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how is the efficient frontier constructed | the efficient frontier rates portfolios on a coordinate plane plotted on the x axis is the risk while return is plotted on the y axis annualized standard deviation is typically used to measure risk while compound annual growth rate cagr is used for return the bottom linethe efficient frontier comprises investment portfolios that offer the highest expected return for a specific level of risk it represents graphically portfolios that maximize returns for the risk assumed showing the benefit of diversification to use the efficient frontier a risk seeking investor selects investments that fall on the right side of the frontier meanwhile a more conservative investor would pick investments that lie on the left side of the frontier | |
what is the efficient market hypothesis emh | the efficient market hypothesis emh alternatively known as the efficient market theory is a hypothesis that states that share prices reflect all available information and consistent alpha generation is impossible according to the emh stocks always trade at their fair value on exchanges making it impossible for investors to purchase undervalued stocks or sell stocks for inflated prices 1 therefore it should be impossible to outperform the overall market through expert stock selection or market timing and the only way an investor can obtain higher returns is by purchasing riskier investments investopedia theresa chiechiunderstanding the efficient market hypothesis emh although it is a cornerstone of modern financial theory the emh is highly controversial and often disputed believers argue it is pointless to search for undervalued stocks or to try to predict trends in the market through either fundamental or technical analysis theoretically neither technical nor fundamental analysis can produce risk adjusted excess returns alpha consistently and only inside information can result in outsized risk adjusted returns 1the february 9 2024 share price of the most expensive stock in the world berkshire hathaway inc class a brk a 2while academics point to a large body of evidence in support of emh an equal amount of dissension also exists for example investors such as warren buffett have consistently beaten the market over long periods which by definition is impossible according to the emh detractors of the emh also point to events such as the 1987 stock market crash when the dow jones industrial average djia fell by over 20 in a single day and asset bubbles as evidence that stock prices can seriously deviate from their fair values 3the assumption that markets are efficient is a cornerstone of modern financial economics one that has come under question in practice special considerationsproponents of the efficient market hypothesis conclude that because of the randomness of the market investors could do better by investing in a low cost passive portfolio data compiled by morningstar inc in its june 2019 active passive barometer study supports the emh morningstar compared active managers returns in all categories against a composite made of related index funds and exchange traded funds etfs the study found that over a 10 year period beginning june 2009 only 23 of active managers were able to outperform their passive peers better success rates were found in foreign equity funds and bond funds lower success rates were found in us large cap funds in general investors have fared better by investing in low cost index funds or etfs 4while a percentage of active managers do outperform passive funds at some point the challenge for investors is being able to identify which ones will do so over the long term less than 25 percent of the top performing active managers can consistently outperform their passive manager counterparts over time 4 | |
what does it mean for markets to be efficient | market efficiency refers to how well prices reflect all available information the efficient markets hypothesis emh argues that markets are efficient leaving no room to make excess profits by investing since everything is already fairly and accurately priced this implies that there is little hope of beating the market although you can match market returns through passive index investing | |
has the efficient markets hypothesis any validity | the validity of the emh has been questioned on both theoretical and empirical grounds there are investors who have beaten the market such as warren buffett whose investment strategy focused on undervalued stocks made billions and set an example for numerous followers there are portfolio managers who have better track records than others and there are investment houses with more renowned research analysis than others emh proponents however argue that those who outperform the market do so not out of skill but out of luck due to the laws of probability at any given time in a market with a large number of actors some will outperform the mean while others will underperform can markets be inefficient there are certainly some markets that are less efficient than others an inefficient market is one in which an asset s prices do not accurately reflect its true value which may occur for several reasons market inefficiencies may exist due to information asymmetries a lack of buyers and sellers i e low liquidity high transaction costs or delays market psychology and human emotion among other reasons inefficiencies often lead to deadweight losses in reality most markets do display some level of inefficiencies and in the extreme case an inefficient market can be an example of a market failure accepting the emh in its purest strong form may be difficult as it states that all information in a market whether public or private is accounted for in a stock s price however modifications of emh exist to reflect the degree to which it can be applied to markets | |
what is egalitarianism | egalitarianism is a philosophical perspective that emphasizes equality and equal treatment across gender religion economic status and political beliefs egalitarianism may focus on income inequality and distribution which are themes that have influenced the development of various economic and political theories egalitarianism may also look at how individuals are treated under the law karl marx used egalitarianism as the starting point in the creation of his marxist philosophy and john locke considered egalitarianism when he proposed that individuals had natural rights understanding egalitarianismone of the main tenets of egalitarianism is that all people are fundamentally equal everyone should be treated equally and have equal opportunities and access in society no matter their gender race or religion egalitarianism can be examined from a social perspective that considers ways to reduce economic inequalities or a political perspective that considers ways to ensure the equal treatment and rights of diverse groups of people types of egalitarianismphilosophers break down egalitarianism into several types proponents of economic egalitarianism or material egalitarianism believe every member of society should have equal access to wealth and the ability to make money whether that be through investments entrepreneurial efforts or income from employment and that this should translate into everyone having similar levels of income and money this line of thinking forms the basis for marxism and socialism starting a business can be attempted by anyone and represents an opportunity to make money the entrepreneur will typically seek financing and invest the capital in a business enterprise customers meanwhile have an equal opportunity to buy the company s products or services they have an equal choice to respond to the company s prices and quality of goods or services to make an informed decision about a purchase a few things limit economic egalitarianism in a free market society money supply inflation lack of jobs and consumer prices may limit economic activity for people who lack wealth legal constraints also affect economic egalitarianism economic egalitarianism in a free market is the belief that everyone should have an equal opportunity to become wealthy by investing in and supporting entrepreneurship and employment legal egalitarianism is the principle that everyone is subject to the same laws meaning no group has unique legal protections over another moral egalitarianism is the idea that all human beings must have equal respect and concern for everyone else it is the idea that humanity is connected and that everyone deserves human rights of course the definition of equal respect or fairness may vary and depend on individuals making it hard to enforce true egalitarianism people who believe in political egalitarianism espouse democracy demanding that every person has equal standing concerning governmental power political egalitarianism posits that each individual has the same social power or influence over politics in work government and daily life for example principals have the authority over their teachers and staff to make choices for the school and grade however under political egalitarianism every educator at the school would have the same level of authority and power racial egalitarianism is the idea that everyone should have equal respect for one another no matter their race or ethnicity gender egalitarianism believes that men and women no matter their gender are equal and must be treated as such gender egalitarianism supports equal rights roles and responsibilities for men and women it does not support the idea that there is women s work and men s work or gender specific roles in business and the home in a society where there is gender egalitarianism in families parents play equal parts within the family structure | |
is egalitarianism the same as socialism | not exactly socialism is an economic and political system that in short offers a specific set of ideas on how society can achieve egalitarianism | |
what is an egalitarian society | in an egalitarian society all are considered equal regardless of gender race religion or age there is not a class system in an egalitarian society but relatively equal access to income and wealth some societies are more egalitarian than others and some areas of egalitarianism are part of economies politics and laws | |
what is the most egalitarian society | there isn t data for the most egalitarian society in the world but in terms of economic inequality european countries slovenia czech republic and slovakia rank as having the least wealth inequality in 2022 1 | |
are equality and equity the same thing | no equality means giving everyone exactly the same resources or opportunities equity involves giving each person the resources and opportunities they need to achieve an equal outcome for everyone | |
how is feminism different from egalitarianism | feminism and egalitarianism have shared aspects but they are not the same thing feminism is the belief that gender discrimination has to be eliminated for men and women to be considered equal egalitarianism is the idea that everyone is created equal and deserves equal rights the bottom lineegalitarianism is a philosophical belief in human equality and it emphasizes equal treatment across gender religion economic status and political beliefs it can be seen in economic social and legal terms economic egalitarianism argues for equal access to wealth at its core egalitarianism holds that all people are fundamentally equal | |
what is elastic | elastic is a term used in economics to describe a change in the behavior of buyers and sellers in response to a single variable like a change in price or other variables for a good or service in other words demand elasticity or inelasticity for a product or good is determined by how much demand for the product changes as the price increases or decreases an inelastic product is one that consumers continue to purchase even after a change in price the elasticity of a good or service can vary according to the number of close substitutes available its relative cost and the amount of time that has elapsed since the price change occurred the main types of elasticity include price income and cross product subsitutions investopedia julie bangelastic explainedcompanies that operate in fiercely competitive industries provide goods or services that are elastic because these companies tend to be price takers or those that must accept prevailing prices when the price of a good or service reaches the point of elasticity sellers and buyers quickly adjust their demand for that good or service the opposite of elastic is inelastic when a good or service is inelastic sellers and buyers are not as likely to adjust their demand for a good or service when the price changes elasticity is an important economic measure particularly for the sellers of goods or services because it indicates how much of a good or service buyers consume when the price changes when a product is elastic a change in price quickly results in a change in the quantity demanded when a good is inelastic there is little change in the quantity of demand even with the change of the good s price the change that is observed for an elastic good is an increase in demand when the price decreases and a decrease in demand when the price increases elasticity also communicates important information to consumers if the market price of an elastic good decreases firms are likely to reduce the number of goods or services they are willing to supply if the market price goes up firms are likely to increase the number of goods they are willing to sell this is important for consumers who need a product and are concerned with potential scarcity real world examples of elastic goodstypically goods that are elastic are either unnecessary goods or services or those for which competitors offer readily available substitute goods and services the airline industry is elastic because it is a competitive industry if one airline decides to increase the price of its fares consumers can use another airline and the airline that increased its fares will see a decrease in the demand for its services meanwhile gasoline is an example of a relatively inelastic good because many consumers have no choice but to buy fuel for their vehicles regardless of the market price | |
what is elastic | elastic is a term used in economics to describe a change in the behavior of buyers and sellers in response to a single variable like a change in price or other variables for a good or service in other words demand elasticity or inelasticity for a product or good is determined by how much demand for the product changes as the price increases or decreases an inelastic product is one that consumers continue to purchase even after a change in price the elasticity of a good or service can vary according to the number of close substitutes available its relative cost and the amount of time that has elapsed since the price change occurred the main types of elasticity include price income and cross product subsitutions investopedia julie bangelastic explainedcompanies that operate in fiercely competitive industries provide goods or services that are elastic because these companies tend to be price takers or those that must accept prevailing prices when the price of a good or service reaches the point of elasticity sellers and buyers quickly adjust their demand for that good or service the opposite of elastic is inelastic when a good or service is inelastic sellers and buyers are not as likely to adjust their demand for a good or service when the price changes elasticity is an important economic measure particularly for the sellers of goods or services because it indicates how much of a good or service buyers consume when the price changes when a product is elastic a change in price quickly results in a change in the quantity demanded when a good is inelastic there is little change in the quantity of demand even with the change of the good s price the change that is observed for an elastic good is an increase in demand when the price decreases and a decrease in demand when the price increases elasticity also communicates important information to consumers if the market price of an elastic good decreases firms are likely to reduce the number of goods or services they are willing to supply if the market price goes up firms are likely to increase the number of goods they are willing to sell this is important for consumers who need a product and are concerned with potential scarcity real world examples of elastic goodstypically goods that are elastic are either unnecessary goods or services or those for which competitors offer readily available substitute goods and services the airline industry is elastic because it is a competitive industry if one airline decides to increase the price of its fares consumers can use another airline and the airline that increased its fares will see a decrease in the demand for its services meanwhile gasoline is an example of a relatively inelastic good because many consumers have no choice but to buy fuel for their vehicles regardless of the market price | |
what is an elective deferral contribution | an elective deferral contribution is made directly from an employee s salary to his or her employer sponsored retirement plan such as a 401 k or 403 b plan the employee must authorize the transaction before the contribution can be deducted elective deferrals can be made on a pre tax the internal revenue service irs establishes limits on how much an employee can defer or contribute to a qualified retirement plan an elective deferral contribution is also known as a salary deferral or salary reduction contribution 12 | |
how elective deferral contributions work | elective deferral contributions to traditional 401 k plans are made on a pre tax or tax deferred basis effectively reducing an employee s taxable income 4 suppose an individual who earns 40 000 a year decides to contribute 100 per month to their 401 k these deferrals total 1 200 per year as a result the employee s pay is taxed at 38 800 that year instead of 40 000 since there s a tax deduction upfront any distributions are taxed at the income tax rate for the retiree at the time of withdrawal several restrictions apply as to when and under what circumstances an employee can make withdrawals from an employer sponsored retirement plan for example an additional 10 penalty tax may apply if an individual makes a withdrawal before age 59 assuming the employee meets the conditions that allow him or her to take an early distribution state and local taxes may also be assessed for early withdrawals 5some employers allow workers to contribute toward roth 401 k plans contributions made to these plans are made on an after tax basis after tax basis means the funds are taxed before they are deposited into the retirement plan since there s no pre tax benefit with roth 401 k s employees can withdraw deferrals tax free as long as they re over the age of 59 6unlike roth iras roth 401 k s are not subject to rmds during the owner s lifetime 7elective deferral contribution limitsthe irs has limits on how much money can be contributed to an employee s qualified retirement plan 2individuals under the age of 50 can contribute up to 22 500 in 2023 and 23 000 in 2024 into a 401 k those aged 50 and above can make catch up contributions of an additional 7 500 for 2023 and 2024 for a total of 30 000 for 2023 and 30 500 for 2024 these rules apply to roth 401 k s as well 2irs rules also apply if you have multiple 401 k accounts this means if a person under 50 invests in a traditional 401 k and a roth 401 k plan they can make elective deferral contributions of up to 22 500 for 2023 and 23 000 in 2024 3the rules stated earlier apply only to elective deferral contributions they do not apply to the matching contributions from an employer nonelective employee contributions or any allocations of forfeitures the irs limits the total amount that can be contributed to an employee s retirement plan from all sources including the employer s matching and the employee s contributions 8the total contributions to an employee s retirement plan from both the employee and employer cannot exceed the lesser of | |
what is the irs limit for elective deferrals | an elective deferral is the amount that an employee chooses to deduct from their paycheck and deposit into an employer sponsored retirement plan like a 401 k the limit set by the irs is 22 500 in 2023 and 23 000 in 2024 individuals who are 50 or over can contribute an additional 7 500 each year for a total of 30 000 in 2023 and 30 500 in 2024 3employers may also match a portion of the employee s contribution this combined total cannot exceed the lesser of 100 of the employee s salary or 66 000 in 2023 73 500 with the catch up contribution and 69 000 in 2024 76 500 with the catch up contribution 10 | |
are elective deferrals tax deductible | you cannot take a tax deduction for contributions to your 401 k or employer sponsored retirement plan on your annual tax return but your annual contribution can reduce your tax bill because you use pre tax dollars for your contributions it lowers your taxable income this in turn lowers your overall tax bill | |
are 401 k plans insured by the fdic | most of the money in a 401 k is not insured by the federal deposit insurance corporation fdic your plan may be eligible for fdic insurance if it meets certain criteria for instance fdic insurance applies to certain accounts that allow participants to direct how the money is invested 11the bottom linesaving for retirement is an important part of anyone s financial plan if you can make sure you take advantage of an employer sponsored plan such as a 401 k these plans allow you to contribute pre tax dollars which also lowers your annual taxable income this means you may even be able to lower your tax liability if your employer provides a match it sweetens the pot even more because it means free money in your account keep in mind that there are limits to how much you can contribute if you go over these limits you will have to correct them and you may face penalties | |
what is electronic bill payment and presentment | electronic bill payment and presentment ebpp is a process that companies use to collect payments electronically through systems like the internet direct dial access and automated teller machines atms it has become a core component of online banking at many financial institutions today other industries including insurance providers telecommunications companies and utilities depend on ebpp services as well understanding ebppebpps come in two types biller direct and bank aggregator biller direct is electronic billing which is offered by the company providing the good or service the company gives customers the option to pay bills directly on their web site and might alert them when a payment is due via email the customer then logs into the site via a secure connection reviews the billing information and enters payment amount the bank aggregator or bill consolidator model allows customers to pay bills to many different companies through one portal that is the service collects different payments from customers and distributes each payment to the appropriate company a bank for instance might offer online users the option to make many different payments like credit cards utility bills and insurance premiums standalone sites also exist that allow people to view and pay all of their bills these are called consumer consolidator models some newer ebpp products include features like secure email delivery stored payment data and autopay for example a healthcare insurance company looking to streamline its customer billing system may decide to switch to ebpp and allow customers to pay directly on their website or to have premiums automatically deducted each month doing so saves customers the hassle of filing paperwork and can save the organization on document delivery and processing costs some providers allow the development of ebpp systems by building new payment sites for their customers these might include features to authorize transactions capture payments or allow for refunds these systems typically accept major credit cards and can sometimes save an enterprise money on transaction processing costs increasing their revenue and profit overall ebpp and online bankingmany large banks offer electronic bill payment and presentment services as a part of their online banking system in general online banking which is sometimes called internet banking or web banking allows users to execute financial transactions via the internet specifically an online bank offers customers the ability to make deposits withdrawals transfers between accounts and other traditional services as well as online bill payments such as ebpp convenience is obviously a major advantage of online banking because transactions can take place 24 hours a day seven days a week on the downside accounts can be vulnerable to hacking although banking security is continually improving for that reason when using online banking consumers are advised to use their data plans rather than public wi fi networks to help prevent unauthorized access | |
what is an electronic check e check | an electronic check or e check is a form of payment made via the internet or another data network designed to perform the same function as a conventional paper check since the check is in an electronic format it can be processed in fewer steps additionally it has more security features than standard paper checks including authentication public key cryptography digital signatures and encryption among others | |
how an electronic check e check works | an electronic check is part of the larger electronic banking field and part of a subset of transactions referred to as electronic fund transfers efts this includes not only electronic checks but also other computerized banking functions such as atm withdrawals and deposits debit card transactions and remote check depositing features the transactions require the use of various computer and networking technologies to gain access to the relevant account data to perform the requested actions electronic checks were developed in response to the transactions that arose in the world of electronic commerce electronic checks can be used to make a payment for any transaction that a paper check can cover and are governed by the same laws that apply to paper checks this was the first form of internet based payment used by the u s treasury for making large online payments benefits of electronic checksgenerally the costs associated with issuing an electronic check are notably lower than those associated with paper checks not only is there no requirement for a physical paper check which costs money to produce but also electronic checks do not require physical postage in cases of payments being made to entities outside the direct reach of the entity issuing the funds it is estimated that printing and issuing a paper check will cost your business anywhere between 4 and 20 1 however the average fee per echeck transaction ranges from 0 30 to 1 50 2further there are multiple levels of authentication to help ensure funds are routed properly electronic checks also come with a lower risk of the associated funds being stolen as there is no tangible item to intercept direct deposit systemone of the more frequently used versions of the electronic check is the direct deposit system offered by many employers it is an electronic method of sending an employee s wages directly into the employee s bank account additionally taxpayers who are owed a refund on federal tax returns can elect to receive a directly deposited electronic check from the internal revenue service irs instead of having a physical paper check sent through the mail 3can anyone send an e check yes but you must first sign up for an e check service this can be done through your bank or a payment processor such as square stripe or paypal then you ll need to provide the payment details and authorize the payment can you send an e check instantly e checks are sent online instantly but processing them tends to take longer than other online payments done through apps because they are transferred using the automated clearing house ach network e checks can take several business days to clear | |
is it safe to pay with e checks | although e checks are as vulnerable as any other online bank transaction they can be considered safer than traditional paper checks which are riskier because they are tangible physical documents which can be stolen and forged the bottom linee checks are considered the digital version of traditional paper checks e checks are facilitated by the automated clearing house ach network an electronic network used by u s financial institutions funds are electronically withdrawn from the payer s checking account transferred over the ach network and deposited into the recipient s checking account e checks are a safer alternative than paper checks and also faster to clear and cheaper to issue | |
what is electronic commerce e commerce | electronic commerce e commerce refers to companies and individuals that buy and sell goods and services over the internet e commerce operates in different types of market segments and can be conducted over computers tablets smartphones and other smart devices nearly every imaginable product and service is available through e commerce transactions including books music plane tickets and financial services such as stock investing and online banking as such it is considered a very disruptive technology investopedia laura porterunderstanding e commerceas noted above e commerce is the process of buying and selling tangible products and services online it involves more than one party along with the exchange of data or currency to process a transaction it is part of the greater industry that is known as electronic business e business which involves all of the processes required to run a company online 12e commerce has helped businesses especially those with a narrow reach like small businesses gain access to and establish a wider market presence by providing cheaper and more efficient distribution channels for their products or services target tgt supplemented its brick and mortar presence with an online store that allows customers to purchase everything from clothes and coffeemakers to toothpaste and action figures right from their homes providing goods and services isn t as easy as it may seem it requires a lot of research about the products and services you wish to sell the market audience competition as well as expected business costs once that s determined you need to come up with a name and set up a legal structure such as a corporation next set up an e commerce site with a payment gateway for instance a small business owner who runs a dress shop can set up a website promoting their clothing and other related products online and allow customers to make payments with a credit card or through a payment processing service such as paypal 3e commerce may be thought of as a digital version of mail order catalog shopping also called online commerce e commerce is the transaction between a buyer and a seller that leverages technology special considerationse commerce has changed the way people shop and consume products and services more people are turning to their computers and smart devices to order goods which can easily be delivered to their homes as such it has disrupted the retail landscape amazon and alibaba have gained considerable popularity forcing traditional retailers to make changes to the way they do business but that s not all not to be outdone individual sellers have increasingly engaged in e commerce transactions via their own personal websites and digital marketplaces such as ebay or etsy serve as exchanges where multitudes of buyers and sellers come together to conduct business the u s department of commerce recognizes e commerce businesses such as transactional sites static content sites online marketplaces and auction sites 4history of e commercemost of us have shopped online for something at some point which means we ve taken part in e commerce so it goes without saying that e commerce is everywhere but very few people may know that e commerce has a history that goes back to before the internet began e commerce actually goes back to the 1960s when companies used an electronic system called the electronic data interchange to facilitate the transfer of documents it wasn t until 1994 that the very first transaction took place this involved the sale of a cd between friends through an online retail website called netmarket 3the industry has gone through so many changes since then resulting in a great deal of evolution traditional brick and mortar retailers were forced to embrace new technology in order to stay afloat as companies like alibaba amazon ebay and etsy became household names these companies created a virtual marketplace for goods and services that consumers can easily access new technology continues to make it easier for people to do their online shopping people can connect with businesses through smartphones and other devices and by downloading apps to make purchases the introduction of free shipping which reduces costs for consumers has also helped increase the popularity of the e commerce industry advantages and disadvantages of e commercee commerce offers consumers the following advantages there are certain drawbacks that come with e commerce sites too the disadvantages include owners can generate revenue semi passivelyconsumers can easily browse for specific productsgreater earning potential as there are no limitations on physical location as long you can ship therereduced costs assuming digital presence costs less than building insurance taxes and repairs greater marketing control including data extraction from customers targeted ads and pop up placementlimited customer service opportunities as there is little to no face to face opportunitieslacks instant gratification as customers must believe in a product before seeing it in personproducts can t been seen or handled until delivered can t try before they buy loss of revenue or income when websites go downhigh reliance on shipping constraintshigher competition due to lower barriers of entry and greater customer potentialtypes of e commercedepending on the goods services and organization of an ecommerce company the business can opt to operate several different ways here are several of the popular business models b2c e commerce companies sell directly to the product end user instead of distributing goods to an intermediary a b2c company performs transactions with the consumer that will ultimately use the good this type of business model may be used to sell products like your local sporting goods store s website or services such as a lawn care mobile app to reserve landscaping services this is the most common business model and is likely the concept most people think about when they hear the term e commerce similar to b2c an e commerce business can directly sell goods to a user however instead of being a consumer that user may be another company b2b transactions often entail larger quantities greater specifications and longer lead times the company placing the order may also have a need to set recurring goods if the purchase is for recurring manufacturing processes some entities specialize as government contractors providing goods or services to agencies or administrations similar to a b2b relationship the business produces items of value and remits those items to an entity b2g e commerce companies must often meet government requests for proposal requirements solicit bids for projects and meet very specific product or service criteria in addition there may be joint government endeavors to solicit a single contract through a government wide acquisition contract established companies are the only entities that can sell things e commerce platforms such as digital marketplaces connect consumers with other consumers who can list their own products and execute their own sales these c2c platforms may be auction style listings i e ebay auctions or may warrant further discussion regarding the item or service being provided i e craigslist postings enabled by technology c2c e commerce platforms empower consumers to both buy and sell without the need for companies modern platforms have allowed consumers to more easily engage with companies and offer their services especially related to short term contracts gigs or freelance opportunities for example consider listings on upwork a consumer may solicit bids or interact with companies that need particular jobs done in this way the e commerce platform connects businesses with freelancers to enable consumers greater power to achieve pricing scheduling and employment demands less of a traditional e commerce relationship consumers can interact with administrations agencies or governments through c2g partnerships these partnerships are often not in the exchange of service but rather the transaction of obligation for example uploading your federal tax return to the internal revenue service irs digital website is an e commerce transaction regarding an exchange of information alternatively you may pay your tuition to your university online or remit property tax assessments to your county assessor investopedia sabrina jiangthe u s census bureau conducts estimates of retail e commerce sales in the united states in the first quarter of 2023 retail e commerce accounted for 15 1 of total sales in the country totaling roughly 272 6 billion these figures are adjusted for seasonal variation 5types of e commerce revenue modelsin addition to crafting what type of e commerce company a business wants to be the business must decide how it wants to make money due to the unique nature of e commerce the business has a few options on how it wants to process orders carry inventory and ship products often considered one of the easier forms of e commerce dropshipping allows a company to create a digital storefront generate sales then rely on a supplier to provide the good when generating the sale the e commerce company collects payment via credit card paypal cryptocurrency or other means of digital currency then the e commerce store passes the order to the dropship supplier this supplier manages inventory oversees the warehouse of goods packages the goods and delivers the product to the purchaser white label e commerce companies leverage already successful products sold by another company after a customer places an order the e commerce company receives the existing product repackages the product with its own package and label and distributes the product to the customer although the e commerce company has little to no say in the product they receive the company usually faces little to no in house manufacturing constraints a more capital intensive approach to e commerce wholesaling entails maintaining quantities of inventory keeping track of customer orders maintaining customer shipping information and typically having ownership of the warehouse space to house products wholesalers may charge bulk pricing to retailers or unit prices for consumers however the broad approach to wholesaling is to connect to buyers of large quantities or many smaller buyers of a similar standardized product private labeling is a more appropriate e commerce approach for companies that may not have large upfront capital or do not have their own factory space to manufacture goods private label e commerce companies send plans to a contracted manufacturer who makes the product the manufacturer may also have the ability to ship directly to a customer or ship directly to the company receiving the order this method of e commerce is best suited for companies that may receive on demand orders with short turnaround times but are unable to handle the capital expenditure requirements e commerce companies can also leverage repeating orders or loyal customers by implementing subscription services for a fixed price the e commerce company will assemble a package introduce new products and incentivize locking to a long term agreement at a lower monthly price the consumer only places an order once and receives their subscription order at a fixed cadence common subscription e commerce products include meal prep services agriculture boxes fashion boxes or health and grooming products example of e commerceamazon is a behemoth in the e commerce space in fact it is the world s largest online retailer and continues to grow as such it is a huge disrupter in the retail industry forcing some major retailers to rethink their strategies and shift their focus the company launched its business with an e commerce based model of online sales and product delivery it was founded by jeff bezos in 1994 as an online bookstore but has since expanded to include everything from clothing to housewares power tools to food and drinks and electronics company sales increased by 9 in 2022 from the previous year totaling 513 98 billion compared to 469 82 billion in 2021 amazon s operating income dropped from 24 88 billion in 2021 to 12 25 billion in 2022 the company posted a net loss of 2 72 billion in 2022 compared to net income of 33 36 billion in 2021 6 | |
how do you start an e commerce business | make sure you do your research before you start your business figure out what products and services you re going to sell and look into the market target audience competition and expected costs next come up with a name choose a business structure and get the necessary documentation taxpayer numbers licenses and permits if they apply before you start selling decide on a platform and design your website or have someone do it for you remember to keep everything simple at the beginning and make sure you use as many channels as you can to market your business so it can grow | |
what is an e commerce website | an e commerce website is any site that allows you to buy and sell products and services online companies like amazon and alibaba are examples of e commerce websites | |
what is the difference between e commerce and e business | e commerce involves the purchase and sale of goods and services online and is actually just one part of e business an e business involves the entire process of running a company online put simply it s all of the activity that takes place with an online business | |
what is an example of e commerce | dollar shave club offers customers personal grooming health and beauty products 7 customers can opt for what product s they want shipped to them and can sign up for long term memberships to have products sent to them on a recurring basis dollar shave club procures goods in bulk from other companies then bundles those products maintains membership subscriptions and markets the products | |
what are the types of e commerce | an e commerce company can sell to customers businesses or agencies such as the government e commerce can also be performed by customers who sell to businesses other customers or governments the bottom linee commerce is just one part of running an e business while the latter involves the entire process of running a business online e commerce simply refers to the sale of goods and services via the internet e commerce companies like amazon alibaba and ebay have changed the way the retail industry works forcing major traditional retailers to change the way they do business if starting an e commerce site is something you re considering make sure you do your research before you start and make sure you start with a small narrow focus to ensure that you have room to grow | |
what is an electronic communication network ecn | an electronic communication network ecn is a computerized system that automatically matches buy and sell orders for securities in the market ecn trading is especially helpful when investors in different geographic areas wish to complete a secure transaction without the use of a third party understanding an electronic communication network ecn ecns connect major brokerages and individual traders so they can trade directly between themselves without going through a middleman they also make it possible for investors in different geographic locations to quickly and easily trade with each other the u s securities and exchange commission sec requires ecns to register as broker dealers ecns are computer based systems that display the best available bid and ask quotes from multiple market participants and then automatically match and execute orders they not only facilitate trading on major exchanges during market hours but they are also used for after hours trading and foreign currency trading ecns allow for automated trading passive order matching and speedy execution classified by the sec as an alternative trading system ats an ecn makes money by charging a fee for each transaction to meet financial obligations it attempts to eliminate the third party s role in executing orders entered by an exchange market maker or an over the counter otc market maker and permits such orders to be entirely or partly executed orders placed through ecns are usually limit orders which is particularly useful for safely trading after hours given the volatile effect that can have on a stock s price some ecns are designed to serve institutional investors while others are designed to serve retail investors advantages and disadvantages of electronic communication networksthe use of the ecn allows investors a way to trade outside traditional trading hours providing a mechanism for those who either can t be actively involved during normal market times or who prefer the flexibility offered by wider availability it also avoids the wider spreads that are common when using a traditional broker and provides overall lower commissions and fees for those concerned about privacy the ecn can provide a level of anonymity to those who desire it this can be particularly attractive to investors interested in making larger transactions one of the biggest drawbacks to using an ecn is the price to pay for using one access fees and commission charges can be costly and are difficult to avoid per trade based commissions can be costly and can affect your bottom line and profitability another disadvantage of using ecns is that the platform is less user friendly than those provided by traditional brokers furthermore the lack of integrated charts and data traditional brokers provide on their interfaces may make it difficult for beginner investors finally the wider spreads may complicate the process of calculating break even and stop loss points for some investors provides wider spreads than traditional brokersanonymityless user friendly platforms than traditional brokersharder to calculate break even points because of wider spreadsspecial considerationsalong with ecns matching systems and call markets are also considered forms of alternative trading systems matching systems receive orders and route the activity through a matching engine instance where the prices are checked against current resting limit orders if no match is found the order is placed in the book immediately as a quote call markets accept orders one at a time with buying and selling prices determined based on the exchange activity after the order is placed examples of ecnssome of the different ecns include instinet selectnet and nyse arca instinet was the first ecn founded in 1969 and is used by small brokerages and for transactions between institutions it is widely used by market makers for nasdaq trades but individuals and small firms can also use it selectnet is used primarily by market makers but it does not require immediate order execution and helps investors trade with specific market makers nyse arca grew out of the merger between the new york stock exchange nyse and archipelago an early ecn from 1996 it facilitates electronic stock trading on major u s exchanges such as the nyse and nasdaq in foreign exchange markets certain forex brokers are designated as ecn brokers who can facilitate currency trades across electronic matching networks the year that instinet the first electronic communication network ecn was founded ecns vs market markersthe term market makers refers to high volume traders that literally make a market for securities by always standing at the ready to buy or sell unlike ecns market makers profit on the bid ask spread rather than through commissions and fees similar to ecns they benefit the market by increasing liquidity market markers set both the bid and the ask prices on their systems and display them publicly on their quote screens the spread is typically kept lower than that investors can find in ecns due to the fact that market makers generate their profit via the spread without market makers and ecns it would take considerably longer for buyers and sellers to be matched with one another this would reduce liquidity making it more difficult to enter or exit positions and adding to the costs and risks of trading ecn trading faqsecns are computer based programs that connect retail forex investors with major brokerages all around the clock after logging on to the ecn platform investors will see the best available bid and ask quotes displayed from multiple market participants ecns will automatically match and execute orders electronic communication network ecn fees are applied on a per trade basis usually fractions of a cent ecns charge a service fee for matching buyers and sellers who trade on their exchange and networks to open an ecn trading account simply create an account at one of the many ecn trading platforms available best suited to your needs go markets exness and xm are some of the most popular platforms whereas ecns provide liquidity by connecting investors with a number of parties whether brokers or other retail investors in order to complete a trade stp brokers are automated brokers that provide traders with the ability to skip the middle man but only through select liquidity providers | |
what is electronic data gathering analysis and retrieval edgar | edgar electronic data gathering analysis and retrieval is the electronic filing system created by the securities and exchange commission to increase the efficiency and accessibility of corporate filings the system is used by all publicly traded companies when submitting required documents to the sec corporate documents are time sensitive and the creation of edgar has greatly decreased the time it takes for corporate documents to become publicly available | |
what is the electronic federal tax payment system eftps | the electronic federal tax payment system eftps is a service provided by the u s department of the treasury the service allows taxpayers to make tax payments either by telephone or online this system is accessible every day of the week 24 hours a day 1 eftps can be utilized by corporations or individuals seeking to make payments on personal income taxes the primary function is the convenience of allowing secure payments around personal schedules and avoiding the need to make payments in person or through the mail 1 understanding the electronic federal tax payment systemindividuals or businesses wishing to submit tax payments to the internal revenue service irs may use the eftps however users must plan ahead if using eftps the service can only be used for payments after enrollment a process that can take up to a week while the system makes secure tax payments simple it requires users to take a few steps beforehand the initial online registration is followed by physical mail sent to the address provided at registration the mail includes verification of the bank account for the debiting of payments and a unique personal identification number pin 1 the irs recommends using the eftps to make estimated tax payments 2 taxpayers may schedule advance payments which can be modified later if unexpected changes occur 3 such changes can include a shortage of funds in the funding account using an electronic password taxpayers may access their personal and business tax records and accounts if eftps is not working correctly or is unavailable for any reason taxpayers still must make timely payments in person or through the mail as of jan 2020 taxpayers may access the eftps voice response system at 1 800 555 3453 speak to a customer service agent at 1 800 555 4477 or log on to eftps gov 4 5 eftps security and privacythe eftps website uses a secure server complete with internal security policies and firewalls to prevent unwanted and unintended parties from gaining access to users financial information 6 only explicitly scheduled or authorized payments can be processed by the site furthermore the eftps website requires enrollees to input their pin received as part of the enrollment process also their taxpayer identification number and password must be entered to access the site and perform functions connected to sensitive financial information 6 the most significant risk when using eftps is the potential for phishing scams that occur outside of the eftps website in the past fraudulent emails were sent that targeted eftps users indicating that identification numbers were rejected or prompting users to follow an embedded link to change personal information such a link instead installed malware on users computers and was used to intercept banking information all users are advised to contact eftps if any suspicious emails are received 7 | |
what is electronic filing e file | electronic filing is the process of submitting tax returns over the internet using tax preparation software that has been preapproved by the relevant tax authorities such as the u s internal revenue service irs or the canada revenue agency the convenience and efficiency of e filing have made it increasingly popular in recent years the irs says e filing speeds up tax refunds and helps to avoid delays | |
how electronic filing e file works | taxpayers can file their returns directly on the irs website submitting fillable forms using irs free file those with an adjusted gross income earned in 2023 of 79 000 or less can alternatively use the free file site to access the free e filing services of irs software partners with guided tax preparation including a spanish language option 12a taxpayer has the option of filing the return using any tax preparation software with e filing functionality or hiring the services of tax professionals who use similar software the irs free file site has a search feature to help taxpayers find an authorized e filing provider in their area 3certain taxpayers may file their federal tax returns for free directly with the irs through the direct file program this service is available to people who lived in the following states in 2023 arizona california florida massachusetts nevada new hampshire new york south dakota tennessee texas washington state and wyoming tax filers must submit state tax returns separately refer to the irs website to see if you qualify 4benefits of electronic filinge filing saves the tax agency time and money because it transmits a return s data directly to its computers significantly reducing input errors filing electronically with tax preparation software also helps to reduce taxpayer calculation errors and missing entries the irs says 5most taxpayers who e file and provide direct deposit information can expect to receive any due refund within 21 days if there are no issues with their tax return according to the irs 6another benefit of e filing is that the tax filer receives an acceptance or rejection notice within 48 hours usually within 24 hours of transmitting the tax return acceptance is proof that the documents have been received and are in the system while a rejection alerts the taxpayer that the return has not been accepted by the irs 7the rejection notice will include information on what needs to be corrected on the return to make it so that it is acceptable if you e filed before the tax due date but are rejected after it then there is a five day grace period for correcting and resubmitting your return after that you must send in a corrected paper return 7limitations on e filingthe irs recommends only taxpayers who are comfortable doing their own taxes e file without help from a professional irs free file is only available for returns for the most recent tax year prior year returns going back two years can still be filed electronically by registered tax preparers 1the irs accepts e filed returns for the most recent year until a november cutoff date typically announced in october subject to the same timeliness rules as paper returns 8an electronic filing could be rejected over mistakes in entering a social security number or a payer s identification number an omitted form or a misspelled name returns can typically be e filed again once such errors are fixed the irs says if all else fails and the deadline looms send in a paper return instead 89 | |
how can you electronically file your taxes | the simplest way to electronically file your taxes is by using software such as turbotax or taxact among many others these services allow you to fill in the information page by page with instructions and prompts created by the tax software once complete the software allows you to send off your return to the irs you can also use certain systems provided by the irs to file electronically | |
what are the disadvantages of e filing taxes | there are no real disadvantages to e filing taxes most tax software saves your information even if you accidentally close out of the program or your computer crashes if your taxes are extremely complicated that may be the only limitation to e filing | |
when do i need to file my income tax | for 2023 taxes filing is due by april 15 2024 if you need an extension you must also request it by this date if your extension is granted you then have till oct 15 2024 to file your taxes the bottom lineyou can electronically file your tax returns with approved software that makes the entire tax filing process much simpler most software prompts you through the questions that are needed to file a complete and correct tax return | |
what is the electronic fund transfer act efta | the electronic fund transfer act efta is a federal law that protects consumers when they transfer funds electronically including through the use of debit cards automated teller machines atms and automatic withdrawals from a bank account among other protections the efta provides a way to correct transaction errors and limits the liability resulting from a lost or stolen card understanding the electronic fund transfer act efta electronic fund transfers are transactions that use computers phones or magnetic strips to authorize a financial institution to credit or debit a customer s account electronic transfers include the use of atms debit cards direct deposits point of sale pos transactions transfers initiated by phone automated clearing house ach systems and pre authorized withdrawals from checking or savings accounts 1the efta outlines requirements for banking institutions and consumers to follow when errors occur under this act consumers can challenge errors have them corrected and receive limited financial penalties the efta also requires banks to provide certain information to consumers and defines how they can limit their liability in the case of a lost or stolen card 23the use of paper checks has steadily declined since the efta was passed but checks continue to serve as hard evidence of payment the explosion of electronic financial transactions created a need for new rules that would give consumers the same level of confidence as they have in the checking system 4this includes the ability to challenge errors correct them within a 60 day window and limit liability on a lost card to 50 if it is reported as lost within two business days if the institution is notified within three to 59 days of a lost card the liability could be as much as 500 and should it not be reported within 60 days the consumer isn t protected from liability at all meaning they could forfeit all funds in the associated account and be responsible for paying any overdraft charges 2history of the electronic fund transfer act efta congress passed the efta in 1978 in response to the growth of atms and electronic banking and the federal reserve board frb implemented it as regulation e the act established rules to protect consumers and defined the rights and responsibilities of all participants involved in transferring funds electronically the rule making authority of the efta eventually migrated from the federal reserve fed to the consumer financial protection bureau cfpb in 2011 following the enactment of the dodd frank wall street reform and consumer protection act 5you have the right to stop preauthorized transfers at any time regardless of any opposing contract terms 6services protected under the electronic fund transfer act efta basic services that are protected under the efta include 1efta requirements for service providersthe efta requires financial institutions and any third party involved in electronic fund transfer services to disclose the following information to consumers 7who does efta apply to efta applies to all persons including offices of foreign financial institutions in the united states that offer eft services to residents of any state it covers any account located in the united states through which efts are offered to a resident of a state no matter where a particular transfer occurs 8 | |
does efta require withdrawal limits | yes the efta requires banks to limit the amount of money that can be withdrawn from your account during any given time period most banks set the limit at 200 or 300 each day meaning you cannot electronically withdraw more than this amount in cash within 24 hours 9 | |
does efta cover lost cards | yes but its protections are limited efta limits your liability for spending on a lost or stolen card to 50 only if you notify the bank or credit union within two business days of your debit card being lost or stolen for this and other reasons the right to dispute undelivered purchases for example consumers who shop online should use a credit card 3the bottom linethe electronic fund transfer act efta is a federal law that was passed in 1978 it provides important protections to consumers when they transfer funds electronically including through the use of debit cards automated teller machines atms and automatic withdrawals from a bank account the efta provides a way for transactions to be reviewed and errors to be corrected it also limits a bank s liability if a card is lost or stolen as long as this is reported within 60 days the efta also imposes responsibilities on financial institutions requiring them to disclose important information about the way that they manage accounts | |
what is electronic money | electronic money is the currency that exists in banking computer systems that may be used to facilitate electronic transactions although its value is backed by fiat currency and may be exchanged into a physical tangible form electronic money is primarily used for electronic transactions | |
what is the electronic payments network epn | the term electronic payments network epn refers to a financial clearinghouse that handles a variety of electronic funds transfers for the private sector it is one of the automated clearinghouses achs in the united states along with the reserve banks funds are transferred using the epn between accounts at the same or different financial institutions examples of transfers under the epn include deposits for payroll social security benefits and tax refunds as well as debit transfers like loan payments and insurance premiums understanding the electronic payments network epn the automated clearinghouse is a network that facilitates the electronic transfer of money from one account to another by allowing financial institutions to execute bulk transfers electronically either credit or debit transactions there are two systems used across the united states the federal reserve bank and the electronic payments network both of these systems process all of the ach transactions in the country the network was originally used to process recurring payments but now facilitates one time debit transfers such as payments made over the telephone and the internet many individuals and businesses prefer ach payments because they are easy convenient and secure for instance the epn is likely a key part of direct payroll deposits made by most employers saving employees from a trip to the bank to deposit their paychecks automatic clearinghouse payments are also ideal for things like recurrent billing allowing for much faster processing and lower fees compared to checks and credit cards here s how the system works credit transactions settle in one to two business days while debit transactions settle in one business day history of the electronic payments network epn the epn is owned and operated by the clearing house payments company a private corporation owned by some of the largest commercial banks 1 this makes the epn a bank consortium of sorts the network was created in 1981 when the clearing house payments company pioneered the use of an evening processing cycle to permit overnight delivery of time critical corporate ach debits this system made funds available much sooner than ever before replacing the use of the older depository transfer checks the epn has been responsible for some of the most important ach innovations including the creation of the first all electronic transfer environment this pivotal invention has increased the efficiency and timeliness of business operations in all corners of the financial marketplace including the facilitation of credit and debit transactions as mentioned above credit transactions include things such as payroll social security tax refund and dividend deposits while debit transactions include withdrawals like loan payments insurance premiums mortgage payments and utility bills | |
what is electronic retailing e tailing | electronic retailing e tailing is the sale of goods and services through the internet e tailing can include business to business b2b and business to consumer b2c sales of products and services e tailing requires companies to tailor their business models to capture internet sales which can include building out distribution channels such as warehouses internet webpages and product shipping centers notably strong distribution channels are critical to electronic retailing as these are the avenues that move the product to the customer | |
how electronic retailing e tailing works | electronic retailing includes a broad range of companies and industries however there are similarities between most e tailing companies that include an engaging website online marketing strategy efficient distribution of products or services and customer data analytics successful e tailing requires strong branding websites must be engaging easily navigable and regularly updated to meet consumers changing demands products and services need to stand out from competitors offerings and add value to consumers lives also a company s offerings must be competitively priced so that consumers do not favor one business over another just for price reasons e tailers need distribution networks that are prompt and efficient consumers cannot wait for long periods for the delivery of products or services transparency in business practices is also important so consumers trust and stay loyal to a company there are many ways companies can earn revenue online of course the first income source is through the sales of their product to consumers or businesses both b2c and b2b companies can earn revenue by selling their services through a subscription based model such as netflix nflx which charges a monthly fee for access to media content revenue can also be earned through online advertising for example meta meta formerly facebook inc earns money mainly from ads placed on its facebook website by companies looking to sell to the millions who are on facebook regularly checking their pages types of electronic retailing e tailing business to consumer retailing is the most common of all e commerce companies and the most familiar to most internet users this group of retailers includes companies selling finished goods or products to consumers online directly through their websites the products could be shipped and delivered from the company s warehouse or directly from the manufacturer one of the primary requirements of a successful b2c retailer is maintaining good customer relations business to business retailing involves companies that sell to other companies such retailers include consultants software developers freelancers and wholesalers wholesalers sell their products in bulk from their manufacturing plants to businesses these businesses in turn sell those products to consumers in other words a b2b company such as a wholesaler might sell products to a b2c company advantages and disadvantages of electronic retailing e tailing e tailing includes more than just e commerce only companies more and more traditional brick and mortar stores are investing in e tailing infrastructure costs are lower with electronic retailing versus operating brick and mortar stores companies can move products faster and reach a larger customer base online than with traditional physical locations e tailing also allows companies to close unprofitable stores and maintain the profitable ones automated sales and checkout cut down on the need for staff and sales personnel also websites cost less than physical stores to open staff and maintain e tailing reduces advertising and marketing expenses as customers can find the stores through search engines or social media data analytics is like gold for e tailers consumer shopping behavior can be tracked to determine spending habits page views and length of engagement with a product service or website page effective data analytics can decrease lost sales and boost client engagement which can lead to increased revenue there are disadvantages to running an e tailing operation though creating and maintaining an e tailing website while less expensive than a traditional retail location can be expensive infrastructure costs can be substantial if warehouses and distribution centers need to be built to store and ship the products also adequate resources are necessary to handle online returns and customer disputes also e tailing does not provide the immersive emotional experience that physical stores can offer e tailing does not give the consumer a chance to smell feel or try on products before purchasing them sensory experiences that often result in a decision to buy browsing is also more pleasurable in person and lends to increased spending personalized customer service and interaction can also be an advantage to brick and mortar stores real world examples of e tailingamazon com amzn is the world s largest online retailer providing consumer products and subscriptions through its website amazon s website shows the company generated more than 280 billion in revenue in 2019 while posting more than 11 6 billion in profit or net income 1 other e tailers that operate exclusively online and compete with amazon include overstock com and jd com alibaba group baba is china s largest e tailer which operates an online commerce business throughout china and internationally alibaba has adopted a business model that not only includes both b2c and b2b commerce but it also connects chinese exporters to companies around the world looking to buy their products the company s rural taobao program helps rural consumers and companies in china sell agricultural products to those living in urban areas for the fiscal year 2020 alibaba generated nearly 72 billion in annual revenue while posting just under 19 8 billion in profit 2 | |
what is an elevator pitch | elevator pitch is a slang term used to describe a brief speech that outlines an idea for a product service or project the name comes from the notion that the speech should be delivered in the short time period of an elevator ride a good rule of thumb is that an elevator pitch should be approximately 30 seconds long with a maximum of 60 seconds in the financial world an elevator pitch refers to an entrepreneur s attempt to convince a venture capitalist that a business idea is worth investing in generally a successful elevator pitch will be enough to pique an investor s curiosity and sets the stage for a follow up meeting it s during this meeting that the entrepreneur will present the investor with a more formal presentation in the hopes of raising seed capital understanding an elevator pitchventure capitalists use the quality of the elevator pitch as a way to judge whether to take the next step on the road to potentially investing in a startup the elevator pitch is also used by project managers salespeople and job seekers as a way to market themselves or their ideas an elevator pitch should include why your product idea or project is worth investing in by explaining such things as the features benefits and cost savings an elevator pitch is frequently memorized and practiced in advance by entrepreneurs who actively seek backers for their business ideas there are a variety of forums and events where such pitches are presented before an audience that may include potential investors for example startup incubator programs may conclude with a demo day event where a founding member of the team often the ceo will deliver the elevator pitch about the company in such an instance the pitch will describe the pain point the team is attempting to solve what approaches have already been attempted to resolve the issue and what the startup has to offer that has not been tried before moreover the pitch is intended to explain in clear and direct terms why the idea or product can succeed where other novel concepts have not depending on the circumstances some elevator pitches may be longer than the proverbial elevator ride and can go into greater detail about the team involved in developing the idea the pitch may also provide more information about how the concept will be brought to market ways it will grow a customer base and what the broader market opportunities are for the concept a twit pitch or pitch on the x platform formerly twitter is even shorter than an elevator pitch at a standard 280 characters this type of pitch uses the social media platform to provide a condensed version of a business idea elevator pitches may be used at some events as a form of contest where the presenters compete for prizes that might assist them in furthering their ideas this can include nominal funding or business services and mentoring with business veterans regardless of winning such a contest the opportunity to present ideas before an audience of angel investors venture capitalists and other possible backers can be seen as a significant benefit of the pitch | |
how to create an elevator pitch | fans of the popular tv show shark tank are familiar with the show s concept that allows budding entrepreneurs the opportunity to pitch their startup businesses to a panel of investor sharks while each entrepreneur s pitch is much longer than a standard elevator pitch you can still use key elements that appear in most successful shark tank presentations as a model to help you create an effective elevator pitch for your own business taking our cue from shark tank you ll want to include the following elements in your elevator pitch your elevator pitch should be concise engaging and offer just enough tantalizing details that hook your potential shark investor into asking for more information then and there or for a follow up meeting at a later date | |
what do you say in an elevator pitch | the material you include in your pitch depends on context what are you pitching and what do you hope to achieve if you re promoting yourself as a job candidate your pitch would include your background accomplishments and the value you bring to the organization if you re pitching a product or service you d mention your company s background what your product or service offers and how it s different from other offers on the market don t forget to close your pitch with a call to action | |
how long should an elevator pitch be | an elevator should be about 30 to 60 seconds long brief but just long enough to touch on the important points if you give a successful pitch that piques your audience s curiosity you ll have time later to go into greater detail | |
what makes an elevator pitch good | the best elevator pitches are interesting engaging and invite the listener to find out more deliver your pitch confidently and get to the point quickly if you want to make a good impression a good elevator pitch sets the stage for further action whether that s an interview a meeting or just an exchange of business cards the bottom linean elevator pitch is a quick explanation that aims to give your audience enough information that they are interested in learning more knowing how to craft a succinct and successful elevator pitch will help you attract people who are interested in what you have to offer and is often the key to making connections with interested investors | |
what is the elliott wave theory | the elliott wave theory in technical analysis describes price movements in the financial market developed by ralph nelson elliott it observes recurring fractal wave patterns identified in stock price movements and consumer behavior investors who profit from a market trend are described as riding a wave investopedia sydney saporitounderstanding the elliott wave theorythe elliott wave theory was developed by ralph nelson elliott in the 1930s he studied 75 years worth of yearly monthly weekly daily and self made hourly and 30 minute charts across various indexes his theory gained notoriety in 1935 when elliott made an uncanny prediction of a stock market bottom and has become a staple for thousands of portfolio managers traders and private investors 1elliott defined rules to identify predict and capitalize on wave patterns in books articles and letters summarized in r n elliott s masterworks published in 1994 elliott wave international is the largest independent financial analysis and market forecasting firm whose market analysis and forecasting are based on elliott s model 1his patterns do not provide any certainty about future price movement but help to order the probabilities for future market action they can be used with other forms of technical analysis including technical indicators 1 | |
how elliott waves work | some technical analysts profit from wave patterns in the stock market using the elliott wave theory the theory assumes that stock price movements can be predicted because they move in repeating up and down patterns called waves created by investor psychology or sentiment the theory is subjective and identifies two different types of waves motive or impulse waves and corrective waves wave analysis does not equate to a template to follow instructions wave analysis offers insights into trend dynamics and helps investors understand price movements impulse and corrective waves are nested in a self similar fractal to create larger patterns for example a one year chart may be in the midst of a corrective wave but a 30 day chart may show a developing impulse wave a trader with this elliott wave interpretation may have a long term bearish outlook with a short term bullish outlook impulse wavesimpulse waves consist of five sub waves that make net movement in the same direction as the trend of the next largest degree this pattern is the most common motive wave and the easiest to spot in a market it consists of five sub waves three of which are motive waves two are corrective waves image by julie bang investopedia 2020if one rule is violated the structure is not an impulse wave the trader would need to re label the suspected impulse wave corrective wavescorrective waves called diagonal waves consist of three or a combination of three sub waves that make net movement in the direction opposite to the trend of the next largest degree its goal is to move the market in the direction of the trend elliot wave theory vs other indicatorselliott recognized that the fibonacci sequence denotes the number of waves in impulses and corrections wave relationships in price and time also commonly exhibit fibonacci ratios such as 38 and 62 for example a corrective wave may have a retrace of 38 of the preceding impulse 1other analysts have developed indicators inspired by the elliott wave principle including the elliott wave oscillator chart the oscillator provides a computerized method of predicting future price direction based on the difference between a five period and a 34 period moving average elliott wave international s artificial intelligence system ewaves applies all elliott wave rules and guidelines to data to generate automated elliott wave analysis 3 | |
what is the elliott wave theory | in technical analysis the elliott wave theory looks at long term trends in price patterns and how they correspond with investor psychology these price patterns or waves depend on rules developed by ralph nelson elliott in the 1930s they identify and predict wave patterns within stock markets and help predict future movement 1 | |
how do elliott waves work | based on elliott s wave theory market prices will alternate between an impulsive phase and a corrective phase impulses are always subdivided into a set of 5 lower degree waves alternating again between motive and corrective character so that waves 1 3 and 5 are impulses and waves 2 and 4 are smaller retraces of waves 1 and 3 2 | |
what is an email money transfer emt | an email money transfer emt is a retail banking service that allows users to transfer funds between personal accounts using email and their online banking service used in canada and available from its largest banking institutions email money transfers are considered a secure way to transfer money emts are often referred to as an interac e transfer because the service is provided by interac which is a canadian company involved in creating interbank networks to facilitate financial transactions between banks 1 | |
how an email money transfer emt works | an email money transfer emt is initiated through an account holder s online banking application users select the amount to be sent and the specific account from which the funds will be withdrawn they choose the recipient of these funds and when confirmed funds are instantly debited the interac e transfer service offers auto deposit and options to request money 1the recipient commonly receives an email with a specific security question along with instructions regarding the retrieval of the funds via a secure website funds are deposited immediately at no additional charge if the recipient participates at the online banking institution or it could take three to five additional business days interac e transfer is not available in the united states but it is possible to send money from a canadian bank to the u s via interac s partnership with mastercard and western union cybersecurity and emtemail money transfer emt as with all banking transactions may be subject to fraud so cybersecurity and online financial safety are important money in an emt is not transferred via email in an online money transfer just the instructions to retrieve and deposit funds from the participants accounts users should not accept email transfers from unknown parties and contact the sender directly when notified of a transfer that is not expected because email is used the service is susceptible to phishing scams who can use emt for money transfers most email money transfers are completed by clients of the big five banks in canada along with other financial institutions | |
is email money transfer available for businesses | interac offers email money transfer services for businesses which have options like bulk processing services bulk receivables and bulk payables as well as invoicing capabilities for business customers | |
how does interac keep transactions secure | interac uses encryption technology including confidential user ids and passwords a secure login process security questions and 128 bit browser encryption 1 | |
what is an embargo | an embargo is a trade restriction typically adopted by a government a group of countries or an international organization as an economic sanction embargoes can bar all trade or may apply only to some of it for example to arms imports they are designed to punish the targeted country for its actions and to deny it the means to carry out objectionable policies | |
how an embargo works | countries use embargoes to punish and deter objectionable behavior without resorting to military force often in response to human rights violations and armed conflict a widely observed embargo can be a powerful tool isolating the targeted country and denying it the benefits of international trade countries dependent on global trade or technology imports are especially vulnerable to embargoes in contrast determined authoritarian regimes have successfully resisted embargoes for decades often at immense cost to living standards u s trade embargoesthe u s has imposed long running and comprehensive trade embargoes on cuba north korea iran and syria countries whose policies it finds particularly objectionable those embargoes are backed by a variety of legislative acts and presidential orders 1the u s president has the authority to impose embargoes and other sanctions during times of war under the trading with the enemy act 2another act the international emergency economic powers act authorizes the president to enact commerce restrictions during strictly defined periods of national emergency 3in the u s the office of foreign assets control a division of the department of the treasury administers embargoes the office also plays a central role in tracking down and freezing sources of funding for terrorist and drug trafficking organizations 4effect of embargoesembargoes rarely result in a change in policy much less in the targeted country s government for example the u s embargo on cuba in effect since 1962 has failed to oust the country s governing communist party or to persuade it to tolerate dissent similarly the embargo on oil exports to the u s imposed by arab members of the organization of the petroleum exporting countries opec during the 1973 arab israeli war failed to end u s support for israel embargoes can be successful in their goal of punishing the targeted country however for example the 1973 1974 arab oil embargo caused fuel shortages rationing and soaring gas prices increasing the cost of america s foreign policy 5in the 1980s limited trade restrictions imposed on south africa along with investment and other economic sanctions by several countries including the u s hastened the end of apartheid 6limited trade sanctions imposed on russia following its invasion and occupation of parts of ukraine in 2014 failed to deter renewed russian aggression in 2022 the broader u s and allied sanctions imposed since february 2022 have reportedly deprived the russian military of semiconductors vital for military electronics as well as parts needed to manufacture tanks 78the boycott divestment and sanctions movement which uses the south africa model to promote sanctions punishing israel for occupying palestinian territory has prompted fierce opposition from israel and its allies in an indication of the high costs such sanctions could impose 910criticism of embargoesin addition to their limited likelihood of prompting a policy change by the targeted country embargoes have been criticized for hurting subject populations with no role in setting or carrying out the objectionable policies notably the international economic embargo imposed on iraq following its 1990 invasion of kuwait drew criticism for hurting the poorest and sickest iraqis the most 11 similar arguments have been made in opposition to the u s embargo on iran over violations of the nuclear non proliferation treaty 12 | |
what countries are subject to a u s embargo | trade with cuba north korea iran and syria is prohibited under broad u s embargoes u s restrictions on trade with russia and ukrainian territories under russian occupation have also been described as an embargo 13can an embargo be effective embargos have been more effective in punishing the targeted country than in changing its policies though trade was included in the economic sanctions credited for encouraging south africa to end apartheid the trade sanctions imposed on russia following its 2022 invasion of ukraine have been credited for disrupting russian military supplies | |
what are the legal underpinnings of u s trade embargoes | u s trade embargoes are based on laws passed in congress and executive orders signed by u s presidents the u s treasury s office of foreign assets control administers the embargoes and fields applications for exemptions | |
what is embezzlement | embezzlement refers to a form of white collar crime in which a person or entity intentionally misappropriates the assets entrusted to them in this type of fraud the embezzler attains the assets lawfully and has the right to possess them but the assets are then used for unintended purposes embezzlement is a breach of the fiduciary responsibilities placed upon a person understanding embezzlementindividuals who are entrusted with access to an organization s funds are expected to safeguard those assets for their intended use it is illegal to intentionally access that money and convert it to personal use such activities can include diverting funds to accounts that appear to be authorized to receive payments or transfers however the account is a front that allows the individual or a third party they are collaborating with to take the funding for instance an embezzler might create bills and receipts for business activities that never took place or services that were never rendered to disguise the transfer of funds as a legitimate transaction an embezzler might collaborate with a partner who is listed as a consultant or contractor who issues invoices and receives payment yet never actually performs the duties they are charging for the nature of embezzlement can be both small and large embezzling funds can be as minor as a store clerk pocketing a few bucks from a cash register however on a grander scale embezzlement also occurs when the executives of large companies falsely expense millions of dollars transferring the funds into personal accounts depending on the scale of the crime embezzlement may be punishable by large fines and time in jail | |
how embezzlement occurs | embezzlement occurs when someone steals or misappropriates what they were entrusted to manage or safeguard the property or asset need not be of substantial value for embezzlement to occur although closely related it differs from fraud in that the embezzler had authorization to use or oversee the property or funds 2some types of embezzlement might be combined with other forms of fraud such as ponzi schemes in such cases the embezzler scams investors to entrust them with their assets to invest on their behalf but instead uses the money for personal gain and enrichment maintaining the fraud often includes seeking out new investors to bring in more money to appease prior investors the number of years bernie madoff was sentenced to for orchestrating the largest ponzi scheme in history 3an embezzler might also transfer other assets aside from money an embezzler might claim the real estate company vehicles smartphones and other hardware such as laptops that belong to an organization for personal use embezzlement might take place in the government sector as well if employees seize local state or national funding for themselves such instances may occur when funding is disbursed to fulfill contracts or to support projects and a member of the staff skims some of the money that was earmarked people who embezzle can be charged with a criminal offense and or held civilly responsible for their crimes punishment can range from paying monetary damages and restitution to victims to incarceration white collar offenses don t prevent offenders from being prescribed lengthy prison sentences ones traditionally handed to violent offenders | |
how to prevent embezzlement | theft and embezzlement cost companies approximately 400 billion per year and account for more than 50 of business failures 1 however employers can develop strategies to combat these white collar crimes embezzlement starts with the breach of trust of a person endowed with the authority to care for the property or money of another reasonably one of the first steps an employer can take is to carefully vet prospective employees in addition to conducting thorough background checks assessing character traits via personality tests could reveal undesirable behaviors a security and monitoring program could also deter corporate crime especially when performed by a dedicated risk management team or an independent third party these risk managers can create internal controls that monitor behaviors and allow for the anonymous reporting of suspicious activities as well as conduct periodic audits that expose misappropriations early detection helps to mitigate losses and protect the company s reputation and the people it serves employers should make clear that they have a no tolerance policy regarding illegal acts such as embezzling and communicate the consequences of such violations every company should promote a culture of honesty and fairness encouraging its employees to remain vigilant and report instances of wrongdoing | |
how does one legally prove embezzlement | to legally prove embezzlement the claimant must prove that the perpetrator had a fiduciary responsibility to the victim and that the embezzled asset was acquired through that relationship and conveyed to the accused intentionally 4 the key to spotting embezzlement is that it involves a betrayal of trust or duty while this looks different in every state generally these four factors must be present 5 | |
what is the punishment for embezzlement | a person can be held civilly and criminally responsible for embezzling punishments range from monetary fines and restitution to imprisonment | |
what is a white collar crime | a white collar crime is a non violent crime committed by a business professional who breached trust for economic gain white collar crimes include fraud theft counterfeiting embezzlement money laundering and other fraudulent schemes 6 | |
what was the emergency banking act of 1933 | the emergency banking act of 1933 was a bill passed in the midst of the great depression that took steps to stabilize and restore confidence in the u s banking system it came in the wake of a series of bank runs following the stock market crash of 1929 among its major measures the act created the federal deposit insurance corporation fdic which began insuring bank accounts at no cost for up to 2 500 1 additionally the president was given executive power to operate independently of the federal reserve during times of financial crisis understanding the emergency banking actthe act was conceived after other measures failed to fully remedy how the depression strained the u s monetary system by early 1933 the depression had been ravaging the american economy and its banks for nearly four years mistrust in financial institutions grew prompting a rising flood of americans to withdraw their money from the system rather than risk leaving it in banks despite attempts in many states to limit the amount of money any individual could take out of a bank withdrawals surged as continuing bank failures heightened anxiety and in a vicious cycle spurred still more withdrawals and failures while the act originated during the administration of herbert hoover it passed on march 9 1933 shortly after franklin d roosevelt was inaugurated it was the subject of the first of roosevelt s legendary fireside chats in which the new president addressed the nation directly about the state of the country 1roosevelt used the chat to explain the provisions of the act and why they were necessary that included outlining the need for an unprecedented four day shutdown of all u s banks in order to fully implement the act during that time roosevelt explained banks would be inspected for their financial stability before being allowed to resume operations the inspections together with the act s other provisions aimed to reassure americans that the federal government was closely monitoring the financial system to ensure it met high standards of stability and trustworthiness on march 13 the first banks to reopen were the 12 regional federal reserve banks these were followed on the next day by banks in cities with federal clearinghouses the remaining banks deemed fit to operate were given permission to reopen on march 15 1 remember that no sound bank is a dollar worse off than it was when it closed its doors last week 1important effects of the emergency banking actuncertainty even anxiety about whether people would believe president roosevelt s assurances that their money was safe all but evaporated as banks reopened to long depositor lines the stock market also weighed in enthusiastically with the dow jones industrial average rising by 8 26 points a gain of more than 15 on march 15 when all eligible banks had reopened 1the effects of the emergency banking act continued with some still seen today the fdic continues to operate and virtually every reputable bank in the u s is a member of it certain provisions such as the extension of the president s executive power in times of financial crisis remain in effect the act also completely changed the face of the american currency system by taking the united states off the gold standard the loss of personal savings from bank failures and bank runs had gravely damaged trust in the financial system perhaps most importantly the act reminded the country that a lack of confidence in the banking system can become a self fulfilling prophecy and that mass panic can do the financial system and the people of the nation great harm other laws similar to the emergency banking actthe emergency banking act was preceded and followed by other pieces of legislation designed to stabilize and restore trust in the u s financial system approved during herbert hoover s administration the reconstruction finance corporation act sought to provide aid for financial institutions and companies that were in danger of shutting down due to the ongoing economic effects of the depression the federal home loan bank act of 1932 similarly sought to strengthen the banking industry and the federal reserve 1a few related pieces of legislation were passed shortly after the emergency banking act the glass steagall act also passed in 1933 this act separated investment banking from commercial banking to combat the corruption of commercial banks that engaged in speculative investing such speculation was recognized as a key cause of the stock market crash 2glass steagall was repealed in 1999 however and some believe its demise helped contribute to the 2008 global credit crisis a similar act the emergency economic stabilization act of 2008 was passed at the beginning of the great recession 3 in contrast to the emergency banking act the focus of this legislation was the mortgage crisis with legislators intent on enabling millions of americans to keep their homes was the emergency banking act a success or failure overall a success in immediate terms confidence was restored and customers brought the money they d withdrawn back to deposit at their banks decades later the fdic continues to support bank customers confidence by insuring their deposits to this day | |
what effect did the emergency banking act have on the fed | it changed the dynamic of control over monetary policy because the act granted the president greater power to respond independent of the federal reserve during a financial crisis did people believe roosevelt s fireside chat about the emergency banking act yes they did confidence in the act and in roosevelt was demonstrated clearly when people lined up to put their money back into their bank accounts once banks reopened roosevelt famously said during this fireside chat i can assure you that it is safer to keep your money in a reopened bank than under the mattress 1the bottom linethe emergency banking act of 1933 was legislation intended to restore the nation s confidence in its financial system after banks had been shut down for a week the famous bank holiday to prevent any more runs by depositors its effects are seen to this day in the continued role of the fdic to insure bank deposits and in the lasting executive power that presidents have during financial crises | |
what is an emergency fund | the term emergency fund refers to money stashed away that people can use in times of financial distress the purpose of an emergency fund is to improve financial security by creating a safety net that can be used to meet unanticipated expenses such as an illness or major home repairs 1assets in an emergency fund tend to be cash or other highly liquid assets this reduces the need to either draw from high interest debt options such as credit cards or unsecured loans or undermine your future security by tapping into retirement funds understanding emergency fundsyou establish an emergency fund when you put away money that is intended to be used during times of financial hardship this includes the loss of your job a debilitating illness or a major repair to your home or car not to mention the kind of major economic crisis and lockdown that happened in 2020 the best size for an emergency fund depends on a number of factors including your financial situation expenses lifestyle and debts many financial advisors recommend saving enough to cover anywhere from three to six months worth of expenses which can help you weather a modest healthcare bill or a short bout of unemployment 2however some experts argue for an even heftier cushion celebrity finance guru suze orman for example suggests an emergency fund that can handle up to eight months worth of outlays 3 and she made that contention well before the 2020 crisis a stark reminder of how sudden and deep an economic slump can be 4individual circumstances may dictate the specific savings level with which you re comfortable for example a single adult without children may be content covering three months of expenses while the sole breadwinner for an entire family may want to have enough to cover half a year or more 5 research shows that many americans are well short of the recommended range in fact a 2020 survey by the federal reserve found that more than one fourth of americans lacked the ability to cover a 400 expense with cash or its equivalents among unemployed workers that figure rose to 45 4if you re living paycheck to paycheck you may want to start with more modest goals such as putting 2 of your net income into a rainy day fund and slowly increasing your contribution rate every few months even a modest safety net can help buy you a little time should you face an unforeseen financial crisis it may be tempting to use your fund for incidental or frivolous purposes so make sure that you don t deplete this resource for any purpose other than an actual emergency | |
how to build an emergency fund | starting early is the key to setting up an emergency fund because it helps you build up a comfortable cushion against unexpected emergencies later in life 6 getting a start on emergency funds is relatively easy here are two simple ways to begin saving for one you probably want to park your emergency fund in a vehicle that can be easily liquidated should a financial need suddenly arise while storing cash in a savings account may be the safest approach there are other relatively secure ways to store a part of your emergency fund that offer greater interest earning potential these include high interest savings accounts money market accounts and no penalty certificates of deposit cds which don t charge savers a fee if they need to pull their money out before the maturity date 7 you ll have the access you need in an emergency but won t be incurring fees and time delays associated with other vehicles such as brokerage accounts you may want to build an emergency fund before venturing into volatile investment vehicles such as stocks the latter offer greater long term growth potential than cash and cash equivalents but their value can suddenly decrease in the event of an economic downturn as the 2020 economic crisis and lockdown made vividly clear should that be the moment when you need to tap them you could lose more value an emergency fund protects your portfolio against that risk 7want more advice for saving money toward your financial goals order a copy of investopedia s what to do with 10 000 magazine helping employees savea number of major employers have introduced programs encouraging emergency savings because of the effects of financial instability on productivity and retirement security here s a sampling of programs from three major companies example of an emergency fundhere s a hypothetical example showing how to assemble an emergency fund let s say a married couple has monthly expenses totaling 5 000 this includes the couple s mortgage payments food bills car payments and other necessary outlays using the three month rule the couple needs to set aside at least 15 000 or 30 000 for six months and 40 000 for eight months to address any unexpected financial burdens | |
how much should i have in an emergency fund | the amount varies according to your living expenses but the general rule of thumb is to eventually save three to six months of living expenses | |
how can i create an emergency fund if i am living paycheck to paycheck | it won t be easy but instead of worrying about your eventual savings amount decide on a percentage of take home pay that you can do without it can be 1 or 2 the important thing is to save a set amount each payday and not touch it the money will add up | |
what is an emergency fund for | as simple as the answer seems it is important to make sure that you can distinguish between what is an emergency and what isn t an emergency is an unexpected bill that you can t pay not money to go to a movie or for some other nonessential expense | |
what is an emerging industry | an emerging industry is a group of companies in a line of business formed around a new product or idea that is in the early stages of development an emerging industry typically consists of just a few companies and is often centered around new technology emerging industries frequently come into existence when one technology begins to eclipse and replace an older technology stocks of companies in emerging industries are often volatile and can experience wide price swings it can be hard to value such companies especially if they have little revenue or have yet to make a profit while early investors hope to get in on the ground floor of what might be the next google or apple the risks of investing in an emerging industry can be quite high understanding an emerging industryit may take years for an emerging industry to reach profitability research and development r d expenses will comprise the bulk of the early operating expenses of companies in the industry also marketing expenses will be high because the product or service is largely unknown and unproven so companies in an emerging industry must convince both investors and consumers that the product or service will be valuable investing in an emerging industry is a high risk reward proposition barriers to entrybarriers to entry in an emerging industry can be relatively high because of the level of expertise required to compete in the new field examples of these barriers include scarce resources to manufacture a company s products inability to take advantage of economies of scale lack of sufficient financing government restrictions and competition from established companies however despite these barriers many entrants will rush into a new industry in an attempt to gain an early advantage they will raise money if they can hire key personnel and secure the services of influential advisors many of these entrants however will eventually discover they do not have the skills or sufficient funds to bring a product or service to market and at some point fail entirely examples of emerging industriesthe world in the mid 1990s knew the internet as an emerging industry hundreds of companies formed to try to capitalize on the new technology the dotcom bubble refers to the rapid proliferation of internet based companies that fueled a bull market in technology stocks speculation grew and venture capitalists poured money into many startups that in some cases had no actual product or service to sell by the end of 2001 and into 2002 the dotcom bubble burst and many publicly traded companies folded however those companies that offered valuable consumer services and products such as amazon and ebay survived and flourished becoming standard bearers for the emerging internet industry emerging industries in the current era perhaps viewed as the next evolution of the internet are artificial intelligence ai virtual reality and self driving vehicles again only a select few companies with the financial resources and intellectual property are thus far dominating the nascent fields the biotechnology industry however is experiencing such breakthroughs in immunotherapy and gene therapy that it can be considered an emerging industry or at the very least a sector with growth potential at an inflection point special considerationsmany investors are interested in diversifying their portfolios by investing in emerging industries however the risks associated with investing in individual companies that are in the early stages of development deter many would be investors from taking action the creation of exchange traded funds etfs that focus on specific new sectors can offer investors a way to invest in emerging industries while mitigating some of the risks for example there are etfs that target artificial intelligence and robotics companies blockchain etfs invest in companies involved in blockchain technology biotech etfs have become favorites among investors looking to gain exposure in companies making advancements in medicine pharmaceuticals and genetics | |
what is an emerging market economy | an emerging market economy is the economy of a developing nation that s becoming more engaged with global markets as it grows countries classified as emerging market economies are those with some but not all of the characteristics of a developed market characteristics of developed markets can include strong economic growth high per capita income liquid equity and debt markets accessibility by foreign investors and a dependable regulatory system it typically becomes more integrated with the global economy as an emerging market economy develops it can have increased liquidity in local debt and equity markets increased trade volume and foreign direct investment it can develop modern financial and regulatory institutions some notable emerging market economies include india mexico russia iran saudi arabia china and brazil an emerging market economy is transitioning from a low income less developed often pre industrial economy toward a modern industrial economy with a higher standard of living understanding an emerging market economyinvestors seek emerging markets for the prospect of high returns because these markets often experience faster economic growth as measured by gross domestic product gdp higher returns usually come with much greater risk however risks can include political instability domestic infrastructure problems currency volatility and illiquid equity because many large companies may still be state run or private local stock exchanges might not offer liquid markets to outside investors emerging markets generally don t have highly developed market and regulatory institutions like those found in developed nations market efficiency and strict standards in accounting and securities regulation are generally not on par with advanced economies such as those of the united states europe and japan emerging markets typically have a physical financial infrastructure including banks a stock exchange and a unified currency a key aspect of emerging market economies is that they adopt reforms and institutions like those of modern developed countries over time this promotes economic growth emerging market economies tend to move away from activities that are focused on agricultural and resource extraction toward industrial and manufacturing activities instead their governments usually pursue deliberate industrial and trade strategies to encourage economic growth and industrialization these strategies include export led growth and import substituting industrialization export led growth is more typical of economies that are considered emerging because it promotes more engagement and trade with the global economy emerging market countries also often pursue domestic programs such as investing in educational systems building physical infrastructure and enacting legal reforms to secure investors property rights frontier markets are usually smaller than emerging markets with lower per capita income less market liquidity and less industrialization they offer attractive investment opportunities but frontier markets are considered riskier for investors than emerging markets | |
how emerging market economies are classified | emerging market economies are classified in various ways levels of income quality of financial systems and growth rates are all popular criteria but the exact list of emerging market economies can vary depending on who you ask the international monetary fund imf classifies 20 countries as emerging markets morgan stanley capital international msci classifies 24 countries as emerging markets 12 standard and poor s s p ftse russell and dow jones also vary slightly in their classification of countries as emerging markets a country can be removed from the list by either upgrading it to developed nation status or downgrading it to a frontier nation at any of these institutions discretion developed nations may likewise be downgraded to an emerging market as was the case with greece frontier markets such as qatar and argentina may be upgraded to emerging markets | |
what s an emerging market economy | an emerging market economy is generally considered an economy that s transitioning into a developed market economy it has rapid gdp growth growing per capita income increasing debt and equity markets liquidity and an established financial system infrastructure | |
what countries are classified as emerging markets | classifications differ but the so called brics countries represent five emerging markets with major economic growth and opportunities for investment brazil russia india china and south africa the gdps of these countries have increased steadily from 2000 through 2023 data for 2024 isn t yet available 3that trend is expected to continue through the years ahead | |
do emerging markets make good investments | they can make good investments due to their propensity for rapid gdp growth compared to more mature markets but investing in emerging markets can be risky due to potential political instability lack of dependable information currency fluctuations lower liquidity and investment volatility investors should carefully weigh potential risks and rewards before making any investment the bottom linecountries that are classified as emerging market economies are those with economies that are transitioning into being developed they have a unified currency stock market and banking system and they re in the process of industrializing emerging market economies can be attractive to investors due to their rapid growth and greater returns but they also involve greater exposure and risk due to political instability or currency fluctuation | |
what is the emerging markets bond index embi | the emerging markets bond index embi is a benchmark index for measuring the total return performance of international government and corporate bonds issued by emerging market countries that meet specific liquidity and structural requirements despite their increased riskiness relative to developed markets emerging market bonds offer several potential benefits such as portfolio diversity as their returns are not closely correlated to traditional asset classes understanding the emerging markets bond indexan emerging market describes a developing country or economy that is progressing toward becoming more advanced by rapidly industrializing and adopting free market economies the largest emerging markets include nigeria china india brazil south africa poland mexico turkey argentina russia etc to take advantage of the rapid growth occurring in these countries investors look to bonds issued by the government of these nations emerging market debt or bonds are considered sovereign debt these government bonds are typically issued in foreign currencies either in us dollars euros or japanese yen because of the increased economic and political risk present in these countries the credit rating on emerging market bonds tend to be lower than that on developed market bonds due to the perceived higher risk of investing in these assets the sovereign bonds have higher yields for investors than that of more stable bonds in developed countries for example the pimco emerging local bond fund delivered a total return of more than 14 in the first nine months of 2017 while the ishares core us aggregate bond etf gained 3 1 during the same time period investors who want exposure to emerging economies and who are willing to take on additional risk typically do so through mutual funds or exchange traded funds etfs that track the performance of a benchmark index such as the emerging markets bond index | |
how the embi is used | emerging markets bond indexes are used as benchmarks for bond performance in emerging markets the most popular emerging markets bond indexes are the jp morgan embi index jp morgan embi global index and jp morgan embi global diversified index the embi index measures brady bonds which are dollar denominated bonds issued primarily by latin american countries the embi also includes dollar denominated loans and eurobonds and expands on j p morgan s original emerging markets bond index embi which was introduced in 1992 when it covered only brady bonds countries in the embi index are selected according to a sovereign credit rating level the index is weighted on the basis of the market capitalization of government bonds but it is the sub index with the greatest liquidity requirements so some markets are excluded to qualify for index membership the debt must be more than one year to maturity have at least a 500 million outstanding face value and meet stringent trading guidelines to ensure that pricing inefficiencies don t affect the index embi the jp morgan embi global index is an extended version of the embi index the embi global has the same criteria as the embi however it does not select countries based on their sovereign credit rating level instead the index includes a number of higher rated countries through a formula which combines the world bank defined per capita income brackets and each country s debt restructuring history hence it is somewhat more comprehensive broader and thus more representative than the embi index the embi global diversified limits the weights of countries with larger debt stocks by only including a specified portion of these countries eligible current face amounts of debt outstanding the large markets are weighted lower and the small markets are weighted higher than in the embi global index the j p morgan indexes are a popular benchmark for money managers that deal in emerging market debt so that investors may see the index used as a comparison for their mutual funds or exchange traded funds because of their higher interest rates emerging market bonds can significantly outperform u s treasury bonds other emerging bond indexes include barclays usd emerging market govric cap index db emerging market usd liquid balanced index and bloomberg usd emerging market sovereign bond index ishares jpmorgan usd emerging markets bond etflaunched with the help of ishares in december 2007 the ishares jpmorgan usd emerging markets bond etf emb tracks the jpmorgan embi global core index embi global core is a very broad u s dollar denominated emerging markets debt benchmark it is also highly diverse no single debt instrument comprises more than 2 of total holdings and most fall short of 1 nearly three quarters of the embi global core is emerging government debt with most of the rest focused on high yielding corporate bonds the expense ratio is in line with what you d expect from an ishares etf at 0 40 the ishares jpmorgan usd emerging markets bond etf is best suited for investors are looking for a diversified path to high yielding fixed income the fund has holdings in 50 countries including in allocation in russia mexico poland hungary south africa and the philippines | |
what is the msci emerging markets index | the msci emerging markets index is a selection of stocks that is designed to track the financial performance of key companies in fast growing nations it is one of a number of indexes created by msci inc formerly morgan stanley capital international u s investors who want to buy into global stocks can buy shares of an exchange traded fund etf that mirrors the index there are also many etfs and mutual funds that use the msci emerging markets index as a benchmark for their own performance understanding the msci emerging markets indexthe msci emerging markets index reflects the performance of large cap and medium cap companies in 25 nations all are defined as emerging markets that is their economies or some sectors of their economies are seen to be rapidly expanding and engaging aggressively with global markets the msci emerging markets index currently includes the stocks of companies based in brazil chile china colombia czech republic egypt greece hungary india indonesia korea kuwait malaysia mexico peru philippines poland qatar russia saudi arabia south africa taiwan thailand turkey and the united arab emirates 1the index was created in 1988 at that time companies in only 10 nations were represented today the index is widely used to measure the economic performance of emerging market companies it is also used by emerging market etfs and mutual funds as a benchmark against which to measure their own performance 2msci has a number of indexes that track global stocks including the msci world index which tracks the stocks of developed nations and the msci all country world index which tracks a broad selection of stocks across both developed and emerging nations msci emerging markets index performanceas of december 2021 the msc emerging markets index recorded a one year net return of 2 54 a five year annualized return of 9 87 and a 10 year annualized return of 5 49 since its inception on dec 29 2000 it has returned an annualized 8 97 by contrast the msci world index returned 21 82 in one year 15 03 for the five year period and 12 70 for the 10 year period since dec 29 2000 it has returned an annualized 6 72 the msci acwi index returned 18 54 in the past year 14 40 for the five year period and 11 85 over 10 years its return since dec 29 2000 was 6 68 1investing in the msci emerging markets indexthe msci emerging markets index is not a fund in itself investors can buy shares in exchange traded funds or mutual funds that buy stocks listed in the index however for example the ishares msci emerging markets index etf eem invests at least 80 of its assets in stocks and american depositary receipts included in the index 3 there are several other etfs that mirror the msci emerging market index but the ishares fund is by far the largest 4there also are funds that do not mirror the msci emerging markets index but use it as a benchmark against which to measure their own performance these include avantis emerging markets equity etf avem innovator msci emerging markets power buffer etf january series ejan and innovator msci emerging markets power buffer etf july series ejul 5there are many other choices of emerging market etfs and emerging market mutual funds that track other indexes such as the ftsi emerging markets index these include managed mutual funds that do not mirror an index but do their own stock picking emerging markets are considered a risky investment due to political risks and currency exchange fluctuations investors who turn to emerging markets should expect volatile returns the potential gains are substantial and so are the potential losses they can be used to add some diversity to a portfolio that is heavy on u s assets msci emerging markets index compositionas of december 2021 the index reflected the performance of 1 420 constituents across 25 nations the top 10 were overall the index is heavily weighted in chinese firms at 32 41 of its composition followed by taiwanese at 16 09 and south korea and india at over 12 each in terms of its sector makeup information technology financials and consumer discretionary were dominant 1offers an easy to track benchmark for global growth investingprovides a broad survey of performance in developing economies across the worldfocuses on relatively conservative large and mid cap companiesnot as diversified as other global indexesoriented toward very long term investment horizons short and mid term returns often laginherently high on the risk scale given its focus on emerging marketsmsci emerging markets index faqshere are the answers to some commonly asked questions about the msci emerging markets index like the dow jones industrial average the msci emerging markets index is a selection of stocks each is considered a bellwether in its sector collectively their performance from day to day suggests the overall direction of a market in the case of the msci emerging markets index the stocks are selected as representative of the performance of companies in fast growing developing markets the countries and the stocks in the index change from time to time as of the end of 2021 they include brazil chile china colombia czech republic egypt greece hungary india indonesia korea kuwait malaysia mexico peru philippines poland qatar russia saudi arabia south africa taiwan thailand turkey and the united arab emirates the index is rebalanced twice a year at that time the weighting of any of the 1 400 or so stocks tracked by the index may increase or decrease or it may be dropped altogether 1the msci world marks index tracks the performance of large cap and mid cap stocks in 23 developed nations in north america western europe and the asia pacific region less than 12 of the index was comprised of the stocks in emerging market nations more than half of the index is made up of u s companies 6msci stands for the investment research firm morgan stanley capital international now msci inc which has been a fully independent stand alone public company since 2009 there are more than 200 000 msci indexes that are used to track the performance of industries sectors and regions 7these indexes are used by institutional investors stock pickers hedge fund managers and the media as bellwethers of the performance of the slice of the economy that each tracks the indexes also are used as the basis for etfs which invest in the stocks listed in the index proportionally to their weight in the index other etfs do not mirror an index but use it as a benchmark to measure their own performance msci does not buy the stocks it indexes it makes money from licensing the indexes to the financial companies that create the etfs that mirror them | |
what is emigration | emigration is the relocation or process of people leaving one country to reside in another people emigrate for many reasons include increasing one s chance of employment or improving quality of life emigration affects the economies of the countries involved in both positive and negative ways depending on the current state of the countries economies understanding emigration | |
when people leave a country they lower the nation s labor force and consumer spending if the country they are leaving has an oversaturation of the labor force this can result in the positive effect of relieving unemployment rates on the other hand the countries receiving the emigrants tend to benefit from more available workers who also contribute to the economy by spending money 1 | while emigration usually represents people leaving a country immigration is the process of a country receiving people who left another country in other words immigration is the result of emigration for the receiving country for example people might say they immigrated to the united states which is where they now have permanent residence but they emigrated from spain many countries regulate the number of people that can emigrate or immigrate from one country to another in the united states the number of people who emigrate and eventually become permanent residents are tracked and totaled by the u s citizenship and immigration services uscis which is part of the department of homeland security dhs in q4 2022 286 000 noncitizens obtained lawful permanent residency status in the u s approximately half of these entered the united states as new arrivals with slightly more than half having had their status adjusted within the united states 2in q4 2022 42 of immigrants came from india mexico china cuba or the dominican republic 2fiscal impact of emigration | |
when people emigrate to a new country they pay taxes in the new country based on earnings property owned and other factors they may also pay sales tax on purchases when applicable these people may also qualify for social services provided by that country such as education for dependent children or universal health care each country needs to ensure new tax revenues match the additional expenses for social services provided to the emigrants and their families | remittances are funds sent by emigrants to their families or communities in their home countries these financial inflows can provide a significant source of income for recipients and have a positive impact on the sending country s economy remittances can be used for various purposes including daily expenses education healthcare and investments in local businesses this increased income can lead to improved living standards and reduced poverty in the sending country some emigrants engage in circular migration where they move back and forth between their home country and host country this can have different fiscal implications compared to permanent emigration circular migrants may contribute to both countries economies intermittently and they may have different needs and impacts on social services effect of emigration on job market and wages | |
when large groups of emigrants enter the job market in a new country there is an effect on the available number of jobs and the amount of wages one can ask for a particular job the new country must have enough job openings to support emigration without damaging the chances of the native born labor force finding employment additionally if an emigrant takes a job for a lower wage than typically offered to the native labor force it can lower wages for both emigrants and the native population | the emigration of skilled workers can have a negative fiscal impact on the sending country this is because the country invests in education and training of these individuals and when they emigrate the country loses the potential economic contributions and tax revenues from these skilled workers this can hinder economic development and productivity growth in the sending country in some cases emigration can alleviate pressure on the labor market in sending countries leading to reduced unemployment and potentially boosting economic growth when emigrants leave there may be less competition for jobs which can lead to increased wages and improved working conditions for those who remain this can result in increased tax revenues for the government as workers incomes rise rules for emigration to the united statesthe immigration and naturalization act serves as the basis for emigration into the united states and allows for 675 000 permanent immigrants yearly the country also provides emigration status to a certain number of refugees separate from this number when choosing emigrants the united states examines things such as family ties and unique job qualifications and creating diversification within the country the goal of this act is to protect the american economy by making positive additions to the workforce and maintaining a healthy job market for american citizens 3the u s immigration system emphasizes family unification allowing u s citizens and legal permanent residents to sponsor certain family members for immigration immediate relatives of u s citizens including spouses unmarried minor children and parents if the petitioner is at least 21 years old have unlimited visas available annually family preference visas are also offered but are subject to numerical limits 3the united states also offers multiple avenues for immigrants with valuable skills to come to the country either on a temporary or permanent basis these visas come with various eligibility criteria and limitations often tying the worker to the petitioning employer on the other hand permanent immigration has an annual limit as well the process involves labor market testing certification by the department of labor and filing petitions with uscis in some cases 3the term brain drain is often used in associated with emigration it s used to refer to the phenomenon of skilled knowledgeable workers leaving one area draining that country of its resources financial reasons to emigratebroadly speaking there are many economic and financial reasons an individual may choose to emigrate note that there may be many non financial reasons someone may emigrate but for the purpose of this section we ll focus on the financial reasons those reasons may include | |
what role do education and skills play in emigrants economic impact | the education and skills of emigrants significantly influence their economic impact skilled emigrants are often better positioned to secure high paying jobs and contribute positively to the host country s economy however the sending country may face a resource drain if too many skilled individuals emigrate | |
what is the economic significance of circular migration | circular migration where individuals move back and forth between home and host countries can have economic significance it allows emigrants to maintain ties to their home country while benefiting from economic opportunities abroad this mobility can impact remittances investment and knowledge transfer by continually shifting resources from one country to another | |
how does emigration affect the sending country s economy | emigration can have a mixed impact on the sending country s economy while remittances from emigrants can boost household incomes and local businesses a departure of skilled workers may result in lost economic potential the overall effect depends on factors such as the skill level of emigrants the volume of remittances and the country s ability to replace lost talent | |
how do economic factors like income inequality influence emigration trends | income inequality can be a driving factor for emigration particularly among individuals seeking higher incomes and better economic opportunities disparities in wealth and income can motivate individuals to leave in pursuit of greater financial security putting some pressure on governments and legislative bodies to ensure equity on its citizens ability to generate income and wealth the bottom lineemigration refers to the process of leaving one s home country to settle in another nation it s often driven by factors such as economic opportunities political instability or personal aspirations it can have diverse economic impacts including remittance flows brain drain effects and contributions to both sending and receiving countries economies | |
what is eminent domain | eminent domain is the power of the government to take private property and put it to public use following the payment of just compensation this is a practice that occurs in the united states and in many different countries under different names it may not seem fair to the owners of the property but eminent domain lawsuits especially when the owner feels they are not justly compensated are fairly common understanding eminent domaineminent domain is a right granted under the fifth amendment of the constitution 1 similar powers are found in most common law nations eminent domain is called expropriation in canada compulsory acquisition in australia and new zealand and compulsory purchase in the u k and ireland private property is taken through condemnation proceedings in which owners can challenge the legality of the seizure and settle the matter of fair market value used for compensation 2 the most straightforward examples of condemnation involve land and buildings seized to make way for a public project it may include airspace water dirt timber and rock appropriated from private land for the construction of roads eminent domain can include leases stocks and investment funds in 2013 municipalities began to consider using eminent domain laws to refinance underwater mortgages by seizing them from investors at their current market value and reselling them at more reasonable rates 3 congress passed a law prohibiting the federal housing administration from financing mortgages seized by eminent domain as part of the fy 2015 budget 4because contract rights patents copyrights and intellectual property are all subject to eminent domain the federal government could theoretically use eminent domain to seize a social media company such as meta formerly facebook and turn it into a public utility to protect people s privacy and data 5types of takingthe government decides what use it has of your property each category of use is taken used and compensated differently unfortunately property owners find they do not have much say in which manner their property is seized and are hesitant to enter into lengthy legal battles against the government complete taking also known as total taking is when the entire piece of land is seized despite the amount of just compensation being the highest market value many do not feel they are being fairly compensated when large construction projects or utilities need the entire parcel in order to function complete taking is usually the resulting type of condemnation 6partial taking under eminent domain is exactly what it sounds like a partial piece of the property is taken this is slightly more complicated than a complete taking since it is much easier to value a piece as a whole than it is to assign fair value to each individual part the government realizes that the seizure of one aspect of the property may decrease the value of the remainder which is why there are two components considered when a property is partially taken the first is the value of the property that was acquired and the second is the loss of value to the property remaining called the remainder 76the taking of a property for a set period of time is known as temporary taking many owners consider this type of eminent domain a form of leasing and for some it can be a breath of fresh air a common example is when a construction project requires easement of the property the easement is paid out based on the rental value of the land and can provide some owners with a steady stream of income for a piece of property they may not have been able to lease under other circumstances if the easement requires denying access to any other part of the property than what is currently being seized just compensation would pay for all affected sections of the property not just what is directly required 8regulatory taking can be broken down into two sections total regulatory taking and partial regulatory taking a total regulatory taking occurs when a regulation affects a property to such a degree that it cannot be used a partial regulatory taking occurs when a regulation affects the property as well but does not cause it to lose all of its value only a substantial portion 9just compensationjust compensation is the amount that you are determined to receive if you are undergoing an instance of eminent domain depending on which type of taking you are facing the government will calculate the value of the property and offer you what they consider just compensation which is the fair market value of your property the fair market value assumes that you as a seller are not forced to sell and a buyer is willing but is not being forced to buy this consideration exists to ensure that unseen aspects of the sale process are not considered during just compensation such as an owner desperate to sell or a buyer who may overpay because they are desperate to purchase some consider this method of determination unfair as the necessity of eminent domain points to the buyer needing the property more than the seller or the person having their property seized needs to sell just compensation is dependent on a few factors including the value of any land improvements any residue damage to the property due to the seizure and something called benefits benefits are a rare component when compiling just compensation and are used to offset the total compensation received 1011the definition of what constitutes a public project has been expanded by the supreme court from highways trade centers airport expansions and other utilities to anything that makes a city more visually attractive or revitalizes a community 12 under this definition of public use eminent domain began to encompass big business interests general motors took private land for a factory in the 1980s to create jobs and boost tax revenues 13most notoriously pfizer seized the homes of a poor neighborhood in new london connecticut in 2000 to build a new research facility critics were outraged to learn a city could condemn homes and small businesses to promote private development while the supreme court upheld this ruling in 2005 several states passed new laws to protect property owners from abusive eminent domain takings 1415 long after the homes were bulldozed pfizer abandoned its plans 16seizing land for private use has led to serious abuses throughout history inverse condemnationthere is also legal debate about the debt of the government to fairly compensate those whose property or assets have been taken or impacted due to eminent domain private property owners have sued the government in proceedings called inverse condemnation in which the government or private business has taken or damaged property but failed to pay compensation this has been used to obtain damages for pollution and other environmental problems 17for example electrical utilities can be found liable for economic damages caused by a wildfire they started in another case when the army corps of engineers released a torrent from houston s two reservoirs during hurricane harvey houses were deliberately flooded leading property owners to demand compensation under inverse condemnation 18 | |
what if i refuse eminent domain | there are some clear guidelines for eminent domain they are that the property will serve a public purpose that just compensation is offered and that the property is acquired it is fairly easy for the government to assert its fulfillment of constitutional responsibility and therefore it is usually not possible to refuse eminent domain the most that most property owners can hope for is a high market valuation or to engage in a lawsuit | |
why is eminent domain in the fifth amendment | eminent domain is in the fifth amendment to ensure that the u s government is able to acquire assets that benefit the public good an example of this would be if a town needed water and the only possible way to bring water to that town was through the property of a private landowner the landowner may not want pipes running through their property but since it benefits the public the government will pursue it | |
has anyone ever won an eminent domain case | many people have won eminent domain cases in the sense that their fair market value claim was awarded the claimant in this case would be an aggrieved property owner who can sue for a higher value than what the government assessed although these cases are lengthy and extremely expensive to pursue most private property owners find it is easier to just accept the value and move on with their lives it is nearly impossible to halt an eminent domain case although it is possible to pursue further compensation | |
how do i protect my property from eminent domain | unfortunately there is not much you can do to protect your property from eminent domain it is not always real estate that is seized and it is not possible to anticipate the future needs of the public or the government it may seem unfair but property owners do not have many options to protect their property from seizure by the government the bottom lineeminent domain is the practice of the federal state and local governments seizing private property for public use after the private owner has received fair compensation both an entire property and a partial property can be taken property can also be seized temporarily lawsuits surrounding whether a property should have been taken and whether the compensation for seized property was sufficient abound it is almost impossible to stop an eminent domain case but it is sometimes possible to negotiate for higher compensation | |
what is empire building | empire building is the act of attempting to increase the size and scope of an individual or organization s power and influence in the corporate world this is seen at the intra company level when managers or executives are more concerned with expanding their business units their staffing levels and the dollar value of assets under their control than they are with developing and implementing ways to benefit shareholders empire building can also occur in the larger public arena when corporations take steps to acquire competitors or other firms that might offer downstream or upstream integration or other synergies a corporation might attempt to control a larger market share or form a conglomerate to branch into other industries in an attempt to grow the corporation s influence assets under control and influence | |
how empire building works | empire building is typically seen as unhealthy for a corporation as managers will often become more concerned with acquiring greater resource control than with optimally allocating resources corporate controls imposed by a company s board and upper level management are supposed to prevent empire building within a corporation s ranks on a larger scale it may lead to acquisitions or other decisions that do not ultimately benefit shareholders increase the corporation s financial health or bolster the company s long term viability economists refer to this potential conflict of interests between management and shareholders as an agency cost the failure to screen out empire builders can lead to corporate actions that do not necessarily provide the best growth opportunities for a corporation and its shareholders such as acquisitions made to boost the control of the company s executives empire building strategiesempire building can be done through a variety of strategies let s take a look at a few of the main methods mergers and acquisitions growth through acquisition is by far the most commonly used strategy of empire building there s no easier way to quickly grow the size and scope of your company than simply gobbling up other companies of course this strategy is fraught with risk as serial acquirer leadership teams often overpay and or get into industries that simply don t fit vertical integration vertical integration is a growth strategy that involves controlling all parts of the supply chain suppliers distributors and or retail locations the strategy is effective for empire building because it allows leadership to expand the company while maintaining efficiency strategic alliances forming strategic alliances is another effective way in which empires are built by creating powerful alliances a company is able to grow in a consistent and predictable manner a good example is when defense companies use government contracts to rapidly expand in the 1870s andrew carnegie used vertical integration as one of his main strategies to build a massive iron and steel empire advantages and disadvantages of empire buildingfrom the company s perspective if done right empire building can translate into possible economies of scale cost efficiency and streamlined operations vertical integration in particular is an effective way to expand the company while still being efficient from the perspective of empire building leadership empire building can maximize both job security and promotability finally empire building can increase prestige for both the company and empire builders but as we mentioned earlier empire building often leads to a conflict of interest between management and its stakeholders in other words management decisions that expand the size and scope of a company very often don t benefit shareholders or strengthen the business s long term health possible economies of scale cost efficiency streamlined operators for the company maximization of job security and promotability for the empire builders increased prestige for both the company and empire builders conflict of interest between empire builders management and stakeholdersinefficient allocation of company resourcesexample of empire buildingfor example if bob is a middle manager at xyz company and begins to hire large amounts of personnel and launch projects that increase his influence over other departments at xyz company bob could be seen as an intra company empire builder the added expense of additional employee salaries and the spending required to launch the projects may hurt company xyz in the name of bob increasing his own personal influence and profile within the company this desire creates a principal agent problem that can ultimately undermine the success of the company this term should not be confused with the landmark the empire state building empire building faqsa family empire is a large company or enterprise that is primarily controlled by a single family famous family empires in history include the waltons walmart the mars family mars chocolate the thomsons thomson reuters and the johnsons s c johnson five main building blocks of an empire include strong leadership a sound financial position practical strategies effective resource allocation and strong risk management protocols generally speaking a bureaucratic organization is shaped like a pyramid with the president and or ceo at the very top vice presidents report the president ceo managers report the vice presidents and so on the concept is related to empire building as people often become more concerned with acquiring greater resource control growing the layers of the pyramid beneath them than with being efficient | |
what is empire building | empire building is the act of attempting to increase the size and scope of an individual or organization s power and influence in the corporate world this is seen at the intra company level when managers or executives are more concerned with expanding their business units their staffing levels and the dollar value of assets under their control than they are with developing and implementing ways to benefit shareholders empire building can also occur in the larger public arena when corporations take steps to acquire competitors or other firms that might offer downstream or upstream integration or other synergies a corporation might attempt to control a larger market share or form a conglomerate to branch into other industries in an attempt to grow the corporation s influence assets under control and influence | |
how empire building works | empire building is typically seen as unhealthy for a corporation as managers will often become more concerned with acquiring greater resource control than with optimally allocating resources corporate controls imposed by a company s board and upper level management are supposed to prevent empire building within a corporation s ranks on a larger scale it may lead to acquisitions or other decisions that do not ultimately benefit shareholders increase the corporation s financial health or bolster the company s long term viability economists refer to this potential conflict of interests between management and shareholders as an agency cost the failure to screen out empire builders can lead to corporate actions that do not necessarily provide the best growth opportunities for a corporation and its shareholders such as acquisitions made to boost the control of the company s executives empire building strategiesempire building can be done through a variety of strategies let s take a look at a few of the main methods mergers and acquisitions growth through acquisition is by far the most commonly used strategy of empire building there s no easier way to quickly grow the size and scope of your company than simply gobbling up other companies of course this strategy is fraught with risk as serial acquirer leadership teams often overpay and or get into industries that simply don t fit vertical integration vertical integration is a growth strategy that involves controlling all parts of the supply chain suppliers distributors and or retail locations the strategy is effective for empire building because it allows leadership to expand the company while maintaining efficiency strategic alliances forming strategic alliances is another effective way in which empires are built by creating powerful alliances a company is able to grow in a consistent and predictable manner a good example is when defense companies use government contracts to rapidly expand in the 1870s andrew carnegie used vertical integration as one of his main strategies to build a massive iron and steel empire advantages and disadvantages of empire buildingfrom the company s perspective if done right empire building can translate into possible economies of scale cost efficiency and streamlined operations vertical integration in particular is an effective way to expand the company while still being efficient from the perspective of empire building leadership empire building can maximize both job security and promotability finally empire building can increase prestige for both the company and empire builders but as we mentioned earlier empire building often leads to a conflict of interest between management and its stakeholders in other words management decisions that expand the size and scope of a company very often don t benefit shareholders or strengthen the business s long term health possible economies of scale cost efficiency streamlined operators for the company maximization of job security and promotability for the empire builders increased prestige for both the company and empire builders conflict of interest between empire builders management and stakeholdersinefficient allocation of company resourcesexample of empire buildingfor example if bob is a middle manager at xyz company and begins to hire large amounts of personnel and launch projects that increase his influence over other departments at xyz company bob could be seen as an intra company empire builder the added expense of additional employee salaries and the spending required to launch the projects may hurt company xyz in the name of bob increasing his own personal influence and profile within the company this desire creates a principal agent problem that can ultimately undermine the success of the company this term should not be confused with the landmark the empire state building empire building faqsa family empire is a large company or enterprise that is primarily controlled by a single family famous family empires in history include the waltons walmart the mars family mars chocolate the thomsons thomson reuters and the johnsons s c johnson five main building blocks of an empire include strong leadership a sound financial position practical strategies effective resource allocation and strong risk management protocols generally speaking a bureaucratic organization is shaped like a pyramid with the president and or ceo at the very top vice presidents report the president ceo managers report the vice presidents and so on the concept is related to empire building as people often become more concerned with acquiring greater resource control growing the layers of the pyramid beneath them than with being efficient | |
what is an employee buyout ebo | an employee buyout ebo is when an employer offers select employees a voluntary severance package the package usually includes benefits and pay for a specified period of time an ebo is often used to reduce costs or avoid or delay layoffs an employee buyout ebo may also refer to a restructuring strategy in which employees buy a majority stake in their own firm this type of restructuring is a company takeover by its workers in either example ebos are most often employed when companies are in financial distress understanding an employee buyout ebo employees that are offered a severance via an ebo must balance the value of the severance payments with their overall job prospects there is the potential that if they decline an employee buyout offer from an employer that their job may eventually be eliminated via downsizing with less generous severance if employees are considering buying out their company the process can be challenging and time consuming in part because it requires that employees reach an agreement to pool their assets to buy a majority stake in their company from ownership below we explore the pros and cons of these two types of employee buyouts whether the purchase is initiated by the company or by the employees employee buyout voluntary severanceemployee buyouts are used to reduce employee headcount and thus salary costs the cost of benefits and any contributions by the company to retirement plans a common formula for severance packages includes a base of four weeks pay plus an additional week for every year of employment at the company some employers may tack on extended healthcare coverage or assistance in finding new employment or education and training ebo offers are typically made to nonessential staff though older employees who are approaching retirement age are frequently approached if the goal is to consolidate the position or not fill it altogether however if a company has a pension plan management must weigh the savings from the salary cost of employees nearing retirement and the annual pension amount due to be paid each employee typically but not always the annual pension is less than the employee s current salary in evaluating an ebo employees must consider a number of factors such as their career prospects and goals some of those considerations include receiving a buyout from a company can be exciting if the employee was looking to begin a new chapter in life or looking for a career change however the money received from a buyout is likely to last for only a short period of time also employees that currently receive bonuses for performance would not get paid that extra income under a buyout and given the cost of living expenses the money may evaporate quickly as a result a decision would need to be made by the employee at some point whether to work at another company start a business or retire since the pay from a buyout only lasts a short period employees must decide as to the next step whether to work at another company start a business or retire employee buyout corporate restructuringemployee buyouts of companies are a form of buyout that s often done as an alternative to a leveraged buyout a leveraged buyout lbo is when a significant amount of borrowed funds or leverage is used to acquire another company companies being sold might be financially healthy though they re typically suffering from financial distress if a buyout is being considered also employees might be unhappy with how their company is managed or might not like the direction the company is heading executing such a buyout is a significant financial risk but the rewards can be substantial for small businesses an employee buyout often focuses on the sale of the company s assets while for larger firms the buyout might be for a subsidiary or division of the company the official way an employee buyout occurs is through an employee stock ownership plan esop an esop is a type of trust fund that can be created to allow employees to buy stock or ownership in the company over time to facilitate succession planning the buyout is complete when the esop owns 51 or more of the company s common shares employee buyouts are not unheard of employees at polaroid and united airlines both utilized esops to buy their companies out of bankruptcy | |
what is the employee retirement income security act erisa | the employee retirement income security act erisa is a federal law that protects the retirement assets of american workers the law outlines rules that qualified plans must follow to ensure that plan fiduciaries do not misuse plan assets it also covers certain health plans 1under the law plan administrators must regularly inform participants about the plan erisa is enforced by the employee benefits security administration ebsa a unit of the u s department of labor dol 2understanding the employee retirement income security act erisa erisa was established by the federal government in 1974 and holds fiduciaries responsible for their actions as they relate to the maintenance of certain employer sponsored retirement and health plans 4plans that fall under its mandate include defined benefit plans and defined contribution plans such as 401 k plans 403 b plans employee stock ownership plans esops and profit sharing plans 5 erisa also covers certain private sector health plans 4erisa addresses fiduciary provisions and bans the misuse of assets through these provisions 6 under erisa a fiduciary is anyone who exercises discretionary control or authority over plan management or plan assets including those who provide investment advice for the plan fiduciaries who do not follow the principles of conduct may be held responsible for restoring losses to the plan the law also sets minimum standards for participation vesting benefit accrual and funding 7 erisa also grants participants the right to sue for benefits and breaches of fiduciary duty according to ebsa to ensure that participants do not lose their retirement assets if a defined benefit pension plan is terminated or other circumstances such as company bankruptcy arise erisa guarantees payment of certain benefits through a federal agency known as the pension benefit guaranty corporation pbgc 87not every employer sponsored retirement plan is subject to the terms of erisa erisa does not cover plans set up or maintained by government entities and churches plans maintained outside the united states for nonresident employees are not covered by erisa either 4erisa and small businesseserisa rules can be complicated as such they may deter some small business owners from setting up retirement accounts for their employees there are alternatives that allow small businesses to sidestep some of erisa s complexity for example small businesses with 100 or fewer employees can offer simple iras to their employees this type of tax deferred retirement savings plan is covered by erisa and doesn t have the reporting and administrative burden that retirement plans such as 401 k s do 59employers must follow erisa rules that dictate which employees are eligible and how a company handles employee contributions they are also required to clearly spell out details of the plan s features with a summary plan description 10erisa and healthcareerisa provides protections to workers who participate in various healthcare plans 1112under the law plan administrators must keep participants updated about their plans including the law was amended with the passage of the affordable care act aca which mandated that employers with 50 or more workers offer healthcare coverage it capped out of pocket expenses and eliminated the denial of coverage due to preexisting conditions 14151617erisa regulation and standardsebsa administers and enforces erisa to ensure compliance with erisa plan administrators must follow plan document terms and make deposits and deferrals on time 18 they must also submit notices disclosures and forms to participants and update participants of any changes to the plan within mandated time frames 13plan administrators may choose to manage the paperwork on their own but if it proves to be too cumbersome they may hire a third party to do the work for them doing so however doesn t absolve the administrator from their fiduciary responsibility to their participants retirement accounts that qualify under erisa are generally protected from creditors bankruptcyproceedings and civil lawsuits 19history of the employee retirement income security act erisa erisa is the culmination of a series of laws that attempted to regulate pension plans the impetus was a growing wave of public concern in the 1960s and 1970s that funds of private pension plans were being mismanaged and abused 20 take for example the teamsters central states pension fund which had a history of questionable loans to sources with ties to las vegas casinos and real estate developments 2122 and in 1963 when studebaker closed its indiana factory more than 4 000 auto workers lost some or all of their pension plan benefits 2324erisa was signed into law on september 2 1974 by president gerald ford who said it may finally give the american worker solid protection in his pension plan 25the law has gone through several changes since it was first enacted for instance lawmakers approved an amendment that lengthened the time a worker is allowed to be away from work before they lose out on their plan s vesting period erisa has also since created a process where during divorce proceedings a spouse may claim access to a participant s retirement benefits via a qualified domestic relations order qdro the law has also modified healthcare 20 for example cobra which was passed in 1985 ensured the continuation of health insurance coverage after an individual s employment situation changes 2026who is eligible for erisa erisa is very broad it applies to essentially anyone with a qualified plan who works for a partnership limited liability company s corporation c corporation or nonprofit organization it even covers businesses with only one employee however governmental and religious organizations aren t typically covered and plans that operate outside the united states primarily for the benefit of nonresident employees aren t covered 27 |
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