Order Book A complete ledger of all buys and sell orders for a stock or other investment instrument, showing how many shares, bid price, and ask price. The order book logs who is trading at what prices.

Options A financial instrument that gives an investor the right, but not the obligation, to buy or sell an underlying stock or other asset at a specific price by a specific date. Options are frequently used to protect against risks in a stock’s price rapidly rising or falling. Click Here for the Investing101 Chapter on Read More…

Opportunity Cost Opportunity cost is the value of the next-best option you give up when you choose something else. It is separate from the price on the receipt. If you spend $1,000 on a new phone instead of investing that money, the opportunity cost is the interest you will not earn over the years you Read More…

Operational Planning A management exercise that analyzes how an organization currently operates – what business units exist, what are people’s jobs, and how does information flow through a company. Operational planning focuses on improving these structures to turn a company into a well-oiled machine.

Operating Revenue The income of a business incurred while “doing what they do” as a company. An example of a operating income would be the revenue a shop earns from selling products. If a company were to sell stock to investors to raise cash, this income would NOT be considered operating income.

Operating Margin The revenue a business earns as part of its operating activities divided by the expenses incurred as part of their operating activities. The “Operating Margin” is frequently used by analysis to determine how profitable a business, while filtering out distorting income or expenses that are not considered a “normal” part of how they Read More…

Operating Expenses The expense of a business incurred while “doing what they do” as a company. An example of an operating expense would be paying salaries to employees. If a company is paying back a long-term loan, this expense would NOT be considered an operating expense.

Operating Activities The activities of a business that is considered to be “doing what they do” as a company. Operating Activities are distinguished from Investing Activities on financial statement. An example may be that a car dealership with a huge parking lot sells part of their parking lot to another business. While they earned income Read More…

Market Open The time of day when a stock market allows trading to begin. Before the Market Open, no orders may execute. Because investors are trying to react to news that may have happened overnight, the Market Open is typically when the biggest price swings occur.

Offer (Contract) A part of a contract that specifies what each party is offering the other as part of the exchange. An example would be the money being offered in exchange for hours worked. Click Here for our lesson on Contracts

Non-Spending Alternatives A personal finance concept where a person should evaluate options to complete a task that do not require spending money. An example would be cooking dinner at home instead of eating out or learning a skill instead of hiring a professional.

Non-Profit Organization A type of mission-based organization that specifically does not aim to retain a profit each year. These are almost always charitable organizations and have certain tax advantages but are highly restricted in how they can fundraise and retain cash from one year to another.

Non-Monetary Assets Types of assets that cannot be quickly converted into cash and spent. This does not mean they have no value, but it means that there is more work involved to sell them before the assets can be spent.

Nominal Interest Rate The published interest rate for a loan. Because prices tend to increase over time, many analyses will subtract inflation from the interest rate of long-term loans to find a “real” interest rate.

Nominal GDP The Gross Domestic Product from a given year, without taking inflation into consideration. Economists typically will not compare Nominal GDP over time, but instead will adjust the figures to account for inflation (becoming Real GDP). Click Here for our lesson on What Are Interest Rates?

No Fault A concept in liability insurance where neither party involved in an accident is considered to be “at fault” for the damage, so both sides either cancel the payments or pay back equally.

Niche A small, specialized subset of a market. For example, while there are hundreds of book publishers in the world, Harlequin Books targets a niche market specifically marketing romance novels to female readers.

New York Stock Exchange A stock exchange based in New York City. This is the largest stock exchange in the world, both by the value of companies in it and the number of trades executed per day. Click Here for our lesson on What is the New York Stock Exchange?

Net Worth A person or family’s total assets minus their total liabilities

Net Present Value The discounted value of a series of future payments in today’s terms, discounted by some interest rate. An example of Net Present Value would be if someone owes you money – they will pay you back $10 per week for 1 year. After 1 year, you would get $520, but perhaps you Read More…

Net Margin The Net Income of a business divided by Total Sales. The Net Margin represents how much of a company’s income is retained as profit.

Net Income The total income of a business, minus its total expenses. Net Income is another way of saying “Profit”, but with specific regulatory definitions of income and expenses.

Negative Externality A type of result from a current allocation of resources that causes some harm or damage, which cannot be easily reflected in the price of goods or services. For example, pollution caused by a factory would be a negative externality. Governments usually apply penalizing taxes to activities with negative externalities to try to Read More…

Needs Analysis A type of analysis that seeks to understand what the current “need” is for a product or service in the market, and analyzing what alternatives are currently being offered to address that need. The Needs Analysis seeks to identify the gap between what is needed and what is being offered and use that Read More…

Needs A type of expense that a person MUST purchase. Needs include basics like shelter and food, but can also include contractual expenses, like repayment of loans.

Net Asset Value (NAV) A term that is used to measure the total value of the holdings in a mutual fund or ETF, based on the value of all the assets owned by that fund.

Natural Barrier A barrier to competition that arises from something inherent to the type of business being done, rather than government intervention. An example of a natural barrier to entry might be extremely high costs for equipment to make a particular product – new competitors simply do not want to spend the required amount of Read More…

National Foundation of Credit Counselors A non-profit organization that specializes in providing credit counselling services to persons struggling to pay their bills or have high levels of debt load. This organization is usually more well-regarded than for-profit credit counselling services due to their non-profit mission.

NASDAQ The second-largest stock exchange in the United States. NASDAQ is known for having more technology-related companies than the NYSE. It was formed in 1971 through the merger of several smaller stock exchanges, and now is also the parent company of several international exchanges.

Naked Call A call option where the person writing the option does not actually own the underlying stock. This means that if the option is exercised by the buyer, the person who wrote the option must buy the shares at the market price to give to the option holder. Click Here for the Investing101 Chapter Read More…

Mutual Fund An investment instrument managed by professional fund managers to reach some objective, which can be pure growth or to match certain indices. Mutual funds are among the most popular types of investments in a retirement account.

Moving Average A type of statistical measurement that creates a trend line by taking the average of small parts of data, instead of looking at just the whole. Moving averages give a smoother “trend line” than the raw data.

Mortgage A type of loan used to buy a home or property. The home or property itself is used as collateral and must be paid back in equal installments over a period of years. Click Here for our lesson on Mortgages

Monopoly An economic concept where only one provider of a particular good or service exists in a given market. Monopolies are usually discouraged, with some rare exceptions.

Money Market Account A type of bank account that typically offers a slightly higher rate of return than a savings account but limits how often money can be deposited or withdrawn.

Money Any item that serves as a unit of account and medium of exchange within an economy. Click Here for our lesson on What is Money?

Monetary Policy Government policy centered on interest rates and the money supply in order to control inflation and promote full employment. Monetary policy is usually set by a country’s central bank (like the Federal Reserve in the United States) and is planned independently of fiscal policy.

Monetary Assets Assets owned by a company that are cash or the equivalent of cash, which can be quickly and easily spent to pay off debts (without needing to be sold).

Mission Statement A mission statement describes what an organization does, who it serves, and how it will achieve its goals. A vision statement describes the future the organization is working toward and the values that guide that aim. Related Lessons:

Minimum Wage The minimum amount of money that a business can pay their employees by law. Minimum wages differ by state or province and can even differ by type of job (for example, farming minimum wage is typically lower than other occupations).

Minimum Payment The minimum payment is the smallest amount most credit cards require you to pay toward any outstanding balance each month for the account to remain in good standing. Paying at least that amount, on time, keeps the account from being marked late. It does not pay off the balance. The unpaid remainder usually Read More…

Millionaire A person with a net worth of more than one million dollars.

Middle Class An economic class of people who are characterized by the ability to accumulate a modest amount of wealth, but not enough to be considered “rich”.

Medium Of Exchange A key concept of “money” – that it is readily accepted by a wide range of people and businesses, and that having a unit of currency can be easily traded for many other goods or services. Click Here for our lesson on What is Money?

Medicare Medicare is federal health insurance, mainly for people 65 and older and for some younger people with disabilities. Workers pay toward it through the Medicare part of the FICA payroll tax, long before most of them use it. It is not Medicaid, which is based on income, and it is not the health plan Read More…

Medicaid A healthcare program in the United States aimed at serving people or families with little or no income. Medicaid is administered at the state level but is supported by federal funding. Related Lessons:

Matrixed Management A type of management structure where each team reports to two different managers – one overseeing a type of product, and another a geographic region. The concept behind matrix management is to give a better crossflow of information between higher business objectives, but it can be difficult to implement due to its complexity.

Matching Principle A fundamental concept in double-entry bookkeeping that every transaction is recorded twice – once as a credit in one place, and once as a debit somewhere else. This gives accurate representations of assets, liabilities, and profit, while introducing controls for error detection and correction.

Marketing Plan A specific outline of actions a marketing team will execute to reach the maximum number of potential clients, maximize sales, and do so profitably.

Marketing Mix The 4 Ps, or marketing mix, are the four controllable decisions a company makes about an offer: product, price, place, and promotion. Product is what is sold. Price is what customers pay. Place is how the product reaches them. Promotion is how the company communicates. A marketing plan uses the mix to reach Read More…

Marketing The act of helping connect providers of goods and services with people who would be interested in purchasing them.

Market A place of exchange of goods, services, or financial products.

Market Tops The concept of a general “peak” in the stock market as a whole, before experiencing a period of decline.

Market Timing The act of trying to “buy low” and “sell high” – timing individual trades based on the time of day when prices fluctuate.

Market Summary A snapshot of what is going on in the financial markets at a given time. A market summary will typically include the day’s performance of the S&P 500, Dow Jones Industrial Average, Gold, Oil, and several other major commodities or indices.

Market Strategy A plan a marketing team develops for how they will bring a particular product “to market” – how it will compete with alternatives, pricing, and an outline of marketing plans for various target customers.

Market Socialism A type of hybrid economic model where most of an economy is established by market forces, but some aspects are nationalized (or run directly by the government). Examples of this would be when the government is the direct provider of all health insurance but does not interfere with other parts of the economy.

Market Sentiment The current ‘attitude’ of the financial markets, usually called “bull” (optimistic) or “bear” (pessimistic).

Market Segmentation Segmentation is the marketing step of dividing potential customers into groups that share traits, such as demographics or psychographics. A target segment starts as a hypothesis until research shows those people actually want the product. Segmentation narrows the field; market research tests the choice. Without that test, a segment is only a guess. Read More…

Market Outcomes The allocation of resources that results from a market economy.

Market Order A type of order placed for a stock or other investment that is sent to the market to execute at “whatever the current price is”, with no other restrictions. Click Here for our tutorial video on Order Types

Market Forces The “Invisible Hand” of the market that pushes companies and people to change products, jobs, and prices to be better in line with what everyone else is doing. In a market economy, the market forces generally push for companies to be more profitable and individuals to seek higher income for their services.

Market Failure Market failure is a condition in which prices, supply, and demand fail to produce an outcome society wants. An externality is a common cause: a cost or benefit that lands on someone who was not part of the deal. A factory can sell at a low price while the neighborhood downwind bears the Read More…

Market Equilibrium A condition where supply and demand for all goods and services are balanced at the current prices.

Market Economy An economic system based on the free (or nearly free) buying and selling of goods and services, with a strong financial background and open access to credit. Major economic decisions evolve out of the actions of the agents in the market, rather than being dictated by a central planning agency.

Market Cap The total value of a company’s stock at the current market price.

Market Analysis A marketing exercise that looks into the group of customers that exists to identify what needs are currently not being met, and what business opportunities might exist. This is an important part of product planning.

Marginal Cost The extra cost incurred from one single additional unit. In production, this would be the cost of a factory to produce one more widget than they are today.

Marginal Benefit The extra benefit gained from one single additional unit. For example, the pleasure you would get from eating one single additional potato chip. Marginal benefit typically decreases as quantity increases.

Mania A time characterized by over-enthusiastic optimism for a type of investment, driving up its price. Manias typically end in crashes, when investors realize the investment has been over-valued and try to sell off at the same time.

Managerial Accounting A type of accounting that is concerned with providing actionable information to a company’s management or leadership. This differs from financial accounting, which is primarily concerned with producing financial statements for investors and other outside parties.

Management The decision makers of a company, who oversee teams of employees.

MACD A technical analysis indicator that tries to give an indication of where a stock’s price will be moving based on the previous trading data. MACD uses statistical analysis to try to estimate where the “momentum” of the stock’s price movement will drive it to next.

Low The lowest price a stock or other investment reached over the course of a period of time, typically day or year.

Losses The value an asset loses after it has been purchased.

Loss Leader A marketing ploy where very common items (such as milk, bread, and eggs at a grocery store) are priced at or below cost in order to attract customers to the store. While the store may lose money on every sale of their “loss leader”, profits are made on the other items the customer Read More…

Long-Term Purchase A type of purchase that a person expects to pay for or use over the course of several years.

Long-Term Liabilities Liabilities of a company that are not due to be repaid within the next year.

Long-Term Care Insurance A type of medical insurance that covers the cost of long-term care, such as nursing home or hospital stays longer than 1 week. Click Here for our lesson on Health Insurance

Long Term Gains The increase in value of an asset that is held for longer than one year. This is typically applied to gains in value of stocks. Whether a gain is long term or short term (less than a year) can have significant tax implications.

Loan Term The length of time over which a loan must be repaid. Loan terms may be listed in weeks, months, or years, depending on the type of loan. Related Lessons

Loan Restructuring A type of debt management where a loan’s terms are modified to make it easier to repay. The most common types of loan restructuring are loan consolidation (taking out one large loan to pay off many smaller loans), or extending the loan term, so each individual payment is more affordable. Click Here for Read More…

Living Will A legal document that specifies what medical treatments are authorized, or not authorized, if you are medically incapacitated (such as in a coma). It may also include specifications for things like organ donation. Click Here for our lesson on Simple and Living Wills

Liquidity Liquidity is how quickly an asset can be turned into cash and used to pay bills. Cash is the most liquid asset. A retirement account is much less liquid, because it cannot be spent right away. For a business, liquidity is the ability to pay obligations due within a year. Solvency asks a different Read More…

Line Of Credit A contract between a lender and borrower that promises that a certain amount of money is available for lending. The borrower can spend this borrowed money until a certain day or other trigger, at which point the amount that was spent is converted into a loan that must be paid back. Any Read More…

Limit Order A type of order placed for a stock or other investment that is set to trigger to execute only if the price moves in a favorable direction. A limit buy order would be triggered when the stock’s price falls below a specific threshold, while a limit sell order would be executed if the Read More…

LIFO An accounting methodology, standing for “Last In, First Out”, to determine the Cost of Goods Sold. Under LIFO, the last input that was purchased is considered to be used in production.

Lifetime Learning Tax Credit A type of tax credit that is granted to persons earning additional education beyond a bachelor’s degree. Click Here for our lesson on Tax Credits and Deductions

Lifetime Earnings The total income a person has earned over the course of their working life.

Life Insurance A type of insurance that makes a payment in the case of the insured person’s death. The payment is typically used by the surviving family for living expenses and to cover the cost of the funeral. There are also types of life insurance that pay out at the end of a specific period Read More…

Liability Coverage A type of insurance that protects against damage done to another person by your car (liability car insurance) or while in your home (liability homeowner’s insurance). Liability coverage is often legally required, particularly for car insurance. Related Lessons:

Liabilities The financial obligations of a person or company. Liabilities are the opposites of assets.

Leveraged ETF A type of exchange traded fund that seeks to double or triple the price change of some other index or asset. For example, a 2x index ETF tracking the S&P 500 would attempt to double the daily gains or losses of the S&P 500.

Level 2 Quotes A type of quote of a stock or other financial instrument that shows even more detailed data on the trading movements of the stock. This will always include the actual trades of a stock on the actual markets (along with the bid and ask price) and may also contain other data. Click Read More…

Legal Capacity The concept where a person is able to enter into a binding contract. Children, persons who are medically incapacitated, or someone who does not have the legal authority to sign a contract (like an employee at McDonalds signing a contract to sell the entire company) would lack legal capacity, and any contracts they Read More…

Ledger The official accounting record of a business, listing all transactions.

Lease To rent an asset for some period of time. Some assets can be “lease to own”, where after the original rental period expires, the renter has the option to purchase the asset at reduced cost.

Leading The concept of a senior manager inspiring and motivating their team towards the accomplishment of a common goal.

Leadership The senior managers of a company that decide on the general direction of what the organization is trying to accomplish, and how it will reach those goals.

Large-Cap A company that has a combined value of stock worth over $10 billion.