Retirement Savings Contribution Credit A tax credit that applies to specific retirement savings accounts (like IRA or 401(k) accounts) that offers a rebate to a percentage of retirement contributions made that year. This tax credit increases with lower incomes and exists to encourage people with lower total earnings from still making contributions to their retirement Read More…

Retirement The act of a person formally ending their working career, living of savings, pensions, and investments going forward. Most people hope to have a comfortable retirement, where they can maintain a standard of living at the same or similar level that they had while working.

Retained Earnings The total profit of a business that is not re-invested or paid out to investors as dividends. This is profit that the company carries forward to the next quarter or year.

Resume A single document that summarizes a person’s education and previous job experience, to be shared with a potential employer when applying for a new job.

Resource Allocation The result of an economic system in a particular country. A “Market Economy” uses a capitalist economy with prices, consumer preferences, and investments to determine the overall resource allocation. A “Command Economy” has a central planning agency that dictates the allocation of resources across industry and people.

Resistance Lines A technical analysis indicator that points to peaks in the graph of a stock’s price over time to establish a “maximum” price that investors are paying before backing off (and having the price begin to fall). The act of the price going above the resistance line is called a “Breakout”. Related Lessons

Reserve Requirement A banking concept where a bank must keep a certain percentage of its total deposits “in reserve” (in its physical bank vault or on deposit at the Federal Reserve Bank), not loaned out. The idea behind reserve requirements is that it helps provide stability for a bank even if some of their outstanding Read More…

Research And Development The act of a business investing time and resources in the development of new products or services, many of which may never leave the testing phase.

Repossession The act of a creditor seizing property that was used as the collateral of a loan if the borrower is unable to repay the loan. This is most common with car loans and mortgages. Click Here for our lesson on Mortgages

Replacement Cost The cost of changing from one good or service to another. This may be the cost of replacing a worn-out piece of machinery with a new one, or the cost of switching from one service provider to another.

Renter’s Insurance Renters insurance protects a person renting a house or apartment against theft or damage to their belongings, such as a laptop, clothes, and furniture. It can also cover liability if a guest is injured. The building itself stays on the landlord’s homeowners policy, which is why a renters policy costs much less. A Read More…

Religious Donation A type of donation made to a church or religious institution. This can also be called a “Tithe”. If the religious organization has tax-exempt status, this donation can be written off of the donor’s taxes.

Relative Price The ratio or comparison between the prices of two different goods or services. It represents the value or cost of one item in relation to another, indicating the trade-off or exchange rate between the two items.

Regressive Tax A type of tax that has a higher rate on persons of lower incomes than persons of higher incomes. An example of this is a sales tax. With a sales tax of 8%, a person who is earning $10,000 per year will usually spend almost everything they earn (with not much room for Read More…

Reconcile The act of evaluating financial records and entering missing data or correcting errors so the records accurately reflect the transactions that took place.

Receipts A financial record serving as the proof of purchase of a good or service, with a record of the transaction for the purchaser to keep as proof of the transaction.

Recession A period of time characterized by low (or negative) growth in GDP and job losses.

Reasonable Person A legal concept of what an average person would think or do in a particular situation. The “Reasonable Person” is frequently used in a benchmark to determine of a person was purposefully misled by a contract or other situation. A famous example is that when someone sued the Captain Crunch cereal manufacturer because Read More…

Real-Time Price A type of stock or other security quote that uses the to-the-second market pricing. Real-time quotes are not available from all vendors because exchanges typically charge much higher fees to providers to display this data to end customers. Click Here for our lesson on Getting (and Understanding) Stock Quotes

Realized Losses The decrease in value of a stock or other investment from when an investor purchased it to when it was sold.

Realized Gains The increase in value of a stock or other investment from when an investor purchased it to when it was sold.

Real Interest Rate The interest rate on a loan, minus inflation that has occurred over the previous year. The Real Inflation Rate can only be calculated in the past, since inflation is only measured in the past. Click Here for our lesson on What Are Interest Rates?

Real GDP Gross Domestic Product that has been adjusted to account for inflation over time. Real GDP is used to measure the total economic growth over time, controlling for changes in prices. Related Lessons

Real Estate Investment Trust (REIT) A type of organization that sells shares to the public to raise money to purchase housing or commercial property that it then rents out to households or businesses. The profit from the rents is paid back to investors as dividends.

Real Estate Property, land, and buildings that are bought and sold either for use, or as an investment.

Rate Of Return The amount of growth in an asset’s price over one year.

Raise Capital The act of a business to sell shares in order to raise money to fund future growth.

Rainy Day Fund A type of separate savings that is reserved for either emergencies or some large purchase in the future. Rainy Day funds differ from Emergency Funds in that the Rainy Day fund is sometimes also used to save up for vacations or other “wants”.

Quote Information about a stock’s price at a specific time. A quote will include the company’s name, ticker symbol, time of the quote, bid price, ask price, and last price it was traded. More information may also be present (such as sector, industry, or day’s change). Related Lessons

Quick Ratio A company’s current assets (minus inventory) divided by current liabilities. This is one measure of liquidity – or how able a company is to pay its bills in the short term.

Quantity Supplied The number of units of a good or service that producers are willing to make and sell at a specific price.

Quantity Demanded The number of units of a good or service that the public is willing to buy at a specific price.

Put Option A type of option that gives the buyer the right, but not obligation, to sell a stock at a certain price in the future, up until a specified expiration date. This is frequently used to protect against a stock’s price from falling – knowing they will be able to sell it at a Read More…

Put Interest The total number of investors that are willing to buy a put option for a particular stock at a particular stock price. These would be the “bidders” for the option. Click Here for the Investing101 Chapter on an Introduction to Options (30 min)

Purchase Power Parity (PPP) A type of economic measurement that tries to compare the GDP (or some other indicator) of two different countries not just by the currency exchange rate, but by how much the same types of goods cost in both countries. A simple example of this would be comparing the price of a Read More…

Pump And Dump A fraudulent scheme where a scammer purchases large volumes of a penny stock, then misleadingly promotes the value of the stock to other investors. As other investors “buy in”, it drives the price up, and allows the scammer to sell their shares at a huge profit. This scheme is considered a type Read More…

Public Good A resource that exists for the good of the general public, rather than a specific individual. Public water and roads are examples of public goods.

Public Company A type of company that has publicly traded shares available on a stock exchange. Public companies are typically larger than private companies but have very strict financial reporting requirements. Click Here for our lesson on Stocks

Psychographic Segmentation The act of a marketer to divide their target audience based on how different types of people make buying decisions. This can include marketing differently to people with different lifestyles, economic status, or religions. Related Lesson:

Property Tax A type of tax applied to the value of land and businesses. Property tax is most frequently used by local governments to fund operations and schools. Click Here for our lesson on Taxation Overview

Property Lien A restriction a creditor can place on property owned by a borrower, which prevents that property from being sold without the creditor’s permission. If the property is sold (with permission), the creditor gets cash from the sale first to pay off any loans. Click Here for our lesson on Managing Debt

Progressive Tax A progressive tax charges a higher rate on higher slices of income. U.S. federal income tax is progressive: a person earning $1 million pays a larger share of income in tax than a person earning $100,000. That share is the average tax rate. The marginal tax rate is the rate on the next Read More…

Program Logic Model A document frequently used by non-profit organizations and governments to explain what a program is trying to accomplish, how, and what benchmarks will be used to determine success (or failure). A Program Logic Model is both used to pitch a new program to potential funders, and as a guide on how the Read More…

Profitability A measure of how profitable a company is over time. This can be expressed as total profit divided by total sales, total profit divided by the amount that was invested in a business, or several other measures depending on what an analyst is most interested in.

Profit The amount of revenue earned by a company over a certain period minus their total costs.

Profit Sharing A type of compensation package where a portion of the profits of a business are distributed to the workforce to boost morale and increase productivity.

Profit Maximization An idea in business philosophy that a publicly traded company’s primary concern is to maximize the total profit as their duty to their shareholders. Other concepts, like including ideas of social responsibility, are becoming more common in the business landscape today.

Productivity A measurement of the economic output of a person or economy divided by the total number of hours worked. This is a measurement of how efficient workers are, and how effectively they are at leveraging technology.

Product Lifecycle The timeline of a typical product in the open market. It usually starts with introduction and rapid growth, the introduction of competitors, maturity where total demand starts to stabilize, and a decline where demand decreases as customers find newer and better products. The lifecycle can be extended or reset through continual product innovations.

Product Innovation The act of a business to actively analyze their products and how well they are meeting the needs of their target customers and find ways to improve the product to better reach those needs or reach new segments of customers. This is an act of making things that the market wants more than Read More…

Product Differentiation A competitive strategy for businesses to add features or benefits to their product that the competition does not have. This can be new features on a phone, a different taste of a beverage, or any number of things. In other words, this is what makes the products offered by different sellers different from Read More…

Producer Surplus An economic concept that measures how much benefit a producer or seller of a good or service gets from selling at a specific price and quantity. This is slightly different from profit, because it includes saved theoretical costs if they were to produce a lower quantity than they actually do.

Producer Price Index (PPI) An economic measure that looks at how much raw input prices and salaries increase from year to year. The PPI is not usually used to measure total economic inflation, but an increase in PPI is usually a sign that the prices of finished goods and services is about to go up.

Process Innovation The act of a business to actively analyze how they operate or produce a good or service and find ways to produce more of the same thing more efficiently. Process innovation focuses on cutting costs without sacrificing quality.

Private Company A type of company that is owned by individual investors and is not traded on a stock exchange. Private companies do not need to publicly disclose any financial information to the public.

Prior Authorization A concept in health insurance where an insured person may be required to get permission from their health insurance provider before getting some medical procedure, otherwise the insurance company will not cover the cost. Seeking prior authorization gives the insurance company the chance to identify if they have some other provider in their Read More…

Principal Principal is the amount borrowed, not including interest, and the part of that amount still owed. Each payment on a loan or a credit card usually covers some interest and some principal. On a bond, principal is the face amount paid back when the bond ends. Related Lessons

Price War A form of competition where two or more competitors begin to consistently lower the price below the competition to attract price-sensitive buyers. Consumers usually love price wars, as it lowers the cost of these goods. Sellers usually engage in price wars to get the price of the good so low that their competition Read More…

Price Floor An artificial price limitation that specifies a lowest price a product can be sold for on the market. This is done to protect the producers of this product against temporary market price drops that could force some sellers into bankruptcy, hurting long-term competition. Milk usually has a price floor – the government specifies Read More…

Price Elasticity Price elasticity of demand measures how much the quantity people buy changes when the price changes. Demand is elastic when a small price increase costs a lot of sales, as with a snack a student can skip. Demand is inelastic when people buy about the same amount anyway, as with a medicine they Read More…

Price Controls The act of a government placing a maximum or minimum price on a good or service, either as a consumer or producer protection.

Price Ceiling An artificial price limitation that specifies that no seller can sell this good or service above a certain dollar amount. This is typically put in place as a consumer protection. Price ceilings usually forces the price of the good or service to be below the equilibrium price, and so often results in shortages. Read More…

Present Value The value of an investment today, given that it will grow in value (or have interest payments) in the future. The present value is found by discounting the future growth by some interest rate, so it can be expressed in today’s dollars and compared with other investments.

Pre-Paid Debit Card Originally a type of gift card, this is a medium of exchange that can be pre-loaded with value by paying cash at a store or other vendor to “load” the card, which can then be spent anywhere debit cards are accepted. Pre-Paid debit cards can be used to give gift cards that Read More…

Premium The amount paid above the par value of a bond. A premium would be paid if a bond has better-than-average interest rates, and the investor is willing to pay more now to get those future payments. Click Here for our lesson on Bonds

Preferred Stock A classification of stock that is consistently paid higher and more frequent dividends. While preferred stock also represents a share of ownership of a business, it does not have voting rights at shareholder meetings. Preferred stock is usually owned by a company’s founders or very early investors. Click Here for our lesson on Read More…

Precomputed Interest A type of loan that has the total interest payments outlined explicitly in the terms of the loan. With other types of loans, a borrower can make additional payments to pay off the loan sooner to lower the total interest paid over the life of the loan, but this is not possible with Read More…

Precious Metal A type of metal that is bought and sold by investors based on its intrinsic value, rather than the ability for the metal to be used in production of some other good. Silver, gold, and platinum are considered precious metals.

Positive Externality The result of some economic activity that produces benefits greater than what is reflected in the price of that good or service. For example, offering after school sports programs usually also decreases crime in a neighborhood, which is a benefit that cannot be charged for in the price of the class. Governments often Read More…

Portfolio A mix of investment assets that makes up the total investments of a person or business. This can include stocks, bonds, derivatives, commodities, properties, and anything else held as an investment. Related Lesson

Policy Owner The person or business that is protected by an insurance policy.

PMI Private Mortgage Insurance – this is a type of insurance policy that protects a bank that issues a person a mortgage loan against the loss if the person defaults on their loan. If the borrower fails to pay back their loan, the bank can seize and sell off the house or other property. If Read More…

PLUS Loans A type of student loan that is offered to the parents of students. A PLUS loan allows a parent to fund their child’s education and take on the debt of the student loan themselves, instead of by the student. This enables the student to finish school with less total debt. Click Here for Read More…

Physical Asset A type of asset that can theoretically be sold for cash. Physical assets include cash, properties, inventories, and equipment.

Peter Lynch A famous investor and former manager of the Magellan Fund at Fidelity Investments, which was consistently one of the top performing funds in the world. Peter Lynch emphasized looking at a stock’s price compared to the potential for the company to grow its earnings over time as a strong reason to buy (or Read More…

Personal Selling The one-on-one act of a salesperson engaging with a potential customer to sell them a specific product or service. Personal selling is different than mass marketing and is tailored explicitly to the person being sold to.

Personal Property The assets owned by a person. This can include small things like clothes and shoes, or big things like houses and bank accounts.

Personal Injury Protection A type of liability insurance most frequently found in car insurance that covers the health expenses of people injured in an accident without health insurance. Personal Injury Protection is usually only offered in “no fault” states, where legal regulation states that no single person is “at fault” for an accident.

Personal Debt The debt held by a person that is attributable only to that person. Personal debt is different from business debt, which is debt owned by a business or company, and has some difference in bankruptcy rules. Click Here for our lesson on Managing Debt

Personal Budget A budget to manage one’s personal finances over a period of time. Related Lessons

Per Capital GDP The Gross Domestic Product of a country or economy, divided by the population. The Per Capita GDP allows economists to compare the relative economic input across differently sized countries to determine which country is wealthier for each citizen.

Pension A retirement benefit where an employer pays out monthly payments to a person who has retired from their company for the rest of that person’s life. Retirement benefits are usually paid out of separate retirement accounts that are invested in a business.

Penny Stocks Stocks with a very low price, typically below $3 or $5. These stocks are typically for companies performing very poorly and could be on the verge of bankruptcy. Penny stocks are frequently the targets of scams, where fraudulent investors buy up penny stocks, try to get other people interested in the company with Read More…

Peer Pressure A social phenomenon where encouragement of one’s friends or similarly aged group of people can heavily influence one’s behavior. Peer Pressure does not necessarily mean that friends are ganging up to insist that you take a certain action but can also be subtle expectations of certain types of behavior to better “fit in”.

PE Ratio The “Price to Earnings” ratio, which measures the stock’s price divided by the net profit of that business for the last year, divided by the total number of shares. The PE ratio is one way to compare stocks – which stock costs less relative to the profit of the business?

Payroll Employment An employment arrangement where a person is a legal employee of their employer. This mandates the employer provide certain minimum working conditions, minimum wages, and withhold income taxes on the employee’s behalf. Payroll Employment is the opposite of working as a contractor. Click Here for our lesson on Employer and Employee Rights and Read More…

Payment Plan An arrangement made with a creditor to pay back a loan with different terms than normally agreed upon. An example would be a person who falls behind on their rent coming to an agreement to make partial payments every 2 weeks until caught up, with the landlord waiving all late fees. Creditors usually Read More…

Payday Loan A payday loan is a short-term, high-interest loan, usually due on your next paycheque. It is an alternative financial service, not a regular bank loan. Payday loans typically have extremely high interest rates and are a factor in trapping a person in a cycle of poverty. Canada’s criminal interest-rate cap is meant to Read More…

Paycheck A check that is given to an employee in exchange for work performed. The paycheck can be deposited in a bank account. It also usually includes a Pay Stub, which outlines the hours that were worked, and the cash withheld from this paycheck to pay income taxes.

Pay Yourself First Pay Yourself First is a savings strategy that moves money from income into savings as soon as you are paid, before the rest of the money is spent. The transfer is treated like a bill. It replaces saving whatever is left at the end of the month. Related Lessons:

Passive Investing A type of investment strategy that does not focus on constant monitoring of the investment portfolio. Passive investing relies on long-term buy-and-hold investing strategies. Related Lessons

Partnership A type of business that is jointly owned by two or more people, with the owners being directly liable for the business itself (the business is not a separate legal entity from its owners).

Pareto Optimal An economic concept where no change in the allocation of resources can make someone better off without making someone else worse off. It is important to note that Pareto Optimal does not mean “fair”.

Pareto Improvement An economic concept where the allocation of resources is changed so at least one person is made better off without making anyone else worse off.

Paper Asset A paper asset can mean one of two things. In accounting and management, a “paper asset” is something that has value to a company and may appear on financial statements but is extremely hard to convert into cash (like “goodwill”). In Investments, a paper asset is an asset that exists on paper but Read More…

Overtime Pay Labor laws and employment contracts specify a limit to the number of hours an employee should be working per week. If the employer requires that employee to work more hours than specified, there is generally a significant increase in the hourly rate of that work.

Overhead Ratio A measurement of a company’s cost of doing business against their total revenues. These are costs that cannot be directly associated to a single sale (like administration fees, management salaries, etc.). Generally speaking, a lower overhead ratio is preferred.

Overdraft An overdraft happens when your bank lets you spend more than you have in the account and treats the difference as a short-term loan, usually with high fees or interest. That is the opposite of an Non-Sufficient Funds (NSF) bounce, where the bank rejects the payment. NSF means the bank rejects the payment and charges a Read More…

Over The Counter A type of transaction that does not take place in an organized and fully regulated exchange. While “OTC” markets do exist, they do not have the same stringent reporting and regulatory compliance requirements as a main stock exchange.

Over Diversification An investing concept where a portfolio with too many holdings will not be able to take advantage of the price movements of any one of its holdings, making it difficult to out-perform the market as a whole. Click Here for our lesson on Building a Diversified Portfolio