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Definition of Economic life
The period over which a company expects to be able to use an asset.
This term has two quite different meanings. First, it may
Abramsâ€™ model for calculating DLOM based on the interaction of discounts from four economic components.
Also referred to as the weighted-average life (WAL). The average number of years that each
A monthly fixed-dollar payment beginning at retirement age. It is nominal
economic environment in which the firm expects to reside over the life of the
See: in-substance defeasance.
Exists when the costs and/or revenues of one project depend on those of another.
The real flow of cash that a firm could pay out forever in the absence of any change in
The extent to which the value of the firm will change because of an exchange rate change.
Cash flow plus change in present value.
The order quantity that minimizes total inventory costs.
Profits in excess of the competitive level.
In project financing, the risk that the project's output will not be salable at a price that will
For any entity, the difference between the market value of all its assets and the market
An agreement between two or more countries that allows the free movement of capital,
Leading economic indicators
economic series that tend to rise or fall in advance of the rest of the economy.
Term life insurance
A contract that provides a death benefit but no cash build-up or investment component.
A whole life insurance product whose investment component pays a competitive interest rate
Variable life insurance policy
A whole life insurance policy that provides a death benefit dependent on the
Weighted average life
Whole life insurance
A contract with both insurance and investment components: (1) It pays off a stated
Economic Value Added (EVA)
Operating profit, adjusted to remove distortions caused by certain accounting rules, less a charge
An approach to costing that estimates and accumulates the costs of a product/service over
the creation of multi-country markets
economic order quantity (EOQ)
an estimate of the number
economic production run (EPR)
an estimate of the number
when the incremental revenue from the sale of reworked defective units is greater than
economic value added (EVA)
a measure of the extent to which income exceeds the dollar cost of capital; calculated
life cycle costing
the accumulation of costs for activities that
product life cycle
a model depicting the stages through
The estimated life span of a fixed asset, during which it can be expected to
economic order quantity
Order size that minimizes total inventory costs.
economic value added (EVA)
Term used by the consulting firm Stern Stewart for profit remaining after deduction of the cost
The school of macroeconomic thought prior to the rise of Keynesianism.
The study of the allocation and distribution of scare resources among competing wants.
The study of the determination of economic aggregates such as total output and the price level.
The study of firm and individual decisions insofar as they affect the allocation and distribution of goods and services.
View that incentives to work, save, and invest play an important role in determining economic activity by affecting the supply side of the economy.
The time period during which inventory can be retained in stock and beyond
Shelf life control
Deliberate usage of the oldest items first, in order to avoid exceeding
Group Life Insurance
This is a very common form of life insurance which is found in employee benefit plans and bank mortgage insurance. In employee benefit plans the form of this insurance is usually one year renewable term insurance. The cost of this coverage is based on the average age of everyone in the group. Therefore a group of young people would have inexpensive rates and an older group would have more expensive rates.
Level Premium Life Insurance
This is a type of insurance for which the cost is distributed evenly over the premium payment period. The premium remains the same from year to year and is more than actual cost of protection in the earlier years of the policy and less than the actual cost of protection in the later years. The excess paid in the early years builds up a reserve to cover the higher cost in the later years.
The average number of years of life remaining for a group of people of a given age and gender according to a particular mortality table.
Life Income Fund
Commonly known as a LIF, this is one of the options available to locked in Registered Pension Plan (RPP) holders for income payout as opposed to Registered Retirement Savings Plan (RRSP) holders choice of payout through Registered Retirement Income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.
Split Dollar Life Insurance
The split dollar concept is usually associated with cash value life insurance where there is a death benefit and an accumulation of cash value. The basic premise is the sharing of the costs and benefits of a life insurance policy by two or more parties. Usually one party owns and pays for the insurance protection and the other owns and pays for the cash accumulation. There is no single way to structure a split dollar arrangement. The possible structures are limited only by the imagination of the parties involved.
Temporary Life Insurance
Temporary insurance coverage is available at time of application for a life insurance policy if certain conditions are met. Normally, temporary coverage relates to free coverage while the insurance company which is underwriting the risk, goes through the process of deciding whether or not they will grant a contract of coverage. The qualifications for temporary coverage vary from insurance company to insurance company but generally applicants will qualify if they are between the ages of 18 and 65, have no knowledge or suspicions of ill health, have not been absent from work for more than 7 days within the prior 6 months because of sickness or injury and total coverage applied for from all sources does not exceed $500,000. Normally a cheque covering a minimum of one months premium is required to complete the conditions for this kind of coverage. The insurance company applies this deposit towards the cost of a policy at its issue date, which may be several weeks in the future.
Term Life Insurance
A plan of insurance which covers the insured for only a certain period of time and not necessarily for his or her entire life. The policy pays a death benefit only if the insured dies during the term.
Canadian Life and Health Insurance Association (CLHIA)
An association of most of the life and health insurance companies in Canada that conducts research and compiles information about the life and health insurance industry in Canada.
Joint Policy Life
One insurance policy that covers two lives, and generally provides for payment at the time of the first insured's death. It could also be structured to pay on second death basis for estate planning purposes.
Insurance that provides protection against an economic loss caused by death of the person insured.
Life Insurance (Credit Insurance)
Group Term life insurance that pays or reduces the balance due on a loan if the borrower dies before the loan is repaid.
The person who's life is protected by an individual policy.
Mortgage Life insurance (Credit Insurance)
Decreasing term life insurance that provides a death benefit amount corresponding to the decreasing amount owed on a mortgage.
A product that provides life coverage for a specified duration typically not beyond the age of 75.
An unbundled life product with a separate investment component. It typically does not participate in companies profits.
Component that provides life coverage during the insured's life.
Extended Amortization Period
An amortization period that continues beyond a long-lived asset's economic useful life.
In England in the 1700's it was popular to bet on the date of death of certain prominent public figures. Anyone could buy life insurance on another's life, even without their consent. Unfortunately, some died before it was their time, dispatched prematurely in order that the life insurance proceeds could be collected. In 1774, English Parliament passed a law which restricted the right to be a beneficiary on a life insurance contract to those who would suffer an economic loss when the life insured died. The law also provided that a person has an unlimited insurable interest in his own life. It is still a legal stipulation that an insurance contract is not valid unless insurable interest exists at the time the policy is issued. life Insurance companies will not, however, issue unlimited amounts of coverage to an individual. The amount of life insurance which will be approved has to approximate the loss caused by the death of the individual and must not result in a windfall for the beneficiary.
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