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What is a foreign transaction fee?
Credit card companies and banks generally charge an additional percentage for all purchases made with a card in a foreign country. If you’re traveling abroad, you may want to find another way to pay. Most credit card companies and bank debit cards will charge an additional percentage on transactions made abroad, to help them pay the cost of clearing the transaction with international institutions. This is sometimes called a currency conversion fee. Continue reading...
ETFs vs Mutual Funds -- What's the Difference?
The better choice might be different for each investor. There is no clear-cut answer to this question, since it will depend on an investor’s unique situation and what’s being offered. If you intend to trade actively, ETFs might be a better choice since they have prices that update minute-to-minute during the day and their trades settle more quickly. If you are just buying and holding an index (see ‘index investing’), an ETF will give you the cost effective means for doing so. You may be able to buy into an ETF with lower initial requirements than a mutual fund, since you can buy one share instead of possibly having to meet a $1,000 minimum initial investment requirement for a mutual fund. Continue reading...
What is Account History?
Account history is a term especially useful for investment accounts, where transactions beyond a current month or year’s records are useful for reference. Most people are familiar with the transaction history that is available for the current month, quarter, or year on an individual’s savings, checking, and credit card accounts. These are often called “activity ledgers” or something similar. Account history that reaches further back might be more useful for investment accounts, where the current value of investments, and their cost basis, will depend heavily on account history from potentially years in the past. This sort of query can be made easily with online investment account viewing software from a broker or custodian company. Continue reading...
What is Cost of Debt?
The cost of debt is a calculation that determines the actual cost of a company’s debt financing. Since interest payments are generally tax deductible, the cost of debt may not be as simple as just adding up all of the interest paid on a loan. It would have to be adjusted for the tax savings, such that it is total interest paid less the tax savings. Continue reading...
What is a No-Cost Mortgage?
No-Cost Mortgages waive the initial closing costs by making a repayment structure for those costs into the interest payments on a mortgage loan. Closing costs can range from 2%-5% of the total cost of the home, and include attorney fees, underwriting fees, application fees, and so on. These costs are deferred and are paid in the form of additional interest on the loan. Closing costs are separate from down-payments of equity, and are a miscellaneous hodgepodge of a wide range of fees associated with closing a mortgage deal. These costs are sometimes covered by the seller, but most often they are paid by the buyer. Continue reading...
What is a Variable Cost?
When budgeting for companies, some expenses are fixed overhead and some are variable, which depend on the amount of work being done. The direct cost of materials and labor are a good example of variable costs that will fluctuate with production levels. There may be an equation that the company can use to reliably predict these variable costs, but they are not fixed costs. From an accounting perspective, of course, these costs would be in separate sections. Fixed costs include warehousing, depreciation, insurances, rent, taxes, salaries, and so forth. These can be put into the budget before anything else happens or any orders have been taken for the year. The variable costs must be taken into account on the fly. Continue reading...
How Does Ethereum Mining Work?
Ethereum mining is the process of solving blocks of encrypted blockchain data using a proof-of-work algorithm and occasionally being rewarded with Ether. Blockchain data is validated and added to the distributed ledger by computers on the network performing the task of “mining,” which is continually attempting to solve puzzles, basically, which each unlock a block of encrypted data containing information about transactions, and, on the Ethereum platform, information about distributed application functions and smart contracts. Once a block is unlocked, the data within is shared with the network and added to the distributed ledger. Continue reading...
What is a Billing Statement?
Billing Statements are primarily used by credit card companies, listing the transaction history and balance due on a customer account. A billing statement is mailed, physically or electronically, to a customer at the end of a billing cycle, which is usually monthly. The statement will show the balance due and the transaction history, perhaps including recent payments received from the customer. The term “billing statement” is sort of a blend between two distinct documents: a bill and a statement. Continue reading...
What is Adjusted Cost Basis?
Adjusted Cost Basis (ABC) is the value of an item for tax purposes, adjusted for depreciation and expenditures. Sometimes abbreviated ABC, adjusted cost basis is the valuation of an item for tax purposes; that is, if it is to be bought or sold, what gains or losses would be assigned to it? Some business assets are depreciated on a set schedule, such as equipment. For equipment sold or taken as part of an acquisition a few years after it was purchased, the depreciation factor would reduce the value of the item for tax purposes by perhaps as much as 20% per year. If a company spent significant amounts of money improving a facility, the cost basis of the facility would go up by that amount. Continue reading...
What is Cost of Capital?
The Cost of Capital is the hurdle over which a business must get to generate positive cash flow. It is what it will cost companies to get capital from investors. Companies sometimes use debts or equities to finance their business operations. The service paid on debt and the operating expenses are lines over which the revenue must get to be saved as retained earnings or distributed as dividends. The yield expected by investors on debt is the cost of capital for the company taking on those loans. Continue reading...
What is Abatement Cost?
Environmental regulations or lawsuits occasionally force companies to comply by taking measures or acquiring technologies to abate their environmental impact, and the overhead of such projects is called Abatement Cost. Increasingly over the last 20 years or so more countries and states have begun imposing laws on companies to reduce their carbon emissions, noise pollution, and various other environmental impacts. The costs of enacting measures or technologies to help them comply with such regulations is known as abatement cost. Continue reading...
What Does Opportunity Cost Mean?
Opportunity cost is a fundamental concept in economics and decision-making. It refers to the potential loss of choosing one option over another and helps individuals and organizations make informed decisions by considering the potential benefits and costs of each option. Opportunity cost also plays a significant role in macroeconomics, trade, and determining the price of goods and services. Understanding opportunity cost is essential for making trade-offs, allocating resources, and achieving long-term success. Continue reading...
What is dollar cost averaging?
Dollar cost averaging (DCA) is a method of hedging against the risk of investing a lump sum at high market prices. With DCA, the investor deploys money at set intervals, hoping to get the best average price per share. If you use the same amount of money to buy shares at set intervals, you will acquire more shares when the market is down, and fewer shares when the market is up, so theoretically you would have acquired more of the advantageously-priced shares overall and will be in a better position in the long run. Continue reading...
What is Lifetime Cost?
Lifetime cost is the total amount of money that a good will cost a consumer over the entire course of ownership. This included related, add-on costs such as maintenance, fuel, insurance and so on. These costs can dwarf the actual purchase price of the item. Lifetime cost is also known as total cost of ownership (TCO), and it is a budgetary way to look at the expenses that go along with the purchase of an item. Continue reading...
What is the Cost of Goods Sold?
The Cost of Goods Sold, or COGS, represents the overhead associated with the materials and labor, which were needed to produce the goods sold during a given period. The COGS calculation is only concerned with the production costs of a good, and does not take distribution and sales force costs into account. It will always include the direct materials cost and direct labor cost for each item, but indirect overhead associated with production, such facility costs, are distributed between Inventory and COGS, according to Generally Accepted Accounting Practices (GAAP). Continue reading...
What is an Unrealized Gain?
Gains and losses are only "real" when shares are sold or withdrawals are made, but up until that point the gains were more of a notional amount, and are said to be "unrealized." A more salient way to understand unrealized gains is to look at the opposite: unrealized losses. If a person makes an investment of $1,000 and the value of the shares drops sharply the next week, has the person lost any money? The answer of course is no, not unless he sells the shares and takes the lower market price for them. Continue reading...
What is commodity paper?
Commodity paper is the contract for a loan which is secured by collateral in the form of a commodity held in a warehouse or in transit. This is basically a form of warehouse financing, where the inventory in storage is verified and the changing level of inventory insures a larger or smaller line of credit from the lender. In this arrangement, however, there is one agreed-upon loan and collateral amount. Continue reading...
What is an Interest Rate?
An interest rate is a simple financial principle that’s been around for centuries, whereby a borrower has to pay for money borrowed. The interest rate is agreed to between the lender and the borrower, and there may be provisions under which the rate could change over the course of a loan. In simple terms, an interest rate is the cost of money. Continue reading...
What is the currency carry trade?
Assets that are held are sometimes analyzed in terms of the cost of carrying them, called the cost of carry. In certain situations, there may be a potential for profit if an asset that might otherwise have a cost of carry could be traded for an asset that actually generates profit. The arbitrage opportunity that exists in that space, and the market formed by it, is sometimes called the carry trade, or the currency carry trade where it applies to currency. Continue reading...
What is a Dividend Rollover Plan?
Dividend rollover plan is another, rarely used way to refer to a Dividend Reinvestment Plan (DRIP). Unfortunately just reinvesting dividends in a systematic way will not get you out of any tax implication associated with the dividends attributed to your account. An automatic dividend reinvestment plan (DRIP) is an option in some investment accounts and financial products. Any dividends paid out will be reinvested in the same mutual fund, ETF, or stock at the earliest possible opportunity. Continue reading...