What if I Need the Money in My IRA Before Retirement?
It is possible to withdraw money from an Individual Retirement Account without incurring a penalty, but it should be used as a last resort. If you withdraw the money before age 59½, you will pay both a 10% penalty and regular income taxes on the amount you withdraw from a Traditional IRA. However, there are special circumstances that allow you to make withdrawals without being charged the 10% penalty. These circumstances might include: paying for college expenses (whether for you, your grandchildren, etc.), paying for costs associated with a disability, medical expenses (must be greater than 7.5% of your adjusted gross income), and first-time home purchase. Continue reading...
What is Earnings Before Tax (EBT)?
Earnings before tax (EBT) is used to look at cash flows after expenses but before taxes. In a world without tax, this is what earnings would look like. Taking advantage of an advantageous tax-event, or hiring a better CPA, or merging with a company that can reduce the tax implications of some regular transactions, can bring earnings closer to their before-tax amount. Earnings before tax from an accounting standpoint is net income (which is another word for earnings) with taxes added together with it. Continue reading...
What are Accounting Earnings?
Earnings that are reported in a given year may differ for the same company if different accounting methods were used. Earnings are the revenues of the company minus the cost of good sold, expenses, and investment losses. If that seems like something that’s pretty cut-and-dried, and will look the same no matter who is doing the accounting… well, that’s not entirely correct. Earnings can be made to look different if different non-GAAP or pro-forma methods are used. If non-recurring expenses are ignored or amortized in a pro-forma accounting method, then earnings will not match up to the GAAP-based books. Continue reading...
What is Acquisition Accounting?
Also known as Business Combination Accounting, there are specific guidelines and bits of information that must be documented on the books during an acquisition. Acquisition Accounting is a standardized way to account for the assets and liabilities of companies who are part of a merger or acquisition. International Financial Reporting Standards (IFRS) stipulate that even in a merger where a new company is formed, one company must play the role of acquirer and the other of acquiree, but that rule really only applies outside of the US. Continue reading...
What is a short position?
A short position is a sale made by an investor for a security which he or she will deliver to the buyer in the near future, but which he or she is hoping will go down in price in the near future so that a profit can be retained from the price collected in the short sale. A short position is a bearish play on a security which an investor believes will decrease in price in the near future. The investor offers shares for sale, and collects the current market price for the shares from the buyer. Continue reading...
What are some Key Numbers Related to the World Capital Markets?
As of 2014, global GDP was $77 trillion. The total market capitalization of all world stock markets is approximately $70 trillion, and about a fourth of that amount is the U.S. market. The U.S. economy is the largest by GDP, which for 'fiscal year' (FY) 2016 was approximately $19 trillion. The total value of notional derivatives fell to $18.1 trillion. How Many Dollars do We Have in Circulation? What is Currency in Circulation? Continue reading...
What is a support line?
A support line represents an estimation of where a price is likely to stop moving downwards, based on recent data and analysis methods. It is arrived at with different formulas for different indicator methods, but it is generally a line derived from moving averages and standard deviation which represents a lower level at which traders would expect a price to rebound back upwards. Several methods of technical and fundamental analysis plot a support line or two as part of a graphical representation of trends. Theoretically, a price will only deviate so far from its moving average before bouncing back toward the middle. Continue reading...
What is the Debt Ratio?
The debt ratio measures a company’s total debt to total assets. It is the simplest calculation available for determining how indebted a company is on a relative basis. The debt ratio is crucial for determining a company’s financial standing, and should be considered by potential investors. To calculate the debt ratio, one only needs to divide total liabilities (i.e. long-term and short-term liabilities) by total assets. Continue reading...
What are the Vesting Rules for My Keogh Plan?
Vesting rules depend on the type of Keogh contributions being made. The IRS imposes certain rules on Keogh Plans, which includes vesting restrictions. Different employers might have totally different vesting schedules, as long as they satisfy the IRS rules. It depends on the type of contribution being made, such as matching or profit-sharing or money-purchase contributions, whether the plan is a QACA, and so on. Many contributions are immediately vested, while some are gradually vested over a few years, and some are on a cliff-vesting schedule. Continue reading...
What Are the Contribution Limits for My SIMPLE IRA?
SIMPLEs allow higher employee deferrals than most retirement accounts. Employees are only able to make salary reduction contributions. As of 2016, they are able to defer up to $12,500 a year, but if an employee is over 50, they may defer an additional $3,000 as a “catch-up” contribution. However, an employee may choose not to contribute anything to their SIMPLE IRA. Employers, on the other hand, are required to make either a dollar-for-dollar matching contribution of 3%, or a non-elective contribution of 2% of the employee’s pay. The 3% match can be reduced to 1% in two out of five years if employees are notified before they make contributions. Continue reading...