Finance glossary
Finance glossary
20 terms
The finance world has a lot of different career paths. This field of study can range from accounting to financial adviser or even investment banking! Different terms are used to identify certain patterns or phenomenons that are presented in most of finance related jobs. This glossary is to help people or students interested in finance understand the terminology used in this field. Even people that are not interested in working this type of job can benefit from this glossary. Learning these terms can help everyone with their personal finances.
- asset
- An item with economic value, such as stock or real estate.
- bond
- A type of debt. When you buy a bond, you’re lending to the issuer, which may be a government, municipality, or corporation. The issuer promises to pay you a specified rate of interest during the life of the bond and to repay the principal.
- budget
- An estimate of income and expenditure for a set period.
- capital gain
- The profit that comes from selling an investment for more than you paid for it.
- cash-flow
- Net balance of cash moving in and out of a business at a specific point in time.
- compound interest
- When you earn interest on both the money you save and the interest you earn.
- credit
- A customer's ability to obtain goods or services before payment, based on the trust that payment will be made in the future.
- debt
- Money you owe another person or a business.
- depreciation
- Decrease in an asset’s value. It’s a term commonly used in accounting and shows how much of an asset’s value a business has used over a period.
- dividend
- A sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves).
- equity
- Represents the amount of money that belongs to the owners of a business after all assets and liabilities have been accounted for.
- exchange rate
- A number that is used to compare the value of money in two different countries. For example, you would use an exchange rate to figure out how many pesos or euros you could get for one U.S. dollar.
- gross income
- Total pay before taxes and other deductions are taken out.
- income statement
- An income statement is a financial statement that summarizes a business’s income and expenses during a given period. An income statement is also sometimes referred to as a profit and loss statement.
- interest
- A fee charged by a lender, and paid by a borrower, for the use of money. A bank or credit union may also pay you interest if you deposit money in certain types of accounts.
- liquidity
- A measure of the ability and ease with which you can access and use your money.
- net worth
- Represents the amount of money that belongs to the owners of a business after all assets and liabilities have been accounted for.
- profit margins
- Measure of how much money a company is making on its products or services after subtracting all of the direct and indirect costs involved.
- return on investment
- Return on Investment is a simple calculation used to determine the expected return of a project or activity in comparison to the cost of the investment, typically shown as a percentage.
- stock
- A type of investment that gives people a share of ownership in a company.