APR - Business Literacy - 10%
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401(k) and 403(b) retirement plans
Voluntary retirement plans for employees of profit and public/not-for-profit organizations are known as 401(k) and 403(b) plans respectively. These employer sponsored retirement plans allow a worker to elect to save for retirement while deferring income taxes on the saved money and earnings until withdrawal. Employees select from a number of investment options.
Cafeteria benefit plan
A cafeteria plan allows employees to choose from among different types of benefits. Cafeteria plans may include benefits such as health insurance, group-term life insurance and flexible spending accounts. Typically, these plans allow an employee to pay for these benefits through a salary reduction agreement, similar to a payroll deduction. Deductions under such agreements are often called pre-tax deductions; they are not subject to income tax, or in most cases, FICA.
Defined benefit plan
This retirement plan promises the employee a specific monthly benefit. The employee usually is not required to contribute to this plan in the private sector; however, in the public sector, employee contributions are required. Sometimes referred to as a fully-funded pension plan, the employee is not required to make investment decisions.
Defined contribution plan
This retirement plan creates an individual account for each employee. The benefit the employee receives is based on the amount contributed and affected by income, expenses,gains and losses. Two common types of defined contribution plans are the 401(k) and 403(b) plans.
Pension plans are forms of retirement plans that provide income after retirement or disability. Pensions can be created for employees by companies, not-for-profit organizations, labor unions, the government, etc. Other organizations also can fund pensions.
Roth retirement plan
Roth plans also allow you to save for retirement. If you meet certain criteria, you can invest on an after-tax basis and the earnings are tax-free when you withdraw them.
Compare the balance sheet to a photograph. The balance sheet shows a firm’s assets,liabilities and equity at a given point. A firm’s assets are listed in their order of liquidity, as are the firm’s liabilities. The balance sheet always balances because assets must equal liabilities plus owner’s equity.
Compare the income statement to a video. It measures a firm’s profitability over a period of time. The firm can choose the length of its reporting time period, such as a month, a quarter or a year. The income statement shows gross income, revenues, expenses and net income. It is important to recognize that an income statement includes both cash items, such as cash sales as income, and non-cash items, such as credit card sales as income, and depreciation as expense. An income statement is often called a profit/loss or P&L statement.
Statement of cash flow
This is the third major financial statement required of all publicly-traded corporations. Compare the statement of cash flow to a video. It shows how cash flows in and out of a company over a given period of time. This statement shows positive or negative cash flow in operating,investing and financing activity. For example, selling stock generates cash and is a positive cash flow.
Regulation Fair Disclosure, Regulation FD or Reg FD
Adopted in August 2000, Regulation Fair Disclosure requires that all publicly traded companies disclose material information to all investors at the same time.
Sarbanes Oxley legislation covers corporate auditing accountability, responsibility and transparency.
Securities Act of 1933 and the Security Exchange Act of 1934
- Were enacted following the 1929 stock market crash.
- The need for such legislation grew out of abuses in the securities industry—investors’ and brokers’ devious practices were destroying small investors.
Rule 5c of the Security Act of 1933
- Deals with the registration of securities and led to the embargo of publicity materials during a specific time frame—frequently called “gag period” —because these materials could be construed as an effort to sell a new security.
- The gag period is in effect from the date a corporation officially registers its intent to offer a security, or to a date 90 days after the registration statement becomes effective.
Security Exchange Act of 1934
- Mandates disclosure.
- The prospectus of a new security fulfills this requirement.
Section 14 of the Act of 1934
Covers solicitation of proxies in the time-frame between sending the official statement and holding the annual meeting where the proxy voting occurs.
Generally is defined as any information that would cause a reasonable and prudent investor to buy or sell stock.
Sherman/Clayton Act and Robinson Putnam Act make it illegal to engage in activity that ruins competition. Overselling wording in news releases announcing acquisitions and divestitures can be cited as violations.
Federal Lobbying Act (1913) states lobbyists must register with the clerk of the house or the secretary of the senate between the first and tenth day of each quarter.
Federal Corrupt Practices Act of 1925, Hatch Act of 1939 and the Taft-Hartley Act govern labor relations management and made it illegal for organizations, including unions, to make political contributions in connection with elections to any political office or for any candidate to receive such a contribution. But organizations and unions can form political action committees (PACs), which are legal because they’re funded by employees, union members, etc., and, not the organization itself.
Registering as a foreign agent
Registration of Foreign Agents Act of 1938 requires public relations professionals who represent a foreign government to register with the US government.
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