Finance Glossary
Aa
Accounts Payable
Amounts owed on open account to creditors for goods and services.
Accounts Receivable
Amounts due from customers for goods sold or services rendered.
Accrual
The recognition of revenue and expenses when they are incurred, regardless of when cash is received or paid.
Accrual Accounting
Recording revenues and expenses when they are incurred.
Accrued Expenses
Expenses that have been incurred but not yet paid.
Accrued Income
Income that has been earned but not yet received.
Amortization
The paying-off of debt in regular installments over time.
Angel Investor
Individual providing capital for startups in exchange for equity.
Annual Percentage Rate (APR)
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Annuity
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Arbitrage
The simulteaneous purchase and sale of an asset to profit from price differences.
Asset
Anything of value owned by an individual or business.
Audit
An examination of financial records to ensure accuracy and compliance.
Auditor
A person who conducts an audit.
Bb
Balance Sheet
A financial statement showing assets, liabilities and capital.
Bankruptcy
A legal proceeding for inability to repay debts.
Bear Market
Market trend characterized by falling prices.
Beta (investment risk measure)
Measure of a stock's volatility relative to the market.
Bond
A debt security issued to raise capital
Book Building
Net value of an asset or company according to its balance sheet.
Book Value
Value of an asset recorded in accounts.
Bridge Loan
A short-term loan used to bridge gaps in financing.
Cc
Capital
Financial resources used to fund a business.
Capital Gain
Increase in asset value over purchase price.
Capital Market
Market for long-term securities.
Cash Flow
Movement of cash in and out of a business.
Cash Flow Statement
Statement of cash inflows and outflows.
Compliance
Adherence to laws and regulations.
Contingent Liability
Potential obligation based on future events.
Contribution Margin
Revenue remaining after variable costs to cover fixed costs.
Cost of Goods Sold (COGS)
Direct costs of producing goods sold.
Credit Risk
Risk of loss due to borrower defaulting.
Current Assets
Assets convertible to cash within one year.
Current Liabilities
Obligations due within one year.
Dd
Deferred Revenue
Income received before delivery of goods/services.
Deflation
General decrease in prices.
Depreciation
Allocation of asset cost over time.
Derivative
Financial instrument derived from underlying asset.
Diversification
Spreading investments to reduce risk.
Dividend
Earnings distributed to shareholders.
Ee
Equity
Ownership interest in a company.
Expense
Cost incurred to generate revenue.
Ff
Financial Statement
Record of financial activities of a business.
Gg
Goodwill
Intangible asset from acquisition premium.
Gross Profit
Revenue minus COGS.
Ii
Income Statement
Statement showing revenue, expenses, profit.
Inflation
General increase in prices.
Interest
Cost of borrowing money.
Interest Rate
Percentage charged on borrowed funds.
Inventory
Goods held for sale or production.
Investment
Allocation of money to generate returns.
Ll
Liability
Financial obligations or debts.
Liquidity
Ability to convert assets to cash quickly.
Loan
Borrowed money to be repaid with interest.
Loan Tenure
Duration of loan repayment.
Mm
Margin
Difference between revenue and cost.
Market Value
Current price of an asset.
Nn
Net Profit
Profit after all expenses.
Oo
Operating Expenses
Ongoing business costs.
Overhead
Indirect business expenses.
Pp
Principal
Original amount borrowed or invested.
Profit Margin
Profit as a percentage of revenue.
Rr
Return on Investment (ROI)
Measure of investment efficiency.
Revenue
Total income from business operations.
Risk
Possibility of financial loss.
Ss
Secured Loan
Loan backed by collateral.
Uu
Unsecured Loan
Loan without collateral.
Vv
Valuation
Process of determining asset/company worth.
Volatility
Degree of price variation over time.
Ww
Working Capital
Difference between current assets and liabilities.
Write-off
Reduction of asset value to zero.
Yy
Yield
Income return on investment.
Zz
Z-scre
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