Tag Archives | funds

Unclaimed Property

See Also:
Flat Tax Rates
Marginal Tax Rate
Prepaid Income Tax
Tax Brackets
Deferred Income Tax

Unclaimed Property Definition

The unclaimed property definition is any funds, or asset, that is unclaimed by the rightful owner. A common example of unclaimed property is the unredeemed value of gift cards and gift certificates. Other typical examples include the following:

  • Outstanding checks that have not been reissued
  • Dormant bank accounts, unclaimed security deposits
  • Uncashed dividend checks
  • Unidentified remittances

State Departments of Revenue see unclaimed property as a revenue source: an alternative to higher state tax rates to generate additional revenue. State laws mandate the reversion of such property to the rightful state, after a presumed period of abandonment. This creates a compliance exposure for many commercial enterprises. Consider the reversion indebtedness, and is subject to unclaimed property tax laws in multi-state jurisdictions.

Some large companies are turning over millions of dollars to the states, even though they have tried to locate and give back the unclaimed funds to the rightful owner. Other companies are paying because they have never filed an unclaimed property tax report or even tried to pay back unclaimed funds.

Unclaimed property tax audits used to occur maybe once every fifteen to twenty years. But the frequency has escalated to every one to three years. With no statute of limitations on unclaimed property, a state’s window of opportunity is unlimited.

unclaimed property definition

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Shanghai Stock Exchange (SSE)

See Also:
Tokyo Stock Exchange (TSE)
National Stock Exchange of India (NSE)
Bombay Stock Exchange (BSE)
Frankfurt Stock Exchange (FSE)
Hong Kong Stock Exchange (HKEX)

Shanghai Stock Exchange (SSE)

The Shanghai Stock Exchange (SSE) is the third largest exchange in terms of market capitalization. The exchange is currently not open to all foreign investors.

Shanghai Stock Exchange (SSE) Meaning

The Shanghai Stock Exchange was formed in the 1842 as one of the first to be established in Asia and the first in China. The SSE Exchange trades in bonds, funds, and two classes of stock. The two types of stock are the Class A and Class B stock. At first the Class A stock was limited to Chinese Investors while the Class B remained open to all investors. However, after reforms the SSE changed its format slightly allowing a few foreign investors to invest in the Class A stock with several limitations. The class B stock remained open to all foreign and domestic investors after the reformation. The Class A stock is also currently listed with the local Yuan currency while Class B is listed under the U.S. dollar. The SSE exchange main indexes are the SSE 180 index and the SSE 50.

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shanghai stock exchange (sse)

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Pension Plans

See Also:
How to compensate sales staff
Cafeteria Plan
Keogh Plan
Individual Retirement Account (IRA)
401k
Revocable Trust

Pension Plans

Pension plans are often a key component of your employee’s benefits package from their perspective. But they can be costly for you.

Basically there are two types of pension plans:

  1. Defined benefit
  2. Defined contribution

Let’s expand on these plans!

Defined Benefit Pension

Now, defined benefit pension plans guarantee a certain level of monthly payments for an employee after they retire. These payments are based on factors such as the number of the years of service for the employee and their salary level. These payments are guaranteed regardless of the investment performance of any pension fund used to fund those payments. Over the last couple of decades in the US there has been a significant shift by employers away from offering these kind of plans due to the investment risk borne by the employer and the increasing longevity of retirees.

Defined Contribution Pension

Defined contribution pension plans allow an employee to contribute or withhold a certain amount of pre-tax earnings into a tax deferred savings account (typically a 401(k) plan but also including ESOPs). The amount of payments the employee will be able to enjoy in retirement is solely dependent upon the investment performance of the funds contributed. Often an employer will match some level of the employee’s contributions, since the employee is the one who bears the investment risk. The employee has greater flexibility in how their individual retirement funds are chosen, often being able to select from a menu of equity and bond mutual funds and determine the amount allocated to each fund selected.

Choosing the right retirement plan can go a long way towards retaining valuable employees and keeping them happy. Give attention to this significant part of the benefits you offer employees.

If you want to determine which candidates are the right fit for your company, then download and access the 5 Guiding Principles For Recruiting a Star-Quality Team.

Pension Plans

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Pension Plans

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National Stock Exchange of India (NSE)

See Also:
Common Stock Definition
Over the Counter Bulletin Board (OTCBB)
Currency Exchange Rates
Non-Investment Grade Bonds (Unsecured Debentures)
Australian Securities Exchange (ASX)

National Stock Exchange of India (NSE) Definition

The National Stock Exchange of India or NSE for short is the largest stock exchange market in India. It is the third largest in the world in terms of trading volume as well as the second fastest growing in the world today.

National Stock Exchange of India (NSE) Meaning

Located in Mumbai, India the NSE stock exchange was started by the Indian government in the year 1992. The National Stock Exchange is the largest next to the Bombay Stock Exchange (BSE). It can be used for most of the markets that you would find in any of the stock exchanges like stocks, bonds, futures, derivatives, mutual funds, etc. The NSE’s hours are from 9:00 AM – 3:30 PM Indian Time. The two leading owners in the NSE stock is the New York Stock Exchange (NYSE) as well as Goldman Sachs. Other owners include local banks and financial institutions around India.

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National Stock Exchange of India

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Keogh Plan

See Also:
Pension Plans
Deferred Income Tax
Tax Brackets
Contribution Margins
Employee Stock Ownership Plan (ESOP)

Keogh Plan Definition

The Keogh plan was developed by a United States Representative from New York named Eugene Keogh. A Keogh plan is a tax deferred retirement plan which has some advantages to the self-employed companies that have less than 10 employees working for them.

Keogh Plan Meaning

There are two types of Keoghs. The first is a defined contribution plan in which a fixed sum or percentage of a paycheck each period is contributed to the keogh account. In total a person can generally contribute 25% of their annual earnings at a max of $49,000. The employer is also able to contribute a total of $16,500 to each employee’s account making the total contribution $65,500. This is higher than other contribution plans making it a huge benefit.

The second, which is known as a defined benefit plan works off of a complicated pension formula which requires the work of an actuary. Although both of these plans receive more in benefits and contributions than most other retirement funds, there are several disadvantages as well. There is a penalty if a person pulls money out of their account before they’re 59 1/2. Withdrawals are also taxable as they are taken out of the account. However, because you are able to contribute cash without it being taxable the account is able to grow more quickly.

Keogh Plan Example

Dexter owns a Law firm in which he has 9 employees, Dexter wants to contribute the maximum amount of 25% of his salary to his Keogh Plan. Dexter makes a salary of $300,000 at this rate Dexter would contribute $75,000 into his Keogh account. However, she is only allowed to contribute a total of $65,500 ($49,000 + $16,500) as are the limits to a Keogh retirement plan.

Keogh Plan

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Hot Money

See Also:
Effective Rate of Interest Calculation
Fixed Interest Rate vs Floating Interest Rate
Interest Rate
Nominal Interest Rate
Term Deposit

Hot Money Definition

Hot money refers to the cash that investors from foreign countries will invest during the short term in search of the highest interest rate possible. Normally, you do this through term deposits or certificates of deposit (CDs).

Hot Money Meaning

Hot money flows usually occur when one country can provide a higher interest rate than the one where the investor currently lives or conducts business. Often times these investors will invest in short term deposits like CDs. Then they will jump the funds from bank to bank if they can obtain a higher interest rate. Sometimes they will even do this if there is a penalty involved in withdrawing the funds like in a CD. This would only occur if the interest rate at another institution were dramatically higher to cover the cost of withdrawing the funds.

Hot Money Example

Kawahonda is a hot money investor from Japan and is looking to aggressively invest $100,000 he currently has sitting in a savings account in Japan earning 1%. He begins looking in the United States, and finds that he can earn 5% in short term CDs. He immediately contacts a bank in the United States and deposits the $100,000 in a 3 month CD. There is a 1% penalty if Kawahonda were to withdraw his funds early. After a month invested in the CD Kawahonda finds another bank in the U.S. that offers a CD that pays 8%. Kawahonda immediately withdraws the $100,000 and invest the money in a 6 month CD. at the end of the six month period Kawahonda will have earned:

$100,000 +($100,000 * 1/12 *.05) = $100,417 = amount earned in original CD

$100,417 – ($100,000 *.01) = $99,417 = amount after penalty is assessed

99,417 + ($99,417 * 6/12 * .08) = 103,394 = amount earned in 8% CD

Note: By investing in the higher interest paying CD Kawahonda is able to make $2,144($103,394 – $101,250) more even with the penalty. It is also $2,894 ($103,394 – $100,500) more than if Kawahonda kept is money in his savings account domestically.

hot money

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Credit Letter

See Also:
Letter of Credit
Credit Memorandum (memo)
Debit Memorandum
Trade Credit
Proforma Invoice
5 C’s of Credit (5 C’s of Banking)

Credit Letter Definition

credit letter, defined as a letter written by a bank which declares that the account holder has enough funds to pay for something, is most commonly used during importation.

Credit Letter Explanation

A credit letter, explained as a two sided protection for both buyers and sellers, is a valuable tool for minimizing risk. With a credit letter of reference, the concerns of companies selling across boarders are put to ease. This letter serves two functions: proving that a company has the funds to pay for a shipment of products and protecting the purchasing company from loosing money. In this scenario, the bank protects the account holder by transferring funds only when it receives a document which proves that the products have been shipped.

Example

Ivan is both a Russian and American citizen. He has earned his place in the business world by relying on the experience he has gained. He now imports and exports products both to and from both nations. Ivan has a successful business and is trying to move ahead.

Ivan wants to purchase some products from Russia. Despite this, he is not able to visit the supplier. He wants to receive these products while protecting himself from the risks of international trade. To do this Ivan will use a credit letter of explanation.

Ivan talks with his bank to have a line of credit letter made. Then, he sends the letter to the supplier. After having the letter for a few weeks the company attempts to use the letter of credit without sending a shipment notice. Luckily, Ivan is protected by his bank. They refuse to transfer the payment until they received a shipment confirmation.

Ivan appreciates that his bank protected him. He could have lost a large sum of money without the line of credit letter of credit. Ivan thanks his account manager the next time he sees her.

credit letter

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