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Liberty Bonds: What they were and how they worked Liberty Bonds were U.S. government–backed debt securities issued to finance American involvement in World War I and, later, to support reconstruction after the September 11, 2001 attacks. Designed to channel civilian savings into the war effort, they also introduced many ordinary Americans to investing. Origins and…

Index Options: A Guide to Benchmark Index Contracts What is an index option? An index option is a cash-settled derivative that gives the holder the right, but not the obligation, to receive a cash payoff based on the value of an underlying benchmark index (for example, the S&P 500) at a specified strike price. Most…

Index‑Linked Bond: Definition, How They Work, and Example What is an index‑linked bond? An index‑linked bond (also called a real return bond, TIPS in the U.S., or a linker in the U.K.) is a fixed‑interest government bond whose coupon payments and/or principal are adjusted according to a price index—typically the Consumer Price Index (CPI). The…

Index Investing Index investing is a passive strategy that seeks to replicate the returns of a market benchmark—such as the S&P 500, Dow Jones Industrial Average, or a bond index—by holding the same securities (or a representative sample) in the same proportions as the index. Investors can achieve this by buying index mutual funds or…

Index Futures: Types, Uses, and How They Work What are index futures? Index futures are futures contracts whose underlying asset is a stock market index. They let traders agree today on a price at which the cash value of an index will be settled on a future date. Index futures are cash-settled (no physical delivery)…

Index Funds: A Clear Overview Index funds are pooled investment vehicles designed to replicate the performance of a market benchmark (an index) such as the S&P 500, Nasdaq Composite, or a broad bond index. They achieve this by holding the same securities—in roughly the same proportions—as the index they track. Because they follow a passive…

What Is a Financial Index? A financial index is a numeric measure that tracks the performance of a defined group of assets—such as stocks, bonds, interest rates, or economic indicators—to represent a market or market segment. Indexes serve as standardized snapshots of market behavior and as benchmarks for evaluating investment performance. How Indexes Work An…

Independent Contractor Explained: Definition, Taxes, and Practical Examples What is an independent contractor? An independent contractor (often called a freelancer) is a self-employed person who provides services to clients under contract rather than as an employee. Contractors control how and when they work, manage their own business expenses, and are responsible for their own taxes,…

Indentured Servitude: Definition, History, and Legacy Key takeaways Indentured servitude is a labor contract in which a person works without wages for a fixed period to repay a loan or the cost of passage. It was a common means of migration and labor in the American colonies and other parts of the world from the…

Indenture: Definition, Types, Key Clauses, and Why It Matters What is an indenture? An indenture is a formal legal contract that sets the terms, conditions, and obligations of a financial or real‑estate arrangement. Common contexts include: Bonds and other debt securities (credit indentures or debentures) Real‑estate deeds and property agreements Bankruptcy filings where indentures document…

Indemnity Insurance Explained Indemnity insurance compensates an insured person or business for certain unexpected losses or damages—typically covering legal defense costs, court fees, and settlements when the insured is alleged to have performed negligently or failed to meet professional standards. It’s commonly used by professionals and service providers whose advice or actions can cause financial…

Incurred But Not Reported (IBNR) What is IBNR? Incurred But Not Reported (IBNR) refers to reserves that insurance companies set aside to cover claims for events that have already occurred but have not yet been reported. Actuaries estimate these latent liabilities so insurers have funds available when the claims are eventually filed. Why IBNR matters…

Incumbent: Definition, Meanings in Contexts, and Examples What is an incumbent? An incumbent is an individual or entity that currently holds a particular office, position, or role. The term applies broadly—to people in political office, executives and officers in a corporation, and organizations that occupy a leading position in an industry. Incumbents have the duties,…

Incumbency Certificate Definition An incumbency certificate (also called a certificate of incumbency or form of incumbency) is an official company document that lists the names, titles, and signatures of a corporation’s or LLC’s directors, officers, and often key shareholders. Its primary purpose is to confirm who is authorized to act and sign on behalf of…

Understanding Incremental Cost Incremental cost is the additional expense a company incurs to produce one more unit of a product. It focuses on costs that change with production volume—primarily variable costs like raw materials, direct labor, and incremental utilities—rather than fixed costs such as rent or core equipment. Key Takeaways Incremental cost (also called marginal…

Incremental Cash Flow: Definition, Formula, and Examples Key takeaways Incremental cash flow (ICF) is the additional net cash a company expects to receive from taking on a new project or investment. Positive ICF indicates the project increases company cash flow and may be worth pursuing, but it should not be the sole decision metric. ICF…

Incremental Cost of Capital: What It Is and How It Works What it is Incremental cost of capital is the average cost a company will incur to raise one additional unit of financing, whether through debt or equity. It reflects the marginal effect of new issuances on the company’s overall cost of funds and can…

Incremental Capital Output Ratio (ICOR) What is ICOR? The Incremental Capital Output Ratio (ICOR) measures how much additional capital (investment) is needed to produce one additional unit of output (usually GDP). It is used to assess the marginal productivity of investment and overall capital efficiency in an economy. Formula ICOR = Annual Investment / Annual…

Incremental Analysis What it is Incremental analysis (also called marginal analysis, differential analysis, or the relevant cost approach) is a decision-making tool that compares the additional costs and benefits of alternative business actions. It focuses only on costs and revenues that change as a result of the decision and ignores sunk (past) costs. Core principles…

Incoterms: A concise guide What are Incoterms? Incoterms (International Commercial Terms) are standardized trade terms published by the International Chamber of Commerce (ICC). They define key responsibilities between buyers and sellers in domestic and international goods transactions—who arranges transport, who pays freight and insurance, and where risk transfers—reducing ambiguity in contracts. Explore More Resources ›…

Incorporation: Definition, How It Works, and Advantages Key takeaways Incorporation is the legal process that creates a corporation — a separate legal entity distinct from its owners. Corporations provide limited liability: owners’ personal assets are generally protected from corporate debts. The process requires filing articles of incorporation, adopting corporate bylaws, and organizing a board of…

Incontestability Clause Key takeaways * An incontestability clause in a life insurance policy prevents the insurer from voiding coverage for misstatements after a defined contestability period (typically two years). * The contestability period begins when the policy is issued. * The clause protects most honest mistakes but does not shield deliberate fraud; some limited exceptions…

Income Tax Payable Key takeaways Income tax payable is a current liability on the balance sheet representing taxes expected to be paid within 12 months. Financial accounting (GAAP) and tax law can treat the same transactions differently, producing timing differences. Taxes that will be paid in later periods are reported as deferred tax liabilities. Income…

Income Tax What is income tax? Income tax is a government levy on earnings from work, investments, and business activity. It funds public services such as Social Security, defense, education, and infrastructure. Systems vary by country and by state/local jurisdictions; understanding how income tax is calculated and the available deductions and credits helps taxpayers reduce…

Income Stock: Definition and Overview An income stock is a share in a company that delivers regular cash returns to shareholders, typically through dividends. These stocks prioritize steady, often steadily increasing dividend payments over rapid capital appreciation. Investors seeking predictable income—such as retirees or conservative portfolios—commonly favor income stocks. Key takeaways Income stocks provide regular…

Income Statement What it is An income statement (also called a profit and loss or P&L statement) summarizes a company’s financial performance over a specific period. It reports revenues, expenses, gains, and losses and ends with net income (or loss). Together with the balance sheet and cash flow statement, the income statement helps users evaluate…

Income Smoothing Income smoothing is the practice of using accounting choices to reduce apparent fluctuations in a company’s net income across reporting periods. Firms do this to present steadier earnings, which investors often value more highly than volatile results. When performed within accepted accounting standards, income smoothing is legal; when it relies on misstatements or…

Income Property What is an income property? An income property is real estate purchased or developed primarily to generate income—usually by renting or leasing—while also aiming for price appreciation. Income properties can be residential or commercial and are a common form of real estate investment used to diversify a portfolio and create ongoing cash flow…

Per Capita Income Per capita income measures the average income earned per person in a defined area. It is calculated by dividing the total income of a population by the total number of people in that population. Policymakers, researchers, and businesses use it as a quick indicator of average economic well‑being and living standards. How…

Understanding Income Inequality: Causes, Measurement, and Solutions What is income inequality? Income inequality refers to the uneven distribution of income across a population. It reflects differences in wages, salaries, and earnings and often correlates with wealth inequality (differences in assets and net worth). Inequality can be examined by demographic groups (gender, race, region, occupation) and…

Income in Respect of a Decedent (IRD) What is IRD? Income in respect of a decedent (IRD) is untaxed income that a person had earned or had a right to receive before they died but which was not received until after death. The beneficiary or entity that receives those amounts is generally responsible for reporting…

Income Fund — Definition, Types, and Key Considerations What is an income fund? An income fund is a mutual fund or exchange-traded fund (ETF) that prioritizes current income—typically interest and dividends—over capital appreciation. These funds build portfolios from income-producing securities such as bonds, preferred shares, dividend-paying stocks, and short-term cash instruments. Key takeaways Income funds…

Income From Operations (IFO) Overview Income from operations (IFO), also called operating income or EBIT (earnings before interest and taxes), measures the profit a business generates from its core, day-to-day activities. It isolates performance of the primary business by excluding income and expenses that are not part of regular operations. Definition IFO = Revenue from…

Income Elasticity of Demand Income elasticity of demand measures how the quantity demanded of a good or service responds to changes in consumer real income. It helps classify goods (necessities, luxuries, inferior goods) and lets businesses and policymakers anticipate how demand will change across economic cycles. Formula At its simplest: income elasticity = (% change…

Income Effect The income effect describes how a change in a consumer’s real income or purchasing power alters the quantity demanded of a good or service. Real income can change because of wage changes, currency fluctuations, or price changes: when prices fall (or nominal income rises) consumers can buy more with the same money, and…