As an example of accumulated depreciation, let’s say that a company purchased a piece of machinery that it must have for its production process. That machinery costs $100,000 and is expected to be in service for ten years. First, you calculate the depreciation of that asset for the first year it is in service. If you’re using the straight-line depreciation method—meaning taking the same amount of depreciation in each year of the asset’s useful life—and there is no salvage value, then the depreciation calculation is: Depreciation = Cost of the Asset ➗ Number of Years in Service In this case, depreciation would be $100,000 ➗ 10 = $10,000 per year For accumulated depreciation, the formula is: Accumulated Depreciation = (Cost of the Asset - Salvage Value) ➗ Life of the Asset * Number of Years We already know the depreciation for each year is $10,000, and there is no salvage value....

Definition and Examples of an Annuity Income Rider Annuity income riders are one way to protect against market losses (or in the case of an indexed annuity, lukewarm market performance). Even if your annuity loses money, you’re still guaranteed a minimum income or withdrawal amount. When you buy an indexed or variable annuity, the money in that annuity grows according to how the market performs. In an indexed annuity, you’re protected from market losses but only get a portion of market gains credited to your account....

Grace periods vary, depending on insurance type and company. Not all insurance companies have grace periods. Your policy will define whether there’s a grace period, how long the period is, what penalties come with it, and whether a claim will be paid if payment is received within that period of time. Insurance grace periods vary by state as well as by company. Some states require no grace period at all....

Learn how cash accounting works, what types of businesses can use it, and its pros and cons. Definition and Examples of Cash Accounting Under cash accounting, a business’s bookkeeper records income and expenses only when the cash is received or spent. In other words, your accounting records will match the dates when cash hits or leaves your bank account. Cash accounting is often compared to accrual accounting, which records income and expenses as soon as they were incurred....

Definition and Examples of Caveat Emptor Caveat emptor is a Latin phrase that translates to “let the buyer beware.” The idea behind caveat emptor is that the duty falls on the buyer to ensure that the product, service, or property they are buying is of the quality they expect. While a common practice from the past, caveat emptor has become less relevant over time. Sellers have gained an unfair advantage due to numerous factors, so many regulations have been put in place to provide buyers with more protection....

Generally expressed as a percentage amount and outlined in your policy documents, coinsurance allows you to share the cost of the insured service with the insurance company—your insurance company pays the portion of the cost of the service that is insured, and you pay the remainder. Coinsurance only applies once you’ve paid your deductible. Once you’ve met your deductible for the year, your coinsurance percentage will be charged to you, along with any copays that apply....

Before moving forward with a collateral assignment, learn how the process works, how it impacts your policy, and possible alternatives. Definition and Examples of Collateral Assignment Collateral assignment is the practice of using a life insurance policy as collateral for a loan. Collateral is any asset that your lender can take if you default on the loan. For example, you might apply for a $25,000 loan to start a business....

This kind of insurance policy is purchased by a lender to protect itself from the potential loss of the vehicle if the borrower has not shown proof of adequate insurance, or has had coverage lapse or canceled. Carrying a certain level of auto insurance is generally required per the loan agreement. Lenders have a legal right to purchase insurance to protect the collateral—and bill the borrower for it. Acronym: CPIAlternate names: forced car insurance, lender-placed insurance, creditor-placed insurance, force-placed insurance...

For instance, when you buy a home, the property is used as collateral to secure the mortgage. Before your home loan lender signs off on the mortgage, an appraiser will evaluate the home to ensure it’s really worth the price you’re paying for it. How Collateral Value Works For certain types of loans, your lender will require collateral to secure the loan. If you default on the loan—meaning you stop repaying it—your lender can seize the asset you used as collateral and sell it to recover the funds lost....

An example of contractor insurance is contractors equipment insurance, which covers loss or damage to equipment owned by contractors and used in their business, such as backhoes, forklifts, and air compressors. Contractors equipment insurance is also designed to cover property that’s frequently moved from one job site to another. How Contractor Insurance Works Contractor insurance safeguards contracting businesses from risks, such as workplace accidents and fires, that can lead to liability claims and property losses....

Understanding how the cost of attendance is calculated and what it includes can help students learn how it impacts their eligibility for financial aid and student loans, and what it might mean for their overall budget. Definition of Cost of Attendance COA is the estimated total cost of going to a particular college for one school year. Every college and university in the U.S. is legally required to provide a COA for its students....

How Credit Card Delinquency Works Your delinquent status is reported to the credit bureaus and is included in your credit report. A late payment is added to your account, and your credit card issuer may begin calling, emailing, or sending letters to urge you to get you caught up again. Your credit card issuer is permitted to raise your interest rate to the penalty rate when your payment is 60 days delinquent....

For example, if France exported tires to the U.S. for less than their normal value, it could make it difficult for American tire manufacturers to compete. A prolonged “dumping” of cheap tires could force American tire manufacturers out of business. While this could also be costly to France, once it eliminated American competition for its tires, it could hike the price again and recoup some of the lost revenue....

If you were a single taxpayer in tax year 2022, $12,950 of your gross income, or total income, is exempt from federal taxes because this is the standard deduction available. For single taxpayers in tax year 2023, the standard deduction is $13,850. All you have to do is claim the standard deduction on your return. You can subtract this number—and other sources of exempt income—from your total income, so you’ll only pay taxes on the rest of your income....

adamkaz / Getty Images Definition and Example of Fixed Income Investing Fixed income investing focuses on investments that pay a return on a fixed schedule. These returns could be dividends or coupon payments. Those who are looking to adopt this method often focus on low-risk investments. These may be bonds, bond mutual funds, money market funds, certificates of deposit (CDs), and blue chip stocks. How Fixed Income Investing Works Fixed income investing involves certain goals that make assets like bonds, money markets, and CDs the best options....

In addition to paying off a mortgage after the death of an insured borrower, some policies protect against a disability interfering with mortgage payments. In other words, if you can’t earn an income, your insurance company can make monthly mortgage payments for you. How Mortgage Protection Insurance Works A home loan might be one of the biggest financial commitments you ever take on. Leaving that responsibility to your loved ones when you pass away can put a large financial burden on them....

Price discovery is the primary function of exchanges like Nasdaq and the New York Stock Exchange (NYSE). Here’s a look at how the price-discovery process works and what influences buyers and sellers in the financial markets. Definition and Example of Price Discovery Price discovery for financial assets, stocks, bonds, commodities, and derivatives takes place on exchanges. Exchanges are auction markets where buyers and sellers simultaneously enter competitive bids. The exchanges publish prices for each listed stock, bond, or commodity that are continuously updated throughout the day....

In a PIPE transaction, there are two parties: the issuing company and an accredited investor. Companies that use PIPE transactions most often have substantial capital requirements. Examples include companies in industries like science, biotech, real estate, and technology. Acronym: PIPE How Does Private Investment in Public Equity Work? A PIPE transaction takes place between a publicly traded company and an accredited investor. The securities are generally either newly issued shares of common stock or existing shares held by a selling shareholder....

Quarterly reports filed with the SEC after each of the first three quarters of the year are called 10-Q reports. The annual report filed with the SEC that includes the full year’s financial information is called a 10-K. The two types of reports provide similar information, although a 10-K is typically more detailed and comprehensive. Alternate names: Quarter on quarter, quarter to quarter, or one-quarter growth rates Acronym: QOQ or Q/Q Alternate definition: Quarter over quarter also can refer to larger-scale economic performance such as the GDP report that is released by the U....

Suppose you borrow money and hand over the collateral. The original lender then turns around and borrows money, repledging your collateral. Your lender no longer has ultimate control over the collateral; their lender now does. Rehypothecation can result in big problems, especially in the case of “regulatory arbitrage,” which is the practice of conducting business in a way that takes advantage of more favorable regulations—sometimes in completely different countries. In other words, it lets an institution take advantage of opportunities created by different regulations....