the difference between a ceo and coo | a ceo is the top most ranking person at a firm responsible for the long term health and direction of the firm while a coo is the second highest individual in the firm reporting to the ceo and responsible for the day to day operations of the firm | |
what does it take to be a coo | coos have a strong educational background combined with extensive work experience a strong coo will have worked in a variety of positions particularly in a specific organization to understand all of the different parts of a business and how they work together this allows them to pinpoint specific issues and gaps within the organization having experience managing people and teams is also imperative to be a coo in addition coos should be great communicators strong leaders and flexible managers | |
how much money does a coo make | the salary of a coo will vary greatly depending on a variety of factors including the company they work for their experience and their contract according to payscale as of 2023 the average coo salary is 139 156 the base salary ranges from 69 000to 249 000 on top of that coos are paid bonuses and profit sharing plans 11the bottom line a coo is the ceo s right hand person and the second highest in command at a firm the coo is responsible for the day to day operations of a firm and for assisting the ceo in a variety of tasks not all firms require a coo however those that do often benefit from the specific skill set that a coo brings to a company such as strong analytical organizational and communication skills | |
what is a chief technology officer cto | a chief technology officer cto is the executive in charge of an organization s technological needs as well as its research and development r d also known as a chief technical officer this individual examines the short and long term needs of an organization and utilizes capital to make investments designed to help the organization reach its objectives the cto usually reports directly to a company s chief information officer cio but may also report to the chief executive officer ceo of the firm understanding the role of the chief technology officer cto a chief technology officer cto is the highest technology executive position within a company and leads the technology or engineering department they develop policies and procedures and use technology to enhance products and services that focus on external customers the cto also develops strategies to increase revenue and performs a cost benefit analysis and return on investment analysis previously a chief information officer cio performed dual roles as cio and chief technology officer however as technology continued to advance there was a growing need to separate the cio job into two roles to ensure a company s success hence the cto was developed as a separate position | |
how do the two differ despite the titles the cto has more of an outward looking strategic planning role while the cio has more of a technology focused operational role generally a cio is responsible for technologies that run the company s internal operations and business procedures the cto is responsible for technologies that grow the business externally implementing services and products that serve clients and customers | many large corporations need both a cto and cio while smaller companies tend to have one or the other the choice depends on the company s vision and budget as technology focuses more on integrating applications processes and the internet of things ctos must keep abreast of big data streaming analytics and cloud technology to remain innovative and stay competitive types of chief technology officerswhile research and development have been a component of businesses for many years the rise of information technology it and computers has increased the importance of the chief technology officer companies focusing on scientific and electronic products employ ctos who are responsible for the oversight of intellectual property and have backgrounds in the industry but the responsibilities and role of the cto also depend on the company there are typically four different kinds of ctos whose main duties may differ this type of cto may oversee the data security maintenance and network of a company and may implement but not necessarily set the company s technical strategy the cto may also manage the company s technological roadmap a second type of cto may envision how technology will be used within the company while setting the technical strategy for the company this cto will also look at how to further implement new technologies within the company to ensure its success in this role a cto will act as a liaison between the customer and the business by taking on the responsibilities of customer relations getting a grasp on the target market and helping deliver it projects to market this kind of cto helps set up the corporate strategy and fuel technological infrastructure analyzes target markets and creates business models additionally the cto will have a close relationship with the ceo and other members of the company s senior management becoming a chief technology officer cto as with most jobs in the it industry the path to cto starts with a bachelor s degree in a computer or information science related field computer programming software development management information systems applied mathematics or cybersecurity many firms also prefer their ctos to have a master s degrees in computer sciences information technologies or technology management given that ctos often focus on products for customers and customer relations sales and marketing courses are often useful as well many chief technology officers have mba degrees reflecting the significance of it in strategic corporate planning and business goals on the job practical experience is important most ctos have worked their way up the it ranks at different organizations industry certifications if not crucial can significantly enhance an applicant s credentials as well a chief technology officer is a high ranking executive level position in a company part of the senior level c suite so applicants may need more than 15 years of experience in the it field before being considered for a cto job as of may 12 2024 annual salaries for ctos in the united states range from 265 475 to 348 517 according to salary com 1the average base salary of a cto in 2024 according to salary com as of may 12 2024 1special considerationsthe u s bureau of labor statistics bls predicts that the job outlook for ctos along with other computer and information systems managers is good employment is expected to increase 15 between 2022 and 2032 much faster than the average 3 for all jobs 2the continued growth of business conducted over information systems and the need to bolster cybersecurity in computer and information systems that businesses use are the main reasons for employment growth in this role increases in cybersecurity threats mean that implementing more robust security policies is critical for organizations that manage sensitive information in 2009 the white house announced the appointment of the country s very first cto an official in the office of science and technology policy this official s main focus is to use technology to help stimulate job creation improve healthcare and security systems and increase broadband access aneesh chopra was the first cto of the u s 3 currently the u s doesn t have a cto and hasn t had one for three years 4 | |
what does a chief technology officer do | a chief technology officer cto is responsible for overseeing the development and dissemination of technology for external customers vendors and other clients to help improve and increase business they may also deal with internal it operations if a company is small and doesn t have a chief information officer cio | |
is a cto the same as a cio | the cto title has been in use for over 10 years but there is still confusion about the role and how it differs from the cio the title first developed at dot com companies in the 1990s and then expanded to it departments the cto role became popular as the information technology it industry grew but it is also used in other industries such as e commerce healthcare telecommunications and government although there is overlap between the two positions since both deal with it ctos generally look outward using technology to improve the company s customer experience the use of the goods and services cios generally look inward developing and using technology to improve the company s procedures and operations | |
whom does a cto report to | ctos often report to cios however they may report directly to a company s ceo especially if there is no cio position the bottom linectos start out with bachelor s degrees in a computer science related field they often earn master s degrees as well again in computer sciences or mathematics fields though more general mbas are common as well ctos generally have at least 15 years of it job experience under their belts along with technical expertise they must demonstrate leadership decision making management and business strategy skills with more and more cybersecurity threats to businesses ctos will play an increasingly critical role | |
what is the child tax credit | the child tax credit is a tax benefit granted to american taxpayers with children under the age of 17 as of the end of the year for the 2023 tax year the tax return filed in 2024 the credit is 2 000 for each qualifying child you qualify for the full amount for each child if you earn up to 200 000 as an individual filer or 400 000 for joint filers the benefit is phased out for parents with higher incomes 1this benefit has reverted to pre 2021 levels after two years during which emergency legislation related to the covid 19 pandemic boosted the benefit to as much as 3 000 per child and 3 600 for children under age 6 2 | |
how the child tax credit works | the child tax credit lowers taxpayers total taxes owed on a dollar for dollar basis that s better than a tax deduction which reduces total taxable income and generally results in smaller savings 3to get the credit you must have a social security number for the dependent child it can be claimed by filing schedule 8812 credits for qualifying children and other dependents with form 1040 41the credits are available if the dependent child or children meet the following qualifications the irs offers an online tool to help taxpayers figure out if their child or dependent qualifies for the child tax credit the credit is partially refundable through the additional child tax credit that is taxpayers whose credit exceeds their tax liability will receive a check for up to 1 600 of the unused portion of the credit 5 this refundable amount rises to 1 700 in the 2024 tax year 6 | |
how to claim the child tax credit | some people with low income don t bother filing taxes because they know they don t owe any money that can be a mistake for several reasons all but the lowest income earners are required to file a tax return even more importantly however you may be missing out on some valuable benefits that you are eligible to receive one of these if you have a family is the child tax credit which is partially refundable when combined with the additional child tax credit this means you can receive part of it back even if you don t owe any taxes 5to claim the child tax credit a taxpayer must file form 1040 u s individual income tax return in addition a taxpayer must attach schedule 8812 credits for qualifying children and other dependents schedule 8812 is used to figure out the amount of child tax credit a taxpayer is eligible to receive 4child tax credit impact on policy and povertysince its enactment in 1997 the child tax credit has benefited most working families 7 over the years it has been criticized regularly for providing little or no benefit to the poorest families many of whom are not taxpayers and do not file tax returns the expansion of the child tax credit during the pandemic had important implications for the economy at large as well as for low and moderate income families the emergency measures include prepayment of the benefits to eligible taxpayers some efforts also were made to reach out to very low income families who didn t normally file tax returns and therefore weren t easily identifiable by the irs when it came time to mail out the checks 8well before the pandemic frequent amendments increased the child tax credit amount and widened its eligibility requirements at one time refunds were restricted to taxpayers with three or more children 9 but for years the child tax credit did not reach the poorest families in 2021 for the first time the significant increase in the credit amount and the provision of total refundability extended benefits to the neediest families according to the center on poverty social policy at columbia university the sixth child tax credit payment kept 3 7 million children from poverty in december 2021 as a result monthly child poverty was reduced by nearly 30 10the child tax credit is not considered earned income therefore it does not affect other government benefits such as unemployment insurance medicaid snap ssi or public housing 11the expanded and fully refundable child tax credit was enacted as part of the american rescue plan act a law formally targeted at relieving the economic problems created by the covid 19 pandemic it also addressed many limitations considered problematic in the earlier versions of the child tax credit 8the enlarged credit constituted an enormous financial commitment congressional democrats strongly supported the increased child tax credit republicans generally favored some expanded benefits for children but criticized the version of the child tax credit that was enacted for its cost and for the lack of any work requirement the biden administration undertook an extensive public educational and promotional program to maximize the credit s use and benefits who is eligible for the child tax credit to claim the child tax credit both the taxpayer and the child must have social security numbers and only one taxpayer may claim the child tax credit for any single dependent the child must be under the age of 17 at the end of the year provide no more than half of their own financial support and have lived with the taxpayer for at least half of the year the qualifying child must be the taxpayer s son daughter stepchild brother sister stepsibling half sibling or a descendant of any of these 1 | |
what are the child tax credit income limits for the 2023 tax year | the full child tax credit is available to individuals earning no more than 200 000 couples filing jointly may have a joint income of up to 400 000 the credit phases out so taxpayers with higher incomes may be eligible for a partial refund 1 | |
how do i claim the child tax credit | form 8812 which is filed with form 1040 is used to claim the child tax credit each qualified dependent must have a social security number otherwise the credit cannot be issued it also calculates the amount you qualify to receive 12the bottom linethe child tax credit for the 2023 tax year is 2 000 for each child or other dependent while the ctc is nonrefundable the actc is partially refundable which means that even taxpayers who don t owe any income tax can receive part of it as a refund in 2023 up to 1 600 is refundable in 2024 that increases to 1 700 to claim the child tax credit you must file a federal income tax return | |
what is a chinese wall | the offensive term chinese wall describes a virtual barrier intended to block the exchange of information between departments if it might result in business activities that are ethically or legally questionable the term is harmful given its cultural insensitivities and ethical wall is seen as a more appropriate term to prevent linguistic discrimination in the united states corporations brokerage firms investment banks and retail banks have used ethical walls to describe situations where there is a need to maintain confidentiality in order to prevent conflicts of interest over the years large financial institutions have used ethical wall policies as a means to self regulate their business dealings by creating ethical boundaries between departments however these efforts have not always been effective thus the securities and exchange commission sec has enacted regulations governing how financial institutions share information the sec has implemented fines penalties and legal consequences for companies that break these regulations | |
how does an ethical wall work | the policy of building an ethical wall within a company is common in investment banking through their client relationships investment bankers frequently have access to non public material information concerning publicly traded companies or companies that are about to become public through an initial public offering ipo investment bankers are responsible for developing information barriers that control the flow of confidential information from one department of the bank to another and to other business units within the bank the need for an ethical wall in the financial industry became more critical after the enactment of the gramm leach bliley act of 1999 glba the law repealed federal regulations prohibiting companies from providing any combination of banking investing and insurance services the glba reversed restrictions on such combinations that had been in place since the great depression the glba also enabled the creation of today s financial giants such as citigroup and jpmorgan chase the glba has been criticized for several reasons particularly for its impact on consumers and its contribution to economic crises like the one experienced in 2008 2009 it weakened consumer protections by allowing the consolidation of financial services potentially limiting consumer choice and bargaining power the glba s facilitation of large financial conglomerates increased systemic risk by concentrating financial activities making institutions too big to fail and exacerbating economic downturns ethical walls increasingly came into the spotlight during the dotcom bubble when the gramm leach bliley act of 1999 prevented banks insurance and financial firms from merging in order to protect customers information 1 | |
what is an example of an ethical wall | a financial services firm might have a corporate investment arm that is acting on the behalf of a public company planning a takeover of a rival company the talks are highly confidential not least because of the potential for illegal insider trading on the information yet the same firm has investment advisers in another division who may be actively advising clients to buy or sell stock in the companies involved an ethical wall is supposed to prevent any knowledge of the takeover talks from reaching the investment advisers the need for an ethical wall policy was strengthened in 2002 by the passage of the sarbanes oxley act sox which mandated that companies have stricter safeguards against insider trading 2the concept of an ethical wall exists in other professions the ethical wall may be temporary or permanent for example if a legal firm is representing both sides in an ongoing legal dispute a temporary wall may be placed between the two legal teams to prevent actual or perceived collusion or bias | |
why the term is culturally insensitive | the original offensive term for an ethical wall got its name from the great wall of china erected in ancient times to protect china from its enemies the started being used in the us shortly after the stock market crash of 1929 when congress began debating the need to put regulatory barriers between brokers and investment bankers in more recent times the term has been more widely denounced as culturally insensitive in 1988 justice low a judge in peat marwick mitchell co vs the superior court wrote extensively about the offensiveness of the phrase and its negative connotation towards chinese culture and business practices 3for that matter the judge noted the metaphor isn t even appropriate the phrase is meant to define a two way seal to prevent communication between parties while the actual great wall of china is a one way barrier to keep invaders out justice low offered the term ethics wall as an alternative | |
how do you create an ethical wall | in a business an ethical wall is established when a person or department is required to withhold and not disclose information from another part of the business these information barriers are often common across financial institutions and legal professions | |
what is involved in an ethical wall process | an ethical wall can be created through the process of notifying upper management of any conflicts of interest and any related or external parties involved in the business an ethical wall is then put in place to ensure that information remains confidential to the respective person or department and is not disclosed to other parties in this way the other party should not have access to this information when there is a conflict of interest in order to protect the customer and prevent any action that could potentially lead to personal or corporate gain | |
what is the gramm beach bliley act | the gramm beach bliley act was introduced in 1999 to protect customers from financial firms sharing their sensitive data and information the act repealed parts of the glass steagall act of 1933 which had previously prohibited banks from offering investment commercial banking and insurance services the glba aimed to modernize the financial industry by allowing these different types of financial institutions to merge and operate under a single holding company the bottom lineethical walls are commonly used in business financial and legal professions to protect customers information from external departments in order to prevent conflicts of interest in the financial services sector ethical walls came to the forefront during the height of the dotcom boom with regulatory changes requiring financial firms to provide only one type of service instead of combining insurance banking and investment management businesses while an ethical wall has come a long way from the original offensive term that was used for the concept it remains an important part of business ethics to help ensure the privacy of customers data while improving disclosure of information sharing practices especially in the financial industry | |
what is the churn rate | the churn rate also known as the rate of attrition or customer churn is the rate at which customers stop doing business with an entity it is most commonly expressed as the percentage of service subscribers who discontinue their subscriptions within a given time period it is also the rate at which employees leave their jobs within a certain period for a company to expand its clientele its growth rate measured by the number of new customers must exceed its churn rate understanding the churn ratechurn rate reflects the rate at which a company loses customers or subscribers a high churn rate could adversely affect profits and impede growth what is considered a good or bad churn rate can vary from industry to industry the churn rate not only includes when customers switch providers but also includes when customers terminate service without switching this measurement is most valuable in subscriber based businesses in which subscription fees comprise most of the revenues the churn rate of a company is particularly meaningful in industries where customers can easily switch from one provider to another such as telecommunications or streaming services churn rate vs growth ratewhile the churn rate tracks lost customers the growth rate tracks new customers a company can compare its new subscribers to its loss of subscribers to determine both its churn rate and growth rate the difference between the two shows whether there was overall growth or loss in a specific time period if the growth rate was higher than the churn rate the company experienced growth if the churn rate was higher than the growth rate the company experienced a loss in its customer base for example if in one quarter a company added 100 new subscribers but lost 110 subscribers the net loss would be 10 there was no growth for the company this quarter but rather a loss this would be a negative growth rate and a positive churn rate it s important to pay attention to customer acquisition costs if most customers churn before you have made back the money spent on acquiring that customer then your customer acquisition costs are too high for your business model it is critical for a company to ensure that its growth rate is higher than its churn rate otherwise it will experience declining revenues and profits with the eventual scenario of having to close the business advantages and disadvantages of the churn ratethe advantage of calculating a company s churn rate is that it provides clarity on how well the business is retaining customers which is a reflection on the quality of the service the business is providing as well as its usefulness if a company sees that its churn rate is increasing from period to period this can show that a fundamental component of how it is running its business is flawed this can indicate a few potential problems the churn rate will indicate to a company that it needs to understand why its clients are leaving and where to fix its business the cost of acquiring new customers is much higher than it is to retain current customers so working to lower the churn rate can save a business money in the long run one of the limitations of the churn rate is that it does not take into consideration the types of customers that are leaving customer decay is primarily seen in the most recently acquired customers perhaps your company had a recent promotion that attracted new customers once this promotion was over or even if the benefit of the promotion never ended customers that were trying out the product may determine it s not for them canceling their subscription the impact of losing new customers versus long term customers is critical new customers are transient whereas old customers are entrenched and have enjoyed your product if they leave that is usually due to a significant reason a high churn rate in one period may be indicative of a high growth rate from the previous period rather than a judgment on the quality of the business the churn rate also does not provide a true industry comparison of the types of companies within an industry most new companies will have a high acquisition rate as new people try the business but they will also have a higher churn rate as these new clients leave a company that is mature and has been around for decades will have a low churn rate as its clients are established but its acquisition rate will also be lower comparing the churn rates of both these companies will be like comparing apples and oranges provides clarity on the quality of the businessindicates whether customers are satisfied or dissatisfied with the product or serviceallows for comparison with competitors to gauge an acceptable level of churneasy to calculate | |
does not differentiate between startups growing and mature companies | example of the churn ratethe churn rate is a particularly useful measurement in an industry like the telecommunications industry this includes cable or satellite television providers internet providers and telephone service providers landline and wireless service providers this is an industry in which most customers have multiple providers from which to choose and the cost of switching between them isn t high this means that church rates could be quite high the churn rate helps a company determine how it is measuring up to its competitors for example say in a quarter a startup internet provider acquired 1000 new subscribers in that same quarter the company also lost 120 subscribers the churn rate would be the startup could then use this number in a few different ways employment churn rateemployee turnover within a business can also be measured with the churn rate as it provides a method for analyzing the company s hiring and retention patterns this can be especially helpful if overall employee longevity within a company is low | |
what is the meaning of churn in business | churn rate in business refers to the number of customers or subscribers that leave a provider in a given time period this is the opposite of growth rate which shows the number of new subscribers or customers in that time frame churn rate can also refer to the number of employees that leave a firm in a given period | |
how do you calculate churn rate | to calculate the churn rate divide the total number of subscribers lost by the total number of subscribers acquired in the same time period then multiply by 100 to find the percentage you can also calculate the churn rate by dividing the number of subscribers lost in a period by the total number of subscribers at the beginning of that period | |
what is a good churn rate | ideally a churn rate of zero would be the best churn rate as that would indicate a business is not losing any subscribers however that is never the reality a business will always lose subscribers for one reason or another in this case it is important to compare the churn rate of the business to its industry s average churn rate taking into consideration if the business is new or mature knowing an industry s churn rate versus that of the business is the only way to understand if a churn rate is acceptable or poor every industry has a different business model and therefore will have different acceptable churn rates | |
what does a high churn rate mean | a high churn rate indicates that a business is losing significant customers certainly more than it is bringing in this would mean that the business is doing something wrong whether that be delivering a poor product having poor customer service or a host of other negative reasons that would explain why it is losing customers fast a high churn rate would most likely mean a company is suffering significant losses the bottom linechurn rate is a calculation that shows the percentage of subscribers of a business that are leaving it can also be used to show the percentage of employees that are leaving a firm understanding a company s churn rate is one metric in understanding its financial health and its long term prospects companies with high churn rates are losing a large number of subscribers resulting in little growth which significantly impacts revenues and profits companies with low churn rates are managing to retain customers understanding the churn rate of your company will also shed light on how your business is operating whether you are providing a quality product matched with good customer service or whether your business needs improvements to lower its churn rate | |
what is churning | churning is the illegal and unethical practice by a broker of excessively trading assets in a client s account in order to generate commissions while there is no quantitative measure for churning frequent buying and selling of stocks or any assets that do little to meet the client s investment objectives may be evidence of churning understanding churningchurning may result in substantial losses in the client s account even if the trades are profitable they may generate a greater than necessary tax liability for the client a broker overtrades by excessively buying and selling stocks on the investor s behalf in order to increase the commissions earned on the transactions in some cases a broker for a financial firm may be incentivized to place newly issued securities that were underwritten by the firm s investment banking arm for example brokers may receive a 10 bonus if they buy a certain number of shares on behalf of their clients such incentives may not be offered with the investors best interests in mind churning is hard to spot an investor may conclude that a broker has been overtrading when the frequency of trades becomes counterproductive to the client s investment objectives driving commission costs higher without observable results over time types of churningat its most basic level churning is defined by excessive trading by a broker to generate commissions if a client is being charged frequent commissions with no noticeable portfolio gains churning might be the problem churning also applies to excessive or unnecessary trading of mutual funds and annuities mutual funds with an upfront load the so called a shares are intended to be long term investments selling an a share fund within five years and purchasing another a share fund needs to be justified as a prudent investment decision most mutual fund companies allow investors to switch into any fund within a fund family without incurring an upfront fee a broker recommending an investment change should first consider funds within the fund family deferred annuities are retirement savings accounts that usually do not have upfront fees like mutual funds instead annuities typically have surrender charges a type of penalty for early withdrawal of funds surrender charges vary from one to 10 years to prevent churning many states have implemented exchange and replacement rules these rules allow an investor to compare the new contract and highlight surrender penalties or fees to prevent churning keep an eye on your account read every transaction notice and review every monthly statement know how much commission you re paying | |
how to prevent churning | churning can only occur if a broker has discretionary authority over the client s account a client can avoid this risk by maintaining full control requiring the client s permission to make changes in the account another way to eliminate churning is to use a fee based account rather than a commission based account known as a wrap account this type of account eliminates the incentive for churning the fee is charged quarterly or annually and is generally 1 to 3 of the assets under management the wrap account does not work for all investors the flat fee can turn out to be excessive if there is little or no trading of the assets in the account in fact that situation is indicative of another form of churning called reverse churning | |
how to prove churning | churning is serious financial misconduct but it s not easy to prove your best defense is to pay careful attention to your portfolio if you think your broker is churning you can report it to the securities and exchange commission sec or the financial industry regulatory authority finra 2sanctions for churningthe sec defines churning as excessive buying and selling in a customer s account that the broker controls in order to generate increased commissions 3 brokers who overtrade may be in breach of sec rule 15c1 7 which governs manipulative and deceptive conduct 4the securities and exchange commission sec looks into complaints about brokers who appear to be putting their own interests over that of their clients 3the financial industry regulatory authority finra governs overtrading under rule 2111 and the new york stock exchange nyse prohibits the practice under rule 408 c 56investors who believe they have been a victim of churning can file a complaint with either the sec or finra 3churning is a serious offense and if proven can lead to employment termination barring from the industry and legal ramifications in addition finra may impose a fine ranging from 5 000 to 116 000 7finra also has the right to suspend the broker for anywhere from one month to two years in more egregious cases finra can suspend the violator for a longer period or even bar the broker indefinitely 7churning faqshere are the answers to some commonly asked questions about churning credit card churning involves opening a series of new credit card accounts in order to take advantage of the introductory rewards offered by each and then closing the accounts or leaving them unused credit card churners used to be able to rack up a lot of rewards points by doing this this practice is not illegal but credit card companies don t like it they have now put in place safeguards to prevent customers from repeatedly opening and closing accounts 8churning occurs when a broker who is paid a commission for every trade makes many trades just to boost the commission pot reverse churning occurs when a broker who is paid a flat fee does little or no trading to earn that fee which is a percentage of the assets under management to back up a step investors have a choice to make when opening an account with a broker online or discount brokers charge a flat fee for every transaction with zero fees common for certain transactions up to a limit this is the do it yourself option with no professional advice or management although online brokers are adding premium tiered services for those who want that in the worst case scenario an investor could flee a commission based broker to avoid excessing transaction fees only to open an account with a flat rate broker who does nothing but take a slice off the top of the account every year a better option for the investor might be to maintain control over the account approving or disapproving any buy and sell decisions and make it clear at the outset how active you expect the management of your portfolio to be insurance salespeople work on a commission basis if they attempt to boost their own commissions by persuading their customers to switch insurance products instead of automatically renewing their existing policies then they are churning 9the practice is illegal in most states | |
what is classical economics | classical economics is a broad term that refers to the dominant school of thought for economics in the 18th and 19th centuries most consider scottish economist adam smith the progenitor of classical economic theory however spanish scholastics and french physiocrats made earlier contributions other notable contributors to classical economics include david ricardo thomas malthus anne robert jacques turgot john stuart mill jean baptiste say and eugen b hm von bawerk understanding classical economicsself regulating democracies and capitalistic market developments form the basis for classical economics before the rise of classical economics most national economies followed a top down command and control monarchic government policy system many of the most famous classical thinkers including smith and turgot developed their theories as alternatives to the protectionist and inflationary policies of mercantilist europe 12 classical economics became closely associated with economic and later political freedom the rise of classical economicsclassical economic theory was developed shortly after the birth of western capitalism and the industrial revolution classical economists provided the best early attempts at explaining capitalism s inner workings the earliest classical economists developed theories of value price supply demand and distribution nearly all rejected government interference with market exchanges preferring a looser market strategy known as laissez faire or let it be classical thinkers were not completely unified in their beliefs or understanding of markets although there were notable common themes in most classical literature the majority favored free trade and competition among workers and businesses classical economists wanted to transition away from class based social structures in favor of meritocracies the decline of classical economicsthe classical economics of adam smith had drastically evolved and changed by the 1880s and 1890s but its core remained intact by that time the writings of german philosopher karl marx had emerged to challenge the policy prescriptions of the classical school however marxian economics made very few lasting contributions to economic theory 3a more thorough challenge to classical theory emerged in the 1930s and 1940s through the writings of british mathematician john maynard keynes keynes was a student of alfred marshall and admirer of thomas malthus keynes thought that free market economies tended toward underconsumption and underspending he called this the crucial economic problem and used it to criticize high interest rates and individual preferences for saving 45 keynes also refuted say s law of markets 6keynesian economics advocated for a more controlling role for central governments in economic affairs which made keynes popular with british and american politicians after the great depression and world war ii keynesianism had replaced classical and neoclassical economics as the dominant intellectual paradigm among world governments 7real world exampleadam smith s 1776 release of the wealth of nations highlights some of the most prominent developments in classical economics his revelations centered around free trade and a concept called the invisible hand which served as the theory for the beginning stages of domestic and international supply and demand 89this theory the dual and competing forces of demand side and sell side moves the market to price and production equilibrium smith s studies helped promote domestic trade and led to more efficient and rational pricing in the product markets based on supply and demand 8 | |
what is a clawback | a clawback is a contractual provision requiring that money that s already paid to an employee must be returned to an employer or benefactor sometimes with a penalty many companies use clawback policies in employee contracts for incentive based pay such as bonuses they re most often used in the financial industry most clawback provisions are non negotiable clawbacks are typically used in response to misconduct scandals poor performance or a drop in company profits investopedia mira norianunderstanding clawbacksclawback clauses have become more common since the financial crisis of 2008 because they allow a company to recover incentive based pay from ceos in the case of misconduct or any discrepancies in the company s financial reports clawbacks are also written into employee contracts so employers can control bonuses and other incentive based payments the clawback acts as a form of insurance in case the company needs to respond to a crisis such as fraud or misconduct or if the company sees a drop in profits the employee must also pay back monies if the employer feels that their performance has been poor clawbacks are different from other refunds or repayments because they often come with a penalty an employee must typically pay additional funds to the employer when a clawback goes into effect clawback provisions prevent people from using incorrect information and they re used to put a balance between community development and corporate welfare they can help to prevent the misuse of accounting information by employees in the financial industry clawbacks are considered an important part of the business model because they help to restore the confidence and faith of investors and the public in a company or industry banks implemented clawback provisions following the financial crisis as a way to correct any future mistakes by their executives clawbacks and executive compensationthe sarbanes oxley act of 2002 was the first federal statute to allow for clawbacks of executive pay it provides for clawbacks of bonuses and other incentive based compensation paid to ceos and cfos if misconduct on the part of the company and not necessarily the executives themselves leads it to restate financial performance the emergency economic stabilization act of 2008 was amended in 2009 it allows for clawbacks of bonuses and incentive based compensation paid to executives or the next 20 highest paid employees it applies in cases where financial results are found to have been inaccurate regardless of whether there was any misconduct the law only applies to companies that received troubled asset relief program tarp funds a proposed securities and exchange commission sec rule was proposed in july 2015 it was associated with the dodd frank act of 2010 and would allow companies to claw back incentive based compensation paid to executives in the event of an accounting restatement the clawback is limited to the excess of what would have been paid under the restated results the rule would require stock exchanges to prohibit companies that don t have such clawback provisions written into their contracts from listing 1this rule was approved on oct 26 2022 2clawbacks in private equitythe term clawback can also be found in some other settings it refers to the limited partners right in private equity to reclaim a portion of the general partners carried interest in cases where subsequent losses mean the general partners received excess compensation clawbacks are calculated when a fund is liquidated medicaid can claw back the costs of care from deceased patients estates clawbacks may not even refer to money in some cases lawyers can claw back privileged documents that were accidentally turned over during electronic discovery the term clawback also refers to a fall in a stock s price after it increased examples of clawback provisionsseveral federal laws allow clawbacks of executive compensation based on fraud or accounting errors companies may also write clawback provisions into employee contracts whether such provisions are required by law or not so they can take back bonuses that have already been paid out some of the most common clawback provisions used by corporations insurance companies and the federal government include | |
when can medicaid claw back care costs | state medicaid programs are required to claw back payment of costs for nursing facilities hospitals prescription drugs and home and community based services but this rule applies only to recipients who are age 55 or older this money is typically recouped from their estates after death but there are provisions for undue hardships imposed upon surviving kin 3 | |
are there any defenses against clawback provisions | it depends on the nature of the provision but a clawback that isn t supported by a written signed agreement at the time a business relationship is entered into can be argued as being unsupportable state wage and hour laws can also support or defend against this issue in employment matters it might help to establish that a clawback was never initiated against anyone else under the same circumstances indicating that some level of prejudice exists 4 | |
what s an example of a clawback penalty | again it can depend on the nature of the provision and the source of the money in question but a penalty is typically an amount that s added to the money being reclaimed an employee might receive a 5 000 bonus for reaching a sales goal but the bonus came with a clawback provision it s later discovered that the employee tinkered with sales records and didn t reach that goal the clawback might include a 5 000 repayment plus a 10 penalty for a total of 5 500 5the bottom lineclawbacks often result from issues of misconduct or poor performance by an employee but they can also occur when a company is experiencing financial woes due to no fault on the part of the employee involved a clawback can typically be enforced if it s agreed upon in a written signed contract you ll want to seek legal help in any case if you re hit with one so you re sure you understand all your rights options and obligations this is particularly the case when the government is involved such as with medicaid or if your retirement provisions are threatened | |
what is the clayton antitrust act | the clayton antitrust act is a piece of legislation passed by the u s congress and signed into law in 1914 that defines unethical business practices such as price fixing and monopolies and upholds various rights of labor the federal trade commission ftc and the antitrust division of the u s department of justice doj enforce the provisions of the clayton antitrust act which continue to affect american business practices today 1understanding the clayton antitrust actat the turn of the 20th century a handful of large u s corporations began to dominate entire industry segments by engaging in predatory pricing exclusive dealings and mergers designed to destroy competitors 1in 1914 rep henry de lamar clayton of alabama introduced legislation to regulate the behavior of massive entities the bill passed the house of representatives with a vast majority on june 5 1914 1 then the senate passed its own version and a final version based on deliberation between house and senate passed the senate on oct 6 and the house on oct 8 president woodrow wilson signed the initiative into law on oct 15 1914 2the act is enforced by the ftc and prohibits exclusive sales contracts certain types of rebates discriminatory freight agreements and local price cutting maneuvers it also forbids certain types of holding companies according to the ftc the clayton act also allows private parties to take legal action against companies and seek triple damages when they have been harmed by conduct that violates the clayton act they may also seek and get a court order against any future anti competitive practice 3in addition the clayton act specifies that labor is not an economic commodity it upholds issues conducive to organized labor declaring peaceful strikes picketing boycotts agricultural cooperatives and labor unions as legal under federal law 1sections of the clayton antitrust actthere are 27 sections to the clayton act 4 the most notable among them are discussed more in depth below the second section deals with the unlawfulness of price discrimination price cutting and predatory pricing this section prohibits a company from monopolizing or attempting to monopolize any part of interstate commerce it also makes it illegal for a company to perform anti competitive practices the third section addresses tying arrangements a tying arrangement occurs when one party enters into a contract with another and one of the terms of the arrangement is to not conduct business with a specific third party this section does not allow companies buying or selling to enter into such agreements the fourth section states the right of private lawsuits any individual that has been injured by anything forbidden in the antitrust laws has the right to potential compensation via lawsuit the sixth section covers labor and the exemption of the workforce the section exempts labor unions and agricultural organizations with the premise that labor of a human being is not a commodity or article of commerce the seventh section handles mergers and acquisitions and is often referred to when multiple companies attempt to become a single entity 4 the section prohibits mergers and acquisitions where the end result is less market competition this section also identifies specific concepts including holding companies that are used through the act the eighth section handles directors and officers and their board stewardship the section prohibits directors officers or other executives of the corporate structure from serving on multiple boards at the same time in which the boards are for competing firms this is subject to several exceptions the clayton antitrust act mandates that companies that want to merge must notify and receive permission from the government through the federal trade commission ftc to do so clayton antitrust act amendmentsthe clayton act is still in force today essentially in its original form however it has evolved over the years and is different today from when it was first drafted the clayton antitrust act was somewhat amended by the robinson patman act of 1936 the robinson patman act reinforces laws against price discrimination among customers the law was passed in response to concerns that large retailers were able to negotiate better prices from manufacturers than smaller retailers 5the robinson patman act involves a variety of practices for example the act disallows giving preferential services or allowance to one customer over another it also prohibits charging different prices for the same product to different geographic areas last the act does not allow for discounts or incentives to be offered based on the condition that a competitor is not to be transacted with another amendment is the celler kefauver act of 1950 the celler kefauver act prohibits one company from acquiring the stock or assets of another firm if an acquisition reduces competition it further extends antitrust laws to cover all types of mergers across industries not just horizontal ones within the same sector 6the act gives the government authority to block mergers that would allow a company to gain significant market power even if the new company technically is not a monopoly the act also requires companies give the government notice should they meet certain size thresholds the clayton act was also amended by the hart scott rodino antitrust improvements act of 1976 this amendment requires that companies planning big mergers or acquisitions make their intentions known to the government before taking any such action 3under the act companies must file a premerger notification if the transaction is greater than a specific value or if the companies involved have a certain amount of total assets or annual sales the act also imposes a waiting period of 30 days during which the transaction can t be completed though this period can be extended should government agencies need more time to review the merger request provisions of the clayton antitrust actanother way to consider the clayton antitrust act is through the lens of the provisions contained in the legislation some major highlights of the act via the provisions are below clayton antitrust act and labor unionsas mentioned earlier section 6 of the clayton act provides protections for the right to organize and join labor unions this section states that no court can stop a workers strike or organization this provision is intended to protect collective bargaining rights without interference from employers or the courts the clayton act also provides some protections for unions and their members against antitrust actions section 20 of the clayton act provides an exemption from antitrust liability for certain activities by labor unions such as collective bargaining and strikes this means that although certain activities would otherwise be considered anticompetitive these activities may also be necessary to negotiate fair wages and working conditions it s important to note that the clayton act makes it clear that labor unions are not immune from antitrust liability for all of their activities for example if a union goes beyond the boundaries of a collective bargaining agreement it can still be held liable for price fixing in addition courts can issue injections against unions if their activities threaten to cause damage to property enforcement of the clayton antitrust actthe doj s antitrust division primarily enforces the clayton antitrust act of 1914 in the united states in some cases the ftc can enforce the law as well the ftc and antitrust division investigate and prosecute alleged violations of the clayton act and other federal antitrust laws and investigators can conduct investigations on their own or respond to complaints or referrals in the event that the antitrust division or ftc determines that a clayton act violation has occurred they can take legal action to stop the anticompetitive conduct and seek compensation for any harm suffered some remedies include injunctions to stop behavior divestiture of assets or imposition of fines or fees as discussed earlier the clayton antitrust act allows for private parties to bring about lawsuits to seek damages for harm they have suffered related to antitrust matters they may also seek injective relief to stop the behavior from continuing clayton antitrust act vs sherman antitrust actthe sherman antitrust act of 1890 was proposed by sen john sherman of ohio and later amended by the clayton antitrust act the sherman act prohibited trusts and outlawed monopolistic business practices making them illegal in an effort to bolster competition within the marketplace 7the act contained three sections the first section defined and banned different types of anti competitive conduct the second section addressed the end results considered to be anti competitive and the third and final section extended the provisions in the first section to include the district of columbia and any u s territories but the language used in the sherman act was deemed too vague this allowed businesses to continue engaging in operations that discouraged competition and fair pricing these controlling practices directly impacted local concerns and often drove smaller entities out of business which necessitated the passing of the clayton antitrust act in 1914 while the clayton act continues the sherman act s ban on anti competitive mergers and the practice of price discrimination it also addresses issues that the older act didn t cover by outlawing incipient forms of unethical behavior for example while the sherman act made monopolies illegal the clayton act bans operations intended to lead to the formation of monopolies 37 | |
is the clayton act the only piece of antitrust legislation | no there are three main antitrust laws in the united states aside from the clayton act there are also the sherman act the celler kefauver act and the federal trade commission act 3 | |
what is the clayton act s overall goal | the clayton act in conjunction with other antitrust laws is responsible for making sure that companies behave themselves and that there is fair competition in the marketplace which according to economic theory should lead to lower prices better quality greater innovation and wider choice | |
is the clayton act necessary | most people agree that these types of antitrust laws benefit society if companies were given free rein to make profits by any means necessary it would likely prove detrimental to everyone other than the company that came out on top there are however many people who oppose antitrust laws like the clayton act in their view allowing businesses to compete without restraints and to fully capitalize on their market power would ultimately prove favorable to consumers and the economy | |
what are the 4 main points of the clayton antitrust act | the clayton antitrust act targeted four anti competitive practices in particular the bottom linewhile america is touted as a free market economy there are several federal laws and regulations that prohibit anti competitive practices and prevent the formation of monopolies among these pieces of legislation is the clayton antitrust act of 1914 which made certain monopolistic practices illegal enforceable by both the federal trade commission and dept of justice since then other pieces of antitrust legislation have also been passed in order to promote competition encourage fair practices and benefit consumers | |
what is clearing | clearing is the procedure by which financial trades settle that is the correct and timely transfer of funds to the seller and securities to the buyer often with clearing a specialized organization acts as the intermediary and assumes the role of tacit buyer and seller to reconcile orders between transacting parties clearing is necessary for the matching of all buy and sell orders in the market it provides smoother and more efficient markets as parties can make transfers to the clearing corporation rather than to each individual party with whom they transact | |
how clearing works | clearing is the process of reconciling purchases and sales of various options futures or securities and the direct transfer of funds from one financial institution to another the process validates the availability of the appropriate funds records the transfer and in the case of securities ensures the delivery of the security to the buyer non cleared trades can result in settlement risk and if trades do not clear accounting errors will arise where real money can be lost an out trade is a trade that cannot be placed because it was received by an exchange with conflicting information the associated clearinghouse cannot settle the trade because the data submitted by parties on both sides of the transaction is inconsistent or contradictory stock exchanges such as the new york stock exchange nyse and the nasdaq have clearing firms they ensure that stock traders have enough money in their account whether using cash or broker provided margin to fund the trades they are taking the clearing division of these exchanges acts as the middleman helping facilitate the smooth transfer of funds | |
when an investor sells a stock they own they want to know that the money will be delivered to them the clearing firms make sure this happens similarly when someone buys a stock they need to be able to afford it the clearing firm makes sure that the appropriate amount of funds is set aside for trade settlement when someone buys stocks | clearing banksclearing can have a variety of meanings depending on the instrument with which it is associated in the case of check clearing this is the process involved in transferring the funds promised on the check to the recipient s account some banks place holds on funds deposited by check since the transfer is not instantaneous and may require time to process the federal reserve banks provide check collection services to depository institutions when a depository institution receives a check drawn on another institution it may send the check for collection to the institution directly deliver the check to the institution through a local clearinghouse exchange or use the check collection services of a correspondent institution or a federal reserve bank 1most of the checks the federal reserve banks receives are collected and settled within one business day 1clearinghousesfor futures and options a clearinghouse functions as an intermediary for the transaction acting as the implicit counterparty to both the buyer and seller of the future or option 2 this extends to the securities market where the stock exchange validates the trade of the securities through to settlement clearinghouses charge a fee for their services known as a clearing fee when an investor pays a commission to the broker this clearing fee is often already included in that commission amount this fee supports the centralizing and reconciling of transactions and facilitates the proper delivery of purchased investments | |
when a clearinghouse encounters an out trade it gives the counterparties a chance to reconcile the discrepancy independently if the parties can resolve the matter they resubmit the trade to the clearinghouse for appropriate settlement but if they cannot agree on the terms of the trade then the matter is sent to the appropriate exchange committee for arbitration | an automated clearing house ach is an electronic system used for the transfer of funds between entities often referred to as an electronic funds transfer eft the ach performs the role of intermediary processing the sending receiving of validated funds between institutions an ach is often used for the direct deposit of employee salaries and can be used to transfer funds between an individual and a business in exchange for goods and services traditionally the sending and receiving bank account information needs to be provided including the account and routing numbers to facilitate the transaction this process may also be seen as an electronic check as it provides the same information as a written check example of clearingas a hypothetical example assume that one trader buys an index futures contract the initial margin required to hold this trade overnight is 6 160 this amount is held as a good faith assurance that the trader can afford the trade this money is held by the clearing firm within the trader s account and can t be used for other trades this helps offset any losses the trader may experience while in a trade this process helps reduce the risk to individual traders for example if two people agree to trade and there is no one else to verify and back the trade it is possible that one party could back out of the agreement or experience financial trouble and be unable to produce the funds to hold up their end of the bargain the clearing firm takes this risk away from the individual trader each trader knows that the clearing firm will be collecting enough funds from all trading parties so they don t need to worry about credit or default risk of the person on the other side of the transaction | |
what is clearing in the banking system | clearing in the banking system is the process of settling transactions between banks millions of transactions occur every day so bank clearing tries to minimize the amounts that change hands on a given day for example if bank a owes bank b 2 million in cleared checks but bank b owes bank a 1 million bank a only pays bank b 1 million | |
which banks are clearing banks in the united states | clearing banks in the united states include the following bank of america bank of the west barclays the bank of new york mellon bb t capital one citi citizens comeria deutsche bank ag consultants fifth third bank hsbc jp morgan chase key bank m t bank mufg union bank pnc regions bank santander state street suntrust td bank ubs u s bank and wells fargo | |
what is an example of a clearinghouse | an example of a clearinghouse is the london clearing house which is the biggest derivatives clearing house followed by the chicago mercantile exchange clearing firms are typically big investment banks such as jp morgan deutsche bank and hsbc | |
what is a clearing process | clearing is the process of reconciling an options futures or securities transaction or the direct transfer of funds from one financial institution to another the process validates the availability of the appropriate funds records the transfer and in the case of securities ensures the delivery of the security or funds to the buyer the bottom linethe process of clearing ensures that the entities or parties engaged in a financial transaction are protected receive their due amount and the transaction goes smoothly the clearinghouse acts as a third party or mediator for the transaction while the clearing process records the details of the transaction and validates the availability of funds | |
the clearinghouse an overview | a clearinghouse is a designated intermediary between a buyer and seller in a financial market the clearinghouse validates and finalizes the transaction ensuring that both the buyer and the seller honor their contractual obligations every financial market has a designated clearinghouse or an internal clearing division to handle this function in the united states this is the national securities clearing corporation nscc canada uses the canadian depository for securities limited cds and the e u uses euroclear as its primary clearinghouse understanding the clearinghousethe responsibilities of a clearinghouse include clearing or finalizing trades settling trading accounts collecting margin payments regulating delivery of the assets to their new owners and reporting trading data clearinghouses act as third parties for futures and options contracts as buyers to every clearing member seller and as sellers to every clearing member buyer the clearinghouse enters the picture after a buyer and a seller execute a trade its role is to accomplish the steps that finalize and therefore validate the transaction in acting as a middleman the clearinghouse provides the security and efficiency that is integral to stability in a financial market in order to act efficiently a clearinghouse takes the opposite position of each trade which greatly reduces the cost and risk of settling multiple transactions among multiple parties while their mandate is to reduce risk the fact that they have to act as both buyer and seller at the inception of a trade means that they are subject to default risk from both parties to mitigate this clearinghouses impose margin requirements the futures market is highly dependent on the clearinghouse since its financial products are leveraged that is they typically involve borrowing in order to invest a process that requires a stable intermediary each exchange has its own clearinghouse all members of an exchange are required to clear their trades through the clearinghouse at the end of each trading session and to deposit with the clearinghouse a sum of money based on the clearinghouse s margin requirements that is sufficient to cover the member s debit balance assume that a trader buys a futures contract at this point the clearinghouse has already set the initial and maintenance margin requirements the initial margin can be viewed as a good faith assurance that the trader can afford to hold the trade until it is closed these funds are held by the clearing firm but within the trader s account and can t be used for other trades the intention is to offset any losses the trader may experience in the transaction the maintenance margin usually a fraction of the initial margin requirement is the amount that must be available in a trader s account to keep the trade open if the trader s account equity drops below this threshold the account holder will receive a margin call demanding that the account be replenished to the level that satisfies the initial margin requirements if the trader fails to meet the margin call the trade will be closed since the account cannot reasonably withstand further losses in this example the clearinghouse has ensured that there is sufficient money in the account to cover any losses that the account holder may suffer in the trade once the trade is closed the remaining margin funds are released to the trader the process has helped reduce default risk in its absence one party could back out of the agreement or fail to produce money owed at the end of the transaction in general this is termed transactional risk and is obviated by the involvement of a clearinghouse stock exchanges such as the new york stock exchange nyse have clearing divisions that ensure that a stock trader has enough money in an account to fund the trades being placed the clearing division acts as the middle man helping facilitate the smooth transfer of the stock shares and the money an investor who sells stock shares needs to know that the money will be delivered the clearing divisions make sure this happens | |
what is a clearinghouse | a clearinghouse is a intermediary between a buyer and a seller in the financial markets whose job is to ensure that both parties honor their obligations | |
what is the difference between a broker and a clearinghouse | a broker is a person or entity through with customers can access the financial markets and place trades the clearinghouse handles the back office operations after the trade is placed ensuring the trade is cleared can a clearinghouse fail while it is technically possible for a clearinghouse to fail under the dodd frank act regulators are authorized to designate clearinghouses as systemically important to the smooth functioning of financial markets and to step in to provide emergency funding is so required the bottom lineclearinghouses are essential to the smooth functioning of the financial markets they act as intermediaries between the buyer and seller ensuring the smooth functioning of the markets | |
the clearinghouse an overview | a clearinghouse is a designated intermediary between a buyer and seller in a financial market the clearinghouse validates and finalizes the transaction ensuring that both the buyer and the seller honor their contractual obligations every financial market has a designated clearinghouse or an internal clearing division to handle this function in the united states this is the national securities clearing corporation nscc canada uses the canadian depository for securities limited cds and the e u uses euroclear as its primary clearinghouse understanding the clearinghousethe responsibilities of a clearinghouse include clearing or finalizing trades settling trading accounts collecting margin payments regulating delivery of the assets to their new owners and reporting trading data clearinghouses act as third parties for futures and options contracts as buyers to every clearing member seller and as sellers to every clearing member buyer the clearinghouse enters the picture after a buyer and a seller execute a trade its role is to accomplish the steps that finalize and therefore validate the transaction in acting as a middleman the clearinghouse provides the security and efficiency that is integral to stability in a financial market in order to act efficiently a clearinghouse takes the opposite position of each trade which greatly reduces the cost and risk of settling multiple transactions among multiple parties while their mandate is to reduce risk the fact that they have to act as both buyer and seller at the inception of a trade means that they are subject to default risk from both parties to mitigate this clearinghouses impose margin requirements the futures market is highly dependent on the clearinghouse since its financial products are leveraged that is they typically involve borrowing in order to invest a process that requires a stable intermediary each exchange has its own clearinghouse all members of an exchange are required to clear their trades through the clearinghouse at the end of each trading session and to deposit with the clearinghouse a sum of money based on the clearinghouse s margin requirements that is sufficient to cover the member s debit balance assume that a trader buys a futures contract at this point the clearinghouse has already set the initial and maintenance margin requirements the initial margin can be viewed as a good faith assurance that the trader can afford to hold the trade until it is closed these funds are held by the clearing firm but within the trader s account and can t be used for other trades the intention is to offset any losses the trader may experience in the transaction the maintenance margin usually a fraction of the initial margin requirement is the amount that must be available in a trader s account to keep the trade open if the trader s account equity drops below this threshold the account holder will receive a margin call demanding that the account be replenished to the level that satisfies the initial margin requirements if the trader fails to meet the margin call the trade will be closed since the account cannot reasonably withstand further losses in this example the clearinghouse has ensured that there is sufficient money in the account to cover any losses that the account holder may suffer in the trade once the trade is closed the remaining margin funds are released to the trader the process has helped reduce default risk in its absence one party could back out of the agreement or fail to produce money owed at the end of the transaction in general this is termed transactional risk and is obviated by the involvement of a clearinghouse stock exchanges such as the new york stock exchange nyse have clearing divisions that ensure that a stock trader has enough money in an account to fund the trades being placed the clearing division acts as the middle man helping facilitate the smooth transfer of the stock shares and the money an investor who sells stock shares needs to know that the money will be delivered the clearing divisions make sure this happens | |
what is a clearinghouse | a clearinghouse is a intermediary between a buyer and a seller in the financial markets whose job is to ensure that both parties honor their obligations | |
what is the difference between a broker and a clearinghouse | a broker is a person or entity through with customers can access the financial markets and place trades the clearinghouse handles the back office operations after the trade is placed ensuring the trade is cleared can a clearinghouse fail while it is technically possible for a clearinghouse to fail under the dodd frank act regulators are authorized to designate clearinghouses as systemically important to the smooth functioning of financial markets and to step in to provide emergency funding is so required the bottom lineclearinghouses are essential to the smooth functioning of the financial markets they act as intermediaries between the buyer and seller ensuring the smooth functioning of the markets | |
what is a closed economy | a closed economy typically refers to a country that does not trade or engage in other financial exchanges with any other country that means no imports come into the country and no exports leave it the goal of a closed economy is complete self sufficiency providing domestic consumers with everything they need from within the country s own borders in today s interconnected world closed economies are more of a theoretical concept than a reality although some economies are more closed than others | |
why there are no real closed economies today | the trend toward globalization in recent decades suggests that governments are becoming more open to participating in international trade closed economies are counterintuitive to modern economic theory which promotes the opening of domestic markets to international trade to capitalize on comparative advantages ideally to the benefit of all citizens by allocating labor and other resources to their most productive efficient operations companies and individuals can increase their wealth the theory maintains in addition according to the international organisation for economic co operation and development oecd relatively open economies grow faster than relatively closed ones and salaries and working conditions are generally better in companies that trade than in those that do not more prosperity and opportunity around the world also helps promote greater stability and security for everyone 1potential advantages aside maintaining a genuinely closed economy is difficult in modern society in part because raw materials play a vital role in everyday life and in the production of finished goods many countries that are powerhouses when it comes to manufacturing and exporting do not have all the necessary raw materials locally and have no choice but to import them for instance in 2023 according to world s top exports an independent research and educational website the five biggest importers of crude oil were 2the united states in fact is both an importer and an exporter of crude oil importing about 6 11 million barrels a day from other countries while at the same time exporting about 2 90 million barrels a day according to the u s energy information administration 3a more dramatic example now and in the future may be lithium a metal that has become integral to the production of the batteries that power electric vehicles the u s and many other industrialized nations have very limited lithium reserves and must rely on others for their supply in fact australia latin america and china collectively accounted for 98 of the world s lithium production in 2020 according to mckinsey co 4 |
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