What is a Licensing Agreement? A licensing agreement is a contract between two parties (the licensor and licensee) in which the licensor grants the licensee the right to use the brand name, trademark, patented technology, or ability to produce and sell goods owned by the licensor. In other words, a licensing agreement grants the licensee…
What is a Joint Probability? A joint probability, in probability theory, refers to the probability that two events will both occur. In other words, joint probability is the likelihood of two events occurring together. Formula for Joint Probability Where: P(A ⋂ B) is the notation for the joint probability of event “A” and “B”. P(A)…
What is A Priori Probability? A priori probability, also known as classical probability, is a probability that is deduced from formal reasoning. In other words, a priori probability is derived from logically examining an event. A priori probability does not vary from person to person (as would a subjective probability) and is an objective probability….
What is Variable Universal Life (VUL) Insurance? Variable Universal Life Insurance is a life insurance policy that builds cash value. The accumulated cash in the policy can be invested in a number of different ways. The investments are chosen by the policyholder, in accordance with their financial goals and risk tolerance. Variable universal policies differ…
What is Hamada’s Equation? Hamada’s Equation falls under the corporate finance umbrella. It is used to differentiate a levered company’s financial risk from its business risk. It combines two theorems: the Modigliani-Miller Theorem and the Capital Asset Pricing Model (CAPM). Hamada’s equation is structured in a way that helps determine, first, a company’s levered beta,…
What is a Keogh Plan? A Keogh Plan is a retirement plan that can be set up by self-employed individuals and those who work for them. Small businesses, partnerships, limited liability companies (LLCs), and sole proprietorships are eligible to establish Keogh plans. Keogh plans are still used today; however, they’ve declined in popularity, with individual/single…
What are the 4 P’s of Marketing? The “4 P’s of Marketing” refer to the four key elements comprising the process of marketing a product or service. They involve the marketing mix, which is a set of tools that a company uses to influence consumers into buying its product. The marketing mix addresses factors such…
What is a SEP IRA? A SEP IRA (Simplified Employee Pension Individual Retirement Arrangement) is a variation on traditional or Roth IRAs that are used by businesses for themselves and their employees. Most commonly, SEP retirement plans are used by individuals who are self-employed; employees working for the individual must all receive the same benefits…
What is the 457 Plan? The 457 Plan is a type of tax-advantaged retirement plan with deferred compensation. The plan is non-qualified – it doesn’t meet the guidelines of the Employee Retirement Income Security Act (ERISA). 457 plans are offered by state and local government employers, as well as certain non-profit employers. How 457 Plans…
What is a 529 Plan? A 529 plan is a savings plan that offers tax advantages and supports the idea of saving for higher education expenses in the future. States, state agencies, or educational institutions sponsor 529 plans, also called “qualified tuition plans.” A designated beneficiary must be attached to the plan. The savings plan…
