Market value added (MVA) is a calculation that shows the difference between the market value of a company and the capital contributed by all investors, both bondholders and shareholders. In other words, it is the sum of all capital claims held against the company plus the market value of debt and equity. It is calculated as:
‘Unfavorable variance’ is an accounting term that describes instances where actual costs are greater than the standard or expected costs. An unfavorable variance can alert management that the company’s profit will be less than expected. The sooner an unfavorable variance is detected, the sooner attention can be directed towards fixing any problems.
Unauthorized insurer refers to a fraudulent operation in which a company poses as an authorized provider of a financial protection plan when it is not one. Unauthorized insurers take advantage of consumers and sometimes even insurance agents to collect premiums on nonexistent policies. It is illegal for unauthorized insurers to conduct business.
Veterans group life insurance pays cash to the beneficiaries of a deceased member of the armed forces who had completed his or her service. Veterans Group Life Insurance (VGLI) is for service members who have completed their service and wish to continue to have life insurance coverage carried over from their Servicemembers’ Group Life Insurance (SGLI) policy. They have one year and 120 days from the date they become veterans to exercise this option, and VGLI is a renewable term policy.
A credit-linked note (CLN) is a security with an embedded credit default swap permitting the issuer to shift specific credit risk to credit investors. Credit-linked notes are created through a special purpose vehicle (SPV), or trust, which is collateralized with AAA-rated securities. Investors buy credit-linked notes from a trust that pays a fixed or floating coupon during the life of the note. In return for accepting exposure to specified credit risks, investors who buy credit-linked notes typically earn a higher rate of return compared to other bonds.
A habendum clause is a section of a contract that deals with rights, interests, and other aspects of ownership being given to one of the parties. Consisting of basic legal language, it is usually included in property-related documents. Most people are have experience with it through real estate transfers, but it is used in all manner of leases and deeds, especially in the oil and gas industry.
A Locked-In Retirement Account (LIRA) is a type of registered pension fund in Canada that does not permit withdrawals before retirement except in exceptional circumstances. The locked-in retirement account is designed to hold pension funds for a former plan member, an ex-spouse, or a surviving spouse.
The term fiscal year-end refers to the completion of a one-year or 12-month accounting period. The fiscal year is the period used for calculating annual financial statements. A company’s fiscal year may differ from the calendar year, and may not close on December 31 due to the nature of a company’s needs.
The Employee Retirement Income Security Act of 1974 protects Americans’ retirement assets by implementing rules that qualified plans must follow to ensure that plan fiduciaries do not misuse plan assets. Under ERISA, plans must provide participants with information about plan features and funding and regularly furnish information free of charge.
Capital budgeting is the process a business undertakes to evaluate potential major projects or investments. Construction of a new plant or a big investment in an outside venture are examples of projects that would require capital budgeting before they are approved or rejected.