What's what in finances, XL Edition! Today we discover everything you need to know about retirement, trad and financing.
A situation in which one stops working in one's old age, or at least when one has saved enough money to last the remainder of one's life. Generally, retirement occurs after the age of 65, but this is not a hard-and-fast rule. Both governments and companies offer pensions, annuities, and other plans to provide for one's financial needs in retirement.
In order to compensate for the loss of income resulting from the cessation of employment, the beneficiary of the retirement is granted a financial benefit which usually consists of a monthly income.
The benefit is for life and only expires upon the death of the person concerned. The amount of the benefit can be based on a different principle: for example, with the actuarial principle, it's established about the quantity and amount of the contributions made; with a substitution principle, it's established from a certain percentage of the amount of income during the working life. Retirement is the termination of an individual's working careerwith the expectation that he or she will no longer undertake paid employment.
The voluntary exchange of goods and/or services for money or an equivalent good or service. Trade is regulated by the laws of the particular jurisdiction in which a trade is made. Common restrictions include prohibitions on selling stolen property or non-existent goods. Most states, however, have much more complex regulations for trade, depending on the complexity of goods and services traded in their jurisdiction. States also regulate trade between parties in different jurisdictions.
Trade exists because of the division of labor, specialization and different funding sources. Since most people focus on one small aspect of production, they need to trade with others to acquire goods and services different from those they produce. Trade exists between different regions mainly because of different conditions in each region, some regions may have a comparative advantage over a product, promoting its sale to other regions.
In modern finance, trade especially refers to trade on securities exchanges. For example, the sale of a stock from one investor to another is known as a trade. And in developed economies, trades are usually made by an intermediary, especially money or credit.
The processor means of acquiring capital necessary to conduct a business activity. Two of the most common forms of financing are debt financing and equity financing. In debt financing, one borrows money, usually from an institution, with the promise to return the money with interest at some point in the future. This provides capital to the borrower and a profit to the lender. In equity financing, a company sells portions of ownership to those who are interested. Unlike debt financing, equity financing usually raises capital without incurring liabilities, but the risk exists that the company will not raise enough. An alternative to both debt financing and equity financing, especially for startups, is using money from personal savings to pay for activities.
Put differently, financing is a way to leverage the time value of money (TVM) to put future expected money flows to use for projects started today. Financing also takes advantage of the fact that some individuals in an economy will have a surplus of money that they wish to put to work to generate returns, while others demand money to undertake investment (also with the hope of generating returns), creating a market for money.
Any financing obtained may imply an obligation in the future. For example, a bank loan requires the debtor to pay a periodic installment over the next few months or years. Similarly, in the case of shareholder contributions, they may expect to be paid a share of the profits in the form of dividends.