Most common Financial terms: Finance is a very broad field and it comprises diverse areas like personal finance, public Finance, corporate finance etc. Each and every field has its own glossary, so does finance. It does not matter if you are a finance guy or an account or an advisor, but understanding basic finance will always only help you to manage your finances better. To understand finance, you should first know basic finance terms which are used in day to day work.
Financial terms
1. Income : Income is a monetary value which is gained by someone for his/her labor, product or service.
2. Adjusted Gross Income (AGI) : AGI is a value which is used by Internal Revenue Service (IRS) to determine your income tax liability for a particular year.
3. Account payable : It refers to someone’s debt is on you or your firm/ company in short term (assumed to be not more than a year period)
4. Account receivable : It refers to the situation when you have given services or sold products but he/she has not paid you the money value in short term.
5. Amortization : It is an accounting technique used to periodically lower the book value of an intangible asset over a period of time.
6. Assets : It refers to the resources with some monetary value that an individual or company owns or control with expectation that it will provide them a future benefit.
7. Asset allocation : It refers to an investment strategy that aims to balance risk and reward by appointing assets according to risk, tolerance and investment horizon.
8. Balance sheet : It is a financial statement of a company or firm which includes assets, liabilities, equity capital, debt etc. at a point of time.
9. Bonds : It is a type of security under which the borrowers issue bond to raise money from investors willing to lend them money for a certain period of time at a certain interest.
10. Budget : An estimation of expenses and revenue for a particular task or project over a specified future period of time that can be re-valued on a periodic basis.
11. Capital : It is a broad term for anything that gives it’s owner value or advantage, like a factory and its equipment, intellectual property like patents, or a company’s or person’s financial assets.
12. Capital gain : It is the increase in a capital asset’s value because of sale of asset.
13. Cash flow : It refers to the net amount of cash and cash equivalents being transferred in and out of a company. Cash received represents inflow, while money spent represents outflows.
14. Cash flow statement : It is an important tool used to manage finances by tracking the cashflow for an organization.
15. Credit : In general it means you lend some monetary value to someone and later you will take it back.
16. Dividend : It can be described as a reward that is achieved when public listed companies extend their shareholders and its source is the company’s surplus.
17. Depreciation : The decrease in monetary value of an asset over a period of time due to use, wear and tear.
18. EBITDA : Earning before interest, tax, depreciation and amortization is an alternate measure of profitability to net income.
19. Equity : The value of capital invested or owned by the owner of the company.
20. EPS : When company’s profit is divided among the shareholders then earning per share is calculated.
21. FICO score : Fair Isaac Corporation created FICO score which is a credit score which is found out by banks or lenders to asses credit risk of borrowers.
22. Interests (S+C) : When you lend money to someone than extra cost is charged on weekly, monthly or yearly basis, that charge is known as interest.
23. Income statement : It is a statement that shows someone’s his/her profit and loss over a period of time.
24. Insurance : It is a protection charge makes sure that you will get partly or fully financial cover in case of damage or accident of the secured thing.
25. Investment : It is the dedication of monetary value which you spend to purchase an asset or to gain higher return on it.
26. Liability : It is the state of being responsible for something generally monetary.
27. Liquidity : It is a state when someone’s total assets are less than his total liabilities.
28. Leverages : It is a technique involving borrowing funds to buy things, hoping that future profits will be many times more than cost of borrowing.
29. Loan : It is lending of money by an individual, organization or entity to other individual, organization or entity.
30. Mortgage : When you take loan than you provide security against your loan, that security is known as mortgage.
31. Net worth : It is the value of all non financial and financial assets owned by someone or organization minus the value of all their liability.
32. Option : A financial instrument that is based on the value of underlying securities such as stocks.
33. Stock market : A stock market, equity market or share market is the aggregation of buyers and sellers of stocks.
34. Taxes : It is the monetary value that you pay to your government for public welfares.
35. Working capital : It the money available with you to meet your current, short-term obligations.
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Keep learning, Keep exploring!!
Beautifully explained 🙌
Thank you Supriya!!
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