Alternate name: Merchant authorization For example, if you are making a credit card purchase at the grocery store for $100, the store will place a hold for $100 with your credit card issuer. In this example, the authorized amount is $100. How Does an Authorized Amount Work? When you make a purchase with a debit or credit card, the merchant you are purchasing from requests authorization from the card issuer to confirm that the card you are using is active and that you have the credit limit (in the case of a credit card transaction) or funds available (in the case of a debit card transaction) to complete the purchase....

For example, suppose that you buy a new car insurance policy that begins on a specific date and ends exactly one year later. That one-year period is your insurance policy period. Your policy is in force during that time. How Insurance Policy Periods Work Your policy period is set by the day your policy starts, which can be any day of the month. It doesn’t always start at the beginning of the month or year....

The New York Division of Corporations notes that an operating agreement is a document that establishes the rights, powers, duties, liabilities, and obligations of all members of an LLC. Is an Operating Agreement Required? An operating agreement is an important document, even for an LLC with only one member (called a single-member LLC). No state requires you to file your operating agreement with the state, but several states require that you create an operating agreement for your records....

In some states you can add auto insurance medical payments coverage to your automobile insurance policy and in others it is required. Learn more about this type of insurance coverage, including what it covers, how it differs from personal injury protection (PIP), and why you might want to add it to your policy. Definition and Examples of Auto Insurance Medical Payments Coverage Auto insurance medical payment coverage is one of the main types of coverage options you can add to your car insurance plan....

Learn more about how cliff vesting works if you have a 401(k) or similar employer-sponsored retirement plan at work. Definition and Example of Cliff Vesting A cliff vesting schedule transfers 100% ownership of the assets in an employee’s retirement account to that employee once they’ve registered a certain number of years of service. In the case of a 401(k) plan, this includes the original contributions made by the employee through salary deferrals as well as employer-matching contributions and earnings on their investments....

Doing a CBA of each project of interest allows an entrepreneur or business owner to decide about the project’s viability. The process of doing a CBA for a project starts with gathering all the costs and benefits that are associated with it. Then, key financial metrics are used to determine how much value investing in the project will add to the business. Definition and Example of CBA A CBA is the process of comparing the costs of a project to the benefits generated from it and determining if a business should invest in the project....

The CPI isn’t the only cost-of-living measurement. Any number of organizations or websites could create their own cost-of-living measurements that take various goods and services into account. And there are plenty of cost-of-living calculators available online. In the end, all measurements tend to answer one question: How much does it cost to live everyday life in one location at any given time? How Does Cost of Living Work? Cost of living is calculated by taking the price of a portion of goods and services everyone needs, such as food and housing....

Credit scoring assigns points to a consumer’s credit information and totals the points to create a three-digit credit score. When a consumer applies for credit with a bank, the lender uses a credit scoring system to then see the applicant’s credit score, and thus make lending and pricing decisions. An auto lender, for example, may use the FICO Score 9 to gauge a consumer’s likelihood of defaulting on a new auto loan, approve or deny the application, and assign an interest rate....

Learn how cross elasticity of demand works. What Is Cross Elasticity of Demand? Sometimes referred to as cross-price elasticity of demand, this guiding formula measures how a consumer responds to a complementary or substitutive product or service when the price of another product or service changes. The equation divides the change (whether it went up or down) in the percentage for the quantity demand of a product by the price change percentage of a specific product with consistent demand....

For example, if only 10% or 20% of the outstanding shares are available to trade, the company’s shares might be said to have a low float. This low float might indicate that it could be difficult to find buyers and sellers for shares in some cases. Alternate name: Stock float How Floating Stock Works The level of a company’s floating stock can be important to investors because it can indicate what percentage of the total shares outstanding are owned by company insiders, such as company officers and directors....

Learn more about implied authority and how it works. What Is Implied Authority? Implied authority is a type of authority that is implied or assumed when someone is acting on behalf of someone else. This situation can occur when someone (usually an employee) is wearing a company uniform or interacting with the public on behalf of a company or organization. The uniform or public interactions imply that person has the authority to act on behalf of the business....

The estate tax is levied on the taxable portion of the whole estate rather than just the share of an estate that a beneficiary inherits. Who Uses Form 706? This tax form should be used by the executor of the estate of any U.S. citizen or resident in either of the following circumstances: The gross estate is valued at more than the exemption amount after adding back lifetime gifts that were made and exceeded the annual gift tax exclusion....

For example, if you own two mutual funds that invest in many of the same stocks, both investments will lose money under the same conditions. You reduce the benefits of diversification by increasing exposure to those same stocks, even though you own two different funds that initially appear to create a diverse portfolio. How Mutual Fund Overlap Works Imagine a Venn diagram with two circles, each representing a mutual fund, overlapping in the center....

If you are selling options contracts, Theta is a good thing because the more time passes, the more the option decreases in value, and therefore the chances of the buyer taking any actions also decrease. Because of this, a higher Theta is preferred when selling options. How Theta Works Because options lose value as they approach their expiration date, Theta is usually stated as a negative number. So, if the Theta measurement is -0....

Alternate name: No-fault coverageAcronym: PIP How Does PIP Insurance Work? Legislation introduced the no-fault system in the 1970s to make it faster and easier for accident victims to receive compensation, regardless of who was at fault for the accident. Under this system, financial losses like medical expenses are paid for by each party’s own insurance carrier, rather than having to wait for the insurers to agree who was at fault—and legally liable—for accident costs....

Learn more about what return-of-capital distributions are, how they work, and what individual investors need to know. Definition and Examples of Return of Capital Return of capital, also known as “ROC,” is a return of some or all of an investment in a stock or fund. ROC distributions aren’t considered dividends even though ROC could be included in a fund distribution because a ROC is the original money you invested....

This article will explain what SEC Form ADV is and how it is used by regulators, investment advisors, and clients of investment advisors. Definition and Examples of SEC Form ADV Form ADV is a registration document that investment advisor firms are required to file with either the SEC or the state (or states) in which they are registered. Not all investment advisors are registered with the SEC, but they will all register with a Form ADV....

10'000 Hours / Getty Images For example, ShopRunner partners may offer deals such as discounts on select items, or on orders over a certain amount, that are only available to ShopRunner members. To be eligible for these benefits, your order must be with a store that is in the ShopRunner network. If you frequently shop online, you will likely end up paying high costs for shipping and returning your orders....

The stated value determines how the insurance company rates your vehicle. In a sense, it’s the value for which you can afford to insure your classic car—usually far less than it is worth. For example, suppose you inherit a Maserati Quattroporte from a grandparent, but you can’t afford to pay the $400 monthly insurance premiums. You can take out a stated value policy that will pay out only a portion of the full value of the car in case of an accident or claim, in order to drop your monthly payments down to a level you can afford....

How Tax-Exempt Interest Works Typically, when you receive interest, such as the yield on money sitting in a savings account or interest paid to bondholders, you have to pay taxes on those additional earnings. But when certain conditions are met, the interest you earn isn’t subject to various kinds of taxes. The amount you receive in tax-exempt interest for a given tax year would often be provided to you by the interest payer via Form 1099-INT or Form 1099-OID....