Extrinsic Incentives Extrinsic incentives are incentives that come from outside – the most common example is price.

Externality A benefit or cost to some economic activity that is not reflected in the price of the transaction. An example would be pollution causing environmental damage or hiring new employees contributing to local economic development.

External Controls A type of risk management concerned with threats from outside the business. This is usually an exercise undertaken by a company’s upper management to assess their strategic position and potential weaknesses.

Export The act of a country selling goods or services it has produced to buyers in another country.

Explicit Rights Rights a person or corporation have that are enshrined in law, written out explicitly what these rights are and how they can be used.

Expiration Date The date at which an order to trade a security would expire. Expiration Dates are used for limit and stop orders to prevent them from remaining open forever.

Experian One of the three major credit rating agencies that issues consumer credit reports.

Expenses A cost that a company or person incurs over a period of time. All cash outflows, other than investments, are considered “expenses”.

Expansion An economic phenomenon when the total economic activity increases over a period of time.

Exit Plan A strategy an investor should create when purchasing a stock or other asset of when the right time is to “sell”. This usually includes a minimum price (to protect against loss) and a maximum price (to lock in gains).

Exercising An Option The act of taking advantage of the rights of an option to either buy or sell a stock at an agreed-upon price, depending on the type of option. Click Here for the Investing101 Chapter on an Introduction to Options (30 min)

Executor Of Estate A person responsible for fulfilling the terms of another person’s will after they die.

Execute The act of an order being sent to the market, a trade being conducted with another investor, and both investor’s accounts being settled afterwards.

Ex-Div Date The effective date for a dividend to be paid. If you hold the stock at the end of the ex-div date, you are entitled to receive the dividend payment even if you sell the stock before the dividend is actually paid.

Exchange Traded Fund (ETF) A type of closed-ended fund that invests in a basket of securities with some theme. Investors can purchase shares of ETFs on a stock exchange.

ESG Investing An investing philosophy that puts a high degree of importance on a company’s environmental/social impact and corporate governance, not just pure returns on investment.

Equity Compensation A type of benefit offered to employees that gives that employee some stake of ownership, typically stock options.

Equity A stake of ownership in some asset, like land, a building, or a business. A company’s stock is a share of equity in that company. If you have a mortgage on a house, your “equity” is the total value you have paid off so far. Related Lessons

Equifax One of the three major credit rating agencies that issues consumer credit reports.

Entrepreneurial Planning A type of planning that focuses on lean and agile early phases of business development, prioritizing flexibility over concrete policies. This type of planning is highly adaptable but can cause confusion among front-line workers who can find to have shifting priorities over a short period of time.

Entrepreneur A person who starts their own business. While this can apply to any businessperson, the term is most often used for a person who starts a new type of business with the goal of growth.

Entitlements Specific social welfare programs that everyone is “entitled” to – if you qualify for the program, you will receive benefits. An example is the SNAP program, also known as “food stamps”. This contrasts with other types of programs that may have a certain number of vouchers available per year, and qualified individuals must enter Read More…

Endowment Life Insurance A type of combined life insurance and savings account. The insured person makes contributions every month, and at the end of the policy receives a large final payment back. This is typically marketed as a way to save for a child’s education and have life insurance coverage at the same time.

Employment Cost Index (ECI) An economic index that measures the total cost of hiring a new employee over time, including the average cost of extra taxes and fees that employers must pay every time a new employee is hired. Click Here for our lesson on Major Economic Indicators

Employee Handbook A set of guidelines about workplace conduct and human resources principles published by most companies. This includes things like dress code, vacation policies, retirement plan information, and other information that is standard among all employees.

Employee A worker with a specific employment agreement with a parent company to work a set number of hours and perform certain tasks as part of their role on an ongoing basis. With an Employee, the employer is typically responsible for tax withholdings and pays for unemployment insurance.

Emergency Fund An emergency fund is savings set aside for large, unexpected expenses that could break your budget, such as a job loss, a major car repair, or a medical bill. It is separate from regular savings. Keep it in a savings account you can access quickly, not in investments. A common first goal is Read More…

Emergency Care The most expensive type of medical care, when the patient is facing a life-or-death healthcare emergency and utilizes emergency services. Click Here for our lesson on Health Insurance

Efficient Equilibrium A price level where the total quantity supplied and the total quantity demanded are equal.

Economies Of Scale Economies of scale occur when the average cost of making a product falls as a company produces more of it. Buying in bulk is a common reason: a bakery making two loaves may buy a small bag of flour, while a bakery making hundreds of loaves can buy from a wholesaler at Read More…

Economics The “Dismal Science” that analyzes trade-off decisions to improve the allocation of resources. Click Here for our lesson on What is Economics?

Economic Growth The total increase in economic activity in a country, sector, or economy over the course of one year. Related Lessons

EBIT / EBITDA EBIT, or earnings before interest and taxes, is a company’s operating profit before financing costs and taxes are subtracted. Analysts use it to judge how well the core business is performing and to calculate interest coverage. EBITDA goes one step further by also leaving out depreciation and amortization, which are non-cash expenses. Read More…

Earnings The net profit of a business.

Earnings Surprise An event when a company’s Earnings Announcement is significantly higher or lower than Wall Street’s Earnings Estimate. An Earnings Surprise can make a company’s stock price jump significantly higher or lower, depending on if they did better or worse than the consensus estimate.

Earnings Strategy An investing strategy that times trades around a company’s earnings calendar, choosing stocks that the investor believes will have an Earnings Surprise and a price jump. This is considered a short-term investing strategy.

Earnings Release A formal announcement, meeting, or call where the leadership of a public company announces the earnings from the last quarter or fiscal year.

Earnings Per Share A company’s net earnings for the previous fiscal year, divided by the total number of outstanding shares of stock.

Earnings Estimate A financial analyst’s “best guess” for what a company will announce for their quarterly earnings report before the official announcement.

Earnings Calendar A calendar that shows critical quarterly dates when a company makes their formal announcement of earnings from the last quarter and expectations for the next quarter. The time around these announcements is typically the most volatile for a stock’s price.

Earned Income Tax Credit A type of tax credit that is granted to working poor families. The Earned Income Tax Credit is designed to give a greater payment to working families as they earn more of their income and tapers off as the family approaches middle class income. Click Here for our lesson on Tax Read More…

Durable Power of Attorney A legal agreement that grants another person legal control of another person’s finances and critical decisions regarding health in the event of incapacitation. This is frequently a component of Living Wills.

DuPont Analysis A method to break down a company’s Return on Equity for analysis. It considers not just profits, but how quickly the company is able to make and sell its goods or services, total sales, and other factors.

Down Payment An initial payment made when purchasing an asset with borrowed money. Down Payments are usually 10-20% of the purchase price of the asset, with the remaining 80-90% of the purchase price paid for with borrowed money. Click Here for our lesson on Mortgages

Dow Jones Industrial Average The oldest stock index continuously maintained in the world; it is made of an agglomeration of some of the largest publicly traded companies in the United States. The combined performance of these 30 companies is frequently used as a measure for the performance of the stock market as a whole.

Donations A charitable contribution made by a person or organization to an individual, non-profit, or religious institution.

Division Of Labor The idea that economies benefit when the economy diversifies and workers are able to specialize in specific types of work, leading to greater efficiency.

Dividend Yield The percentage of a stock’s price that is paid out in dividends per share each year.

Dividend Re-Investment Plan (DRIP) A type of brokerage account that re-invests all dividends back into buying more shares of that company’s stock.

Dividend A share of a company’s profits that is distributed as payments to its shareholders.

Diversify The act of rebalancing a portfolio to be spread across a greater asset pool. Click Here for our lesson on Building a Diversified Portfolio

Diversification The act of dividing up one’s total investing capital between several different assets to both capture the growth across several different industries and protect against price shocks in one’s holdings. Click Here for our lesson on Building a Diversified Portfolio

Disposable Income Income that a person has to spend after taxes have been paid.

Discretionary Income Income that a person has to spend after taxes and other fixed expenses have already been paid.

Discouraged Workers An economic concept of workers who have remained unemployed for so long that they are no longer looking for work and have dropped out of the labor force entirely.

Discount Brokerage A type of brokerage firm that relies on investors to conduct their own research and trading activities, without direct advisement from professional investment advisors. Click Here for our lesson on What is a Brokerage?

Discount Bonds A bond that is selling on the open market for less than its face value. At the bond’s expiration, the person who buys a “discount” bond will receive a bigger return than they originally paid for the bond. Click Here for our lesson on Bonds

Directorship The concept of operating through solid planning and strategy with concrete goals when running an organization.

Directing A leadership style categorized by giving concrete direction on the actions of the organization.

Direct Costs Direct costs are expenses that can be tied to making or delivering one specific product or service. For a manufacturer, they usually include raw materials, production supplies, and production wages that go into cost of goods sold. For a restaurant, the food purchased from suppliers is a direct cost. These costs do not Read More…

Descending Triangle A type of stock chart pattern where the support and resistance lines form a downward pattern, typically predicting a decline in the stock’s price. Related Lessons

Derivatives A type of security that derives its value from some other security. For example, the value of an option’s contract is derived from the value of the underlying stock that this option gives the right to buy or sell. Related Lessons

Depreciation Depreciation is the loss of value of an item over time. A new car or phone is usually worth less each year because of wear, age, and newer models. Businesses also record depreciation as an expense that reduces the book value of equipment and buildings on the balance sheet. That expense is not a Read More…

Dependents A person or people who is financially dependent on someone else, typically children. Dependents are an important distinction for tax purposes, with tax breaks available for each dependent a person is responsible for.

Dental Insurance A type of health insurance that explicitly covers oral health and cleanings, which is typically excluded from most health insurance policies. Click Here for our lesson on Health Insurance

Demographic & Psychographic Segmentation Demographics and psychographics are two ways marketers describe a customer. Demographics are measurable facts such as age, gender, income, education, and location. They answer who the customer is. Psychographics are interests, activities, values, and lifestyle. They help explain why that person might buy. Two 17-year-olds with the same income can still Read More…

Demand A description of how much of a good or service would be purchased by consumers at a given price level.

Delayed Price A type of quote that shows prices delayed 15 or more minutes from the real-time price, typically due to restrictions from the exchange where the data comes from. Click Here for our lesson on Getting (and Understanding) Stock Quotes

Deflation A general trend of a decline in prices, usually associated with economic recession or depression.

Deficit Spending The act of a government spending more money than they earn through taxation. This is financed by borrowing money.

Default The act of failing to pay back a loan. This generally triggers lawsuits, a collection process, and potentially a seizure of assets. Related Lessons

Deductible A deductible is the amount you must pay out of pocket on a covered claim before the insurance company starts paying. For example, if your homeowners policy has a $500 deductible and a TV is destroyed, you pay the first $500. Deductibles exist so you share some of the risk. Choosing a higher deductible Read More…

Decentralized Management A management style where decision making is spread across a large number of individuals, with different departments having a high degree of autonomy.

Debt-To-Equity Ratio The debt-to-equity ratio compares how much a company finances with borrowed money versus owners’ equity. It is total liabilities divided by total equity. A lower ratio generally means a safer balance sheet, but the typical level varies by industry. Capital-intensive businesses, such as utilities, often carry more debt. Analysts compare a company with Read More…

Debt Settlement The act of negotiating with a creditor to pay off less than the total amount owed. Settling a debt instead of fully paying it off is recorded in a person’s credit report but is considered much better than defaulting on a loan. Related Lessons

Debt Management Plan A step-by-step action plan to pay off one’s debt over a specific time horizon. Related Lessons

Debt Consolidation The act of taking out one large loan to pay off many smaller loans to simplify payments, and usually reduce total interest owed. Click Here for our lesson on Consolidating Debt

Debt The state of owing money to another person or institution, typically with interest. Related Lessons

Debit Card A financial tool that allows spenders to make purchases deducting money from their checking account instead of writing a physical check. Related Lessons

Day Trading The act of buying and selling a stock or other security multiple times in the same day. Click Here for our lesson on Building an Investing Strategy

Cyclical Unemployment The fraction of all unemployment that is due to shifts in the business cycle. Related Lessons

Customer Profiles A customer profile is a fictional sample buyer used to represent one person inside a market segment. A segment profile describes the whole group; a customer profile makes one typical buyer concrete for marketing decisions. Teams use it to test messages and features. It is a planning tool, not a real customer’s private Read More…

Custodian A person or business who has legal responsibility for another person, particularly financially.

Current Ratio The current ratio measures a company’s ability to cover short-term debts. It is current assets divided by current liabilities, using numbers from the balance sheet. A higher ratio means more liquid assets are available to meet upcoming obligations. A ratio of 2 or higher is often seen as safe, but the right level Read More…

Current Liabilities Current liabilities are debts a company must pay within one year. They appear on the right side of the balance sheet and typically include accounts payable, accrued expenses, and the portion of long-term debt due in the next 12 months. These short-term obligations are a key part of liquidity analysis. Analysts compare them Read More…

Currency A medium of exchange that facilitates trade between people and businesses.

Cryptocurrency A financial instrument that exists entirely digitally, supported by blockchain technology to prevent fraud. Cryptocurrencies can be used as currencies, as investment vehicles, or as a mechanism as part of an unrelated system to assist with resource allocation.

Creditor An institution who lends money to another person or business.

Credit Union A type of financial institution owned by all depositors. Credit unions specialize in lending to individuals, with relatively low amounts of business loans. A credit union, called a caisse populaire in some communities, especially in Quebec, is a member-owned alternative to a chartered bank for everyday banking. Profits are meant to benefit members Read More…

Credit Terms The agreement under which a person is given credit. This would include the credit limit, interest rate, and how frequently payments need to be made.

Credit Score A credit score is a single number, often a FICO score, that summarizes how well you have managed credit. It is calculated from your credit report, using factors such as payment history, amounts owed, length of credit history, new credit, and credit mix. A higher score generally means lenders see you as more Read More…

Credit Report A credit report is a detailed summary of how you have used credit. It shows accounts you have opened, whether you pay on time, how much you owe, and negative items such as collections or bankruptcies. In the United States, Experian, TransUnion, and Equifax compile these reports. Most items stay on the report Read More…

Credit Rating A rating that an agency issues to a government or corporation on how likely they are to pay back bonds. Low credit ratings means that governments and corporations need to pay higher interest to investors in order to get them to lend money. Click Here for our lesson on Bonds

Credit Limit A credit limit is the maximum amount a lender will let you borrow on a particular account, such as a credit card. The lender sets it based on your ability to repay. With revolving credit, you can borrow again as you pay the balance down. If you reach the limit, you cannot make Read More…

Credit History A record of a person’s usage of credit, and sometimes other recurring expenses, over time. Credit reports are used by potential lenders to determine how risky it is to lend someone money.

Credit Counselling A professional service aimed to helping people improve their credit. This can include recommendations of debt consolidation, negotiation, or even bankruptcy.

Credit Card A basic unsecured line of credit offered to consumers. Credit cards allow borrowing money at interest for every day purchases, typically with interest not needing to be paid during the “grace period.” Related Lessons

Credit The act of borrowing money.

Crash A phenomenon where many investors exit the market at the same time due to falling investor confidence, causing a surplus of sellers and shortage of buyers, with rapidly falling prices.

Covered Call The act of selling a “call” contract while owning the underlying stocks.