What Is Tax Indexing? Tax indexing is the adjustment of the various rates of taxation in response to inflation and to avoid bracket creep. Bracket creep occurs when inflation drives income into higher tax brackets, resulting in higher income taxes but no real increase in purchasing power. Tax indexing attempts to eliminate the potential for…
Imagine a scenario in which you are ready to sell your car, which you now own free and clear, only to be told by your lender that you cannot sell it until you pay off another unsecured loan you have with the same lender. In essence, you are being told by the lender that you…
What Is a Solvency Capital Requirement (SCR)? A solvency capital requirement (SCR) is the total amount of funds that insurance and reinsurance companies in the European Union (EU) are required to hold. SCR is a formula-based figure calibrated to ensure that all quantifiable risks are considered, including non-life underwriting; life underwriting; health underwriting; and market, credit, operational,…
What Is a P45 Form? P45 is the reference code of a tax form titled “Details of employee leaving work” that an employer gives to an employee upon termination of employment in the United Kingdom. The P45 is part of the pay-as-you-earn (PAYE) system. Under the PAYE system, income tax and National Insurance Contributions (NIC) are withheld from…
What Is Scheduled Personal Property? Scheduled personal property is a supplemental insurance policy that extends coverage beyond the standard protection provided in a homeowners’ insurance policy. By purchasing a scheduled personal property policy, owners can ensure full coverage of expensive items, such as jewelry, in the event of a claim. Key Takeaways Scheduled personal property is an additional…
What Is the Difference Between Gross Profit Margin and Net Profit Margin? Profit margin is a percentage measurement of profit that expresses the amount a company earns per dollar of sales. If a company makes more money per sale, it has a higher profit margin. Gross profit margin and net profit marginon the other hand,…
What Is Income Smoothing? Income smoothing uses accounting techniques to level out fluctuations in net income from one period to the next. Companies indulge in this practice because investors are generally willing to pay a premium for stocks with steady and predictable earnings streams as opposed to stocks whose earnings are subject to more volatile…
What Is an Exceptional Item? An exceptional item is a charge incurred by a company that must be noted separately in its financial report in accordance with Generally Accepted Accounting Principles (GAAP). Despite the name, such items are considered to be ordinary business charges but they must be separated out for the sake of financial…
What Is Transfer of Risk? A transfer of risk is a business agreement in which one party pays another to take responsibility for mitigating specific losses that may or may not occur. This is the underlying tenet of the insurance industry. Risks may be transferred between individuals, from individuals to insurance companies, or from insurers…