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how does unitranche debt work | structured unitranche debt will divide pieces of the structured debt vehicle into tranches each with its own class designation the bottom lineunitranche debt combines senior debt and subordinated debt into one loan allowing banks to compete better against private debt funds it is a hybrid loan structure that is typically used in institutional funding deals | |
what is units per transaction upt | units per transaction upt is a sales metric often used in the retail sales sector to measure the average number of items that customers are purchasing in any given transaction the higher the upt the more items customers are purchasing for every visit understanding units per transaction upt retailers want people who enter and browse their stores and websites to buy as many items as possible happy shoppers are more likely to fill up their baskets with goods purchasing stuff they set out to buy as well as add ons and other extra items sold to them when in store or surfing online many experts agree that increasing units per transaction utp is often what determines success versus failure for a small to a mid size retailer getting customers to buy more suggests that the company is engaged and has a decent understanding of its customers it also means extra revenue and potentially more leverage to push up prices and profit margins it should come as little surprise then that retailers often make units per transaction upt a key performance indicator kpi calculating units per transaction upt a basic unit per transaction upt is calculated by simply dividing the number of items purchased by the number of transactions for the period however there is a range of additional factors to consider that might influence how the figure is computed units per transaction upt can achieve a number of objectives they might be measured across individual stores to identify market areas where customers tend to purchase different numbers of items when they shop retailers can also track items per sale by an employee in order to measure sales performance or keep tabs on units per transaction upt company wide for a wider picture of overall sales patterns another important consideration to make is whether to calculate units per transaction upt on a day by day basis seasonal basis or over a longer period of time it is generally advisable to collect data on items sold and transactions daily from there the data can be tweaked to focus on longer time periods with greater accuracy as an example of upt company a can compare the sales performance of two employees the first employee made 30 sales with a total of 105 items while a second employee sold 105 items in 35 sales thus units per transaction upt for the first employee is 3 5 and units per transaction upt for the second employee is 3 0 real life examplein the first quarter of 2019 macy s inc m reported a 5 7 increase in transactions compared to the first quarter of 2018 a closer look at all the figures reveals that this impressive headline number might be slightly misleading why because average units per transaction upt fell 2 2 | |
what this tells us is that a chunk of the department store s transaction growth was boosted by loyal customers spreading out purchases more than usual as opposed to macy s attracting an influx of new shoppers perhaps the company s relatively new loyalty program which offers top spenders free shipping regardless of how little they order had something to do with its customers not feeling inclined to buy items all in one go | analyzing units per transaction upt can help companies adjust operational factors advertising methodologies and even store layouts to entice customers into making more purchases and boosting units per transaction upt | |
what is unisex legislation | in the insurance industry the term unisex legislation refers to laws and legal decisions that made it illegal for insurance companies to charge different rates to men and women within certain types of insurance the term is mainly used in relation to the group insurance policies which companies offer to their employees | |
how unisex legislation works | to determine a reasonable premium insurers consider various factors that would be relevant for predicting the likelihood of future claims for example in the case of health insurance an insurer might look at the age of the insured person as well as their lifestyle habits personal factors such as their gender and ethnicity might also be considered if those factors have been shown to be correlated with different health outcomes for this reason it is common for men and women to receive different insurance premiums when shopping for health insurance women for example have longer average life expectancies than men which might result in lower insurance premiums another example can be seen in automobile insurance where men in general and young men in particular tend to pay higher insurance rates than women due to being perceived as riskier drivers some of these practices however have come under legal challenges unisex legislation states that all people regardless of gender must be treated the same by insurance companies when setting rates and product offerings the state of montana took the lead with unisex legislation passing the first unisex law in the nation in 1985 which prevented insurance companies from using gender when establishing rates and benefits 1 today perhaps the most common area in which we see the influence of unisex legislation is in employer sponsored group health plans in these plans the rates paid by men and women are typically the same in order to comply with unisex legislation real world example of unisex legislationan area of controversy when the law first passed was with life insurance policies in which insurance companies were no longer allowed to use gender as a basis for setting premiums or benefits just as the use of race color religion marital status and national origin were prohibited 23 the insurance companies argued that women were hurting themselves as life insurance policies typically cost less for women given they outlive men on average but the women counter argued that men were receiving larger payouts on their policies one of the most complex areas of interpretation of unisex legislation today is seen in transgender cases many health plans still exclude coverage for a sex change or sex reassignment surgery 4 depending on what future lawsuits may transpire it may be the case that insurance companies will eventually be prohibited from excluding sex reassignment surgeries and other gender related operations in this manner | |
what is unissued stock | unissued stock are company shares that do not circulate nor have they been put up for sale to either employees or the general public as such companies do not print stock certificates for unissued shares unissued shares are normally held in a company s treasury their number typically has no bearing on shareholders understanding unissued stock | |
when a company goes public it authorizes a certain number of shares to be created in its charter or articles of incorporation these shares are referred to as authorized stock authorized stock is comprised of all stock that has been created including shares up for sale to investors and issued to employees as well as any shares not up for sale the former is called outstanding stock while the latter is referred to as unissued shares companies do not print up certificates for unissued stock which are held in the company s treasury | the number of unissued shares can be calculated by taking total shares authorized for issuance and subtracting this from total shares outstanding plus treasury stock from the total number of authorized shares treasury stocks are the shares repurchased by a company unissued shares are not relevant to stockholders in the sense that these shares do not qualify for voting rights nor do they receive dividends but this can change as they represent the possibility for a dilution in the value of existing shareholder ownership and thus share value should the company choose to issue additional shares of stock in the future unissued stock may dilute existing shareholder value if a company decides to release more stock in the future analysts and investors closely monitor a company s plans for issuance of previously unissued shares funding plans that call for issuance of shares could be dilutive to the company s earnings per share eps though they represent a potential source of ownership and earnings dilution for investors unissued shares are not included in fully diluted earnings per share calculations but earnings per share calculations do take into account the potential for convertible securities to be converted into equity as well as stock options granted but not yet exercised unissued stock vs treasury sharesunissued stock is generally not the same as treasury stock treasury stock represents any shares that have already been issued and sold but have subsequently been repurchased by the company but the lines between the two may be slightly blurred as some companies may choose to list these shares as unissued stock companies that choose to list treasury shares as unissued stock have corporate charters that allow for the issuance of a large number of stock shares to provide maximum flexibility in the event future stock sales are needed a company might disclose in the notes of its financial statements that it has the authorization to issue 10 million shares but only a fraction of that amount might be both issued and outstanding let s look at a real example a 2016 8 k filed with the securities and exchange commission sec by dollar tree dltr states shares purchased under the share repurchase authorizations are generally held in treasury or are canceled and returned to the status of authorized but unissued shares | |
what is universal banking | universal banking is a system in which banks provide a wide variety of comprehensive financial services including those tailored to retail commercial and investment services universal banking is common in some european countries including switzerland universal banking became more common in the united states starting in 1999 when the gramm leach bliley act glba repealed the restrictions preventing commercial banks from offering investment banking services proponents of universal banking argue that it helps banks better diversify risk detractors think dividing up banking operations is a less risky strategy | |
how universal banking works | universal banks may offer credit loans deposits asset management investment advisory payment processing securities transactions underwriting and financial analysis while a universal banking system allows banks to offer a multitude of services it does not require them to do so banks in a universal system may still choose to specialize in a subset of banking services universal banking combines the services of a commercial bank and an investment bank providing all services from within one entity the services can include deposit accounts a variety of investment services and may even provide insurance services deposit accounts within a universal bank may include savings and checking under this system banks can choose to participate in any or all of the permitted activities they are expected to comply with all guidelines that govern or direct proper management of assets and transactions since not all institutions participate in the same activities the regulations in play may vary from one institution to another however it is important not to confuse the term universal bank with any financial institutions with similar names some of the more notable universal banks include deutsche bank hsbc and ing bank within the united states bank of america wells fargo and jpmorgan chase qualify as universal banks the history of universal banking in the u s due to strict regulation the universal banking system was slow to grow in the united states during the great depression congress passed the glass steagall act as part of the banking act of 1933 in a measure to prevent further bank failures the act prohibited universal banking 1commercial banks were not allowed to provide investment banking services such as securities trading and brokerage services additionally the act established the federal deposit insurance corporation fdic an independent federal agency that insures u s bank deposits against bank failure 1in 1999 the gramm leach bliley act glba partially repealed the glass steagall act thus making it legal for commercial banks to offer investment banking services the goal of the glba was to modernize the financial services industry by allowing financial institutions to expand the products and services they could offer their customers 2laws impacting universal banking in the u s have continued to evolve and change especially during times of economic upheaval for example the 2008 financial crisis caused a number of failures within the investment banking system in the united states this led to the acquisition or bankruptcy of a variety of institutions some notable examples include lehman brothers and merrill lynch in response congress enacted the dodd frank wall street reform and consumer protection act in 2010 which restricted the ways in which banks could invest by limiting speculative trading and prohibiting involvement with hedge funds and private equity firms 3opponents of dodd frank criticized the act for going overboard in reducing the market making activities of banks in 2018 congress enacted the economic growth regulatory relief and consumer protection act also known as the crapo bill which rolled back some of the dodd frank restrictions 4despite the evolving rules regarding universal banking many financial service providers in the u s today offer a range of services from banking loans mortgages insurance and investments either under one roof or through an affiliate network with partner firms while developments have removed a number of the barriers to the creation of universal banks in the u s they are still not as prevalent as they are across many european countries the united states has banks that focus purely on investments which is uncommon in the rest of the world | |
what is an example of universal banking | examples of universal banks include jpmorgan chase bank of america wells fargo ubs bnp paribas deutsche bank and barclays all of these banks provide a gamut of banking services from retail banking to investment banking | |
what is the advantage of universal banking | the advantage of universal banking for a customer is that it allows a customer to manage all of their finances under one roof for example a person can have a checking account a loan a mortgage asset management services and other investment services all at one institution sometimes they receive benefits or discounts for doing so for banks it allows them to make more money by providing a variety of different services and charging for them multiple revenue streams | |
what is a disadvantage of a universal bank | disadvantages of universal banks include risk concentration for the client and a conflict of interest in certain areas between bank and investor primarily in regards to interest earned on deposits the bottom lineuniversal banking refers to when banks provide a wide array of financial services including commercial banking investment banking and retail banking regulations surrounding what banks can provide have changed over time in the u s primarily to protect bank clients while still remaining competitive | |
what is universal default | the term universal default refers to a provision found in some credit cards cardholder agreements according to this provision the credit card company is permitted to increase the interest rate on the credit card if the cardholder fails to make their minimum monthly payment importantly credit card companies can also increase the customer s interest rate if their customer defaulted on a separate credit product such as a car loan or a mortgage even if that other loan was extended by an unrelated lender | |
how universal default works | historically universal default provisions could be used to increase interest rates on the full outstanding balance of credit card debt however since the passage of the credit card accountability responsibility and disclosure card act in 2009 credit card companies are only permitted to increase their interest rates on any new purchases made by the customer 1 this means that customers who fail to make their minimum payments can at least continue paying off their past purchases using their older and lower interest rate thereby making it easier for them to work their way out of debt although the card act did not prohibit universal default provisions altogether it did help make them less costly for credit card users after all the increased interest rates charged under the universal default provision may be substantially higher than the card s standard annual percentage rate apr these higher rates which are referred to as the default apr are often 30 or more under the terms of the card act credit card companies must give the customer 45 days notice before levying this increased interest rate 2in light of these universal default provisions customers would be wise to carefully review their cardholder agreements in order to understand what interest rates they might be required to pay in the event of default after all a customer who fails to meet their minimum payments might find themselves surprised by the sudden and significant increase in their interest costs example of universal defaultlinda is a long time credit card customer at xyz financial on january 1st she obtained a car loan from abc leasing over the following months she struggled to make her car loan payments and failed to make a complete payment in march in late april she received a notice from xyz financial stating that her interest rate would be increased in accordance with her cardholder agreement s universal default provision in explaining this decision she was told that her risk profile had changed due to having defaulted on her car loan in the previous month due to the card act xyz is prohibited from charging linda the higher default apr on her existing outstanding credit card debts however that higher apr will come into effect for all new debts incurred on the card for this reason linda would be wise to make every effort to always make her monthly credit card payments going forward otherwise her interest expenses could become even more difficult to bear | |
what is universal healthcare coverage | universal healthcare coverage refers to systems in which all residents of a particular geographical area or country have health insurance an early example of universal healthcare coverage is germany in the 1880s when chancellor otto von bismarck introduced a series of bills guaranteeing access to healthcare today most industrialized nations including france switzerland and the united kingdom but not the united states provide universal healthcare coverage for their citizens although the u s leads industrialized nations in healthcare spending it has worse health outcomes and a smaller percentage of the population is served now the healthcare system is struggling even more under the double burden of the global pandemic and the loss of income from elective surgery and routine medical care that was suspended during the crisis one answer to the this crisis according to everyone from new york city mayor bill de blasio to the world health organization and pope francis is to provide americans with universal healthcare coverage understanding universal healthcare coveragethere are at least three types of systems that can potentially ensure that everyone in a jurisdiction is covered for medical and hospital care these include requiring or mandating health insurance providing insurance but not care via a single government payer and socialized medicine in which both insurance and medical care are managed by the government types of universal healthcare coveragesome governments mandate that all residents buy a health insurance policy or face a fine or penalty the government may subsidize part of the premiums but most insurance is provided by private companies germany s system for example includes both for profit and not for profit insurers requiring health insurance has helped some countries including germany the netherlands and switzerland achieve universal coverage in the u s the 2010 affordable care act established a similar requirement and system the law s original individual mandate levied a tax penalty on people who did not purchase health insurance the tax cuts and jobs act tcja repealed the penalty starting in 2019 some u s states california massachusetts new jersey rhode island vermont and the district of columbia levy their own penalties on those who do not buy health insurance since 2006 massachusetts for example has required its residents to have health insurance or pay a fine this has helped encourage insurance rates as high as 95 4 in the state under a single payer system all health costs are paid by the government using tax revenue this allows countries to control costs in part by having the government play a stronger role in negotiating prices for healthcare health insurance is universal and offered by a single entity however medical care itself is provided by private sector doctors and hospitals examples of this model include canada and france in both of these countries private sector insurers also exist but they play a minor role as providers of supplemental coverage in these systems both insurance and medical care are provided by the government in the united kingdom s national health service for example the government owns most of the hospitals and employs medical providers sweden s publicly funded system mostly provides care through government providers though private companies play a limited role socialized systems are less common than single payer ones the global pandemic has increased pressure on america s very complex and expensive healthcare system making it more urgent to lower costs and perhaps provide universal healthcare special considerationsin the u s the aca increased the number of insured people but has not achieved universal healthcare coverage the u s department of health reported the percentage of u s adults without health insurance stood at 8 in 2022 the other 92 of people have health insurance through a mix of government and private insurance providers in the world of employer based insurance large companies often use a mix of private and self insurance to cover a percentage of their employees health costs also since 2011 the federal government has provided incentives for private insurers to compete against government programs such as medicare by providing lower costs and more benefits to enrollees some of the best medicare advantage plans are excellent examples recipients of medicaid choose a private insurance plan for which state and federal governments pay much of the costs this mix of approaches may encourage competition and entrepreneurial opportunities and offer consumers choice and incentives to try to keep healthcare costs down but it results in a very expensive healthcare system that falls short in delivering universal care and on many measures of public health these issues are likely to be pivotal ones in the party platforms and 2024 presidential campaign | |
what is universal life ul insurance | universal life ul insurance is a type of permanent life insurance that like other permanent insurance has a cash value element and offers lifetime coverage as long as you pay your premiums unlike whole life insurance universal life allows you to raise or lower your premiums within certain limits and it can be cheaper than whole life coverage however if your investments underperform or you underpay for too long it could affect your death benefit or cause your policy to lapse 1 | |
how universal life ul insurance works | ul insurance provides more flexibility than whole life insurance policyholders can adjust their premiums and death benefits ul insurance premiums consist of two components a cost of insurance coi amount and a saving component known as the cash value 2as the name implies the coi is the minimum amount of a premium payment required to keep the policy active it consists of several items rolled together into one payment coi includes the charges for mortality policy administration and other directly associated expenses to keep the life insurance policy in force coi will vary by policy based on the policyholder s age insurability and the insured risk amount collected premiums in excess of the cost of ul insurance accumulate within the cash value portion of the policy over time the cost of insurance will increase as the insured ages however if sufficient the accumulated cash value will cover the increases in the coi ellen lindner investopediaadvantages and disadvantages of universal life insuranceflexible premiumspossible flexible death benefitpotential cash value growthallows policy loansrisk of large payment requirements or policy lapsereturns are not guaranteedsome withdrawals are taxedcash value lost at policyholder s deathpros explainedunlike whole life insurance policies which have fixed premiums over the life of the policy a ul insurance policy generally has flexible premiums within limits policyholders can make payments that are more than the coi the excess premium is added to the cash value and accumulates interest alternatively if there is enough cash value policyholders may lower or skip payments without the threat of a policy lapse 3your policy may allow you to increase the size of your death benefit although that may require a medical exam you may also be able to lower your death benefit to lower your premiums 4like all permanent life insurance a ul insurance policy can accumulate cash value in something like a savings account the cash value earns interest based on the current market or the policy s minimum interest rate whichever is greater as it accumulates policyholders may take out a portion of the cash value in the form of partial withdrawals or loans universal life policyholders may borrow against the accumulated cash value without tax implications the interest rates on these loans are often lower than rates available for a personal loan and they don t require a credit check however unpaid loans will reduce the death benefit by the outstanding amount 5cons explainedwhile the ability to lower your premiums and to make withdrawals in times of need help make universal life a very flexible insurance type you have to watch your account carefully if your cash value falls to zero and your premiums don t cover the cost of insurance then your policy can lapse 1if interest rates drop your cash value may not perform well unlike whole life universal life cash value does not earn a guaranteed rate however most ul policies come with a minimum rate so that your losses are limited | |
when a policyholder dies the insurance company keeps the account s cash value your beneficiaries will be paid just the death benefit as the policyholder can only use the cash value while they are alive however some life insurance policies allow you to increase the death benefit as you build the cash value 8 | universal life insurance vs term life insurance vs whole life insuranceuniversal life is a form of permanent life insurance that gives policyholders flexibility in paying premiums a cash savings component and a death benefit universal life insurance allows you to borrow against or cash in their savings portion which grows tax deferred over your lifetime term life provides coverage often through an employer for a set number of years generally 20 or 30 and expires once the term is up term life is usually more affordable with low premiums but there isn t a cash component to borrow from or cash in nor is there a death benefit if you die after the term is up ul premium costs may change with interest rates and as the policyholder grows older whole life insurance is also a form of permanent life insurance with a cash value savings component an important difference between universal life and whole life insurance however is that the ul interest rate is not guaranteed it is set by the insurer and can change frequently whole life insurance premiums are fixed for the life of the policy whereas universal life premiums can vary cash value and death benefits are guaranteed with whole life but not with universal life | |
what is universal life ul insurance and how does it work | ul insurance policies are a form of permanent life insurance with flexible premiums unlike term life ul policies can accumulate interest bearing funds like a savings account also policyholders can adjust their premiums and possibly their death benefit and those paying extra toward their premium receive interest on that excess | |
what is the biggest disadvantage of universal life insurance | a big disadvantage is that you need to keep an eye on the cash value if you don t then the policy could become underfunded meaning you ll have to make big payments to keep the policy active also there is risk that when interest rates drop your cash value won t grow as much as you had hoped however there is typically a minimum interest rate so you re somewhat protected | |
which is better whole life or universal life | both whole life and universal life are forms of permanent life insurance and provide a cash value savings component that policyholders may borrow from or cash out whole life offers fixed premiums while ul premiums may start out lower but are flexible so they may increase as you age depending on the amount of coverage and flexibility that you want in a permanent policy either form may be a good choice for your situation | |
what is the difference between universal life and whole life insurance | whole life insurance is more stable because the death benefit will never go down if you pay your premiums which are fixed monthly amounts universal life insurance offers more flexibility but your death benefit isn t guaranteed you can increase or decrease the amount you spend on premiums with universal life and you may be able to adjust your death benefit with some policies can i cash out my universal life insurance policy yes you can sell your universal life insurance policy or you can liquidate the cash value component and cancel the policy but you may have to pay a surrender fee if you haven t passed the surrender period the bottom lineuniversal life ul insurance is a form of permanent life insurance with an investment savings element loan options and flexible premiums ul policies provide the option to raise or lower premiums within limits so they can be less expensive than whole life coverage you just have to be careful that your cash value doesn t drop so low that either you pay large sums in premiums or the policy lapses there are no tax implications for policyholders who borrow against the cash value of their ul insurance policy but interest will be charged on the loan amount and any unpaid amounts may be taken from the death benefit policyholders should also be careful about withdrawals from the policy as some may be taxable as with other forms of permanent life insurance the insurer will retain the account s cash value after death | |
what are universal market integrity rules umir | universal market integrity rules umir are a set of rules governing trading practices in canada these rules are set out by an independent regulator the investment industry regulatory organization of canada iiroc umir were established to promote fair equitable and efficient markets prior to the formation of the umir each individual exchange was responsible for governing its trading practices by making these practices universal canadian exchanges ensure equal fairness and improve investor confidence in all the exchanges understanding universal market integrity rules umir the iiroc determines the umir the iiroc is a national self regulatory organization that oversees all investment dealers and trade on debt and equity marketplaces in canada the iiroc writes rules that set high regulatory and investment industry standards such as umir screens all investment advisors employed by iiroc regulated firms reviews firms financial compliance and sets minimum capital requirements so that firms have sufficient capital for business operations this oversight reduces the number of bankruptcies from excessive leverage and risky business practices iiroc compliance reviewsthe iiroc conducts compliance reviews to check that firms properly supervise the handling of client accounts and that advice and transactions appropriately reflect the client s needs and instructions iiroc approved advisors must follow suitability and know your client rules by being familiar with a client s financial situation investment needs objectives investing experience and tolerance for risk the iiroc conducts trading conduct compliance reviews to check trading firms trade desk procedures the reviews assess whether trade desk procedures comply with umir and applicable provincial securities law iiroc market surveillancethe iiroc surveys the market and analyzes trading to ensure that trading complies with umir and applicable provincial securities law the iiroc is responsible for identifying misconduct by dealers or firms approved persons and other market participants and bringing disciplinary proceedings such as fines suspensions and permanent bans or terminations for individuals and firms the money raised from fines and settlements is added to iiroc s restricted fund and applied to capital expenditures for regulatory issues investor and industry education projects and other uses authorized under iiroc s recognition orders according to the canadian securities exchange cse traders who are members with a good track record with iiroc and who are also registered with a canadian securities regulatory authority can apply to gain access to trade on the cse 1the iiroc amends umir rules from time to time for example in 2015 the iiroc proposed amendments to the rules after a proposal by canada securities administrator csa to clarify the interpretation of a protected order the csa proposed that orders that implement a systematic order processing delay or a speed bump would not be considered protected orders 2 | |
what is a universe of securities | a universe of securities generally refers to a set of securities that share a common feature for example the broad universe of stocks for a u s investor will include all listed companies large and small and may also include foreign companies listed as american depositary receipts adrs for some investors a narrower universe may be used that is constrained to only value stocks or those with a market cap above some minimum threshold understanding universe of securitiessecurity universes can be used for different purposes institutionally investment managers typically specify a universe of securities that defines some of the investing parameters for a managed fund broadly investors may choose to allocate different portions of their personal portfolio based on various security universes with different risk reward characteristics a universe of securities can be broad or narrow based on the defined parameters and can vary among different investors or portfolio managers the investable universe or market portfolio includes all tradeable assets in reality most investors do not invest so broadly and so a universe of securities could typically encompass all of the securities in a particular asset class within asset classes universes will typically be focused on factors such as capitalization or industry investors will often look to broad universes of securities when building out a diversified portfolio and may segregate universes by fixed income and equity an investor with a conservative risk tolerance may be willing to consider any type of fixed income security for a fixed income portion of their portfolio because the risk of loss for fixed income investments is generally lower than other market investments an investor seeking a slightly higher return and risk may want to focus on the entire universe of equities within the fixed income asset class there are several universes to consider many investors and managed funds segregate fixed income by term to maturity generally shorter term maturities will have lower interest rate risk while longer term maturities have higher interest rate risk other universes in fixed income can include government municipal or corporate further segregation can also create universes by credit quality or geographic location oftentimes a specific index will also form the basis for a universe of securities the equity market also has many different segregation parameters for universes equities will commonly be divided by market capitalization which can create large mid and small cap universes other universes may include geography growth value or sector in the equity market indexes are also commonly used to form the basis for a universe of securities universe analysisuniverses of securities are commonly the focus of research studies and analysis that can help to support all kinds of investors active traders focusing their investment strategies on certain universes will often analyze the historical characteristics of a universe of securities for insight on future trades and trading analysis consider a technical trader focusing on small cap stocks this trader would want to focus their analysis primarily on a universe of small cap stocks rather than a broad market universe like the s p 500 or russell 3000 to analyze the small cap universe they could do historical time series analysis on the russell 2000 to identify various characteristics and regressive tendencies a wide variety of software is also available for traders to develop forward looking forecasted security prices | |
what is the university of miami patti and allan herbert business school | the university of miami patti and allan herbert business school often referred to simply as the miami herbert business school is a business school located at the university of miami in coral gables florida founded in 1929 the school offers a mixture of undergraduate and graduate programs including the master of business administration mba the school received its current name in 2019 in recognition of the numerous gifts given to the school by its alumni patti and allan herbert prior to this change it was known as the university of miami school of business administration understanding the miami herbert business schoolthe miami herbert business school offers both undergraduate and graduate degrees its undergraduate students can work toward 14 different majors in subjects such as accounting economics finance marketing and real estate these can also be combined with other subjects in a diverse range of disciplines outside of business such as those in the arts and science faculties the university places a strong emphasis on international experience among its undergraduate students this is accomplished through a variety of foreign exchange programs and partnerships with foreign universities by taking advantage of these programs miami herbert business school students can complete planned semesters in locations such as italy china south africa and even ecuador s famous galapagos islands at the graduate level the miami herbert business school is known for its mba program which is regularly ranked among the top 100 mba programs worldwide by organizations such as businessweek forbes and the financial times real world example of the miami herbert business schooltoday the miami herbert business school is home to roughly 3 200 students of whom about 900 are graduate students upon graduation its students most common employers are in the financial services real estate and health care sectors with an average starting salary of about 80 000 its full time mba graduates are commonly employed in roles such as general management finance and accounting and marketing and sales the miami herbert business school alumni community is over 45 000 strong with many notable members these include raul alvarez former president of mcdonald s mcd jack creighton former ceo of united airlines ual and joseph j echevarria jr former ceo of deloitte | |
what is an unlawful loan | an unlawful loan is a loan that fails to comply with or contravenes any provision of prevailing lending laws examples of unlawful loans include loans or credit accounts with excessively high interest rates or ones that exceed the legal size limits that a lender is permitted to extend an unlawful loan may also be some form of credit or loan that disguises its true cost or fails to disclose relevant terms regarding the debt or information about the lender this sort of loan is in violation of the truth in lending act tila understanding an unlawful loanthe term unlawful loan is a broad one as a number of different laws and legislation can apply to borrowing and borrowers basically though an unlawful loan violates the laws of a geographic jurisdiction an industry or government authority or agency for example the federal direct loan program administered by the department of education offers government backed loans to postsecondary students it sets limits on how much can be borrowed each year based on what the student s college or university identifies as educational expenses 1 | |
should a lender or loan servicer try to alter those terms or charge the student for filling out the free application for federal student aid fafsa that would also make for an unlawful loan | unlawful loans and the truth in lending actthe truth in lending act applies to most types of credit whether it be closed end credit such as an auto loan or mortgage or open ended credit such as a credit card the act regulates what companies can advertise and say about the benefits of their loans or services the truth in lending act tila is part of the consumer credit protection act and was signed into law on may 29 1968 2the act requires lenders to disclose the cost of the loan to enable consumers to do comparison shopping the act also provides for a three day period in which the consumer may rescind the loan agreement without a financial loss this provision is intended to protect consumers against unscrupulous lending tactics 3the act doesn t dictate who can receive or be denied credit other than general discrimination standards of race sex creed etc nor does it regulate the interest rates a lender may charge unlawful loans and usury lawsinterest rates fall under the provision and definition of local usury laws usury laws govern the amount of interest that can be charged on a loan by a lender based in a certain area in the u s each state sets its own usury laws and usurious rates so a loan or line of credit is deemed unlawful if the interest rate on it exceeds the amount mandated by state law usury laws are designed to protect consumers however the laws that apply are those of the state in which the lender is incorporated not the state where the borrower lives unlawful loans vs predatory loansunlawful loans are often seen as the province of predatory lending a practice that imposes unfair or abusive loan terms on a borrower or convinces a borrower to accept unfair terms or unwarranted debt through deceptive coercive or other unscrupulous methods interestingly however a predatory loan may not technically be an unlawful loan case in point payday loans a type of short term personal loan that charges an amount that can equal 300 to 500 of the borrowed sum often used by people with poor credit and few savings payday loans could certainly be considered predatory taking advantage of those who can t pay urgent bills any other waybut unless the lender s state or municipality expressly sets a cap below such amounts on loan interest or loan fees the payday loan isn t actually illegal if you re considering a payday loan it might be worth first using a personal loan calculator to determine what the total interest paid will be at the end of the loan to ensure it s within your means to repay it | |
do you have to pay back an illegal loan | if a loan was made illegally then you do not actually have to pay back the loan if a lender does not have a consumer credit license it is illegal for them to make a loan it is not illegal to borrow the money however unlicensed lenders are known as loan sharks loan sharks have no legal right to claim the money that you borrowed from them therefore you do not have to pay the money back | |
what qualifies as predatory lending | predatory lending is any lending that takes advantage of the borrower through unfair and abusive practices or loan terms these can include extremely high interest rates high fees undisclosed costs and terms and any characteristic that reduces the equity of the borrower can you go to jail for not paying a loan no you cannot go to jail for not paying a loan no type of consumer debt that is unpaid entails an individual going to jail not paying a loan will impact your credit score and will be a part of your credit history hurting your chances of obtaining loans or loans with good rates in the future but no type of unpaid debt results in the borrower receiving jail time | |
what is unlevered beta | beta is a measure of market risk unlevered beta or asset beta measures the market risk of the company without the impact of debt unlevering a beta removes the financial effects of leverage thus isolating the risk due solely to company assets in other words how much did the company s equity contribute to its risk profile investopedia laura porterunderstanding unlevered betabeta is the slope of the coefficient for a stock regressed against a benchmark market index like the standard poor s s p 500 index a key determinant of beta is leverage which measures the level of a company s debt to its equity levered beta measures the risk of a firm with debt and equity in its capital structure to the volatility of the market the other type of beta is known as unlevered beta unlevering the beta removes any beneficial or detrimental effects gained by adding debt to the firm s capital structure comparing companies unlevered betas gives an investor clarity on the composition of risk being assumed when purchasing the stock unlevered beta asset beta levered beta equity beta 1 1 tax rate debt equity text unlevered beta asset beta frac text levered beta equity beta left 1 frac left 1 text tax rate right text debt text equity right unlevered beta asset beta 1 equity 1 tax rate debt levered beta equity beta 1take a company that is increasing its debt thus raising its debt to equity ratio this will lead to a larger percentage of earnings being used to service that debt which will amplify investor uncertainty about future earnings stream consequently the company s stock is deemed to be getting riskier but that risk is not due to market risk isolating and removing the debt component of overall risk results in unlevered beta the level of debt that a company has can affect its performance making it more sensitive to changes in its stock price note that the company being analyzed has debt in its financial statements but unlevered beta treats it like it has no debt by stripping any debt off the calculation since companies have different capital structures and levels of debt an analyst can calculate the unlevered beta to effectively compare them against each other or against the market this way only the sensitivity of a firm s assets equity to the market will be factored in to unlever the beta the levered beta for the company has to be known in addition to the company s debt equity ratio and corporate tax rate systematic risk and betasystematic risk is the type of risk that is caused by factors beyond a company s control this type of risk cannot be diversified away examples of systematic risk include natural disasters political elections inflation and wars beta is used to measure the level of systematic risk or volatility of a stock or portfolio beta is a statistical measure that compares the volatility of the price of a stock against the volatility of the broader market if the volatility of the stock as measured by beta is higher the stock is considered risky if the volatility of the stock is lower the stock is said to have less risk a beta of one is equivalent to the risk of the broader market that is a company with a beta of one has the same systematic risk as the broader market a beta of two means the company is twice as volatile as the overall market but a beta of less than one means the company is less volatile and presents less risk than the broader market example of unlevered betafor example calculating the unlevered beta for tesla inc as of november 2017 unlevered beta is almost always equal to or lower than levered beta given that debt will most often be zero or positive in the rare occasions where a company s debt component is negative say a company is hoarding cash then unlevered beta can potentially be higher than levered beta if the unlevered beta is positive investors will invest in the company s stock when prices are expected to rise a negative unlevered beta will prompt investors to invest in the stock when prices are expected to decline | |
how can unlevered beta help an investor | unlevered beta removes any beneficial or detrimental effects gained by adding debt to the firm s capital structure comparing companies unlevered betas give an investor clarity on the composition of risk being assumed when purchasing the stock since companies have different capital structures and levels of debt an investor can calculate the unlevered beta to effectively compare them against each other or against the market this way only the sensitivity of a firm s assets equity to the market will be factored in | |
what is beta | simply put beta is a measure of market risk more precisely it is a measure of the volatility or systematic risk of a security or portfolio compared to the market as a whole in statistical terms it is the slope of the coefficient for a security stock regressed against a benchmark market index s p 500 each of these data points represents an individual stock s returns against those of the market as a whole so beta effectively describes the activity of a security s returns as it responds to swings in the market | |
what is levered beta | levered beta measures the risk of a firm with debt and equity in its capital structure to the volatility of the market a key determinant of beta is leverage which measures the level of a company s debt to its equity so a publicly traded security s levered beta measures the sensitivity of that security s tendency to perform in relation to the overall market a levered beta greater than positive 1 or less than negative 1 means that it has greater volatility than the market a levered beta between negative 1 and positive 1 has less volatility than the market | |
what is unlevered cost of capital | unlevered cost of capital is an analysis using either a hypothetical or an actual debt free scenario to measure a company s cost to implement a particular capital project and in some cases used to assess an entire company unlevered cost of capital compares the cost of capital of the project using zero debt as an alternative to a levered cost of capital investment which means using debt as a portion of the total capital required understanding unlevered cost of capital | |
when a company needs to raise capital for expansion or other reasons it has two options 1 debt financing which is to borrow money through loans or bond issuances or 2 equity financing which is the issuance of stock 1 | the unlevered cost of capital is generally higher than the levered cost of capital because the cost of debt is lower than the cost of equity borrowing money is cheaper than selling equity in the company this is true given the tax benefit related to the interest expense paid on the debt there are costs associated with levered projects including underwriting costs brokerage fees and coupon payments however nevertheless over the life of the capital project or the firm s ongoing business operations these costs are marginal compared to the benefits from the lower cost of debt compared to the cost of equity the unlevered cost of capital can be used to determine the cost of a particular project separating it from procurement costs the unlevered cost of capital represents the cost of a company financing the project itself without incurring debt it provides an implied rate of return which helps investors make informed decisions on whether to invest if a company fails to meet the anticipated unlevered returns investors may reject the investment in general if an investor believes a stock is a high risk it will typically be because it has a higher unlevered cost of capital other aspects being constant the weighted average cost of capital wacc is another formula that investors and companies use to determine whether an investment is worth the cost wacc takes into consideration the entire capital structure of a firm which includes common stock preferred stock bonds and any other long term debt formula and calculation of unlevered cost of capitalseveral factors are necessary to calculate the unlevered cost of capital which includes unlevered beta market risk premium and the risk free rate of return this calculation can be used as a standard for measuring the soundness of the investment the unlevered beta represents an investment s volatility as compared to the market the unlevered beta also known as asset beta is determined by comparing the company to similar companies with known levered betas often by using an average of multiple betas to derive an estimate the calculation of market risk premium is the difference between expected market returns and the risk free rate of return once all variables are known the unlevered cost of capital can be calculated with the formula unlevered cost of capital risk free rate unlevered beta market risk premium if the result of the calculation produces an unlevered cost of capital higher than the company s return then further analysis should be conducted the comparison of the result to the cost of a company s debt can determine the benefits of incurring debt and utilizing leverage to lower the cost of total capital including equity and debt | |
what is unlevered free cash flow ufcf | unlevered free cash flow ufcf is a company s cash flow before taking interest payments into account unlevered free cash flow can be reported in a company s financial statements or calculated using financial statements by analysts unlevered free cash flow shows how much cash is available to the firm before taking financial obligations into account ufcf can be contrasted with levered cash flow lfcf which is the money left over after all a firm s bills are paid investopedia zoe hansenformula for unlevered free cash flow ufcf the formula for unlevered free cash flow uses earnings before interest taxes depreciation and amortization ebitda and capital expenditures capex which represents the investments in buildings machines and equipment it also uses working capital which includes inventory accounts receivable and accounts payable | |
what ufcf can tell you | unlevered free cash flow is the gross free cash flow generated by a company leverage is another name for debt and if cash flows are levered that means they are net of interest payments unlevered free cash flow is the free cash flow available to pay all stakeholders in a firm including debt holders as well as equity holders like levered free cash flow unlevered free cash flow is net of capital expenditures and working capital needs the cash needed to maintain and grow the company s asset base in order to generate revenue and earnings non cash expenses such as depreciation and amortization are added back to earnings to arrive at the firm s unlevered free cash flow a company that has a large amount of outstanding debt high leverage is more likely to report unlevered free cash flow because it provides a rosier picture of the company s financial health the figure shows how assets are performing in a vacuum because it ignores the payments made for debt incurred to obtain those assets investors have to make sure to consider debt obligations since highly leveraged companies are at greater risk for bankruptcy interest expense often appears with differences in timing between interest accrued and interest paid the difference between levered and unlevered free cash flowthe difference between levered and unlevered free cash flow is the inclusion of financing expenses levered cash flow lfcf is the amount of cash a business has after it has met all of its financial obligations such as interest loan payments and other financing expenses unlevered free cash flow is the money the business has before paying those financial obligations the difference between the levered and unlevered cash flow is also an important indicator the difference shows how many financial obligations the business has and if the business is overextended or operating with a healthy amount of debt it is possible for a business to have a negative levered cash flow if its expenses are more than what the company earned this is not an ideal situation but as long as it s a temporary issue investors should not be too rattled cash flow from financing activities cff is a section of a company s cash flow statement which shows the net flows of cash that are used to fund the company financing activities include transactions involving debt equity and dividends limitations of using ufcfcompanies looking to demonstrate better numbers can manipulate unlevered free cash flow by laying off workers delaying capital projects liquidating inventory or delaying payments to suppliers all of these actions have consequences and investors should discern whether improvements in unlevered free cash flow are transitory or genuinely convey improvements in the underlying business of the company unlevered free cash flow is computed before interest payments so viewing it in a bubble ignores the capital structure of a firm after accounting for interest payments the levered free cash flow of a firm may actually be negative a possible sign of negative implications down the road analysts should assess both unlevered and levered free cash flow over time for trends and not give too much weight to a single year | |
how do you calculate unlevered free cash flow from net income | free cash flow is calculated as follows free cash flow net income depreciation amortization change in working capital capital expenditure to arrive at unlevered cash flow add back interest payments or cash flows from financing | |
why is unlevered free cash flow preferred in discounted cash flow dcf analysis | because debt and financing charges are not included in ufcf it provides a more accurate picture of a company s enterprise value ev a measure of a company s total value viewed as a more comprehensive alternative to equity market capitalization this makes it easier to conduct discounted cash flow analysis dcf across different investments in order to make like comparisons | |
why don t you take out interest expense in ufcf | unlevered means to remove consideration of leverage or debt since firms must pay financing and interest expenses on outstanding debt unlevering removes that consideration from the analysis therefore you do not deduct the interest expense when computing ufcf | |
what is unlevered free cash flow margin | cash flow margins are ratios that divide a cash flow metric by overall sales revenue ufcf margin would therefore represent the amount of cash available to a firm before financing charges as a percentage of sales the bottom lineunlevered free cash flow ufcf looks at a company s cash flow before considering its obligations ufcf can be misleading to investors because it doesn t show much cash flow is left after paying down its debt a company with a lot of debt would have a small amount of cash flow which ufcf would not indicate investors should look at both levered and unlevered free cash flow to gain a better understanding of a company | |
what is unlimited liability | unlimited liability refers to the full legal responsibility that business owners and partners assume for all business debts this liability isn t capped and obligations can be paid through the seizure and sale of the owners personal assets without the protection that the popular limited liability business structure provides understanding unlimited liabilityunlimited liability typically exists in general partnerships and sole proprietorships it provides that each business owner is equally responsible for whatever debt accrued within a business if the company is unable to repay or defaults on its debt an owner s personal wealth can be seized to cover the balance owed most companies opt to form limited partnerships or limited liability companies instead where one or more business partners are only liable up to the amount of money they ve invested in the company 1an example of unlimited liabilityconsider four individuals who are working as partners each invests 35 000 into the new business that they own jointly the company accrues 225 000 in liabilities over one year all four partners are equally liable for repayment of the 225 000 if the company can t repay and or defaults on these debts the owners would be required to come up with 56 250 each to alleviate the 225 000 in debt in addition to their initial investment of 35 000 unlimited liability laws worldwideunlimited liability companies are typically found in jurisdictions where company law stems from english law unlimited liability companies are incorporated or formed through registration under the companies act of 2006 in the united kingdom 2other areas where these companies are formed under english law include australia new zealand ireland india and pakistan germany france the czech republic and two jurisdictions in canada are also areas where unlimited liability companies are commonly formed but they re referred to as unlimited liability corporations in canada despite the number of companies and countries in which they exist unlimited companies are an uncommon form of company incorporation due to the burden placed on owners to cover a company s debt specifically when the company faces liquidation one of the benefits of forming an unlimited liability subsidiary may be nondisclosure etsy an online crafts marketplace created an irish subsidiary in 2015 that s classified as an unlimited liability company public reports on money that the company moves through ireland or tax payment amounts are therefore no longer required 3joint stock vs unlimited liabilitya joint stock company jsc is similar to an unlimited liability company in the u s because shareholders have unlimited liability for company debts jscs operate under associations in new york and in texas under the texas joint stock company revocable living trust model as well as in other states 45this model has some basic differences from a general partnership including a lack of limited liability for shareholders formation through a private contract that creates a separate entity and the fact that one shareholder can t bind another shareholder regarding liability because each is equally responsible | |
what is a sole proprietorship | a single individual has complete control over a sole proprietorship all business assets are the proprietor s personal assets and the individual is 100 responsible for business debts and liabilities this business structure is most suited to low risk enterprises 1 | |
what is a corporation | a corporation is owned by its stockholders who are completely protected from the business s liabilities forming a corporation requires filing articles of incorporation with the state in which the business is located a small business corporation s corporation is similar but tax obligations pass through from the corporation to the owners who must report their share of the business s income and losses on their personal returns 6 | |
what is a disregarded entity | disregarded entity is a tax term like an s corporation a limited liability business structure allows income and losses to pass down to its owners personal tax returns the business structure itself is disregarded by the irs for tax purposes 7the bottom lineeach business owner is equally responsible for any and all debts that accrue within an unlimited liability business structure their personal assets are at risk if the business is unable to repay or defaults on its debt this type of structure is typically suitable for small businesses with limited assets and debts consult with a financial advisor or attorney in your state if you re considering forming and operating this type of business entity | |
what is an unlimited liability corporation ulc | an unlimited liability corporation ulc is a corporate structure used in canada that allows shareholders to be liable if the company declares bankruptcy sometimes ex shareholders are also liable depending on how recently they sold their stock despite this disadvantage the structure of a ulc can be preferable in certain circumstances due to the tax benefits granted to shareholders of these companies an unincorporated joint stock company jsc is the united states equivalent to an unlimited liability corporation jsc shareholders have unlimited liability for company debts if for some reason it finds it more advantageous to do so a ulc can elect to be treated as a corporation by checking the appropriate box on its tax return understanding unlimited liability corporations ulcs generally the concept of unlimited liability involves general partners and sole proprietors who are equally responsible for debt and liabilities accrued by the business as the word unlimited implies this liability is not capped and can be paid off through the seizure of owners personal assets as opposed to limited liability structures which cap responsibility to the amount a person actually invested in a company thus shielding private wealth most corporations are limited liability structures that s one of the points of incorporation an unlimited liability corporation is sort of a hybrid it is an incorporated entity with unlimited liability the ulc shelters shareholders from liability in most circumstances with one major exception upon liquidation of the company if that happens shareholders become liable for the debts of the company ex shareholders can also be held responsible if they disposed of their shares less than one calendar year before the bankruptcy occurs organizing as a ulc is only available for businesses operating in three canadian provinces alberta british columbia and nova scotia 1advantages of an unlimited liability corporation ulc the unlimited liability corporation has become a useful vehicle for u s investors who wish to acquire or put money into a canadian business or an american company looking to set up shop in canada due to the preferential tax treatment a ulc is treated as a regular canadian corporation for tax purposes as such it s subject to canada s 25 withholding tax on the payment of shareholders dividends and interests though the canada revenue agency allows this to be alleviated by deeming the dividend a distribution of capital however the u s internal revenue code states that the ulc is disregarded as a corporation for u s tax purposes as profits and losses flow through to shareholders it doesn t pay corporate tax in other words so like u s partnerships and other flow through entities a ulc avoids the issue of double taxation its primary advantage also flowing through the company s losses can help shareholders offset their income thus reducing their taxes american shareholders can in addition claim foreign tax credits on their tax returns offsetting the canadian withholding tax for businesses another benefit of forming an unlimited liability subsidiary may be nondisclosure public reports on money the company moves through the ulc or tax payment amounts are not required | |
what is the unlimited marital deduction | the unlimited marital deduction is a provision in the u s federal estate and gift tax law that allows an individual to transfer an unrestricted amount of assets to their spouse at any time including at the death of the transferor free from tax the unlimited marital deduction is an estate preservation tool because assets can be distributed to surviving spouses without incurring estate or gift tax liabilities gifts made to non spouse individuals or organizations are subject to irs gifting limits gift tax and estate tax understanding the unlimited marital deductionthe unlimited marital deduction is an estate tax provision that went into effect in 1982 the provision eliminated both the federal estate and gift tax on property transfers between spouses treating them as one economic unit 1it allows for an unlimited amount of property to be transferred between spouses this means that a spouse can transfer all of their property to the other spouse during their lifetime or after death without incurring any federal estate or gift tax liabilities on this first transfer the transfer is made possible by an unlimited deduction from estate and gift tax that postpones the taxes on the transferred property until the second spouse s death after the surviving spouse dies all assets in the estate over the applicable exclusion amount will be included in the survivor s taxable estate the deduction was adopted by congress to redress the problem of estates being pushed into higher tax brackets by inflation because the estate tax like the income tax is progressive estates that grow with inflation are hit with higher tax rates for tax year 2024 financial gifts up to 18 000 can be made without incurring the gift tax that s up from 17 000 for tax year 2023 2the threshold for irs exemption from estate tax is 13 61 million for the 2024 tax year up from 12 92 million for 2023 3special considerationsany asset transferred to a surviving spouse can be included in that spouse s taxable estate unless it is spent or gifted during the surviving spouse s lifetime alternatively if the surviving spouse remarries the unlimited marital deduction may allow the assets to pass to the new spouse without applying estate and or gift taxes in some situations fewer taxes will be paid by using additional estate planning methods such as exemptions or trusts the unlimited marital deduction applies only to surviving spouses that are u s citizens a qualified domestic trust qdot may be created to provide unlimited marital deductions for non qualified spouses a bequest through a qdot defers estate tax until the principal is distributed by the trustee a u s citizen or a corporation that also withholds the estate tax 4income on the principal distributed to the surviving spouse is taxed as individual income after the surviving spouse becomes a u s citizen the principal remaining in a qdot may be distributed without further tax 4 | |
why is the unlimited marital deduction important | it s important because it provides for a person to transfer any amount of assets to their spouse before or after death without incurring a bill for estate or gift taxes | |
what s the purpose of the unlimited marital deduction | the provision was adopted to prevent the value of estates from reaching higher tax brackets due to inflation | |
does the unlimited marital deduction eliminate taxes | actually no it only defers them estate taxes if applicable will apply when the second spouse dies the bottom linethe unlimited marital deduction is an estate planning tool that allows someone before or after death to transfer assets to their spouse without incurring estate or gift taxes on the amount transferred this estate tax provision treats two spouses as one economic entity it went into effect in 1982 due to an effort by congress to deal with the financial burden that could result when estates were pushed into higher tax brackets | |
what is unlimited risk | unlimited risk refers to a situation where there is potential for unlimited losses on a trade or in a particular investment in practice unlimited risk would be practically realized as a total loss or bankruptcy moreover positions that have unlimited risk can be hedged using other market instruments understanding unlimited riskany time an asset s price can move indefinitely against a trader s position means they are facing unlimited risk a short trade is an example of a strategy with unlimited risk while unlimited risk trades theoretically have unlimited risk the trader doesn t actually have to assume unlimited risk they can take steps to limit actual losses such as hedging or setting stop loss orders unlimited risk is the opposite of limited risk with unlimited risk there is the potential to lose more than your initial investment which is possible in short selling in trading futures contracts or when writing naked options risk itself refers to the probability that an investment will have an actual return different from the return that the investor expected risk ranges from losing some of one s investment to potentially losing the entirety of the original investment with unlimited risk it is possible but not necessarily likely to lose many times the amount of the original investment risk varies from investment to investment and one form of assessing risk can be calculated by using the standard deviation of the historical returns or average returns of a specific investment with a higher standard deviation indicating a higher degree of risk though the process may be intimidating investors make high risk investments regularly and for various logical reasons the main justification is that in finance theoretically the greater the risk to an investor the greater the potential return the higher potential return compensates for the additional risk taken on by the investor controlling risk and unlimited riskunlimited risk may make it sound like making certain trades or certain investments is not worthwhile for instance since short selling has theoretically unlimited risk certain traders may avoid it while risk is theoretically unlimited it isn t actually unlimited unless a trader and their broker allow that to happen a trader could enter a short trade in a stock at 5 and decide that they will close the short trade if the price moves up to 5 50 in this case their actual risk is 0 50 per share and is not unlimited the price could gap above their stop loss price of 5 50 say to 6 or 7 this would certainly increase the loss but the loss is still capped to 1 or 2 where the stop loss would trigger in these cases the same concept applies to futures contracts or writing naked options when losing money a trade can be closed the price at which a trader closes the position determines their actual loss it is possible that the loss could be more than they initially invested in the trade or even more than they have in their trading account when this occurs it is called a margin call and the broker will ask the trader to deposit funds in order for them to maintain their position if still open or bring their account balance up to zero if the trading account drops below zero due to a trading loss this means the trader has a debt to the broker example unlimited risk when writing naked optionsassume that a trader is interested in writing naked calls on apple inc aapl the writer will receive the option premium which is their maximum profit if the price of aapl is below the strike price at expiry the option writer gets to keep the premium as their profit on the trade if the price of aapl rises above the strike price the option writer faces theoretically unlimited risk since there is no cap on how high the price could rise the writer has agreed to sell shares of aapl at the strike price to the buyer of the call option this means the option writer will need to buy shares of aapl in order to sell them to the buyer at the strike price regardless of the market price of aapl at that time assume one call option is written with a strike price of 250 which will expire in three months the current price of aapl stock is 240 50 the option is sold for 6 35 which means the writer receives 635 6 35 x 100 shares for one contract if the price of aapl stock stays below 250 the writer keeps the 635 or a portion of it if they close the position early if aapl rises above 250 then they face unlimited losses but they can still control how much they lose to an extent for example if aapl rises to 255 before expiry they may decide to cut their losses and exit their options trade if the price of aapl is trading at 255 at expiry the writer still hasn t lost money this is because they can buy aapl for 5 above the strike price 255 in order to sell it at the strike price 250 they lose 5 there but made 6 35 on the option so they still pocket 1 35 per share less fees if the price of aapl is trading at 270 at expiry the naked option writer has lost money they need to pay 20 more than the strike price 270 250 in order to sell the shares at the strike price 250 they lose 20 here but made 6 35 on the option sale so they end up losing 13 65 per contract their theoretical loss was unlimited but the actual loss was 13 65 per contract this could potentially be reduced through the use of stop losses exiting early when losing buying the shares for a covered call strategy or hedging | |
what is an unlisted security | an unlisted security is a financial instrument that is not traded on a formal exchange because it does not meet listing requirements trading of unlisted securities is done on the over the counter otc market and they are often called otc securities market makers or dealers facilitate the buying and selling of unlisted securities on the otc market understanding unlisted securityunlisted securities are usually issued by smaller or new firms that cannot or do not wish to comply with the requirements of an official exchange such as market capitalization thresholds or listing fees furthermore because they are not exchange traded unlisted securities are often less liquid than listed securities unlisted stock can be tracked via pink sheets or on the over the counter bulletin board otcbb securities must meet a number of requirements to be listed on an exchange for example to be listed on the new york stock exchange nyse a publicly traded stock must represent a company that surpasses an annual income or market capitalization threshold the company also must have issued a specific number of shares and be able to afford the exchange s listing fee these requirements ensure that only the highest quality companies trade on exchanges thus unlisted securities may be of lower quality and present a greater risk to investors types of unlisted financial instrumentsthe most familiar type of unlisted security is common stock often traded on the otcbb or the pink sheets this includes penny stocks which trade for extremely low prices while some are legitimate foreign companies that don t wish to file reports with the sec there are also many unlisted non stock instruments including corporate bonds government securities and certain derivative products such as swaps which are traded in the otc market risks investors should knowthe normal risks associated with investing are magnified with unlisted securities because size and other requirements for companies are reduced or eliminated some unlisted companies may be undercapitalized have highly risky business plans and be no more than an idea without a plan for success other unlisted transactions carry counterparty risk liquidity concerns and interconnection risks this can include one side reneging on the contract also since there is no formal exchange or clearing mechanism it is up to the reputation of dealers and or counterparties to fulfill all obligations of the transactions including delivery of securities and payment of any monies required | |
what is an unlimited tax bond | unlimited tax bonds are municipal bonds guaranteed by the full faith and credit of a government that can levy taxes until the debt is repaid the repayment of an unlimited tax bond is based on the issuer s ability to levy taxes on its residents a municipality may increase property taxes accordingly to cover its payments and obligations understanding an unlimited tax bondunlimited tax bonds are a type of tax supported bond also called a general obligation go bond go bonds are a way for local governments to create streams of income for things such as roads parks equipment and bridges they are usually used to fund government projects that will serve the public community revenue bonds are another type of go bond revenue bonds are supported by revenue streams from projects such as toll bridges highways and local stadiums or from essential services such as water sewer and electricity providers the amount of taxation available by a particular go bond may be specified as either limited or unlimited unlimited tax bond vs limited tax bondbacked by the full taxing power of the issuer unlimited tax bonds can use property taxes sales taxes special taxes and other sources of income to repay the bonds as well as the interest owed to investors these municipal bonds are secured by some limited taxing power of the issuer for instance an issue may be secured by a town s property tax subject to a maximum rate at which the tax may be imposed in theory unlimited tax bond issuers can raise taxes at an unrestricted rate in practice however it may be difficult to raise taxes beyond a certain point one of the factors that credit analysts use to rate such bonds is the ability of the issuer to enforce penalties against and recover taxes from delinquent taxpayers given the government guarantee unlimited tax bonds may have higher credit ratings and offer lower yields than other comparable municipal bonds of the same maturity unlimited tax municipal bonds have historically had a lower risk than most other bond categories primarily because unlimited tax bonds can only be created when taxpayers vote to approve the bond issues this requirement clearly indicates the level of demand for the bonds voter approval also means the voters of a given population support the initiative and there are usually more than adequate assets or taxing power built into the voting language to repay investors who provide the funds whereas the issuers of unlimited tax bonds can theoretically raise taxes at an unrestricted rate a limited tax bond asks the issuing local government to raise property taxes if necessary to meet existing debt service obligations however the amount of the increase is bound by a statutory limit | |
what are unlisted trading privileges utp | unlisted trading privileges utp refer to the processes around the trading of a security that is not required to meet certain minimum requirements to be traded on an exchange regulation for utp is detailed in the unlisted trading privileges act of 1994 understanding unlisted trading privileges utp utp were developed in order to help increase the liquidity of securities across markets that do not include registered exchanges utp give certain companies the ability to trade on an exchange without meeting the additional requirements required for each national securities exchange in which they choose to list their security the most common instance of unlisted trading occurs with over the counter otc shares also known as pink sheets which may include penny stocks historically utp were granted by the securities and exchange commission sec through an application process however congress in 1994 enacted the unlisted trading privileges act which changed the procedures for utp the new provisions required the company offering a security issuance and the exchange where the security is traded to work jointly in gaining authorization for utp from the sec 1unlisted trading privileges act of 1994the unlisted trading privileges act amended the securities exchange act of 1934 which serves as a primary governing legislation for the requirements for secondary market trading of securities in the united states the unlisted trading privileges act provisions are detailed in u s code title 15 section 78 l f this law allows any securities exchange to extend utp to any company that meets the specified provisions detailed in the act the company must be fully compliant with the provisions preceding part f of the 1934 securities act which discusses the standards required for national securities exchange listing 1the unlisted trading privileges act of 1994 was developed on principles that seek to cultivate fair and efficient market trading as well as protections for all parties involved therefore all decisions surrounding utp seek to consider and maintain certain principles key provisions of the utp act include | |
what is an unofficial strike | an unofficial strike is a work stoppage by union members that is not endorsed by the union and that does not follow the legal requirements for striking workers engaging in unofficial strikes have little legal recourse if they are fired and do not receive strike pay an unofficial strike is also called a wildcat strike or an unofficial industrial action understanding an unofficial strikein the united states an unofficial strike is illegal under the 1935 national labor relations act nlra and courts have held that employers are entitled to fire employees who engage in them however u s workers are entitled to request that the national labor relations board nlrb terminate their relationship with their labor union if they feel that said union does not represent their interests when workers do this any strike action they may undertake afterward is technically unofficial but not illegal as terminating the relationship with the labor union removes the conflict between sections 7 and 9 a of the nlra 1 causes of an unofficial strikeunofficial strikes occur when workers circumvent their own union and take action on their own initiative this might occur because of incidents or conditions that arouse such immediate anger that the workers react before the normal channels of union action can swing into operation alternatively workers may take strike action in opposition to union leadership if they believe the union is failing to represent their interests or has been co opted either by management or outside elements or simply if the union does not agree with the demand of the employees and refuses to support them in their actions to remedy what they perceive to be unjust wages or practices for businesses unofficial strikes can be particularly disruptive because they often occur without warning rather than as a somewhat expected step in a regulated process of labor management relations managed under the nlra and other existing laws an unannounced strike can have immediate serious consequences for the target business related businesses and customers especially in the modern age of just in time jit supply chains due to their inherently extralegal nature and the sometimes volatile emotional factors involved unofficial strikes may also entail an increased risk of violence and property destruction directed toward the business managers and non striking workers real world examples of unofficial strikesa notable unofficial strike was that of west virginia teachers who in 2018 refused to return to classrooms until their demands for higher wages and more generous healthcare benefits were met this strike started out as an official strike but since it failed to maintain the support of union leadership later evolved into an unofficial strike despite being unofficial the strike was successful and inspired other unofficial teachers strikes in kentucky oklahoma and arizona 2 some other notable wildcat strikes started off as unofficial strikes but later gained the support of union leadership and became official examples include the baltimore municipal strike of 1974 in which municipal workers initiated a strike action for better working conditions and higher wages and the memphis sanitation strike of 1968 in which black sanitation workers in the segregation era city fought for better pay and safer working conditions due to the racial factors at play in the memphis strike it became a part of the civil rights movement drawing the attention of black community leaders such as martin luther king jr 3 4 on an international level one of the most famous unofficial strikes occurred in france in may 1968 unofficial strike actions spread across the entire nation causing the french president charles de gaulle to flee the country briefly and bringing the economy and government to a halt this was the first unofficial strike to affect an entire nation 5 | |
what is an unpaid dividend | an unpaid dividend is a dividend that is due to be paid to shareholders but has not yet been distributed unpaid dividends exist because of timing differences between the record date the time at which existing shareholders become eligible to receive the upcoming dividend and the payment date when the dividend is actually paid | |
how unpaid dividends work | to understand unpaid dividends it is helpful to review the four key dates that are part of the dividend payment process the first is the declaration date which is also known as the announcement date this is the date when the company s board of directors announces the upcoming dividend this date is followed by the ex dividend date the date when new buyers of the stock will not be eligible for the upcoming dividend payment the record date also known as the date of record is the next important date in order to be entitled to the upcoming dividend shareholders must be recorded on the company s books by this date typically the record date is two days after the ex dividend date last the payment date is the date when the dividend will be paid to shareholders of record the record date generally occurs about one week after the ex dividend date between the declaration date and the payment date a company will have unpaid dividends on its books once the payments are made the unpaid dividends will be zeroed out accordingly example of an unpaid dividendxyz corporation is a publicly traded company with a price of 30 per share many of its investors view xyz as a stable income producing investment because of its consistent track record of dividend payments eager to maintain this reputation xyz s managers declare an upcoming dividend of 1 50 per share on july 30th its record date is set as thursday august 8th the company s ex dividend date is set for tuesday august 6th in this scenario only shareholders who bought their shares on monday august 5th or before that date would be entitled to receive a dividend the payable date can vary depending on the preferences of the company but it is always the last of the four dates for the period of time between the announcement date on july 30th and the payment date xyz will have unpaid dividends on their books however these will be eliminated once the dividends are paid to shareholders | |
what is an unqualified audit | an unqualified audit reflects business financial statements that are transparent and compliant with generally accepted accounting principles gaap an unqualified opinion is given after thorough research considering all accompanying financial documents any possible remaining discrepancies with the audit would stem from information that could not be obtained by the auditor an unqualified report analyzes the internal systems of control as well as the details in the organization s books additional names for unqualified audits often included unqualified opinions and unqualified reports understanding unqualified auditsthe alternative to an unqualified audit is an unaudited opinion unqualified audits are performed with emphasis on details and accuracy and according to accepted accounting principles if an auditor has reservations as to the accuracy or validity of a firm s financial statements a qualified opinion may be given instead that outlines the auditor s reservations an unqualified report concludes that the financial statements of a company are fair and transparent based on thorough research in an unqualified report auditors will conclude that the financial statements of a business present its affairs fairly in all material aspects this opinion assumes that a business complied with gaap and statutory requirements an opinion of this sort is known as a clean report the unqualified report also reflects that any changes in accounting policies have been considered in the financial statements this opinion does not offer a view on whether a business is in good economic health the opinion rather states that a business s financial reporting is transparent and thorough and has not hidden important facts a qualified report does not comment on whether a business is in good economic health only that a business s financial reporting is transparent and thorough unqualified report vs qualified reportfor an unqualified report the auditor has concluded that most financial matters are dealt with correctly although there may be some outstanding minor issues in contrast an auditor s report is qualified for reasons such as limited scope in the auditor s work or if there are issues concerning the accounting policies the points of concern must be financially significant for an auditor to qualify a report for example the auditor might consider that an issue misrepresents the actual financial position of the firm in this case the auditor might issue a disclaimer or adverse opinion however a qualified audit report does not necessarily mean that a business is in distress or that a firm is failing to disclose important information in the financial statements a qualified audit report only reflects the auditor s inability to give a clean report | |
what is an unqualified audit | an unqualified audit reflects business financial statements that are transparent and compliant with generally accepted accounting principles gaap an unqualified opinion is given after thorough research considering all accompanying financial documents any possible remaining discrepancies with the audit would stem from information that could not be obtained by the auditor an unqualified report analyzes the internal systems of control as well as the details in the organization s books additional names for unqualified audits often included unqualified opinions and unqualified reports understanding unqualified auditsthe alternative to an unqualified audit is an unaudited opinion unqualified audits are performed with emphasis on details and accuracy and according to accepted accounting principles if an auditor has reservations as to the accuracy or validity of a firm s financial statements a qualified opinion may be given instead that outlines the auditor s reservations an unqualified report concludes that the financial statements of a company are fair and transparent based on thorough research in an unqualified report auditors will conclude that the financial statements of a business present its affairs fairly in all material aspects this opinion assumes that a business complied with gaap and statutory requirements an opinion of this sort is known as a clean report the unqualified report also reflects that any changes in accounting policies have been considered in the financial statements this opinion does not offer a view on whether a business is in good economic health the opinion rather states that a business s financial reporting is transparent and thorough and has not hidden important facts a qualified report does not comment on whether a business is in good economic health only that a business s financial reporting is transparent and thorough unqualified report vs qualified reportfor an unqualified report the auditor has concluded that most financial matters are dealt with correctly although there may be some outstanding minor issues in contrast an auditor s report is qualified for reasons such as limited scope in the auditor s work or if there are issues concerning the accounting policies the points of concern must be financially significant for an auditor to qualify a report for example the auditor might consider that an issue misrepresents the actual financial position of the firm in this case the auditor might issue a disclaimer or adverse opinion however a qualified audit report does not necessarily mean that a business is in distress or that a firm is failing to disclose important information in the financial statements a qualified audit report only reflects the auditor s inability to give a clean report | |
what is an unquoted public company | an unquoted public company also known as an unlisted public company is a firm that has issued equity shares that are no longer traded on a stock exchange otc markets that trade unquoted public companies typically have less transparency than public exchanges understanding unquoted public companiesa public company is a company that has issued stock shares through an initial public offering ipo while its stock trades on a stock exchange or an over the counter market that is a market of private brokers and dealers publicly quoted stocks might trade on exchanges like the new york stock exchange which is the largest equities based exchange in the world however unquoted public companies are unlisted and trade over the counter companies might be unquoted because they are too small to qualify for a stock market listing major exchanges have listing requirements for stocks that include annual earnings thresholds a minimum number of outstanding shares and listing fees an unquoted company might have too few shareholders for a listing or the company s management might want to avoid ownership disclosure requirements under certain listing exchanges another reason for remaining unquoted is simply cost savings a struggling company may not want to incur the multimillion dollar expenses of listing companies that have been delisted or removed from major exchanges might result in their stock becoming an unquoted public company delisting can be voluntary or can be due to a failure to meet the listing requirements of an exchange by remaining unquoted the firm s owners can operate the business more like a private company and avoid some of the exchange regulations however although unquoted public companies are less heavily regulated than listed public companies they are more regulated than private ones as public companies they still have to comply with financial reporting requirements and may be subject to the same takeover codes as listed companies unquoted public companies may also be banned from marketing themselves to investors as unlisted securities shares in unquoted public companies are bought and sold in over the counter markets otc in an otc market broker dealers quote stock prices at which they will buy and sell a stock however two investors a buyer and seller can execute a trade on an otc market without other investors being aware of the price at which the transaction was completed as a result otc markets that trade unquoted public companies typically have less transparency than public exchanges also stocks of unquoted public companies are rarely traded or are illiquid leading to difficulty in pricing the stock unquoted public companies are valued using various financial models including the comparables approach the comparables approach analyzes companies or divisions that are of similar makeup and industry by comparing market transactions such as investments or buyouts into similar companies investors can get a sense of the value of the unquoted company the approach also includes an analysis of the competition to estimate the equity share value of the unquoted company example of an unquoted public companylet s say as an example that executives at google have decided to remove the company s stock from listed exchanges and opt for becoming an unquoted public company the company would be primarily owned by the founders and a few private investors as opposed to investors trading google stock on an exchange the unquoted google would not be readily available to trade and any transactions would need to be processed through the otc market as a result investors wouldn t be able to buy and sell the stock quickly or easily also valuing the company s stock price would be a challenge since the financial information might not be available to potential investors and brokers any valuation would be done by analyzing proxy companies such as the competition in the social media sector however google would have fewer regulatory requirements freeing up resources that were used to meet those requirements | |
what is an unrealized gain | the term unrealized gain refers to an increase in the value of an asset such as a stock position or a commodity like gold that has yet to be sold for cash as such an unrealized gain is one that takes place on paper as it has yet to be realized an unrealized gain becomes realized once the position is sold for a profit it is possible for an unrealized gain to be erased if the asset s value drops below the price at which it was bought investopedia laura porter | |
how an unrealized gain works | an unrealized gain occurs when the current price of a security is higher than the price the investor initially paid for the security including any fees associated with the purchase many investors calculate the current value of their investment portfolios based on unrealized values in general capital gains are taxed only when they are sold and become realized investors may choose to sit on unrealized gains for tax benefits most assets held for more than one year are taxed at the long term capital gains tax rate which is either 0 15 or 20 depending on one s income 1 assets held for one year or less are taxed as ordinary income with rates ranging from 10 to 37 12in 2022 a single filer making 41 675 will pay 0 on realized long term capital gains and an individual making 459 750 will pay only 15 3 that single filer pays 0 if they make 44 625 while the 15 rate is applied to a single filer earning 492 300 in 2023 4 if those same people held their investments for one year or less their realized gains would be taxed at the 22 and 35 rates respectively 2an investor may also choose to wait to sell investments if gains realized late in the year would place them in a higher tax bracket and thus increase their tax burden that investor may be better off waiting until january to sell at which point they can incorporate that profit into their tax plan for the year | |
when there are unrealized gains present it usually means an investor believes the investment has room for higher future gains otherwise they would sell now and recognize the current gain | recording unrealized gainsunrealized gains are recorded differently depending on the type of security securities that are held to maturity are not recorded in financial statements but the company may decide to include a disclosure about them in the footnotes of its financial statements securities that are held for trading are recorded on the balance sheet at their fair value and the unrealized gains and losses are recorded on the income statement the increase or decrease in the fair value of held for trading securities impacts the company s net income and its earnings per share eps securities that are available for sale are also recorded on a company s balance sheet as an asset at fair value however the unrealized gains and losses are recorded in comprehensive income on the balance sheet unrealized gain vs unrealized lossthe opposite of an unrealized gain is an unrealized loss this type of loss occurs when an investor holds onto a losing investment such as a stock that has dropped in value since the position was opened similar to an unrealized gain a loss becomes realized once the position is closed at a loss unrealized gains and unrealized losses are often called paper profits or losses since the actual gain or loss is not determined until the position is closed a position with an unrealized gain may eventually turn into a position with an unrealized loss as the market fluctuates and vice versa example of an unrealized gainif an investor purchased 100 shares of stock in abc company at 10 per share and the fair value of the shares subsequently rises to 12 per share the unrealized gain on the shares still in their possession would be 200 2 per share x 100 shares if the investor eventually sells the shares when the trading price is 14 they will have a realized gain of 400 4 per share x 100 shares | |
what is an unrealized loss | an unrealized loss is a paper loss that results from holding an asset that has decreased in price but not yet selling it and realizing the loss an investor may prefer to let a loss go unrealized in the hope that the asset will eventually recover in price thereby at least breaking even or posting a marginal profit for tax purposes a loss needs to be realized before it can be used to offset capital gains unrealized gains and losses can be contrasted with realized gains and losses understanding unrealized lossesan unrealized loss stems from a decline in value on a transaction that has not yet been completed the entity or investor would not incur the loss unless they chose to close the deal or transaction while it is still in this state for instance while the shares in the above example remain unsold the loss has not taken effect it is only after the assets are transferred that that loss becomes substantiated waiting for the investment to recoup those declines could result in the unrealized loss being erased or becoming a profit an unrealized loss can be calculated for a period of time this may span from the date the assets were acquired to their most recent market value an unrealized loss can also be calculated for specific periods to compare when the shares saw declines that brought their value below an earlier valuation the decision to sell an unprofitable asset which turns an unrealized loss into a realized loss may be a choice to prevent continued erosion of the shareholder s overall portfolio such a choice might be made if there is no perceived possibility of the shares recovering the sale of the assets is an attempt to recoup a portion of the initial investment since it may be unlikely that the stock will return to its earlier value if a portfolio is more diversified this may mitigate the impact if the unrealized gains from other assets exceed the accumulated unrealized losses the psychological impact of holding unrealized losses is often different than that of holding gains as investors hope for a rebound in the underlying asset to recoup some or all of their paper losses and may even take on additional risk in hopes of doing so this is known as the disposition effect an extension of the behavioral economics concept of loss aversion the complement of an unrealized loss is an unrealized gain this type of increase occurs when an investor holds onto a winning investment such as a stock that has risen in value since the position was opened similar to an unrealized loss a gain only becomes realized once the position is closed for a profit unrealized losses in accountingwhile unrealized losses are theoretical they may be subject to different types of treatment depending on the type of security securities that are held to maturity have no net effect on a firm s finances and are therefore not recorded in its financial statements the firm may decide to include a footnote mentioning them in the statements trading securities however are recorded in a balance sheet or income statement at their fair value this is primarily because their value can increase or decrease a firm s profits or losses thus unrealized losses can have a direct impact on a firm s earnings per share but their effect on a firm s cash flow is neutral securities that are available for sale are also recorded in a firm s financial statement at fair value as assets calling unrealized losses paper losses implies that the loss is only on paper this is especially important from a tax perspective as in general capital gains are taxed only when they are realized and you can only deduct capital losses on your tax return after they re realized too if you have both capital gains and losses in the same year you can use your capital losses to reduce your tax burden by offsetting your capital gains a capital loss can also be used to reduce the tax burden of future capital gains even if you don t have capital gains you can use a capital loss to offset ordinary income up to the allowed amount example of an unrealized lossassume for example that an investor purchased 1 000 shares of widget co at 10 and it subsequently traded down to a low of 6 the investor would have an unrealized loss of 4 000 at this point if the stock subsequently rallies to 8 at which point the investor sells it the realized loss would be 2 000 for tax purposes the unrealized loss of 4 000 is of little immediate significance since it is merely a paper or theoretical loss what matters is the realized loss of 2 000 | |
what is an unrecaptured section 1250 gain | unrecaptured section 1250 gain is an internal revenue service irs tax provision where previously recognized depreciation is recaptured into income when a gain is realized on the sale of depreciable real estate property unrecaptured section 1250 gains are taxed at a maximum 25 tax rate or less in some cases unrecaptured section 1250 gains are calculated on a worksheet within the instructions for schedule d reported on schedule d and carried through to the taxpayer s 1040 12 | |
how unrecaptured section 1250 gains work | section 1231 assets include all depreciable capital assets held by a taxpayer for longer than one year section 1231 is the umbrella for assets belonging to section 1245 and section 1250 and the latter is what determines the tax rate of depreciation recapture section 1250 relates only to real property such as buildings and land personal property such as machinery and equipment is subject to depreciation recapture as ordinary income under section 1245 3unrecaptured section 1250 gains are only realized when there is a net section 1231 gain in essence capital losses on all depreciable assets offset unrecaptured section 1250 gains on real estate therefore a net capital loss overall reduces the unrecaptured section 1250 gain to zero 4a section 1250 gain is recaptured upon the sale of depreciated real estate just as with any other asset the only difference is the rate at which it is taxed the justification for the gain is to offset the benefit of previously used depreciation allowances while the gains attributed to accumulated depreciation are taxed at the section 1250 recapture tax rate any remaining gains are only subject to the long term capital gains rate of 15 1example of unrecaptured section 1250 gainsif a property was initially purchased for 150 000 and the owner claims depreciation of 30 000 the adjusted cost basis for the property is considered to be 120 000 if the property is subsequently sold for 185 000 the owner has recognized an overall gain of 65 000 over the adjusted cost basis since the property has sold for more than the basis that had been adjusted for depreciation the unrecaptured section 1250 gains are based on the difference between the adjusted cost basis and the original purchase price this makes the first 30 000 of the profit subject to the unrecaptured section 1250 gain while the remaining 35 000 is taxed at the regular long term capital gains rate with that result 30 000 would be subject to the higher capital gains tax rate of up to 25 the remaining 35 000 would be taxed at the long term capital gains rate of 15 special considerationssince the unrecaptured section 1250 gains are considered a form of capital gains they can be offset by capital losses to do so the capital losses must be reported through form 8949 and schedule d and the value of the loss may vary depending on whether it is determined to be short term or long term in nature 15for a capital loss to offset a capital gain both must be determined to be short term or long term a short term loss cannot offset a long term gain and vice versa | |
what are examples of 1250 property | examples of section 1250 property include commercial buildings or residential rental property commercial buildings would be treated as macrs 39 year real property while the residential rental property would be treated as 27 5 year property 67 | |
how can you avoid paying back depreciation recapture | investors can avoid paying tax on depreciation recapture by turning a residential property into a primary residence in addition the taxpayer could conduct a 1031 tax deferred exchange also when an investor passes away their heirs often receive the property on a stepped up basis | |
how much tax do i pay on unrecaptured section 1250 gain | the maximum rate attributable to unrecaptured section 1250 gains is 25 1 | |
how do i calculate section 1250 recapture | section 1250 is calculated as the lesser of two amounts the first amount is the excess of accelerated depreciation claimed on real property over what would have been the allowable amount under a straight line method the second amount is the gain realized upon disposition | |
what triggers depreciation recapture | depreciation recapture occurs when there is a difference between the sale price of an asset and the tax basis or adjusted cost basis the difference in these two amounts is recaptured by reporting the difference as ordinary income the bottom linesection 1250 gain is a tax term that refers to the taxable gain from the sale of depreciable real property the term comes from section 1250 of the internal revenue code irc which deals with the tax treatment of depreciation recapture | |
what is an unrecorded deed | an unrecorded deed refers to the situation where the title to a property usually real estate is not registered with the appropriate public records department understanding an unrecorded deedan unrecorded deed is a deed for real property that neither the buyer nor the seller has delivered to an appropriate government agency unrecorded deeds can present many issues for sellers or grantors and buyers or grantees such as proof of ownership and tax implications a deed transfers specific rights of ownership to a piece of real property between two parties most jurisdictions require that sellers file an original deed with a government agency that maintains such records in a given municipality in the united states this often takes place at the county level this record serves to notify the public of the sale of property which in turn provides assurance of current ownership to any entity involved in transactions affected by the property such as the issuance of a mortgage or a home equity loan where the property serves as collateral failure to record a deed effectively makes it impossible for the public to know about the transfer of a property that means the legal owner of the property appears to be someone other than the buyer a situation that can have serious ramifications a buyer for example could encounter great difficulty in selling insuring or obtaining loans for a property if financial institutions and insurance companies cannot establish clear title worse an unrecorded deed creates potential for a seller to engage in a subsequent sale of the same property to yet another buyer most mortgage companies require prospective home buyers to conduct a title search and secure title insurance on the property to be purchased the title search examines existing public records to ensure a clean transfer of title a process that could be disrupted by outstanding liens or past due property taxes self financed purchasers would do well to consider doing a title search and securing title insurance for any property they want to buy title insurance offers a further backstop by protecting the insurance holder from any losses due to deficiencies in the title not turned up by the title search buyers should note that lenders often require a separate title insurance policy that protects only the lender s interest in the property therefore buyers may want to purchase a policy covering their interests as well suppose for example that a homeowner self funded the purchase of a home with an unrecorded deed and the seller neglected to close out an existing second mortgage if the seller were to default on the loan the bank would file a lien against the collateral which would still appear to belong to the seller because of the unrecorded deed | |
what are unregistered shares | unregistered shares also known as restricted stock are securities that are not registered with the securities and exchange commission sec they are usually issued through private placements regulation d offerings or employee stock benefit plans as compensation for professional services or in exchange for funding a startup company for example a privately held company might issue unregistered shares to its executives and board members as part of their compensation package understanding unregistered sharesunregistered shares have fewer investor protections and pose different kinds of risks than registered securities as a result companies can only sell unregistered shares to qualified investors to be considered a qualified investor you must be a high net worth individual hnwi or a high income investor who qualifies as an hnwi differs by the financial institution but typically you must have liquid assets that range from six to seven figures a high income investor typically has an income of at least 200 000 per year or at least 300 000 per year for married couples in the past soliciting or advertising unregistered shares was prohibited however in 2013 the sec adopted rule 506 c as part of the jumpstart our business startups jobs act allowing certain unregistered securities to be solicited and advertised 1 selling unregistered shares is typically considered a felony but there are exceptions to this rule sec rule 144 lays out the conditions under which unregistered shares may be sold unregistered stock scamssometimes investors can be taken advantage of through unregistered securities scams these scams usually advertise the sales as private offerings with little to no risk plus high returns the sec recommends that investors should be on the lookout for some of these common signs of potential fraud when considering investing in an unregistered offering investors can also find out if a particular security is registered by looking it up in the sec s edgar database online stocks traded by the average investor will all be registered in the database 3 | |
what is unrelated business taxable income ubti | unrelated business taxable income ubti is income earned by a tax exempt entity that s not related to the tax exempt purpose of the entity more precisely the internal revenue service irs defines unrelated business taxable income for most organizations as income from a trade or business regularly carried on that is not substantially related to the charitable educational or other purpose that is the basis of the organization s exemption 1understanding unrelated business taxable income ubti the internal revenue code irc section 501 grants tax exempt status to a variety of tax exempt and mutually beneficial organizations however a tax exempt entity such as a nonprofit or educational organization may be liable for tax if it engages in and derives income from unrelated business activities 2ubti was introduced in 1950 to ensure that tax exempt businesses compete fairly with taxable companies in profit generating activities ubti also prevents or limits tax exempt entities from engaging in businesses that are unrelated to their primary purposes 3most forms of passive income such as dividends interest income and capital gains from the sale or exchange of capital assets are not treated as ubti 4 for example if an investor holds an individual retirement account ira that invests in traditional equities mutual funds and etfs the ubti rules will most likely not apply however if an investment for example a mutual fund generates income that qualifies as ubti the fund may be subject to taxation 4 for example income from a restaurant business that flows into an ira is considered taxable that s because the business activity doesn t relate to the tax exempt purpose of providing a pension to the ira holder activities that generate ubtian activity is considered unrelated business and the income generated taxable if it meets the following thresholds as defined by the irs 5irs publication 598 provides more information about unrelated business activities and these three categories 4some transactions that may be considered unrelated business activity include organizations must make estimated tax payments if they expect annual unrelated business income tax to be 500 or more estimated tax payments are normally due on the 15th day of the 4th 6th 9th and 12th months of the tax year and must total 100 of the organization s total tax liability for that year 4the irs excludes these activities from the definition of unrelated trade or business 6taxes on ubtiany exempt organization subject to the tax on unrelated business income is taxable at corporate rates a federal rate of 21 on gross income beyond 1 000 7 the same applies to exempt trusts except that income is taxed at trust rates federal rates from 10 to 37 8according to the irs the tax computed on the total ubti can be reduced by any applicable tax credits including general business credits such as the investment credit and foreign tax credits however an exempt trust may not claim the deduction for a personal exemption that a trust normally can claim 4to pay the tax exempt organizations must file irs form 990 t 4certain income is excluded from the unrelated business taxable income that an exempt organization may have to pay taxes on 4irs publication 598 provides more information about income that s excluded from ubti | |
do i have to pay taxes on ubti | if your tax exempt organization earns unrelated business income over 500 that doesn t fall into the irs s excluded categories then yes you do have to pay taxes on that income 4 | |
what is excluded from unrelated business taxable income | income that s excluded includes dividends interest capital gains royalties and certain other investment income for a complete list please see irs publication 598 4 | |
what happens if ubti tax isn t paid | an exempt organization may be subject to interest and penalty charges if it fails to pay a tax when the tax is due it underpays its tax liability doesn t file a return or files a late return 9the bottom lineunrelated business taxable income ubti is income earned by a tax exempt entity that isn t related to the tax exempt purpose of the entity an income earning activity is considered to be unrelated if it involves a trade or business is carried on regularly and is not substantially related to helping the organization carry out its mission with some exceptions organizations will owe federal and state corporate or trust taxes on annual gross unrelated business income over 500 | |
what is unrestricted cash | unrestricted cash refers to cash that is readily available to be spent for any purpose and has not been pledged as collateral for a debt obligation or other purpose often to satisfy debt covenants companies must maintain a certain level of cash on their balance sheets in case the company defaults or goes into nonpayment of their credit obligations the remaining cash that exceeds the covenant requirements is referred to as unrestricted cash unrestricted cash is a part of an organization s liquid funds meaning it s easily accessible unrestricted cash is important since it shows how much cash a company has to meet its short term bills and credit obligations understanding unrestricted cashunrestricted cash is listed on a company s balance sheet however it is typically listed as cash and cash equivalents unrestricted cash or cash and cash equivalents represent the money that an organization can spend today meaning the money is readily available or liquid unrestricted cash is considered a current asset on the balance sheet since it can be readily accessed and spent in the short term liquidity is critical to companies since having enough cash available can help a company meet its short term debt obligations and pay its vendors and suppliers these short term debt obligations and bills that are due within 90 days are called current liabilities unrestricted cash helps companies ensure that they have enough current assets to cover their current liabilities called working capital cash and cash equivalents include the following liquid assets | |
when companies report their financial statements unrestricted cash must be listed in the cash and cash equivalents line item of a company s balance sheet | unrestricted cash vs restricted cashrestricted cash is cash held by a company that is not readily available to be spent or used by the company cash might be restricted if the money is required to be held aside to secure a bank loan or credit facility sometimes financial institutions impose credit covenants which include requirements and restrictions the cash pledged as collateral for a loan helps protect the bank in the event the company goes bankrupt or defaults on the loan restricted cash is typically listed as a separate line item on the balance sheet the description or details explaining why the cash is restricted is usually found in the notes section of a company s financial statements if the restricted cash is for a short term pledge meaning it s due to expire in less than one year the line item would be located under current assets however if the restricted cash must be held for more than one year it would be listed under long term assets called noncurrent assets conversely unrestricted cash is listed as a current asset and can be used for any purpose since it has not been pledged to secure an obligation example of unrestricted cashfor example xyz corporation manufactures machinery and borrowed 1 million from the local bank the bank required a debt covenant in which xyz must hold 400 000 in cash on hand at all times below is a portion of the balance sheet for xyz corporation despite 400 000 being held as restricted cash xyz has more than enough unrestricted cash to cover the 300 000 in accounts payable money owed to suppliers and 100 000 in short term debt obligations | |
what are unrestricted net assets | unrestricted net assets are donations to nonprofit organizations that have no strings attached that is the assets may be used by the organization for general expenses or any legitimate expenditure most donations are unrestricted net assets however a donor may choose to classify the donation as temporarily restricted net assets or even permanently restricted net assets thus establishing rules for the use of the donation understanding unrestricted net assetsorganizations typically prefer donations of unrestricted net assets because they allow them maximum flexibility to spend as they see fit whether for hiring additional personnel or expanding their services a restricted net asset may even be a burden to the organization that receives it for example an organization devoted to animal rescue may receive a restricted donation to be spent on the care and feeding of crocodiles if the organization has no facilities or skilled staff devoted to crocodiles it may be forced to spend more than the amount donated in order to fulfill the terms of the bequest watchdog groups like charity navigator and give org help donors pick a worthy cause for their assets restricted or not nonetheless the ability to restrict a gift to a nonprofit organization can be a powerful incentive another animal lover may want to be certain that a gift will be used only to rescue cats from kill shelters and never for mundane administrative purposes temporarily restricted assets usually are donated for a particular purpose and must be used by a particular date such as within one year an example might be a donation to the red cross for emergency aid delivered to puerto rico after a hurricane permanently restricted assets often come in the form of a fund that must be maintained indefinitely with the income generated by its investment to be used for a particular purpose scholarship funds are often created as permanently restricted assets in addition donations to museums of art artifacts and other valuables often come with restrictions which can include a prohibition on the sale of the donated assets nonprofit organizations in the u s produce a statement of financial position which is equivalent to the balance sheet maintained by a business unrestricted net assets temporarily restricted net assets and permanently restricted net assets all are listed on this statement irs form 990 is a template for the creation of the statement of financial position as well as a separate statement of activities which is similar to an income statement a legitimate and well run nonprofit organization will provide form 990s annual reports and auditor s reports to prospective donors for their review those documents are also viewed by watchdog groups which provide ratings and reviews of charitable organizations and cast a harsh light on nonprofits that spend disproportionately on staff salaries or marketing activities rather than on its stated goals among the watchdog groups are | |
what is an unsatisfied judgment fund | an unsatisfied judgment fund is the amount of money set aside by certain states to cover uncompensated expenses related to bodily injuries sustained in motor vehicle accidents where the responsible driver is unable to pay for the damages the unsatisfied judgment fund is used to help the injured and not at fault driver pay for medical bills related to the accident in order to be eligible to receive assistance from the fund the injured party must be able to prove that they were not at fault and that they are unable to collect money from the responsible party usually in order to get an unsatisfied judgment against another driver the injured party must file supporting paperwork with the dmv the requirements for this paperwork vary from state to state unsatisfied judgment funds explainedthe unsatisfied judgment fund is intended to protect drivers from financial losses resulting from motor vehicle accidents for which they are not responsible the responsible party may be unable to pay due to being insolvent underinsured or uninsured often these state funds are financed by a small addition to the state s automobile registration fee the fund pays unsatisfied judgments up to certain fixed limits there can be steep penalties for a driver who is determined to be at fault in an accident and who is unable to pay for damages for example the driver might lose their driver s license until they are able to cover the financial damages once the responsible driver pays back the money into the unsatisfied judgment fund they may be eligible for a driver s license again penalties for unsatisfied judgmentsthe penalties for having an unsatisfied judgment can vary from state to state but they usually include losing your license and your ability to register a vehicle until the debt is paid in most states that have unsatisfied judgment funds a motorist can discharge the debt either by paying it off in full or by filing bankruptcy in some states a motorist can discharge the debt entirely via bankruptcy while in others they are still required to pay the debt but can be given a payment plan once the motorist can show the dmv that their debt has been paid or discharged or that they are making payments according to a court approved payment plan driving and vehicle registration privileges can typically be reinstated if the motorist at fault pays back the unsatisfied judgment amount the injured motorist must file paperwork with the court to show that they have received the money that was owed once this paperwork is filed the motorist at fault can take it to the dmv as proof that the debt is paid and use it to have their license reinstated the costs of an unsatisfied judgment can be steep and can cause an uninsured or underinsured motorist to lose driving privileges for years if they cannot pay back the debt or declare bankruptcy this is why motorists are required in most states to carry collision insurance and why it s a good idea to make sure you have enough coverage | |
what is an unscheduled property floater | the importance of having adequate property insurance coverage can t be overstated one way to make sure you have the coverage you need is with an unscheduled property floater an addition to an existing property insurance policy that provides coverage for personal property items that have not been individually itemized or valued an unscheduled personal property floater also called a blanket floater usually provides coverage against damage theft or loss of these items the additional cost is generally much lower than the original policy premium an unscheduled property floater is the opposite of a scheduled property floater which itemizes all the different properties covered in the policy and their specific value understanding an unscheduled property floaterunscheduled personal property refers to items that are covered in the main policy but not specifically itemized or valued these items usually do not warrant separate insurance as their individual value is too low to warrant a separate policy under homeowners insurance for example unscheduled property could include clothes jewelry sports equipment and cameras in the event of a fire or other catastrophic loss that the policy covers the policyholder would add up all of these unscheduled items estimate their total value and submit them for compensation depending on the policy even if these items were damaged lost or stolen outside of the home for example on vacation they would still be covered floater refers to an addition to a current policy to make sure the insurance covers certain valuables people buy these add on policies to provide coverage for property that insurance may not adequately cover otherwise and they sometimes come with additional benefits for example adding theft coverage even if the item was not in the home when it was stolen adding a floater usually requires a higher insurance premium 1 unscheduled property floater vs scheduled property floaternote that floater policies also can be scheduled as opposed to unscheduled for scheduled policies each item would be individually listed with an approximate value unscheduled jewelry coverage for example might not be enough to adequately compensate for the loss of some particularly expensive pieces which would call for their own scheduled jewelry floater 2 in this manner a policyholder can adequately cover personal property that might be greater than the set coverage limit stipulated in the unscheduled property floater contract payment for an item under an unscheduled property floater is usually the replacement cost of the property in question or the cash value of it after the deductible has been paid unscheduled property floaters may be advantageous when the prospective policyholders have many items to insure each valued at approximately 1 000 or less an unscheduled policy usually has a set deductible and may also have a set coverage ceiling for all types of items conversely a scheduled property floater may be more appropriate if there are fewer but pricier items to insure and it s not a burden to list them all in the policy separately 2 in general unscheduled floaters may be limited to specific types of losses such as theft or fire unscheduled floaters typically have one overarching amount of coverage that applies to any and all items within the scope of the policy scheduled floaters may cover more types of losses but they will not cover items that the buyer doesn t specifically spell out 3 notably it also is possible to have both scheduled and unscheduled policy floaters in the same policy in fact certain types of policies may require one or more scheduled items in order for the policyholder to have unscheduled coverage 4 | |
what is unsecured | unsecured refers to a debt or obligation that is not backed by any sort of collateral collateral is property or other valuable assets which a borrower offers as a way to secure the loan which is found in secured debt in an unsecured loan the lender will loan funds based on other borrower qualifying factors these qualifying factors include credit history income work status and other existing debts | |
what is an unsecured creditor | an unsecured creditor is an individual or institution that lends money without obtaining specified assets as collateral this poses a higher risk to the creditor because it will have nothing to fall back on should the borrower default on the loan if a borrower fails to make a payment on a debt that is unsecured the creditor cannot take any of the borrower s assets without winning a lawsuit first a debenture holder is an unsecured creditor | |
how an unsecured creditor works | it s uncommon for individuals to be able to borrow money without collateral for example when you take out a mortgage a bank will always hold your house as collateral for the loan in case you default if you take out a loan on an automobile the lender will secure their debt with your car until it s fully paid off one exception wherein money is borrowed without collateral is large corporations which often issue unsecured commercial paper unsecured credit is viewed as a higher risk differences between secured and unsecured creditorssecured creditors may repossess assets as payment for a debt using the borrower s collateral since the borrower has more to lose by defaulting on a secured loan and the lender has an asset to gain this type of debt carries less risk for the lender as a result secured debt generally comes with lower interest rates when compared to unsecured debt meanwhile repayment to unsecured creditors is generally dependent on bankruptcy proceedings or successful litigation an unsecured creditor must first file a legal complaint in court and obtain a judgment before proceeding with collection through wage garnishment and other types of liquidated borrower owned assets often a creditor will first attempt to obtain payment through direct contact and report the outstanding debt to the major credit bureaus equifax experian and transunion before seeking to bring the matter to court the creditor may also choose to sell the unpaid debt to a collection agency types of unsecured creditorsdue to the high risk to the lender unsecured debt often comes with higher interest rates placing a higher financial burden on the borrower some of the most common types of unsecured creditors include credit card companies utilities landlords hospitals and doctor s offices and lenders that issue personal or student loans though education loans carry a special exception that prevents them from being discharged defaulting on unsecured debt can negatively affect the borrower s creditworthiness making it much less likely that an unsecured creditor will extend them credit in the future | |
what is unsecured debt | unsecured debt refers to loans that are not backed by collateral if the borrower defaults on the loan the lender may not be able to recover their investment because the borrower is not required to pledge any specific assets as security for the loan because unsecured loans are considered riskier for the lender they generally carry higher interest rates than collateralized loans understanding unsecured debta loan is unsecured if it is not backed by any underlying assets examples of unsecured debt include credit cards medical bills utility bills and other instances in which credit was given without any collateral requirement unsecured loans are particularly risky for lenders because the borrower might choose to default on the loan through bankruptcy in this situation the lender can seek to sue the borrower for repayment of the loan however if no specific assets were pledged as collateral the lender may be unable to recover their initial investment because unsecured loans are considered more risky for the lender they generally carry higher interest rates than collateralized loans although bankruptcy can allow borrowers to avoid repaying their debts it is not without its consequences borrowers who have declared bankruptcy in the past may find it difficult or impossible to secure new loans in the future since the bankruptcy will have a severe negative impact on their credit score likely for many years to come lenders meanwhile may seek alternative methods for recovering their investment in addition to suing the borrower lenders can also report any instances of default or delinquency to a credit rating agency alternatively the lender can also hire a credit collection agency that will then seek to collect the unpaid debt real world example of unsecured debtmax is a private lender specializing in unsecured loans he is approached by a new borrower elysse who wishes to borrow 20 000 because the loan is unsecured elysse is not required to pledge any specific assets as collateral in case she defaults on the loan as compensation for this risk max charges her an interest rate that is higher than rates associated with collateralized loans six months later the loan becomes delinquent due to a series of late and missed payments by elysse max has several options to consider although max could seek to sue elysse for repayment of the loan he suspects this would not be worthwhile because there are no specific assets pledged as collateral as an alternative he chooses to hire a collection agency to pursue repayment of the loan on his behalf as compensation for this service max agrees to pay the collection agency a percentage of any amount that the collection agency succeeds in recovering collection agencies charge on a contingency fee basis collection rates vary by collection type size and age they average between 7 5 and 50 for each account with consumer rates typically around 35 another option max could have sold the debt to another investor using the secondary market in that scenario he would have likely sold the debt at a considerable discount to its face value in exchange for the discounted purchase price the new investor would assume the risk of not being repaid | |
what is an unsecured loan | an unsecured loan is a loan that doesn t require any type of collateral instead of relying on a borrower s assets as security lenders approve unsecured loans based on a borrower s creditworthiness examples of unsecured loans include personal loans student loans and credit cards investopedia julie bang | |
how an unsecured loan works | unsecured loans sometimes referred to as signature loans or personal loans are approved without the use of property or other assets as collateral the terms of these loans including approval and receipt are most often contingent on a borrower s credit score typically borrowers must have high credit scores to be approved for unsecured loans an unsecured loan stands in contrast to a secured loan in which a borrower pledges some type of asset as collateral for the loan the pledged assets increase the lender s security for providing the loan examples of secured loans include mortgages and car loans because unsecured loans require higher credit scores than secured loans in some instances lenders will allow loan applicants with insufficient credit to provide a co signer a co signer takes on the legal obligation to fulfill a debt if the borrower defaults this occurs when a borrower fails to repay the interest and principal payments of a loan or debt because unsecured loans are not backed by collateral they are riskier for lenders as a result these loans typically come with higher interest rates if a borrower defaults on a secured loan the lender can repossess the collateral to recoup the losses in contrast if a borrower defaults on an unsecured loan the lender cannot claim any property but the lender can take other actions such as commissioning a collection agency to collect the debt or taking the borrower to court if the court rules in the lender s favor the borrower s wages may be garnished also a lien can be placed on the borrower s home if they own one or the borrower may be otherwise ordered to pay the debt defaults can have consequences for borrowers such as lower credit scores types of unsecured loansunsecured loans include personal loans student loans and most credit cards all of which can be revolving or term loans a revolving loan is a loan that has a credit limit that can be spent repaid and spent again examples of revolving unsecured loans include credit cards and personal lines of credit a term loan in contrast is a loan that the borrower repays in equal installments until the loan is paid off at the end of its term while these types of loans are often affiliated with secured loans there are also unsecured term loans a consolidation loan to pay off credit card debt or a signature loan from a bank would also be considered unsecured term loans in recent years the unsecured loan market has experienced growth powered partly by financial technology fintech firms the past decade for example has seen the rise of peer to peer p2p lending via online and mobile lenders the amount of u s consumer revolving debt in oct 2023 according to the federal reserve if you re looking to take out an unsecured loan to pay for personal expenses a personal loan calculator is an excellent tool for determining what the monthly payment and total interest should be for the amount you re hoping to borrow unsecured loan vs payday loanalternative lenders such as payday lenders or companies that offer merchant cash advances do not offer secured loans in the traditional sense their loans are not secured by tangible collateral in the way that mortgages and car loans are however these lenders take other measures to secure repayment payday lenders for example require that borrowers give them a postdated check or agree to an automatic withdrawal from their checking accounts to repay the loan many online merchant cash advance lenders require the borrower to pay a certain percentage of online sales through a payment processing service such as paypal these loans are considered unsecured even though they are partially secured payday loans may be considered predatory loans as they have a reputation for extremely high interest and hidden terms that charge borrowers added fees in fact some states have banned them special considerationswhile lenders can decide whether or not to approve an unsecured loan based on your creditworthiness laws protect borrowers from discriminatory lending practices the enactment of the equal credit opportunity act ecoa in 1974 for example made it illegal for lenders to use race color sex religion or other non creditworthiness factors when evaluating a loan application establishing terms of a loan or any other aspect of a credit transaction while lending practices have gradually become more equitable in the united states discrimination still occurs in july 2020 the consumer financial protection bureau cfpb which takes the lead in supervising compliance and enforcing the ecoa issued a request for information soliciting public comments to identify opportunities for improving what the ecoa does to ensure nondiscriminatory access to credit clear standards help protect african americans and other minorities but the cfpb must back them up with action to make sure lenders and others follow the law stated kathleen l kraninger then director of the cfpb | |
what is considered collateral | collateral is any item that can be taken to satisfy the value of a loan common forms of collateral include real estate automobiles jewelry and other items of value | |
is a co signed loan considered secured | although having a co signer may help you get approved for a loan it doesn t make the loan secured in the case of a default the lender would require the co signer to repay the loan can bankruptcy eliminate all unsecured loans declaring bankruptcy is a serious undertaking but in most cases it will clear your unsecured loans there is one exception though student loans to have student loans forgiven the debtor must prove that the loans present an undue hardship during an adversary proceeding private student loans used to pay for living expenses are more likely to be forgiven though a new streamlined adversary proceeding paperwork is making it easier for even federal student loans to be discharged the bottom lineunsecured loans are common but can bear significant risk for both the lender and the borrower before taking out any unsecured loan assess your financial health and your ability to repay the loan borrowing money that you can t repay can result in garnishment of wages and tax returns and put the borrower on a difficult path back to solvency | |
what is an unsecured note | an unsecured note is a loan that is not secured by the issuer s assets unsecured notes are similar to debentures but offer a higher rate of return unsecured notes provide less security than a debenture such notes are also often uninsured and subordinated the note is structured for a fixed period understanding unsecured notecompanies sell unsecured notes through private offerings to generate money for corporate initiatives such as share repurchases and acquisitions an unsecured note is not backed by any collateral and thus presents more risk to lenders due to the higher risk involved these notes interest rates are higher than with secured notes in contrast a secured note is a loan backed by the borrower s assets such as a mortgage or auto loan if the borrower defaults these assets will go towards the repayment of the note for this reason collateral assets must be worth at least as much as the note additional examples of collateral that can be pledged include stocks bonds jewelry and artwork unsecured note and credit ratingcredit rating agencies will often rate debt issuers for example in the case of fitch this agency will offer a letter based credit rating that reflects the chances that the issuer will default based on internal i e the stability of cash flows and external market based factors unsecured debt holders are second to secured debt holders in the event of needing to claim assets in the wake of a company s liquidation special considerationsliquidation occurs when a company is insolvent and cannot pay its obligations when they come due as company operations come to an end its remaining assets go towards paying creditors and shareholders who purchased stakes and or made loans as the company expanded each of these parties has a priority in the order of claims to company assets the most senior claims belong to secured creditors followed by unsecured creditors including bondholders the government if the company owes taxes and employees if the company owes them unpaid wages or other obligations finally shareholders receive any remaining assets beginning with those holding preferred stock followed by holders of common stock | |
what is unskilled labor | unskilled labor is an outdated term once used to describe a segment of the workforce associated with a limited skill set or minimal economic value for the work performed the correct term is low wage labor according to the center for global development the term unskilled and skilled were derived from institutions politicians and other interest groups based on the classifications a determination has been made as to who is and is not powerful in the labor market also the idea that the unskilled labor force is characterized by lower educational attainment such as a high school diploma ged or lack thereof which typically results in lower wages is also outdated 1once characterized by lower educational attainment such as a high school diploma ged or lack thereof it was assumed unskilled laborers made less money however in the 21st century there are jobs for high school graduates or those without a college degree understanding unskilled laboragain unskilled labor is an outdated term but low wage laborers provide a significant part of the overall labor market performing daily production tasks that do not depend on technical abilities or skills menial or repetitive tasks are typical unskilled labor positions jobs that can be fully learned in less than 30 days often fall into the low wage labor category low wage labor jobs may be held by individuals with less education or experience than others when this is the case employers may take advantage of these workers offering low to minimum wage as pay | |
when the term is used to describe a person or employee completing the tasks low wage labor refers to the lack of education or experience the person may have the u s bureau of labor statistics the federal minimum wage is 7 25 although many cities and states have a higher minimum wage for workers 2 | certain semiskilled jobs such as administrative assistants can require advanced skill sets that lead them to be categorized as skilled instead of semiskilled positions related termsall jobs from babysitter to biology professor require a skill set however some jobs and careers require higher education special certifications or a specified number of years of experience entry level positions can be low wage jobs with rising salaries as more experience is gained some low wage jobs only pay federal minimum wage which does not often increase on the job despite the use of skills and experience of the low wage worker rising skills and pay may depend on the employer and the position jobs that call for semi skilled or mid skilled workers typically require a level of education or knowledge in a particular field or experience and training in order to complete the job s tasks successfully skilled labor may refer to persons or positions requiring a very specialized skill set or advanced degree in order to complete some of the assigned tasks | |
what is minimum wage | the federal minimum wage is 7 25 an hour 3 | |
what does skilled labor mean | all jobs take some sort of skill to hold them but skilled labor usually refers to positions which need a very specific skill set to obtain such as computer coding or plumbing skills or a teaching certificate | |
how many states have higher minimum wages | there are 30 states plus washington d c that offer workers a wage above the federal minimum wage 4the bottom linethe term low skilled worker is an antiquated term not reflective of the present day low wage workers are not low skilled workers low wage workers may have plenty of skills but often the low wage jobs do not provide a liveable wage | |
what is an unsolicited application | an unsolicited application is a request for life insurance coverage that is made by an individual rather than an insurance agent or broker life insurance companies generally heavily scrutinize this type of application because of the likelihood of self selection which refers to the probability that individuals with higher health risks will seek insurance on their own instead of through an insurance professional understanding an unsolicited applicationa person with a suspected or known health problem such as heart disease may try to submit an unsolicited application to purchase life insurance before seeking medical treatment for the condition these applicants could weigh the insured pool towards bad risks for this reason the insurers try to screen out self selection applicants either by requiring higher rates or by denying coverage altogether the reason for insurance carriers extreme scrutiny of self selecting insurance applicants can be explained by a statistics concept called self selection bias self selection bias arises in any situation not just buying insurance in which individuals select themselves into a group causing a biased sample and abnormal or undesirable conditions in the group it is closely related to the non response bias which describes when a group of people responding has different responses than the group of people not responding self selection is typically a choice an individual makes when an emergency or sudden need for coverage comes up therefore making the person a higher risk for an insurer to cover disadvantages of unsolicited insurance applicationsself selection makes determining the cause more difficult which makes determining risk levels problematic for insurance actuaries due to self selection there may be a number of differences between the people who choose to apply for insurance and those who are led into it as a course of their life and life decisions these motivations can vary but self selection is typically something a person does after suddenly recognizing they have an urgent need for insurance there are significant differences between self selecting populations and those who aren t self selecting an outcome might be that those who elect to submit an unsolicited insurance application have higher than normal risks and this can skew risk pools and throw off the accuracy of mortality tables for example a relative measure of improvement might improve the reliability of the study somewhat but only partially self selection bias also causes problems in other fields where statistical averages might not follow expected patterns for example research about programs or products in particular is susceptible to biased evaluations of people who have self selected to be part of a product research project special considerationsa distinct but related term is an unsolicited applicant unsolicited applicants are those who apply for a job without any advertisement or requirement from the company for example a job seeker may visit a company s website find contact information for someone who works at the company and send them their resume some people choose to do this on the basis that companies don t always advertise all of their job openings this type of applicant applies of their own accord not in response to any specific job opening as a general rule of thumb the higher up in a company that a position is the more one can assume that it is not advertised this is because companies will usually first look for applicants internally and in their networks keeping unqualified applicants as low as possible saves companies time and money | |
what is an unsolicited bid | an unsolicited bid is an offer made by an individual investor or company to purchase a company that is not actively seeking a buyer unsolicited bids may sometimes be referred to as hostile bids if the target company doesn t want to be acquired they usually come up when a potential acquirer sees value in the target company | |
how unsolicited bids work | an unsolicited bid comes about when a potential acquirer takes an interest in a target company and makes a bid to purchase it in this case the bid is the result of the acquirer s initiative rather than at the request of the bid upon company an unsolicited bid to purchase a company not intending to be sold may be followed by other unsolicited bids as the news travels these other bids may up the purchase price and start a bidding war or takeover fight while unsolicited bids may involve private companies many bids are made by publicly traded companies these kinds of bids were popular in the 1980s when many bidders recognized the potential for profit in undervalued companies or those that were mismanaged unsolicited bid vs solicited bidan unsolicited bid may come as a surprise to the target while a solicited bid is the opposite with a solicited bid the target is actively seeking a purchaser and wants to be purchased these kinds of bids are often called friendly takeovers or proposals that are approved by the management of both companies the amount vodafone paid for germany s mannesmann in 2000 after its original unsolicited offer was rejected this is said to be one of the world s largest acquisitions 1 | |
why do companies make unsolicited bids | unsolicited bidding typically occurs when a company wants to purchase another company in order to |
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