What Is a Loophole? A loophole is a technicality that allows a person or business to avoid the scope of a law or restriction without directly violating the law. Used often in discussions of taxes and their avoidance, loopholes provide ways for individuals and companies to remove income or assets from taxable situations into ones
What Is Loose Credit? Loose credit is the practice of making credit easier to acquire, either through relaxed lending criteria or by lowering interest rates for borrowing. Loose credit often refers to the policies of a country’s central bank—whether it is looking to expand the money supply through the banking system (loose credit) or contract
What Is Losing Your Shirt? Losing your shirt is an idiom that, in the investment world, means to lose one’s money, savings, investments, resources, or more, if investments were made with borrowed funds. Losing your shirt is a 20th-century phrase that signals great financial loss. One may say, for example, “He lost his shirt in
What Is Loss And Loss-Adjustment Reserves To Policyholders’ Surplus Ratio? Loss and loss-adjustment reserves to policyholders’ surplus ratio is the ratio of an insurer’s reserves set aside for unpaid losses. This may also include the cost of investigation and adjusting for losses to its assets after accounting for liabilities. Also called the reserves to policyholders’
What Is a Loss Carryback? A loss carryback describes a situation in which a business experiences a net operating loss (NOL) and chooses to apply that loss to a prior year’s tax return. This results in an immediate refund of taxes previously paid by reducing the tax liability for that previous year. Key Takeaways A
What Is a Loss Carryforward? A loss carryforward refers to an accounting technique that applies the current year’s net operating loss (NOL) to future years’ net income to reduce tax liability. For example, if a company experiences negative net operating income (NOI) in year one, but positive NOI in subsequent years, it can reduce future
What Is Loss Cost? Loss cost, also known as pure premium or pure cost, is the amount of money an insurer must pay to cover claims, including the costs to administer and investigate such claims. Loss cost, along with other items, is factored in when calculating premiums. Key Takeaways Loss cost is the total amount
What Is Loss Development? Loss development is the difference between the final losses recorded by an insurer and what the insurer originally recorded. Loss development seeks to account for the fact that some insurance claims take a long time to settle, and that estimates of the total loss an insurer will experience will adjust as
Losses and loss adjustment expense is the portion of an insurance company’s reserves set aside for unpaid losses and the costs of investigation and adjustment for losses. Reserves for losses and loss adjustment expenses are treated as liabilities. This figure also includes estimates for losses for insurance ceded to reinsurers. Breaking Down Losses and Loss-Adjustment Expense Insurance
What Is Loss Given Default (LGD)? Loss given default (LGD) is the estimated amount of money a bank or other financial institution loses when a borrower defaults on a loan. LGD is depicted as a percentage of total exposure at the time of default or a single dollar value of potential loss. A financial institution’s
