What is Ability-To-Pay Taxation? Ability-To-Pay Taxation is a tax principle that asserts that taxes should be levied based on an individual’s ability to pay the tax. In other words, individuals, corporations, partnerships, and other entities who earn a higher income will need to pay more taxes because they have the ability to do so. Many…
What is Alternative Minimum Tax (AMT)? Alternative Minimum Tax (AMT) is an alternative method to calculate the minimum amount an individual owes in taxes based on their income. It was created to establish fairness in the Canadian taxation system, meaning that higher-income earners would still need to pay their fair share of taxes net of…
What is the Annual Equivalent Rate (AER)? The Annual Equivalent Rate (AER) is the rate of interest after taking into account the effects of compounding to normalize the interest rate. The AER is the actual interest rate an investment, loan, or savings account will yield after accounting for compounding. Annual Equivalent Rate Formula The formula…
What is an Asset Retirement Obligation (ARO)? An asset retirement obligation (ARO) is a legal obligation that is associated with the retirement of a tangible, long-term asset. It is generally applicable when a company is responsible for removing equipment or cleaning up hazardous materials at some agreed-upon future date. A company must realize the ARO…
What are the Different Types of Organizations? This article on the different types of organizations explores the various categories that organizational structures can fall into. Organizational structures can be tall, meaning that there are multiple tiers between the entry-level workers and top managers of the company. They can also be fairly flat, which means that…
What is an Activity Cost Driver? An activity cost driver refers to actions that cause variable costs to increase or decrease for a business. Therefore, identifying what product/service is causing particular costs can help the business to become more profitable by better understanding the specific activities that are driving the costs. Activity cost drivers include…
What are Anti-Dilution Provisions? Anti-dilution provisions are clauses that allow investors the right to maintain their ownership percentages in the event that new shares are issued. They are rights that are usually associated with preferred shares. Understanding Anti-Dilution Provisions Anti-dilution provisions protect an investor’s equity stake from dilution. A company may issue new shares with…
What is Accidental Death and Dismemberment Insurance (AD&D)? Accidental Death and Dismemberment Insurance (AD&D) is an insurance policy that pays out to beneficiaries in the events of accidental death or dismemberment. Dismemberment includes full or partial loss of bodily functions, such as sight, hearing, or use of a limb. How AD&D Insurance…
What is a Non-Covered Security? The term non-covered security refers to a legal definition of securities, the details of which may not necessarily be disclosed to the Internal Revenue Service (IRS). The competent authority that makes such designations for tax reporting purposes in the U.S. is the Securities and Exchange Commission (SEC). The designation entails…
What is Market Value? Market value is usually used to describe how much an asset or company is worth in a financial market. It is mutually determined by market participants and is interchangeably used for market capitalization when dealing with assets and companies. Relationship between Market Value and Market Price On the other hand, market…
