Tag Archives | government

More Questions Your Banker Wants Answered…

monopoly bankerIn a recent post, I talked about a conversation I had with our banker and the three questions she’d most like answers to.  In case you missed it, her questions were…

  1. How are you feeling about your business and the local economy?
  2. What is the outlook for the rest of the year?
  3. What are you doing about it?

More Questions Your Banker Wants Answered…

In response to the article, several of you reached out with questions of your own to add to the list.  Not surprisingly, the questions largely focused on what is going on in the Houston economy right now as a result of the decline in oil prices. Here were your thoughts:

1.  How is the current economic situation impacting your specific industry?

If you’re doing business in Houston you’ve likely felt (or will soon feel) the effects of the drop in oil prices.  Even if you’re not in the energy sector, your banker wants to know that you’ve taken a look at how the economic situation may affect you.

2.  What are the recent trends in your industry that impact your operations?

What other trends are affecting your industry?  Government regulation, increased competition, technology, substitution, etc.?  Your banker wants to know what your plan is to deal with these trends whether it entails mitigating risks or exploiting a competitive advantage.

3.  What are your 5- and 10-year goals and what are you doing today to achieve those goals?

It’s important to your banker to know where you’re headed in the long-term.  It’s easy to get wrapped up in the day-to-day operation of a business, but your banker wants to know that everyday decisions are made with the bigger picture in mind and not just reactions to the situation on the ground.

In the original article, I talked about the 5Cs of credit and how Character was the most important “C”.  Based upon your comments, I’d have to say that Conditions may be of greater importance (or at least more immediate) to you in the current economic climate.

Thanks so much for your feedback!  I’d love to hear what other questions you have.

Questions your banker wants answered

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Special Tax Bond

Special Tax Bond Definition

A Special Tax Bond is a bond, usually issued by a government entity. It uses a particular tax to pay off creditors.

Special Tax Bond Meaning

Local governments like cities or states normally use special tax bonds. A government entity will use a special tax bond for city or state management. Tax bond payments are usually imposed on the general population through a property tax or special income tax. This depends on the city or state. Once these payments are collected, they are sent off to creditors who provided funding for the particular job.

Special Tax Bond Example

For example, Middleland decided that it would like to build a large park in the middle of the city. Middleland thus decided to issue special tax bonds to gain financing for the project. They used the financing to accomplish the following:

  • Tear down older junky houses
  • Plant grass in the cleared out area
  • Build a running track as well as a new playground

As the land is being developed, Middleland imposes a special tax on the population in the form of extra property taxes. Once the city makes these collections, they are then sent to creditors to make coupon payments as well as principal when the project is all finished.

special tax bond

See Also:
Ad Valorem Tax
Direct Tax
Marginal Tax Rate
What is a Bond?
Coupon Rate Bond

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Fiat Money

See Also:
Cash Cycle
Categories of Banks
What are the 7 C’s of banking?
Currency Exchange Rates
Currency Swap

Fiat Money Definition

The definition of fiat money is currency made into legal tender. Furthermore, a governmental entity backs this tender to ensure its legitimacy.

Fiat Money Explained

Normally, fiat money is issued for a government or large grouping of countries. For example, the U.S. Federal Reserve issues dollar bills. When a person uses this, it is assumed that that particular bill has investment power because it is backed by the full faith and backing of the U.S. government. However, in Europe, the European Bank equivalent to the Federal Reserve issues euros to the local population. This process occurs all over the world for different countries and the money is only useful to a person in that particular country. If an American were to try to pay for a pack of gum in Brazil with a U.S. dollar bill, then he/she would be unsuccessful because in Brazil the dollar is of no use within the country of Brazil.

fiat money

 

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Direct Tax Definition

See Also:
Indirect Labor
Direct Labor
Direct Cost vs. Indirect Cost
Unsecured Credit
Flat Tax Rates
Tax Abatement

Direct Tax Definition

Direct tax, defined as a tax directly on the amount of a taxable item, is the current tax method of the U.S.A. Currently in the U.S., this includes taxes wages, property, capital gains, or directly to the amount of some other valuable item. In some situations, direct tax credits are also given to those who need or would benefit from decreased tax income.

Direct Tax Explanation

Direct tax, explained as a tax on valuables, differs greatly from indirect tax. Where indirect tax taxes a factor which does not directly increase the wealth of the individual, like consumption, direct tax places a tax on the factors that increase wealth in a person’s life. This is the difference of direct tax vs indirect tax.

Direct Tax Advantages

Direct tax advantages are numerous. With a direct tax, the government closely knows the amount to be taxed and the amount applied. Direct tax cuts out a liaison, preventing corruption of lower level tax officials. Additionally, many argue that direct tax apportionment creates a civic sense; that people think in terms of the community rather than themselves.

Direct Tax Disadvantages

Direct tax disadvantages also exist. Under direct taxation, people are taxed based on their assumed ability to pay taxes. This means that the certain members of the population receive a disproportionately larger amount of taxation that others. Additionally, direct tax allows the tax rate of individuals to be decided by government rather than their actions. These two factors relate to the common opinion that direct tax can be demotivational. With an indirect tax, like a flat consumption tax, people are taxed based on their amount of consumption. With a direct tax, people are taxed based on the amount of wealth they build. Some argue that this causes the benefits of productivity to be decreased, thus providing a disincentive to produce as much as possible.

Direct Tax Example

For example, Nancy is a financial adviser. She helps others make investments which improve their wealth. Thus, Nancy believes she is helping others to live the best life they can.

Nancy deals with direct tax code often. First, her personal wages fall under direct taxation. Next, the property her clients invest in experiences a direct tax in the form of property tax. Additionally, the financial instruments, which hold the wealth of her clients, fall under direct taxation. When they receive capital gains, they pay a certain portion to the government as tax.

Nancy sometimes questions the government for the method of direct taxation. Despite this, she knows that direct taxation is here to stay. She also knows that the government engages in projects which are important to the people. Though she does not agree with all of the tax laws, she accepts it as a part of her life and still seeks to be the best financial adviser she can.

direct tax definition

 

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Controller vs Comptroller

See Also:
Controller
Controller vs CFO
The Importance of Knowing Your Leadership Competencies
Flash Reports Are a Game Changer

Controller vs Comptroller

What is the difference is between a controller vs comptroller? At the end of the day, the controller vs comptroller relationship is not all too diverse. A controller is a person that is at the highest accounting level in an organization. In other words, he/she is the head of the financial division of a company. Controllers are responsible for the financial accounting reporting, analysis and interpretation to the executive management team. They also administer the internal controls within an organization. A comptroller must possess the same duties of a financial controller. There is not a significant difference in the roles of a controller versus comptroller. A comptroller definition is a senior accountant in a government organization, however, the duties of a comptroller and controller do not differ. However, there seems to be a slight difference between the two entities when examined at a closer level.

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Origins Of Comptroller Vs Controller

Because both definitions seem strikingly similar, why have two terms in the first place? Years ago in the 1800’s, the term “comptroller” arose from a careless misspelling of the term “controller.” At the same time, if one was to examine the etymology of the term “comptroller,” the word itself has French roots that date back to the 15th century. The original English word, countreroller, is a word that means “one who specializes in checking financial ledgers.” From then on, the spelling, along with the duties of a regular controller, stuck and the term “comptroller” became a similar term referring to a financial officer in the government sector.

Controller in the United States

While in the United States, where capitalism seems to have caused a consolidation of the terms controller versus comptroller, it seems that the term “comptroller” seems to have developed a slight difference in the European sector. The difference in question seems to be one involving the expenses involved with products in a company. A comptroller seems to oversee the overall costs that go into the services a company is providing.

On the other hand, the controller is merely concerned with the bottom line; more specifically, the costs that are associated with the final product within a company. Because the controller is more concerned with the bottom line at the end of the day, his job seems to carry a little more weight financially. Therefore, you would most likely pay a person with the title controller more than a comptroller. Though, the amount paid most certainly depends upon the company hiring. If nothing else, the New York Times, when referring to the controller-comptroller relationship states: “the official title controller, in all laws, public records, and documents, be spelled controller, that being historically and etymologically the true and right spelling; and that the false and offensive form ‘comptroller,’ born of ignorance and continued in darkness, be discarded.”

A controller or a comptroller can act as a financial leader in your company. Download the free 7 Habits of Highly Effective CFOs to find out how you can become a more valuable financial leader.

controller vs comptroller

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controller vs comptroller

 

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BM&FBovespa

BM&FBovespa Definition

The BM&FBovespa definition is known as the Bolsa de Valores Mercadorias & Futuros de Sao Paulo or the Sau Paulo Stock Exchange in English. It is the largest stock exchange in Brazil, fourth largest in the Americas, and tenth largest in the world in terms of market capitalization. Furthermore, this stock exchange is currently one of the fastest growing in the world.

BM&FBovespa Meaning

The BM&FBovespa exchange was founded in Sao Paulo in the year 1890. Until the 1960s, the government controlled it. The Comissão de Valores Mobiliários currently regulates it. This is essentially the same thing as the Securities and Exchange Commission in the United States. Although it has made several changes along with the rest of the world adopting an electronic trading system (an upgrade from its old phone system), it’s trading hours tend to be a bit odd. For example, it has pre and post trading sessions before it has its normal operating exchange time. This index is also known as the Ibovespa.

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bm&fbovespa

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bm&fbovespa

See Also:
New York Stock Exchange (NYSE)
London Stock Exchange (LSE)
Euronext
Tokyo Stock Exchange (TSE)

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Ad Valorem Tax

See Also:
Flat Tax Rates
Marginal Tax Rate
Tax Brackets
Tax Efficiency
Internal Revenue Service (IRS)
Special Tax Bond

Ad Valorem Tax Definition

Ad Valorem, which is Latin for “according to value“, refers to the taxes imposed on people usually by local or state municipalities. The two types are ad valorem property taxes and ad valorem tariff taxes.

Ad Valorem Tax Meaning

Some U.S. states and local governments main income comes from an ad valorem tax. The first of these is a ad valorem property tax. This tax requires an appraise to value a household or land on a periodic basis. Once the value is determined, the owner is taxed accordingly. The other ad valorem example is a tariff on imports to the state or local government. These ad valorem tariffs are imposed upon imports into the state or local government. Often times it is a percentage of value of the goods being imported. Thus, if the value of the good goes up according to domestic goods then there is very little need to protect the domestic market. However, if the price goes down for international goods as compared to domestic goods then the tariff protects the domestic producers and provides income to the local government.

Ad Valorem Tax Example

For example, Bob owns a household worth $300,000, and pays property taxes to the state government at 5% or $15,000. Recently, Bob’s house has an appraisal performed. Now, he has to pay $20,000 in ad valorem taxes. What is the new value of Bob’s land? See the following equation worked out:

Bob’s land = $400,000 = $20,000/.05

ad valorem tax, Ad Valorem Tax Definition, Ad Valorem Tax Example

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