A thru L   |   M thru Z


Management Buyout: Management may wish to purchase the company. A leveraged buyout is the use of borrowed funds to complete the purchase. If management has existing funding sources to pay a premium over the existing fair market value of outstanding shares, the company becomes a private corporation without a majority of shares trading on the market. Motivations may include preservation of present management positions, privacy in management operations, or potentially substantial capital gain with future expansion and anticipated profits.

Management Fee: A charge against an investor’s assets for the fund manager’s services in overseeing the portfolio.

Mandatory Employee Contribution: While participation in an employee benefit plan is voluntary, participants who join agree to its contractual terms for mandatory employee contribution. Participants frequently enjoy the possible gain of employer matching contributions.

Market Risk: Also called systematic risk. The portion of a security’s risk common to all securities in the same asset class, and that cannot be eliminated through diversification.

Market Timing: Making buy-sell decisions by attempting to predict market trends, such as the direction of stock prices, the direction of interest rates, or the condition of the economy.

Maturity: The date a long-term interest-bearing investment, such as a bond, becomes due and payable.

Medicaid: Federal program that covers long-term nursing home care for individuals who are financially unable to do so.

Medical Savings Account (MSA): An employer-sponsored account that allows employees to help supplement high deductible health insurance coverage.

Medicare: Federal program that covers health care for individuals age 65 and over.

Minimum Participation Requirements: Employee benefit pension plans usually require minimum participation requirements. Generally, a participant must be a full-time employee, 21 years of age, and having completed one year of employment. Employee welfare benefit plans may provide a separate criterion for employee participation.

Monthly Housing Expenses: The sum of the principal, interest, and taxes a borrower pays on a monthly basis. Determines affordability in relation to total income.

Mortality Table: A statistical table showing the death rate of people at each age, usually expressed as the number of deaths per thousand.

Municipal Bond: A tax-exempt bond that may be issued by a state government or agency, or by a town, county, or other political subdivision or district.

National Association of Securities Dealers Automated Quotations (NASDAQ): A system quoting current prices for securities traded over the counter, as well as many listed on the New York Stock Exchange (NYSE).

Net Income: Total income minus expenses and taxes.

Net Worth: Assets minus liabilities. Commonly defined as "all that you own less all that you owe."

New York Stock Exchange (NYSE): Also called the Big Board and The Exchange. The oldest and largest stock exchange in the US, listing the country’s largest corporations.

Noncontributory Retirement Plan: A pension plan may be funded only with employer contributions, requiring no employee contributions. A "defined benefit" pension plan is a noncontributory retirement plan.

Nondeductible Contribution: A contribution made to an individual retirement arrangement (IRA) and designated by the holder as nondeductible for income taxes.

Nonforfeitable: Upon vesting, a benefit of an employee benefit plan becomes nonforfeitable and payable upon any occurrence listed in the employee contract. Some benefits may be conferred immediately or on a deferred basis.

Nonqualified Plan: A retirement or employee benefit plan that is not eligible for favorable tax treatment.

Notary Public: An officer of the public that can authenticate signatories on documents, and take depositions or oaths. A state or jurisdiction may authorize an applicant to certify specific documents usually for a term of years. Banks, insurance agencies, legal offices, and government buildings often have persons who are notary publics on staff.

Offering Price: The per-share price at which a stock or mutual fund is offered to the public.

Old-Age, Survivors, and Disability Insurance (OASDI): A tax levied on all self-employed and employed workers to fund Social Security benefits. A portion of the Federal Insurance Contributions Act (FICA) funds old-age, survivors, and disability insurance while a smaller portion funds hospital insurance. The premium tax is assessed based on an annual taxable wage base. However, employers and employees contribute a percentage of the FICA tax.

Option: The right to buy or sell a security for a specific price during a stipulated period. If the option is not exercised during this period, it expires and the buyer forfeits the money paid.

Ordinary Income: Income from normal activities, as distinguished from capital gains earned from the sale of assets.

Over The Counter (OTC): A security, typically of a smaller company, not listed or traded on an exchange. Also, a market where transactions are conducted among security dealers over a network of telephone and computer lines, rather than on the floor of an exchange.

Overdrawn: When more money is withdrawn from a bank account than it contains.

Paid-Up Additions: Additional life insurance coverage that is typically purchased with policy dividends. Paid-up additions may have a cash value component in addition to a death benefit.

Par: The face value of a stock or bond when issued. The par value may bear little relationship to a security’s current market value.

Partnership: A contractual association between two or more individuals who share in the management, as well as the profitability of a business venture. If the agreement specifically contracts for only an investment obligation, the investor is a limited partner. If responsibilities include management or supervision of operations, the holder of that responsibility is a general partner. Partnerships employ general partners, while limited partners associate through securities transactions.

Past Due: The period after a due date (the date a payment was due to a creditor). When an account is past due the creditor may assess a late fee, or consider the account delinquent, and report it to a credit reporting agency.

Patent: An official license granted by the Patent Office to issue exclusive right to an individual or business for production or sale of a specific invention. The financial value of a patent is the future monetary returns from its economic worth.

Pension: An employer-provided qualified retirement plan. Examples of pension plans include defined benefit plans, profit sharing plans, bonus plans, employee stock ownership plans (ESOPs), thrift plans, target benefit plans, and money purchase plans.

Permanent Life Insurance: Life insurance with a cash value, such as whole life or variable life. Permanent life insurance generally refers to most forms of life insurance other than term.

PITI: Principal, interest, property taxes, and insurance generally comprise the monetary payment to a mortgage lender. Residential mortgage lenders usually require evidence that homeowners have property and casualty insurance if they do not fund the insurance as part of their monthly payment.

Plan Administrator: As designated in the insurance or retirement documents, plan administrators of employee benefit programs maintain government regulations and procedures, and confirm that all participating employees receive annual reports.

Plan Sponsor: Employers who establish and perpetuate a qualified employee benefit pension plan. Although the plan sponsor (employer) has the ultimate responsibility for plan administration, plan sponsors often use an outside consultant, corporation, government agency, or labor organization to confirm the implementation of Internal Revenue Code regulations and guidelines in plan administration.

Points: Prepaid interest a borrower pays to a lender at closing. A point equals 1% of the total principal of the loan. For example, on a $100,000 mortgage four points would cost a borrower $4,000.

Policy Dividend: A refund of part of a life insurance premium reflecting the difference between the premium charged and the insurer’s actual cost of providing coverage, if lower than previously anticipated.

Policy Exclusion: An item specifically not covered by an insurance policy.

Policy Loan: A loan made by an insurance company, secured by the cash surrender value of a life insurance policy.

Policy Reserves: The funds that a state requires an insurer to hold to cover all policy obligations.

Policy Rider: A provision that may be added to an insurance policy to increase or limit the benefits the policy otherwise provides.

Policy: The legal written document stating the terms of an insurance contract.

Policyholder: The person or entity owning an insurance policy. The policyholder is usually the insured, but may also be a spouse, business partner, partnership, or corporation.

Portability: The ability of an employee to keep benefits after employment ceases. With a mobile workforce in which employees move from one company to another, portability of employee benefits, especially insurance and retirement plans, is important. Concerns about pre-existing conditions or insurability, as well as vesting schedules of qualified pension plans, are critical factors to an employee who entertains a more lucrative employment opportunity elsewhere. Some insurance and brokerage firms stress the portability of their programs.

Portfolio: The combined security holdings of an individual investor or mutual fund. The objective of holding investments in a portfolio is to reduce risk through diversification.

Power of Attorney: During lifetime a grantor may wish to authorize someone full or limited power to perform specified acts or make decisions. A power of attorney gives this power in a document usually drafted in accordance with state law. The power terminates at the death of the conveyor.

Preferred Stock: A security representing partial ownership, also called equity, in a corporation. Preferred stock does not confer voting rights, as does common stock, but takes precedence in claims against the company’s profits and assets.

Premature or Early Distributions: The Internal Revenue Code (IRC) levies penalties for certain distributions before the age of 59½ from qualified retirement plans. The IRC, however, provides some specific exceptions that qualify for premature or early distributions without penalty.

Premium Loan: A loan made from an insurance policy to cover the premiums.

Premium: The periodic payment for an insurance policy.

Prepayment Penalty: On a loan without a prepayment clause, the fee a borrower pays for repaying all or part of the loan before it is due.

Prepayment: The ability to repay installment credit before it is due, or to pay off a loan before its maturity date. Some loans, particularly mortgages, include prepayment clauses allowing you to repay them in advance of the regular schedule without a penalty.

Present Value: Representation of the current value of a future payment or serial payments at scheduled compounding periods with a specific discounting rate of return. Financial advisors may use the phrase "time value of money" while accountants might prefer "discounted cash flows."

Price/Earnings Ratio (P/E): The price of a share of stock divided by earnings per share. The P/E ratio gives financial analysts and investors the relationship between the price of a stock and its underlying value. Generally, the higher the P/E ratio the increased potential of risk.

Primary Beneficiary: The named beneficiary who receives the proceeds of an insurance policy or annuity contract when the insured or annuitant dies.

Prime Rate: Prime rate is a standardized short-term borrowing rate established by the Federal Reserve Board. Most banks use the prime rate and base the loan on the creditworthiness and collateral of bank customers (e.g., prime plus 1% or prime plus 2%).

Principal: The face value of a loan, separate from the interest, due at maturity.

Private Mortgage Insurance (PMI): Protects the lender in case of default. Lenders typically require borrowers to purchase PMI when the loan-to-value ratio is greater than 80%.

Private Ruling Letter: Upon request, the Internal Revenue Service (IRS) may issue an interpretation of a tax situation with a private ruling letter judgment. Private letter rulings are nonbinding and not a precedence for individuals with seemingly similar circumstances.

Profit and Loss Statement: The balance statement and the profit and loss statement usually reflect a company’s financial condition. Because profits and losses relate to revenue inflows from business operations, a profit and loss statement is an income statement.

Profit Sharing: A defined contribution plan in which employers allow employees to share in company profits. The employer’s contribution may vary from year to year with no minimum required. Funds generally accumulate on a tax-deferred basis until the employee leaves the company or retires. An employee’s retirement benefit depends on the amount in his or her account at retirement.

Prohibited Transaction: An individual retirement account (IRA) transaction forbidden by the Internal Revenue Code. Examples of prohibited transactions include borrowing against an IRA, using an IRA as collateral, and investing IRA funds in collectibles.

Property: Anything that has a value and is owned is termed property. It may be tangible or intangible (incorporeal), personal or public, or common.

Prospectus: A formal written sales document providing relevant details about an individual security or mutual fund.

Qualified Plan: A pension meeting the requirements of Section 401(a) of the Internal Revenue Code, and eligible for tax-favored treatment.

Quasi-guaranteed Income: Periodic payments derived from stable, non-fluctuating, contractual arrangements, like annuities, pensions and Social Security.

Quotation: The highest bid and lowest offer (asked) price currently available for a security. For example, an investor requesting a price on XYZ Company might be quoted "40 to 40 1/2." This means that the best bid price (the highest price any buyer will pay) is currently $40 a share, and the best offer price (the lowest price any seller will accept) is $40.50.

Rate of Return: For stocks, the rate of return is the dividend and capital appreciation. The yield is the rate of return on fixed-income securities. Analysts use the return on equity to compare the rates of return on differing investment vehicles. Accountants use internal rates of return when reviewing investment contracts, budgets, or investment opportunities.

Rated Policy: Also called an "extra risk" policy. A rated policy covers a higher risk for a higher-than-usual premium. For example, an insured person with a dangerous occupation or impaired health condition often has a "rated" policy that costs more to protect the insurer from added risk.

Real Estate Investment Trust (REIT): A company that manages a portfolio of real estate investments for shareholders.

Recalculation: A method of determining an individual retirement account (IRA) holder’s life expectancy for purposes of calculating the required minimum distribution. The holder’s current age is compared to Unisex Tables to determine a life expectancy for each year requiring a distribution.

Recapitalization: When a company changes its capital structure to reduce taxes by exchanging preferred stock for bonds or to avoid or emerge from a bankruptcy. Often, new debt (e.g., reorganization bonds) is issued to replace existing debt.

Redemption: The repayment of a debt security or preferred stock, either for par value at maturity or for a premium before maturity.

Registered Investment Advisor: An individual or firm engaged in the business of investment advice and registered with the Securities and Exchange Commission (SEC) or state securities authorities.

Registered Investment Advisor Representative: An individual sponsored by a registered investment advisor (RIA) securities firm and licensed in the business to provide investment advice and/or to buy and sell securities. Also known as Investment Advisor Representative (IAR).

Registered Representative: An individual sponsored by a broker/dealer securities firm and licensed as a transaction-based service provider to buy and sell securities. Also known as Registered Representative (RR).

Registry of Deeds: The location, in some states, where deeds are recorded and filed.

Required Minimum Distribution (RMD): The minimum annual distribution individual retirement account (IRA) holders must take upon reaching age 70 1/2. IRA holders must begin taking minimum distributions by April 1 of the year after they reach 70 1/2.

Revenue Procedure: The administrative practices of the Internal Revenue Service are outlined for taxpayers who wish to understand the methods for gaining information or decisions concerning specific tax laws and rulings.

Revenue: Total sales from goods and services, before expenses and taxes.

Reverse Mortgage: A loan on home equity. The lender makes regular tax-free payments to the homeowner for life.

Risk Tolerance: An investor’s willingness or ability to withstand a drop in an investment’s value.

Risk: The possibility an investment’s actual future return will be below its expected return.

Rollover: A tax-free transfer of funds from one retirement plan to another. Funds from an individual retirement account (IRA) may be shifted to another IRA, while distributions from a qualified retirement plan may be transferred to an IRA or another retirement plan.

Roth IRA Conversion: The process of converting an existing IRA into a Roth IRA. Roth conversions have specific income eligibility requirements and income tax consequences.

Roth IRA: A savings mechanism in which contributions are nondeductible, the funds grow tax-free, and withdrawals are tax-free provided certain conditions are met. The Taxpayer Relief Act of 1997 created Roth IRAs for individuals who do not qualify for traditional IRAs due to their income level or participation in employer-sponsored retirement plans.

S Corporation (Subchapter S of the Code): An incorporated business that is a "pass-through" entity for tax considerations. S corporations have similar legal status to C corporations: limited liability, avoidance of double taxation, and continuity of business in succession transfers However, the maximum number of shareholders may only be 75.

Salary Reduction Plan: A qualified retirement program in which employees make tax advantaged contributions on a pre-tax basis.

Sale and Leaseback: A company may sell its own debt-free property (long-term asset) to acquire working capital. After the sale, the former owner leases the property. The company has not acquired more debt, but has added cash to expand inventories, research and development, plant equipment, or machinery, or as a less expensive means to acquire cash. The sale of the long-term asset also avoids adding debt to the company’s statements of financial condition.

Savings Account: An account with a bank or savings and loan company that pays interest on money deposited.

Savings Bonds: Non-marketable debt securities issued by the U.S. Treasury Department that are backed by the full faith and credit of the federal government. They are considered low risk, and the interest income is generally not subject to state or local taxes.

Section 162 (Executive Bonus) Plan: The Internal Revenue Code Section 162 provides employers a deduction for trade or business expenses. A company may insure the life of a key (executive) employee and pay premiums as a deductible bonus for personal services actually rendered. Premiums are taxable to the employee. Unlike split-dollar arrangements, the employer never recovers the outlay and has little control over the fringe benefits provided.

Secured Card: A credit card guaranteed by a deposit in a savings account or certificate of deposit (CD). The credit line usually equals the deposit. If a cardholder defaults on payments, the issuer may apply the deposit toward the balance owed.

Securities: A multitude of financial assets issued for the purpose of raising capital that may be traded and are broadly categorized either as individual securities, like a single stock or bond, or a collection of securities like a mutual fund or Exchange Traded Fund (ETF).

Securities and Exchange Commission (SEC): The federal agency that regulates activity in the securities markets, and protects the public against malpractice by broker-dealers.

Security Deposit: A type of payment usually required of an individual wishing to secure a personal loan, a rental property, or to guarantee a later purchase.

Self-Directed IRA (SDA): An individual retirement arrangement allowing a holder a wider choice of investments, including stocks, bonds, mutual funds, and money market funds. SDAs may be opened at institutions with trust powers, state FDIC-insured institutions, federal credit unions, and federally-chartered savings banks or savings and loans.

Self-Employment Tax: Social security tax imposed on self-employed individuals. The self employed need to file a special Computation of Social Security Self-Employment Tax (Schedule SE) with their annual Individual Income Tax Return Form 1040.

Seller Financing: A "creative financing" technique in which an owner sells property, usually real estate, to a buyer. This technique is often used if the market interest rates are too high for the buyer and the seller does not require principal from the sale. The title or deed transfers only at full payment of the loan and any foreclosure results in the property reverting to the seller. Seller financing was very popular during the 1980s when real estate values escalated. Buyers used seller financing to arrange "no money down" purchases of real estate.

Settlement Costs: Also called closing costs. The expenses involved in transferring real estate to a buyer from a seller. Typically includes fees or charges for loan origination, discount points, appraisal, property survey, title search, title insurance, deed filing, credit reports, taxes, and legal services. Does not include points and the cost of private mortgage insurance (PMI).

Share: A unit of equity ownership in a corporation or mutual fund. Corporate shares are represented by stock certificates.

SIMPLE Plan: Savings Incentive Match Plans for Employees. A retirement plan that can be set up as a 401(k) or IRA, and allows employee pre-tax contributions and mandatory employer matching contributions. All contributions are immediately vested in a SIMPLE plan.

Simplified Employee Pension Plan (SEP): A retirement plan for small businesses allowing both an employer and an employee to contribute to the employee’s individual retirement account (IRA), subject to special rules on eligibility and contributions.

Situs: The location or position of a property. For intangible property, such as debt, the situs is probably the jurisdiction in which the debt obligation was issued.

Small Business Association (SBA): A federal government organization that assists small businesses in providing programs and opportunities to hasten their potential growth and success.

Smart Card: Unlike a debit, charge, or AMT card, the smart card requires a prepayment of a specified amount for the future purchase of goods, services, or admissions. Smart card holders may use the card without debiting a checking account or adding balances to a charge card. Banks, hotels, recreational facilities, and other businesses provide smart card privileges to their customers and guests.

Social Security Tax: Since inception, the Social Security system has been funded by a Social Security Tax paid by both employers and employees. These levies are deposited in trust funds for investment. At various optional retirement ages, employees may qualify for fixed income payments based on marital status, quarters employed, and wages earned. The self-employed worker has a different contribution schedule, but has equal treatment on all distributions at retirement or disability.

Split-Dollar Life Insurance: A contractual arrangement between employer and employee sharing obligations and benefits of a life insurance policy. The shared arrangement may govern the payment of premiums, death proceeds, cash values, dividends, or ownership.

Spousal IRA: An individual retirement arrangement for a nonworking spouse funded with contributions from the working spouse. The Internal Revenue Service sets a limit on the combined amount a married couple may contribute to a traditional and spousal IRA.

Standard & Poor’s 500 Index (S&P 500): An index of 500 of the most widely held common stocks on the New York Stock Exchange (NYSE). It is used as a measure to indicate the overall health of the US stock market.

Statement: A record of activity on a customer account, generated periodically by a bank or credit card issuer.

Stock Certificate: A document indicating legal ownership of shares of stock in a corporation. Stock certificates are made out to the shareholder or the brokerage firm, and identify the issuer, the number of shares, the par value, and the stock class. A stock certificate must be endorsed by the shareholder to sell the shares.

Stock Market: A general term referring to the organized trading of securities in the various market exchanges and the over the counter (OTC) market.

Stock Purchase Plan: A mechanism for employees to purchase company stock. Increasingly, companies are encouraging employee participation in ownership opportunities. Employees may purchase company stock in Employee Stock Ownership Plans (ESOPs); Dividend Reinvestment Plans (DRIPs); stock options; automatic investment plans; and other creative plans. In theory and practice, employees have the potential of becoming majority stockholders through participation in a stock purchase plan, assuming a viable role in corporate planning.

Stock Split: A distribution of additional shares to each stockholder in proportion to the shares the individual already owns. A stock split has no immediate effect on a stockholder’s equity. For example, if a stock splits 2-for-1, a shareholder who owns one share with a $100 par value before the split, would own two shares, each with a $50 par value, after the split.

Stock: A security representing partial ownership, also called equity, in a corporation. Each stock share represents a proportionate claim against the company’s profits and assets. Common stock entitles shareholders to participate in stockholder meetings and to vote for the board of directors. Preferred stock does not confer voting rights, but takes precedence in claims against profits and assets.

Straight-Term Mortgage: A mortgage in which the borrowed amount is due at the conclusion of a term, or maturity date.

Subsidized Loan: An education loan on which the federal government pays the interest before the repayment period begins, and also during authorized deferment periods after payment begins.

Survivorship Life Insurance: Also called second-to-die or last-to-die insurance. Survivorship life insurance covers the lives of two people, and pays benefits when the second person dies. It is often used by couples to fund estate tax liability.

Tangible Asset: A tangible asset has a value and physically exists. Land, machines, equipment, automobiles, and even currencies, are examples of tangible assets. On some financial statements, however, a nonmaterial item may often be listed as a tangible asset, such as, a payment to be made on products or goods already delivered.

Tax Credit: A tax deduction reduces tax liability by the percentage of the marginal tax bracket for the taxpayer, while a tax credit reduces the taxable amount due dollar-for-dollar. In many cases, tax credits offer incentive to support social change (e.g., renovation of historical property, jobs for the disadvantaged, research and development, and constructing low-income housing).

Tax Deduction: An expense the Internal Revenue Service allows a taxpayer as a reduction against adjusted gross income (AGI). A deduction reduces taxes only by the percent of a taxpayer’s tax bracket. Examples of allowable deductions include charitable contributions, state and local taxes, and some interest expense.

Tax Free: The elimination of income tax liability on accumulated investment earnings.

Tax Lien: A claim against real estate for unpaid taxes.

Taxable Income: Gross income less all allowable adjustments. Incorporated businesses derive net income before taxes after deducting total costs and expenses from gross sales.

Tax-Deductible: Incorporated businesses receive a tax deduction for expenses resulting from the "cost of doing business." For individuals, tax deductions are available to compute adjusted gross income (AGI) and establish the taxable amount due. Some deductions must be in excess of a threshold or floor to qualify as a deduction.

Tax-Deferred: The postponement of taxes on accumulated investment earnings until the investor takes possession of them.

Tax-Exempt Bond: A bond whose interest payments are not subject to tax from federal, state, or local authorities.

Tax-Exempt: Not subject to tax by federal, state, and/or local authorities.

Tax-Sheltered Annuity: Also called a 403(b). A retirement plan under Section 403(b) of the Internal Revenue Code allowing employees of government and nonprofit organizations to make pretax contributions up to a predefined annual limit.

Tenants by the Entirety: Spouses commonly use this form of ownership. Each spouse theoretically owns 100% of the property, but complete ownership will pass at the first death to the surviving spouse without tax and probate.

Tenants in Common: Two or more owners having undivided ownership (not necessarily equal) in property. A tenants in common form of ownership does not have a "right of survivorship" in the event one owner is deceased.

Term Certain: A payout option under an annuity contract that agrees to pay income for a specified period of time.

Term Insurance: Life insurance that pays benefits only when the insured dies within a specific period. If the insured lives beyond the end of the period, no benefits are payable. Term insurance has no cash value and premiums traditionally rise with age.

Time Horizon: Period for which an investor plans to hold investments.

Title Insurance: Protects against loss due to a defect in a real estate title.

Title Search: The inspection of city, town, or county records to determine the legal owner of a piece of real estate.

Title: A document identifying legal ownership of property, and used to transfer it from a seller to a buyer.

Total Disability: A total disability usually means a worker cannot complete most job requirements based on a physical or mental disability. In some cases, total disability is immediate subsequent to the loss of sight or limbs. In other situations, an "elimination" period provides a passage of time to confirm the disability status before an individual receives benefits. Private disability plans, employer group disability benefits, and Social Security will provide a percentage replacement of lost income for gainfully employed workers who are experiencing a total disability.

Total Return: Gross annual yield on an investment or mutual fund, including capital appreciation or distributions, interest, dividends, and personal taxes.

Transaction Fee: A charge for various credit-related activities, such as receiving a cash advance or using an ATM.

Treasuries: The United States Government regularly offers negotiated debt obligations at public auction through the Federal Reserve Bank. Treasuries have varying maturities and yields. Treasury bills have maturities of less than one year; notes less than 10 years; and, bonds less than 30 years. Issued treasuries may be purchased in the public marketplace and reflect current yields to maturities.

Treasury Bill: Also called a T-bill. A short-term security issued by the federal government. Treasury bills have face values ranging from $10,000 to $1 million, and sell at a discount based on current interest rates.

Triple Net Lease: Lease in which the lessee assumes the payments of maintenance and upkeep, taxes, utilities, and insurance. The tenant bears the risks associated with these fluctuating expenses.

Trustee: The party(ies) responsible for managing a retirement plan’s assets for the benefit of the participants.

Underwriting: The process by which an insurance company determines whether, and on what basis, it can assume the risk of a specific life insurance policy.

Unearned Income: Payment received in advance for undelivered products or uncompleted service is unearned income and a current liability on business ledgers. Individual taxpayers must report all income not directly resulting from one’s profession, business, or occupation as unearned income.

Unemployment: When a previously employed worker is "laid off" or involuntarily "not in gainful employment," he or she is considered unemployed and possibly eligible for certain state and federal compensation and benefits.

Uniform Gift to Minors Act (UGMA): Also called Uniform Transfer to Minors Act (UTMA) in some states. Law adopted by most states governing the administration and distribution of assets held in a child’s name.

Uniform Transfer to Minors Act (UTMA): Also called Uniform Gift to Minors Act (UGMA) in some states. Law adopted by most states governing the administration and distribution of assets held in a child’s name.

Universal Life Insurance: Life insurance that allows the holder to vary the amount and timing of premiums, and to change the death benefit.

Unlimited liability: In most limited partnerships, the general partner will collect fees and own a percentage of the partnership (in the form of limited partnership interest).

Unsecured Debt: A debt that is not guaranteed by collateral. If the borrower defaults, the issuer has no assets to back up the loan.

Variable Interest Rate: A rate that fluctuates with a measure or an index, such as current money market rates or the lender’s cost of funds. Often, variable interest rate loans have a fixed rate for several years and then become variable. The borrower is usually protected from dramatic increases in the loan rate by a "rate cap."

Vesting of Employer Contributions: The Internal Revenue Code outlines two minimum vesting schedules for employer contributions for employee benefit plans. Five-year vesting calls for nonforfeiture rights of 100% to employees having completed five years of service in the plan. Three-to-seven year vesting provides cumulative nonforfeiture rights in 20% increments beginning in the third year and commencing with 100% vesting after the seventh year in the plan.

Vesting: A process leading to a future event, at which time, money or property held in trust belongs to a person, but may not be available for distribution until a future date or occurrence. Vesting usually refers to the scheduled confirmation of ownership rights in qualified employee benefit retirement plans.

Volatility: The price fluctuations of a security or mutual fund relative to an appropriate market index. The more volatile a security or mutual fund, the more it is subject to rapid and extreme price fluctuations relative to the market.

Voluntary Employee Contribution: An employee may be permitted to make voluntary contributions, usually unmatched by the employer, in excess of mandatory contributions to his or her plan account. Voluntary employee contributions may be deposited on a pre-tax or post-tax basis, on a pre-arranged basis.

Waiver of Premium: An insurance policy rider that allows a policyholder to stop making premium payments if the insured suffers a permanent disability. Generally, there is an additional cost for this rider to become part of a policy.

Whole Life Insurance: Life insurance that provides coverage for the insured’s entire life, provided the policyholder continues to pay the premiums. Premiums generally remain level for the life of the contract. In addition, there is also a cash value component that can be used to help supplement future financial needs.

Withholding: An employer deducts a portion of employee wages, usually for income taxes. Employers base the withholding amounts on the Form W-4, Employee’s Withholding Allowance Certificate, that employees submit when commencing employment. A Treasury account at a bank is the repository for withholding amounts and is a credit toward future tax liability for the calendar year.

Working Capital: During the business life cycle, working capital or money ensures that the business will be able to operate on a daily basis.

Yield To Maturity (YTM): The return an investor will receive if a long-term interest-bearing investment, such as a bond, is held until the date it becomes due and payable (maturity date).

Yield: The return received from an investment.

Zero Coupon Bond: A bond that makes no periodic interest payments, but rather sells at a deep discount from its face value.



A thru L   |   M thru Z




Your Money, Your Plan!

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