Glossary of Financial Terms
Account number - An eight digit number that identifies your bank account. You will find the number at the bottom of your cheques and also printed on the front of your bank card.
Actuary - A mathematician who calculates premiums, reserves, dividends, insurance, pension and annuity rates for insurance and financial services companies.
Appreciation – An increase in the value of an investment.
Arbitration – a dispute resolution process in which parties agree to be bound by the decision of a neutral third person, the arbitrator, after a hearing that covers both sides of a case or dispute, usually outside the courts.
Asset – Anything with commercial or exchange value that is owned by a business, institution or individual. Examples include cash, real estate and investments.
Balance Inquiry – A basic banking function by which consumers can determine the balance of funds in an account via phone or personal computer.
Bankruptcy – When someone is declared bankrupt, it means officially that they are unable to pay their debts and what assets they do have are seized in order to try and repay their creditors.
Bond – Bonds are investment securities in which an investor lends money to a borrower for a set period of time, in exchange for regular interest payments.
Broker – A person who acts as an intermediary between the buyer and seller of a security, insurance product or mutual fund.
Capital Allocation – The process of determining the most efficient investment strategy for an organization's financial resources, with the goal of maximizing shareholder equity.
Capital Expenditures (CAPEX) – Capital expenditures are costs that occur when purchasing, improving or maintaining physical assets of an investment project. Examples include costs of planning processes, installation or equipment.
Capitalization (Cap) – The total market value of a company’s outstanding equity.
Collateral – An asset that a person offers to secure a loan, promising to give the asset to the lender if loan payments cannot be met. Collateral also refers to the collection of receivables, such as mortgages, which are used to back the interest and/or principal security.
Compound Interest – Compound interest is adding the interest to the original sum invested or borrowed. When a bank adds the interest you have earned on your savings to the original sum invested, this increases the amount of interest you earn for the next period.
Consolidation Loan – A consolidation loan combines all your loans in to one monthly payment, making it easier to manage and keep track of your outgoings.
Credit – Taking a loan from a bank or credit card company to buy something now and paying them back later. You will be charged interest on the amount borrowed.
Credit Scoring System – A statistical system used to determine whether to grant credit to a potential borrower by assigning numerical scores to various characteristics related to creditworthiness.
Current Assets – Assets that can be converted to cash within a year.
Custodian – A person or entity, such as a bank or trust company, responsible for holding financial assets.
Crypto Asset – A digital asset, which may be a medium of exchange, for which generation or ownership records are supported through a blockchain technology.
Debenture – A type of bond or other debt instrument issued by a company. It is backed by credit rather than by assets.
Debit Card – A debit card is used to take money out of a cash machine. It deducts the money you take out direct from your bank account. Cash cards can be used in the same way as cash by paying for goods and services at the point of purchase, and it is deducted direct from your bank account.
Default – A term that denotes the failure to pay the principal or interest on a financial obligation.
Depreciation – A decrease in the value of an investment.
Digital Asset – A digital commodity that is electronically transferable and intangible with a market value.
Digital Share – Shares that have the same properties as paper shares, just that they are recorded in electronic form.
Diversification – Investing in a variety of different securities. This strategy also has the opportunity to maximize investment returns and balancing the risk.
Dividend – A sum of money, determined by a company's directors, paid to shareholders of a corporation out of earnings.
Dow Jones Industrial Average (DJIA) – An indicator showing generally how well the market is going, found by averaging the prices of 30 industrial blue-chip stocks trading in the New York Stock Exchange.
Duration – An estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (higher risk) in relation to interest-rate movements.
Earnings per Share (EPS) – A measure of a company's profitability, calculated by dividing quarterly or annual income (minus dividends) by the number of outstanding stock shares.
Earnings Yield – Yield found by dividing the earnings per share for the last 12 months by the market price per share.
Effective Rate – The annual interest rate that is actually earned or paid on an investment, loan or other financial product as the result of compounding over a given time period.
Emerging Market – Generally, economies that are in the process of growth and industrialization. Investing in emerging markets may provide significant rewards, as well as significant risks.
Equity – Ownership interest in an asset after liabilities are deducted.
External Audit – A financial review that is conducted by a party not associated with the company or department that is voluntarily or involuntarily under audit. An external audit results in impartial reporting to be used by investors, government agencies, the general public or the company itself.
Face Value – The value printed on the face of a stock, bond, or other financial instrument or document.
Financial Bubble – An economic cycle characterized by rapidly increasing prices of an asset to a point that is unsustainable, causing the asset to burst or contract in value. Financial bubbles follow five stages: displacement, boom, euphoria, profit taking and bust.
Forbearance – Allows borrowers to temporarily stop making payments or temporarily reduce monthly payment amounts for a specific period. Borrowers are responsible for paying the interest that accrues during this time for all loan types.
Foreclosure – The legal process used to attempt to recover outstanding debt secured by collateral. The collateral is confiscated by the creditor and sold to repay this debt.
Front-end Load – A sales charge on mutual funds or annuities assessed at the time of purchase.
Fundamental Analysis (FA) – An analysis of stocks based on fundamental factors, such as company growth potential and earnings, to determine a company's worth, strength, and potential for growth.
Gearing Ratio – Compares a company’s equity to its debt. It shows the degree to which a company’s activities are funded by shareholder funds versus creditor funds. Gearing ratios are used to assess how a company structures itself and the amount of risk involved with its chosen capital structure.
Global Fund – A fund that invests primarily in securities anywhere in the world.
Going Public – An expression used to describe the first public selling of shares of an institution that previously sold shares privately.
Grant – A financial award given for a specific purpose, such as facilitate a goal or incentivize performance in a specific area. Unlike loans, grants do not have to be paid back, but it is expected that the funds are employed for their stated purpose, which typically serves some larger good.
Growth Fund – A fund that invests primarily in the stocks of companies with above-average risk in return for potentially above-average gains. These companies often pay little or no dividends.
Hedge Fund – An investment portfolio that employs higher-risk trading methods, which typically include both long and short market positions, leverage and derivatives. Hedge funds are subject to fewer regulations than most investments; thus, they are generally only accessible to accredited investors.
Hedging – The practice of offsetting potential losses from an investment by taking an opposite position in a related asset. Hedging is an effective risk management strategy, although it typically results in a reduction of potential profits.
Holding Period Return – The yield calculated by dividing the income plus price appreciation during a specified time period by the cost of the investment.
IBAN/Swift Code – Codes only used for International bank transfers, so if you are sending or receiving money from abroad you will need to quote these numbers.
Index Fund – A mutual fund or exchange-traded fund that is constructed to track the performance of the components in a financial market index. Examples include the Dow Jones Industrial Average index, the Standard & Poor's (S&P) 500 index and the Nasdaq Composite index.
Inflation Risk – The uncertainty of the future real value of an investment
Innovative Financing – A range of non-traditional activities aimed to raise additional funds for the development and implementation of an investment project. Innovative financing instruments contribute to attract financing from other public or private investors to areas of strong interest of public authorities and organisations.
Interest Rate Risk – The possibility that the market value of a bond will decrease due to rising interest rates. When interest rates go up, bond prices usually go down, and vice versa.
Investment Consultant – A person or organization hired by an investment fund or an individual to give professional advice on investments and asset management practices.
Junk Bond – A weak bond, rated BB or lower, that has a high default risk and thus carries a high interest rate.
Key Interest Rate – The specific interest rate that determines bank lending rates and the cost of credit for borrowers. In the United States, the two Key Interest Rates are the Discount rate and the Federal Funds rate.
Large Capitalization (Cap) – A reference to either a large company stock or an investment fund that invests in the stocks of large companies.
Limit Order – An order to buy or sell an asset at a certain price or better. A buy order will be executed at a target price or higher, while a sell will only occur at a chosen or lower price.
Liquid Market – A liquid market features a large number of buyers and sellers. It is a platform where all the trades are executed with ease and at a low cost.
Liquidity – A measure of how easy it is to obtain and use your money. Can also mean the degree to which an asset or security can be quickly bought or sold in the market without adversely affecting the asset’s price.
Load – A sales commission charged on certain mutual funds. Different types include front-end loads (paid when shares are purchased) and back-end loads (fees paid when shares are sold).
Margin Call – A demand by a broker to add funds to a brokerage account within a specific period of time to offset investment losses. It occurs when an investment loses enough money to fall below a maintenance level required by the brokerage that funds for investment purposes.
Market Analysis – A quantitative and qualitative assessment of a market, demonstrating its dynamics and attractiveness within the industry from the financial viewpoint. Market analysis are often a key part of a project proposal and provide a holistic picture of the market in which a project should be implemented.
Market Capitalization (Market Cap) – The price of an asset multiplied by circulating supply represents the total value of a given asset and its market. It is often used as a measurement of a project's success.
Market Order – An order to purchase or sell stock at a current price.
Mutual Fund – A professionally managed portfolio of stocks, bonds or other investments divided up into shares.
NASDAQ (National Association of Securities Dealers Automated Quotation) – A composite index that measures the performance of more than 5,000 U.S. and non-U.S. companies traded “over the counter” through NASDAQ.
Negative Amortization – Occurs when a repayment that is made is less than the interest charged on a loan, causing the outstanding balance of the loan to increase.
Net Profit Margin – Net profit margin is a calculation derived by dividing net income by total revenue.
New York Stock Exchange (NYSE) – The largest stock exchange in the U.S. located in New York City, also known as Wall Street.
Open-End Credit – A line of credit that may be used repeatedly up to a certain limit, also known as a charge account or revolving credit.
Operational Expenditures (OPEX) – The costs that occur in the daily operation of an investment project, like staff costs, maintenance costs, etc.
Overdraft – Taking more money out of your bank account than is actually in there. Banks will have a prearranged overdraft limit for each individual and if you go over that you will incur bank charges.
Over-the-Counter Market – A communications network, supervised by the National Association of Securities Dealers, which trades bonds, non-listed stocks, and other securities.
PIN – PIN stands for Personal Identification Number. You will be asked to create your own 4 digit number for use with your debit card.
Portfolio – The securities an investor holds.
Portfolio Manager – A financial professional responsible for making investment decisions, investing a fund's assets, implementing an investment strategy and managing day-to-day portfolio trading.
Prepaid Card – A charge card that provides access to money, which was loaded onto it in advance.
Profitability – A measure of an organization’s profit relative to its expenses. Organizations that are more efficient will realize more profit as a percentage of its expenses than a less-efficient organization.
Prospectus – The official document that describes certain investments, such as mutual funds, to prospective investors.
Put Option – The right given a buyer to sell stock at a specified price within a specified period of time.
Quantitative Finance – The application of advanced mathematics and extremely large data sets to analyze financial markets.
Quarterly Statements – A summary of your account sent to you every 3 months.
Real Interest Rates – Interest rates adjusted for the expected erosion of purchasing power resulting from inflation.
Redemption – The selling of fund shares back to the fund.
Refinance – To repay a loan by taking out another loan. Usually done to get a lower interest rate. Refinancing also resets the the repayment period.
Return on Equity (ROE) – The value found by dividing the company's net income by its net assets .
Revolving Funds – A pool of capital replenished by the cost-savings from energy efficiency and renewable energy projects or by the interests paid by the sustainability measures financed by the fund.
Risk Profile – A quantitative evaluation of an organisation’s willingness and ability to take risks as well as of their reliability.
Round Lot – Generally 100 shares, the basic trading unit for stock.
S&P 500 Index – An unmanaged, market capitalization-weighted index of 500 stocks of leading large-cap U.S. companies in leading industries.
Sector Fund – A fund that invests in a particular or specialized segment of the marketplace, such as stocks of companies in the software or real estate industries.
Securities – Any investment opportunity in which the investor has a reasonable expectation of making a profit as a result of the managerial or entrepreneurial efforts of others, but where the investor generally has little power over management and limited access to the enterprise’s business records.
Securities and Exchange Commission (SEC) – A US government agency created by congress in 1934 to regulate the securities industry and to help protect investors, ensuring that the securities markets operate fairly and honestly.
Security Token – As an investment asset, a security token is a digital asset that represents ownership or other rights and transfers value from an asset or bundle of assets to a token. In plain language, security tokens are the digital form of traditional investments like stocks, bonds, or other securitized assets.
Sentiment Analysis – The use of natural language processing, text analysis, computational linguistics and biometrics to systematically identify, extract, quantify and study affective states and subjective information. The most common use of sentiment analysis in the financial sector is the analysis of financial news, particularly news related to predicting the behavior and possible trend of stock markets.
Share – A representation of ownership in a company or investment fund.
Sort Code – The six digit code which identifies the branch of the bank where you hold your account.
Stable Value Fund – An investment fund that seeks to preserve principal and provide consistent returns and liquidity.
Standing Order – A method of paying regular amounts of money to a particular person or company automatically via your bank account.
Stock – A share that represents ownership in the company that issues it.
Stop-Limit Order – An order placed with a stockbroker to buy or sell at a certain price or better during a limited period of time.
Stop-Loss Order – An order placed with a stockbroker to buy or sell a designated stock once a designated price has been reached.
T-Bond – Fixed-interest bonds issued by the U.S. government with a maturity of more than 10 years. These bonds pay its investor interest which are only taxed at the federal level and are generally considered low-risk investments.
Target Risk Fund – A fund that maintains a predetermined asset mix and generally uses words such as “conservative,” “moderate” or “aggressive” in its name to indicate the fund’s risk level. Also known as a lifestyle fund.
Technical Analysis (TA) – The analysis of historical trends of price, volume, and other related market indicators to aid in predicting future trends.
Term of the Loan – The number of years over which you have to repay a loan.
Thrift Institution – A term encompassing savings banks, savings and loan associations, and credit unions. These institutions primarily accept consumer deposits and make home mortgages.
Trading Range – The range of prices within which a stock is normally traded.
Transaction Account – A bank account from which payments can be made to a third party.
U.S. Treasury Securities – Debt securities issued by the United States government and secured by its full faith and credits.
Unit Value – The dollar value of each unit on a given date.
Unitholder – An owner of units in an investment.
Value Drivers – Factors that increase the worth of a product, service, asset or business.
Value Fund – A fund that invests primarily in stocks that are believed to be priced below what they’re really worth.
Virtual Currency – A digital representation of value that is used as a medium of exchange and a store of value used mostly as a way for people to track, store, and send payments over the Internet.
Volatility – The amount and frequency of fluctuations in the price of a security, commodity or market. An investment with high volatility is said to have higher risk.
Wall Street – An eight-block-long street in the Financial District of Lower Manhattan in New York City. Wall Street is used to refer to the financial world in the United States in general and to large corporations and their interests rather than small ones.
Wilshire 5000 Equity Index – A stock market index composed of approximately 7000 securities, including most issues from NYSE, AMEX, and the over-the-counter markets (This index formerly consisted of only 5000 securities).
Withdrawal – The money you take from your financial account, such as the Individual Retirement Account.
Wraparound – A loan where the borrower refinances a previous loan at an interest rate between the current market rate and the interest rate at which the first loan was made, which is hopefully lower.
Yankee Market – A slang term for the stock market in the United States.
Yield – The income an investor receives from an investment. Yield, however, is not a measure of total return since it does not include capital gains or losses.
Yuppie – The term yuppie originated in the 1980s and is used to refer to young urban professionals who are successful in business and considerably affluent.
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