Finance vocabulary

341 vocabulary entries in our Finance study dataset. These are study definitions, not official wording.

12b-1 Fee

An annual marketing or distribution fee on a mutual fund.

30-day SEC yield

A standard calculation for bond funds that shows the interest and dividends the fund earned over the last 30 days, expressed as an annual percentage.

30-day SEC yield (Date)

A standard calculation for bond funds that shows the interest and dividends the fund earned over the last 30 days, expressed as an annual percentage.

Absolute Advantage

The ability of an entity to produce a greater quantity of a good, product, or service than its competitors, using the same amount of resources.

Account balance

The amount of money in a financial repository, such as a checking or savings account, at any given moment.

Accounting

The process of recording financial transactions pertaining to a business.

Accounts Payable (AP)

Money owed by a company to its creditors or suppliers.

Accounts Receivable (AR)

Money owed to a company by its customers for goods or services delivered.

Accrual Accounting

An accounting method where revenue or expenses are recorded when a transaction occurs rather than when payment is received or made.

Accruals

Revenues earned or expenses incurred which impact a company's net income on the income statement, although cash has not yet exchanged hands.

Accumulated Depreciation

The cumulative depreciation of an asset up to a single point in its life.

Acid-Test Ratio (Quick Ratio)

A liquidity ratio that measures a company's ability to pay its current liabilities without relying on the sale of inventory.

Alpha

A measure of an investment's performance on a risk-adjusted basis; it represents the return of a portfolio relative to its benchmark.

Alternative Minimum Tax (AMT)

A supplemental income tax imposed by the United States federal government required in addition to baseline income tax for certain individuals, corporations, and estates and trusts that have exemptions or take certain deductions.

Amortization

An accounting technique used to periodically lower the book value of a loan or an intangible asset over a set period of time.

Annual Report

A comprehensive report on a company's activities throughout the preceding year, intended to give shareholders and other interested people information about the company's activities and financial performance.

Annualized

Translating a rate for a period shorter than a year into an annual rate.

Annualized rate of return

The geometric average amount of money earned by an investment each year over a given time period.

Annuity

A financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees.

Appreciation

An increase in the value of an asset over time.

APR (Annual Percentage Rate)

The annual rate of interest charged to borrowers and paid to investors.

APY (Annual Percentage Yield)

The real rate of return earned on an investment, taking into account the effect of compounding interest.

Arbitrage

The simultaneous purchase and sale of an asset in different markets to profit from a difference in its price.

Arbitrage pricing theory

A financial model that suggests an asset's expected return can be predicted based on its linear relationship with various macroeconomic factors.

Asset allocation

The implementation of an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor's risk tolerance, goals, and investment time frame.

Asset class

A grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations.

Asset Turnover

The ratio of total sales or revenue to average assets, measuring a company's efficiency in using its assets to generate sales.

Assets

Economic resources owned by a company that are expected to provide future benefit.

Audit

An independent examination of financial information of any entity, whether profit-oriented or not, irrespective of its size or legal form when such an examination is conducted with a view to expressing an opinion thereon.

Audit trail

A chronological record that provides documentary evidence of the sequence of activities that have affected at any time a specific operation, procedure, or event.

Austerity

A set of economic policies implemented by a government to control public sector debt, typically by increasing taxes or reducing spending.

Average maturity

For a bond fund, the weighted average of the final maturity dates of all the bonds in the portfolio.

Balance sheet

A financial statement that provides a snapshot of what a company owns and owes, as well as the amount invested by shareholders.

Balanced fund

A mutual fund that contains a stock component, a bond component, and sometimes a money market component in a single portfolio.

Bankruptcy

A legal proceeding involving a person or business that is unable to repay their outstanding debts.

Basis Point (BPS)

A common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01%.

Bear market

A condition in which securities prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment.

Benchmark

A standard against which the performance of a security, mutual fund, or investment manager can be measured.

Best in class

An investment approach that focuses on companies that are leaders in their industry based on environmental, social, and governance (ESG) criteria.

Beta

A measure of the volatility\u2014or systematic risk\u2014of a security or portfolio compared to the market as a whole.

Blue chip

A nationally recognized, well-established, and financially sound company.

Bond

A fixed-income instrument that represents a loan made by an investor to a borrower.

Bond fund

A mutual fund that invests solely in bonds and other debt securities.

Book Value

The value of an asset according to its balance sheet account balance.

Bottom-up budgeting

A budgeting method that starts at the department level and is consolidated up to the corporate level.

Break Even Point

The point at which total cost and total revenue are equal, meaning there is no loss or gain for your business.

Break-even

The point at which total costs and total revenues are equal, resulting in no net gain or loss.

Breakpoint

The investment level in a mutual fund at which an investor qualifies for a reduced sales fee.

Brokerage account

An arrangement between an investor and a licensed brokerage firm that allows the investor to deposit funds and place investment orders.

Budget Deficit

A shortfall that occurs when a company's expenses are greater than its revenues over a given period.

Budget Surplus

A situation where a company's revenues exceed its expenses over a given period.

Bull market

A financial market of a group of securities in which prices are rising or are expected to rise.

Capital asset pricing model (CAPM)

A model that describes the relationship between an asset's systematic risk and its expected return.

Capital Budgeting

The process a business undertakes to evaluate potential major projects or investments.

Capital expenditure

Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.

Capital expenditure (CapEx)

Funds used by a company to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment.

Capital Gain

An increase in a capital asset's value, which is realized when the asset is sold.

Capital gains tax

A tax on the profit realized on the sale of a non-inventory asset.

Capital Loss

A financial loss that occurs when an asset is sold for less than its original purchase price.

Capital Structure

The particular combination of debt and equity used by a company to finance its overall operations and growth.

Cash conversion Cycle

The time it takes for a company to convert its investments in inventory into cash from sales.

Cash equivalent

Short-term, highly liquid investments with a maturity of three months or less that can be easily converted to a known amount of cash.

Cash flow statement

A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company.

CD (Certificate of Deposit)

A savings product that holds a fixed amount of money for a fixed period of time, such as six months, one year, or five years, and in exchange, the issuing bank pays interest.

Central Bank

A national bank that provides financial and banking services for its country's government and commercial banking system, as well as implementing the government's monetary policy and issuing currency.

Charge-off

A debt that a creditor has given up on collecting after the borrower has missed payments for a certain period.

Collateral

An asset that a lender accepts as security for a loan.

Collateralized Debt Obligation (CDO)

A complex structured-finance product that is backed by a pool of loans and other assets and sold to institutional investors.

Commercial Paper

A commonly used type of unsecured, short-term debt instrument issued by corporations, typically for the financing of payroll, accounts payable and inventories, and meeting other short-term liabilities.

Common stock

A security that represents ownership in a corporation.

Comparative Advantage

An economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners.

Compound Annual Growth Rate (CAGR)

The rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each year of the investment\u2019s lifespan.

Compound interest

The interest on a loan or deposit calculated based on both the initial principal and the accumulated interest from previous periods.

Consumer Price Index (CPI)

A measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Contingent deferred sales charge (CDSC)

A fee, or load, that mutual fund investors pay when selling Class-B fund shares within a specified number of years.

Contribution Margin

The revenue left over to cover fixed costs after considering variable costs.

Corporate bond

Debt issued by a company in order for it to raise capital.

Cost Accounting

The process of recording, analyzing, and reporting all of a company's costs to help management make better decisions.

Cost basis

The original value of an asset for tax purposes, usually the purchase price.

Cost of goods sold (COGS)

The direct costs of producing the goods sold by a company.

Credit

An entry in an account representing a payment received.

Credit Default Swap (CDS)

A financial derivative that allows an investor to \

Credit Rating

An assessment of a borrower's creditworthiness based on their financial history.

Credit Risk

The probability of loss resulting from a borrower's failure to repay a loan or meet contractual obligations.

Cryptocurrency

A digital or virtual currency that uses cryptography for security, making it difficult to counterfeit.

Current Assets

All the assets of a company that are expected to be sold or used as a result of standard business operations over the next year.

Current Liabilities

A company's short-term financial obligations that are due within one year or within a normal operating cycle.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.

Custodian

A financial institution responsible for safeguarding a firm's or individual's financial assets.

Daily dividend factor (date)

The daily dividend amount per share distributed by a money market fund on a specific date.

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities on a company's balance sheet.

Debt Coverage Ratio

A measurement of a firm's available cash flow to pay current debt obligations.

Debt Service

The cash that is required to cover the repayment of interest and principal on a debt for a particular period.

Debt to Equity Ratio

A financial ratio calculated by dividing a company\u2019s total liabilities by its shareholder equity.

Debt-to-Equity Ratio (D/E)

A financial ratio calculated by dividing a company\u2019s total liabilities by its shareholder equity.

Default

The failure to make required interest or principal repayments on a debt.

Deferred Revenue

Payments received in advance for services that have not yet been performed or goods that have not yet been delivered.

Deflation

A general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy.

Degree of Financial Leverage

A leverage ratio that measures the sensitivity of a company's earnings per share to fluctuations in its operating income, as a result of changes in its capital structure.

Degree of Operating Leverage

A measure of how a company's operating income changes in response to a change in its sales.

Depreciation

The reduction in the value of an asset over time, due in particular to wear and tear.

Depreciation Expense

The amount of depreciation of a company's assets that is allocated to a specific accounting period.

Depression

A severe and prolonged downturn in economic activity.

Derivative

A financial contract whose value is derived from an underlying asset, index, or interest rate.

Discount Rate

The interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve's discount window.

Discounted Cash Flow (DCF)

A valuation method used to estimate the value of an investment based on its expected future cash flows.

Distribution schedule

A tentative plan that outlines when a mutual fund will distribute dividends and capital gains to its shareholders.

Dividend

A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

Dividend Discount Model (DDM)

A quantitative method used for predicting the price of a company's stock based on the theory that its present-day price is worth the sum of all of its future dividend payments when discounted back to their present value.

Dividend Payout Ratio

The ratio of the total amount of dividends paid out to shareholders relative to the net income of the company.

Dividend Reinvestment Plan (DRIP)

A plan offered by a corporation that allows investors to reinvest their cash dividends by purchasing additional shares or fractional shares on the dividend payment date.

Dividend Yield

A financial ratio that shows how much a company pays in dividends each year relative to its stock price.

Dodd-Frank Act

A U.S. federal law that places regulation of the financial industry in the hands of the government.

Dollar cost averaging

An investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility on the overall purchase.

Double entry accounting

An accounting system that requires every financial transaction to be recorded in at least two different accounts.

Dow Jones Industrial Average (DOW)

A stock market index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange and the NASDAQ.

DuPont analysis

A framework for analyzing a company's return on equity (ROE) by breaking it down into three key components: profitability, asset efficiency, and financial leverage.

Earnings Before Interest and Taxes (EBIT)

An indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

A measure of a company's overall financial performance and is used as an alternative to net income in some circumstances.

Earnings Per Share (EPS)

A company's net profit divided by the number of common shares it has outstanding, indicating its profitability.

Economic Indicator

A piece of economic data that is used to interpret current or future investment possibilities.

Economic Order Quantity (EOQ)

The ideal order quantity that a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs.

Efficient market hypothesis

An investment theory that states it is impossible to consistently achieve returns in excess of average market returns on a risk-adjusted basis.

Efficient Market Hypothesis (EMH)

An investment theory that states it is impossible to consistently \

Equities

Stocks that represent ownership in a company.

Equity fund

A mutual fund that invests primarily in stocks.

ETF (Exchange-Traded Fund)

A type of pooled investment security that operates much like a mutual fund but trades like a stock on an exchange.

Exchange Rate

The value of one currency for the purpose of conversion to another.

Exclusions

An investment strategy that avoids certain industries or companies based on ethical, social, or environmental criteria.

Expense ratio

The annual cost of owning a mutual fund or ETF, expressed as a percentage of your investment.

Fair Value

The estimated worth of a company's assets and liabilities, often used in accounting.

Fair Value Accounting

The practice of measuring a company's assets and liabilities at their current market value.

Federal funds rate (fed funds rate)

The interest rate at which banks lend reserve balances to other banks overnight on an uncollateralized basis.

Federal Reserve Board (the Fed)

The governing body of the Federal Reserve System, responsible for U.S. monetary policy.

Federal Reserve System (The Fed)

The central banking system of the United States.

Financial Accounting Standards Board (FASB)

The independent organization in the U.S. that establishes financial accounting and reporting standards.

Financial statement analysis

The process of analyzing a company's financial statements for decision-making purposes.

Fintech

A term used to describe new technology that seeks to improve and automate the delivery and use of financial services.

Fiscal Policy

The use of government spending and taxation to influence the economy.

Fiscal year

A 12-month period that a company or government uses for accounting purposes and preparing financial statements.

Fixed Asset

A long-term tangible asset that a firm owns and uses to produce income and is not expected to be consumed or converted into cash within a year.

Fixed cost

A cost that does not change with an increase or decrease in the amount of goods or services produced or sold.

Fixed Expense

A cost that remains constant regardless of the level of business activity.

Fixed income fund

A mutual fund that invests in fixed-income securities like bonds, aiming to provide regular income to investors.

Fixed Income Security

An investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity.

Floating Interest Rate

An interest rate that moves up and down with the rest of the market or along with an index.

Forex (Foreign Exchange Market)

A global decentralized or over-the-counter (OTC) market for the trading of currencies.

Forward Contract

A customized contract between two parties to buy or sell an asset at a specified price on a future date.

Free Cash Flow (FCF)

The cash a company produces through its operations, less the cost of expenditures on assets.

Fund

A pool of money collected from many investors to invest in securities like stocks, bonds, and other assets.

Fundamental Analysis

A method of measuring a security's intrinsic value by examining related economic and financial factors.

Futures Contract

A legal agreement to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future.

GAAP (Generally Accepted Accounting Principles)

A common set of accounting principles, standards, and procedures issued by the Financial Accounting Standards Board (FASB).

GE McKinsey Matrix

A strategic tool used by businesses to analyze their portfolio of business units based on market attractiveness and competitive strength.

Generally Accepted Accounting Principles (GAAP)

A common set of accounting principles, standards, and procedures that public companies in the U.S. must follow.

Glass-Steagall Act

A 1933 law that separated commercial banking from investment banking. It was largely repealed in 1999.

Green bond principles

Voluntary guidelines that recommend transparency, disclosure, and reporting in the green bond market.

Green bonds

A type of fixed-income instrument specifically used to raise capital for projects with positive environmental or climate benefits.

Gross Domestic Product (GDP)

The total value of all goods and services produced within a country's borders over a specific period.

Gross Profit

The profit a company makes after deducting the costs associated with making and selling its products.

Gross Profit Margin

A metric that shows the percentage of revenue that exceeds the cost of goods sold (COGS).

Growth stock

A stock of a company that is expected to grow at a significantly faster rate than the overall market.

Growth style funds

Mutual funds that invest in stocks of companies that are expected to grow rapidly, focusing on capital appreciation.

Hedge Fund

A pooled investment fund that trades in relatively liquid assets and is able to make extensive use of more complex trading, portfolio-construction and risk management techniques.

Hedging

An investment strategy used to offset potential losses by taking an opposing position in a related asset.

High-Yield Bond

A type of corporate bond that offers a higher rate of interest due to its higher risk of default.

High-Yield Bond (Junk Bond)

A type of corporate bond that offers a higher rate of interest due to its higher risk of default.

I-M

An investment strategy that aims to generate positive social and environmental impact alongside a financial return.

Impact investing

An investment strategy that aims to generate positive social and environmental impact alongside a financial return.

Incremental budgeting

A method of budgeting where the previous period's budget is used as a baseline, with incremental changes made for the new period.

Index

A statistical measure of change in a securities market, used as a benchmark for investment performance.

Index fund

A type of mutual fund or ETF with a portfolio constructed to match or track the components of a financial market index, such as the S&P 500.

Inflation

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Inflation rate

The percentage increase in the general price level of goods and services in an economy over a period of time.

Initial Public Offering (IPO)

The process of offering shares of a private corporation to the public in a new stock issuance.

Insider Trading

The buying or selling of a publicly traded company's stock by someone who has non-public, material information about that stock.

Intangible Asset

An asset that is not physical in nature, such as goodwill, brand recognition, and intellectual property.

Interest Coverage Ratio

A financial ratio that measures a company's ability to meet its interest payment obligations on its outstanding debt.

Interest rate

The amount a lender charges for the use of assets expressed as a percentage of the principal.

Interest rate risk

The potential for investment losses that result from a change in interest rates.

International Financial Reporting Standards (IFRS)

A set of accounting rules for the financial statements of public companies that are intended to make them consistent, transparent, and easily comparable around the world.

Inventory valuation

The monetary amount associated with the goods in the inventory at the end of an accounting period.

Investment Advisor

A professional who provides financial advice or guidance to customers for compensation.

Investment Bank

A financial services company that acts as an intermediary in large and complex financial transactions.

Investment Grade

A rating that indicates a municipal or corporate bond has a relatively low risk of default.

Investment grade bonds

Bonds that are judged by a credit rating agency as likely enough to meet payment obligations that banks are allowed to invest in them.

Investment portfolio

A collection of assets owned by an individual or institution, which may include stocks, bonds, and other investments.

Investment stewardship

The responsible allocation, management, and oversight of capital to create long-term value for clients and beneficiaries.

Junk Bond

A high-yield bond with a credit rating below investment grade.

Large-cap

Refers to companies with a market capitalization of more than $10 billion.

Law of diminishing marginal returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.

Legal accruals

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when cash is exchanged.

Letter of intent

A document outlining the main points of an agreement between two or more parties before the agreement is finalized.

Leverage

The use of borrowed capital to increase the potential return of an investment.

Leveraged Buyout (LBO)

The acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition.

Liabilities

A company's financial obligations, such as loans, accounts payable, and other debts.

Lipper ratings

A system that ranks mutual funds based on their risk-adjusted performance against their peers.

Liquidated damages

A predetermined amount of money that must be paid as damages for failing to perform under a contract.

Liquidation

The process of closing a business and selling its assets to pay off its debts.

Liquidity

The ease with which an asset can be converted into cash without affecting its market price.

Liquidity preference theory

An economic theory that suggests investors demand a higher interest rate for holding long-term, less liquid investments.

Liquidity ratio

A class of financial metrics used to determine a company's ability to pay off its short-term debt obligations.

Liquidity Risk

The risk that a company or individual will not be able to meet its short-term financial obligations.

Loads (back end, front end, and no load)

Fees associated with buying or selling mutual funds. Front-end loads are paid at purchase, back-end loads are paid at sale, and no-load funds have no such charges.

Loan

A sum of money that is borrowed and expected to be paid back with interest.

Loan Amortization Schedule

A table detailing each periodic payment on a loan, showing how much goes toward principal and interest.

Long-Term Debt

Loans and other financial obligations that are due more than one year from the balance sheet date.

Long-term investment strategy

A plan that involves holding investments for an extended period, typically over a year, to achieve long-term financial goals.

Margin Account

A brokerage account where the broker lends the customer cash to purchase securities.

Margin Call

A demand from a broker that an investor deposit additional money or securities into their margin account to meet the minimum requirement.

Margin of Safety

The difference between the intrinsic value of a stock and its market price, or the buffer between a company's sales and its break-even point.

Market capitalization

The total market value of a publicly traded company's outstanding shares.

Market Risk

The risk of losses in investments arising from factors that affect the entire market.

Market Value

The price an asset would fetch in the marketplace.

Maturity

The date on which the final payment for a financial instrument, such as a bond or loan, is due.

Maturity distribution

The breakdown of a portfolio's fixed-income investments by their maturity dates.

Median market cap

The midpoint market capitalization of the stocks in a portfolio, where half are larger and half are smaller.

Mid-cap

Refers to companies with a market capitalization between $2 billion and $10 billion.

Monetary Policy

The actions undertaken by a central bank to manipulate the money supply and credit conditions to stimulate or restrain economic activity.

Money market mutual fund

A type of mutual fund that invests in high-quality, short-term debt instruments and cash equivalents.

Morningstar ratings

A system that assigns star ratings to mutual funds based on their past risk-adjusted performance.

Mortgage-Backed Security (MBS)

A type of asset-backed security that is secured by a mortgage or collection of mortgages.

Municipal Bond

A bond issued by a state, city, or other local government entity to fund public projects.

Mutual fund

An investment vehicle made up of a pool of money from many investors to invest in a diversified portfolio of securities.

NASDAQ

A global electronic marketplace for buying and selling securities, known for being the home of many technology stocks.

Net Asset Value (NAV)

The total value of a fund's assets minus its liabilities, representing its per-share value.

Net asset value per share (NAV)

The per-share market value of a mutual fund, calculated daily by dividing the fund's total assets minus liabilities by the number of outstanding shares.

Net Income

A company's total profit after subtracting all expenses, including taxes and interest.

Net present value (NPV)

The difference between the present value of future cash inflows and the initial investment cost, used to analyze an investment's profitability.

Net Profit Margin

A financial ratio that measures the percentage of revenue that becomes profit after all expenses are deducted.

Net Worth

The value of an individual's or company's assets minus their liabilities.

New York Stock Exchange (NYSE)

A stock exchange located in New York City that is the largest equities-based exchange in the world.

Operating Cash Flow

The cash generated from a company's normal business operations.

Operating income

A company's profit from its core business operations, excluding interest and taxes.

Operating Profit

A company's profit after subtracting operating expenses from revenue, indicating its core operational performance.

Option

A financial instrument that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a certain date.

Over-the-Counter (OTC)

A security traded in some context other than on a formal exchange.

Owner's Equity

The residual interest in a company's assets after deducting its liabilities, representing the owners' stake.

P/B ratio (price to book ratio)

A financial ratio that compares a company's market value to its book value.

P/E ratio (1 yr forecast)

A stock's price divided by its projected earnings per share for the upcoming year.

P/E ratio (1 yr trailing) (long position)

A stock's price divided by its earnings per share over the past 12 months.

Par value

The face value of a bond, which is the amount the issuer agrees to repay at maturity.

Payback Period

The time required for an investment to generate enough cash flow to recover its initial cost.

Payroll Tax

Taxes imposed on employers and employees to fund social insurance programs like Social Security and Medicare.

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including mutual funds and ETFs.

Portfolio allocation

The process of distributing an investment portfolio among different asset classes.

Portfolio Manager

A professional responsible for making investment decisions and managing a portfolio of assets on behalf of clients.

Positive tilt

An investment strategy that overweights sectors or companies with strong environmental, social, and governance (ESG) characteristics.

Power purchase agreements (PPAs)

A contract where a developer installs a power system, and the property owner agrees to buy the generated power.

Preferred stock

A class of ownership in a corporation that has priority over common stock in dividend payments and asset distribution.

Premium

The amount by which a bond or stock's market price exceeds its face value.

Prepaid expenses

Future expenses that have been paid in advance and are recorded as assets on the balance sheet until they are incurred.

Price to Book Ratio (P/B)

A ratio used to compare a company's market capitalization to its book value.

Price to Earnings Ratio (P/E)

A ratio for valuing a company that measures its current share price relative to its per-share earnings.

Price to Sales Ratio (P/S)

A valuation ratio that compares a company\u2019s stock price to its revenue.

Price-to-book

A financial ratio that compares a company's market price to its book value per share.

Prime Rate

The interest rate that commercial banks charge their most creditworthy customers.

Principal

The original amount of a debt on which interest is calculated, or the initial amount of an investment.

Private Equity

An alternative investment class that consists of capital that is not listed on a public exchange.

Pro Forma Financial Statement

A projected financial statement based on hypothetical scenarios and assumptions about future events.

Profitability Ratio

A class of financial metrics used to assess a company's ability to generate earnings relative to its revenue, assets, and equity.

Prospectus

A formal legal document that is required by and filed with the Securities and Exchange Commission that provides details about an investment offering for sale to the public.

Proxy Voting

A ballot cast by one person on behalf of another. In corporate governance, shareholders can vote by proxy on company matters.

Public offering price (POP)

The price at which new shares of a mutual fund are offered to the public, including any sales charges.

Quality distribution

The breakdown of a bond portfolio's holdings based on their credit quality ratings.

Quantitative Easing (QE)

A monetary policy strategy used by central banks to increase the money supply and encourage lending and investment.

Quick Assets Ratio

A liquidity ratio that measures a company's ability to meet its short-term obligations using only its most liquid assets.

Quota

A government-imposed limit on the quantity of a good that can be produced, imported, or exported.

R-squared (R\u00b2)

A statistical measure that represents the proportion of the variance for a dependent variable that's explained by an independent variable or variables in a regression model.

Rate of Return

The net gain or loss on an investment over a specific period, expressed as a percentage of the initial cost.

Ratings

An evaluation of the creditworthiness of a borrower or the quality of a bond, typically provided by rating agencies.

Recession

A significant, widespread, and prolonged downturn in economic activity.

Redemption

The act of selling mutual fund shares back to the fund in exchange for cash.

Reinvestment option

An arrangement that allows investors to automatically use their dividends or capital gains to purchase additional shares.

Retained Earnings

The portion of a company's net income that is not distributed as dividends but is reinvested in the business.

Retention Ratio

The percentage of a company's net income that is retained for reinvestment rather than paid out as dividends.

Return on Assets (ROA)

A financial ratio that indicates how profitable a company is relative to its total assets.

Return on Equity (ROE)

A measure of a company's profitability calculated by dividing its net income by shareholders' equity.

Revenue

The total amount of income generated by the sale of goods or services related to the company's primary operations.

Risk Aversion

An investor's tendency to prefer lower returns with known risks rather than higher returns with unknown risks.

Royalties

Payments made to the owner of an asset for the right to use it, often calculated as a percentage of revenue.

S&P 500 (Standard & Poor's 500)

A stock market index that tracks the performance of 500 of the largest U.S. publicly traded companies.

Sales charge

A fee paid when buying certain mutual funds, also known as a load, which compensates the broker.

Securities

Tradable financial instruments that hold some type of monetary value, such as stocks, bonds, and options.

Securities and Exchange Commission (SEC)

A U.S. government agency that oversees securities markets, enforces federal securities laws, and protects investors.

Share

A unit of ownership in a corporation or financial asset.

Share class net assets (date)

The total value of assets within a specific share class of a mutual fund as of a certain date.

Share classes

Different types of shares in the same mutual fund, each with its own fee structure and expenses.

Shareholder (Stockholder)

An individual or institution that legally owns one or more shares of the stock of a public or private corporation.

Sharpe ratio

A measure of an investment's risk-adjusted return, which indicates the return earned per unit of risk taken.

Short Selling

The sale of a security that is not owned by the seller, or that the seller has borrowed, in the belief that its price will fall.

Small-cap

Refers to companies with a market capitalization between $300 million and $2 billion.

Social bonds

Bonds issued to finance projects with positive social outcomes, such as affordable housing or healthcare access.

Stagflation

A condition of slow economic growth and relatively high unemployment\u2014a time of stagnation\u2014accompanied by rising prices, or inflation.

Standard and Poor's 500 Index (S&P 500)

A stock market index that tracks the performance of 500 of the largest U.S. publicly traded companies.

Standard deviation

A statistical measure of the dispersion of a dataset from its mean, used in finance to quantify investment risk.

Statement of additional information (SAI)

A document that provides more detailed information about a mutual fund than its prospectus.

Stock Option

A contract giving the holder the right, but not the obligation, to buy or sell a specified number of shares at a set price.

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares.

Stockholders

Individuals or institutions that own shares in a corporation, also known as shareholders.

Stocks

Securities that represent ownership in a corporation and a claim on part of its assets and earnings.

Systematic investment plan

A service that allows investors to make regular, automated investments in a mutual fund.

Systematic Risk

The risk inherent to the entire market or market segment, also known as \

Taxable Income

The portion of an individual's or company's income that is subject to taxation.

Technical Analysis

A trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.

The Fisher effect

An economic theory stating that the real interest rate is equal to the nominal interest rate minus the expected inflation rate.

The five why's

A problem-solving technique used to explore the cause-and-effect relationships underlying a particular problem by repeatedly asking \

The long tail theorem

An economic concept that describes the strategy of selling a large number of unique items in relatively small quantities, in addition to selling a smaller number of popular items in large quantities.

Thematic mutual fund

A mutual fund that invests in companies related to a specific theme, such as renewable energy or technological innovation.

Time Value of Money

The principle that money available today is worth more than the same amount in the future due to its potential earning capacity.

Time Value of Money (TVM)

The principle that money available today is worth more than the same amount in the future due to its potential earning capacity.

Times Interest Earned (Interest Coverage Ratio)

A ratio that measures a company's ability to meet its debt obligations based on its current income.

Total return

The full gain or loss on an investment over a specific period, including income and capital appreciation.

Tracking error

A measure of how much a portfolio's returns deviate from its benchmark's returns.

Transfer agent

A financial institution that manages and maintains records of a company's shareholders or bondholders.

Treasury bill

A short-term U.S. government debt security with a maturity of one year or less.

Treasury Bill (T-Bill)

A short-term U.S. government debt security with a maturity of one year or less.

Treasury bond

A long-term U.S. government debt security with a maturity of 10 years or more.

Treasury Bond (T-Bond)

A long-term U.S. government debt security with a maturity of 10 years or more.

Treasury note

A medium-term U.S. government debt security with a maturity between one and 10 years.

Treasury security

Any debt obligation issued by the U.S. Department of the Treasury.

Trial balance

A bookkeeping worksheet that compiles the balances of all ledgers into debit and credit columns to ensure they are equal.

Trustee

An individual or organization that holds and manages assets for the benefit of another party.

Turnover ratio

The percentage of a portfolio's holdings that have been replaced in a given year.

Value investing

An investment strategy that involves buying stocks that appear to be trading for less than their intrinsic value.

Value stock

A stock that trades at a lower price compared to its fundamentals, such as earnings and sales.

Value style funds

Mutual funds that focus on investing in stocks that are considered undervalued but have strong financial health.

Variable cost

A corporate expense that changes in proportion to production output.

Volatility

The degree of variation of a trading price series over time, usually measured by the standard deviation of logarithmic returns.

Weighted Average Cost of Capital (WACC)

A calculation of a firm's cost of capital in which each category of capital is proportionately weighted.

Weighted average market cap

A stock market index weighting method where component stocks are weighted according to their total market capitalization.

Weighted average maturity

The average time until the securities in a portfolio mature, weighted by the value of each security.

Working capital

The difference between a company's current assets and current liabilities, indicating its short-term liquidity.

Working Capital Management

The strategies a company uses to manage its short-term assets and liabilities to ensure it has enough cash flow for its daily operations.

Yield

The income return on an investment, such as interest or dividends, expressed as an annual percentage.

Yield curve

A graph that plots the interest rates of bonds with equal credit quality but differing maturity dates.

Yield to maturity

The total return an investor can expect on a bond if it is held until it matures.

Yield to maturity (YTM)

The total return an investor can expect on a bond if it is held until it matures.

Yield to maturity distribution

The breakdown of the expected total returns for a portfolio of bonds if all are held until they mature.

Zero based budgeting

A budgeting method that requires all expenses to be justified for each new period, starting from a \

Zero-Coupon Bond

A bond that does not pay periodic interest but is issued at a discount and redeemed for its full face value at maturity.

Other clusters

• Business Management and Administration264 entries
• Hospitality and Tourism149 entries
• Entrepreneurship137 entries
• Marketing127 entries
• General93 entries