Capital Gains Tax A capital gain is the profit from selling an asset, such as a stock or bond, for more than you paid. The gain is taxed only when you sell and collect that profit, not while the asset is still in your account. Capital gains tax is the tax on that realized profit. Read More…

Capital Asset Pricing Model (CAPM) A mathematical model that uses different measures of risk versus reward to determine whether an asset (like a stock) is a good addition to a given diversified portfolio. Click Here for our lesson on Building an Investing Strategy

Capital A type of asset that is used to generate economic activity. This can both refer to the specific assets, such as a machine at a factory, or funds raised by a company to purchase these assets to fund growth (“Seed Capital”).

Call Option A contract that gives the buyer the right, but not obligation, to buy a stock at a specific price at any time before the specified expiration date. Click Here for the Investing101 Chapter on an Introduction to Options (30 min)

Call Interest The general interest of investors to purchase call options on a stock. This is generally a measure of market sentiment on how many investors are currently interested in these options. Click Here for the Investing101 Chapter on an Introduction to Options (30 min)

Buy What You Know An investment strategy championed by Peter Lynch that says that an investor should start by exploring companies that they are already familiar with and can see are successful a “street level”.

Buy Now, Pay Later (BNPL) A financing option that lets you take an item now and repay it in a set number of installments, often four payments over several weeks or months. It is usually offered at checkout by the retailer or a partner, not as a traditional bank loan or credit card. Many plans Read More…

Buy And Hold An investing strategy that focuses on buying stocks or other securities with no intention to sell. This is the investing strategy championed by Warren Buffett. Click Here for our lesson on Building an Investing Strategy

Business Plan A document prepared by a business explaining what their business aims to achieve, their mission statement, short-term and long-term goals, and how they plan to achieve them.

Business Incubator A for-profit or non-profit organization that aims to provide resources and support for start-up business enterprises, typically including shared accounting resources and office space, and expert mentorship on business planning, market strategy, and administration.

Business Cycle The cycle of expansion and recession of the economy over time. Business cycles consist of a period of optimism and growth (expansion) followed by a period of uncertainty and stagnation (recession).

Burrito A type of meal originating in Mexico, including any combination of rice, beans, meats, and vegetables wrapped in a tortilla.

Bureaucratic Management A management style that focuses on success through clear organizational structure, well-defined roles, and refinements to workflow processes.

Bureau Of Labor Statistics A government agency in the United States that compiles important statistics on the labor force. The BLS is one of the organizations that publishes key economic indicators used to measure the health of the economy.

Bull Market A period of general market optimism, typically marked by a general increase in stock prices. Related Lessons

Budgeting Strategy A plan created by an individual or business in how they build their budget. A budgeting strategy ensures that the budget is working to reach a larger financial goal, such as “pay yourself first” to build savings and wealth, or to focus on paying off debt faster to escape costly financing charges. Related Read More…

Budget A financial planning document outlining what income will be received, what bills and other expenses will need to be paid, and what savings goals can be reached over a specified timeframe, typically per month. Related Lessons

Bubble An act where the general prices in an industry or entire market become inflated beyond their rational value due to too many investors rushing in all at once. Bubbles are typically followed by a crash, once investors start to see the bubble being formed and try to pull their money out all at once.

Brokerage Account An account held at a brokerage firm where an investor deposits cash or other investments and can purchase securities from a securities exchange. The brokerage account also holds these securities while the investor owns them as a custodian (instead of mailing individual stock certificates to each investor for every trade). Click Here for Read More…

Brokerage A company consisting of one or several stock brokers and maintain individual investor’s brokerage accounts to facilitate trading of securities. Click Here for our lesson on What is a Brokerage?

Broker A custodial agent that acts as a go-between for parties who wish to make a transaction. For stock market investing, a broker is the person who acts as the go-between from an individual investor and the stock exchanges themselves.

Breakout A term in technical analysis where a security’s price exists some established support and resistance lines. Breakouts can be positive (meaning the price starts increasing) or negative. A primary goal of technical analysis is to identify when breakouts are likely to happen, and whether they will be positive or negative.

Break Even The break-even point is the level at which money coming in exactly covers money going out, so there is neither a profit nor a loss. For a company, that is usually the number of units or customers it must sell to cover its costs. For an individual investor, it is the price at Read More…

Branding The marketing exercise of a company to establish a recognizable presence between themselves and their end customers. Branding helps differentiate companies from their competition.

Bottom Line The last line of an income statement, showing a company’s net profit or loss for the time period covered by this financial statement, typically quarterly or yearly.

Bond Expiration The date at which a bond expires, and the company or government who issued the bonds must pay back the original amount borrowed, typically $1000 per bond. Click Here for our lesson on Bonds

Bonds A bond is a loan an investor makes to a company or a government. The issuer pays interest on a schedule and, at maturity, pays back the amount borrowed. Maturity is the date the loan ends. Bonds are often issued in amounts of $1,000. Owning a bond does not make you an owner of Read More…

Blue Sky Laws State-level laws in the United States regulating the securities industry. In particular, Blue-Sky laws emphasize transparency from companies that seek public investments in order to prevent fraud.

Blue Chip An extremely large and stable publicly traded corporation with a reputation for reliability. These are typically the largest companies in a country.

Black-Scholes Model An options pricing model based on underlying factors, such as the option’s price, time until expiration, and volatility. While an option’s actual trading price is determined by bid and ask prices of investors, this model is used to identify what the “fair” price of an option theoretically should be. Click Here for the Read More…

Black Thursday October 24, 1929. This was the day when the Great Depression is largely considered to have begun, when the stock markets entered a panic with investors entering a period of heavy selling.

Bills Payable statements sent to an individual or business for goods or services that have been rendered. Bills have a due date, the latest date at which the bill can be paid in order to remain in good standing with this vendor.

Billionaire A person with a net worth of more than one billion dollars.

Bid Price The highest price a potential buyer of a good, service, or security would be willing to pay. Related Lessons

Better Business Bureau A consumer protection non-profit organization that maintains ratings of businesses based on their own reviews and customer feedback. The BBB tries to help consumers be aware of the reputation of a business.

Benefits Additional compensation from a job beyond base salary or wages. This can include health insurance, vacation time, flexible working hours, and other perks. Related Lessons

Beneficiary A beneficiary is the person or organization named to receive a life insurance payment, called the death benefit, if the insured person dies. The policy owner can usually name more than one beneficiary and can change that choice later. The beneficiary is not always a family member. For example, a spouse may be listed, Read More…

Beat The Market To achieve returns on investment greater than some other standard benchmark, usually compared to the S&P 500.

Bear Market A period of general market uncertainty, usually accompanying declining stock prices or pessimism. Related Lessons

Barrier Of Entry Barriers to entry are obstacles that make it hard for a new company to compete in a market. They can include high startup costs, exclusive supplier or distributor contracts, patents, or brand loyalty. When barriers are high, existing firms are more protected from rivals. Operations choices such as exclusive agreements can be Read More…

Bankrupt To be unable to pay one’s debt and seek legal protection and discharge of one’s debts. This usually involves a partial repayment plan and a custodian that sells off assets to pay off as much of your debt as possible. Click Here for our lesson on Bankruptcy

Banker’s Acceptance A contract with a bank where you can make a deposit (plus fees) that can be withdrawn later by you or whoever you transfer the contract to. This is frequently used as a go-between for making a transaction where one party does not know the credit worthiness of the other party, so the Read More…

Bank Statements Documents issued from banks to their account holders. These typically include a list of transactions made on an account, starting and ending balance, and any interest earned. Related Lessons

Bank Deposits The total amount of money deposited at a bank by its customers. This is the amount of money available for the bank to lend. Click Here for our lesson on Banks, Credit Unions, and Savings and Loans

Bank Accounts An account at a bank or other financial institution where a customer or business deposits money for safekeeping, to earn interest, or to facilitate other financial transactions. Click Here for our lesson on Banks, Credit Unions, and Savings and Loans

Bank A financial institution that issues savings and checking accounts and earns a profit by issuing loans that charge interest. Other types of banks focus solely on investing. Click Here for our lesson on Banks, Credit Unions, and Savings and Loans

Balloon Payments When a loan is heavily backloaded, with small payments in the beginning of the term but a very large payment at the end of the loan term. Click Here for our lesson on Mortgages

Balanced Budget A budget that exactly balances incoming revenues and outgoing expenses. Related Lessons

Balance Transfer The act of transferring the outstanding balance of one credit card to another credit card, usually with a lower interest rate or some other incentive to lower the total amount owed. Related Lessons

Balance Sheet A balance sheet is a financial statement that shows what a company owns, what it owes, and what is left for the owners at one moment in time. Those three parts are assets, liabilities, and owner’s or shareholder’s equity. The two sides must be equal: assets equal liabilities plus equity. Unlike the income Read More…

Bad Debt Debt that is taken out for non-productive purposes, not increasing total wealth. Click Here for our lesson on Good Debt, Bad Debt

Back Load When the primary charges or payments as part of a contract are delayed until near the end of the contract or budgeting period.

Business to Customer (B2C) Business-to-consumer (B2C) is a business model in which a company sells products or services directly to individual customers who will use them. Marketing focuses on showing the brand’s value to that end consumer, often through websites, company-owned stores, or retail stores. This is the most common type of marketing channel. A Read More…

Business to Business (B2B) Business-to-business (B2B) is a business model in which a company sells products or services to other companies rather than to individual shoppers. Those buyers may use the purchase themselves, such as payroll software, or turn it into something they sell, such as parts and raw materials. B2B firms often sell through Read More…

Average Daily Balance The average outstanding balance over the course of the month on a credit card. The total interest charge for a month is usually based on this amount. Related Lessons

Average Cost An accounting system that bases the calculation of profit or loss on the average purchase price of the assets being sold.

Automatic Payments Payments for recurring bills that are scheduled to be paid automatically from a checking account or credit card without any intervention necessary from the account holder. These are useful to ensure bills are paid on time, but risky when careful cash planning is necessary. Click Here for our lesson on Automatic Payments

Auto Insurance A type of insurance covering cars. It includes, at minimum, liability insurance in case you cause damage to another person, property, or vehicle, but can also include additional coverage to protect you from damage caused by others. Click Here for our lesson on Car Insurance

Audit An exercise of reviewing financial information to detect and correct errors or identify fraud. Related Lessons

Auction A pricing system where potential buyers submit bids up to the true value they place on an asset. There are also reverse auctions, where sellers reduce their price until a buyer is willing to pay. Click Here for our lesson on What is Economics?

Assets Assets are what a company owns that have economic value. They include cash, inventory, equipment, buildings, and amounts customers still owe. Some assets, called intangibles, have no physical form, such as patents or trademarks. On the balance sheet, assets are listed by liquidity, or how quickly they can be turned into cash. Current assets Read More…

Asset Preservation The concept of only converting the returns on an investment into cash, while allowing the original investment to remain invested and continue to grow.

Ask Price The minimum price a seller would be willing to take in order to make a trade. Related Lessons

Ascending Triangle A triangle where the support line increases faster than a resistance line. This is usually a sign that a positive breakout is coming. Related Lesson

Artificial Barrier A barrier of entry into a market imposed by a government or other legal entity to put a limit on competition.

Annual Percent Rate (APR) This is a standardized method of advertising interest rates, by clearly stating it in annual terms. Before the introduction of APR, lenders would advertise their interest weekly, monthly, yearly, or daily, making it very hard for consumers to compare loan terms. Click Here to learn more about Credit Cards

Applicant Tracking Software A tool used by Human Resource departments to log resumes and cover letters submitted for job postings. Applicant Tracking Software frequently “processes” a submitted resume or other data into a standardized format to make it easier to filter job candidates based on specific criteria.

Annual Report A report produced once a year by a publicly traded company which contains both their audited financial statements and extra information from the company itself about their operations and outlook for the next year. Related Lessons

Analyst Ratings A professional opinion from an analyst on the merit of a stock or other security to another investor (buy, sell, or hold). Click Here for our lesson on Getting Trading Ideas

Analyst A professional who researches stock price movements to provide insight on what has happened before and what might happen in the future. Click Here for our lesson on Getting Trading Ideas

Amortization Amortization divides the repayment of a loan into equal payments over several years. Each payment covers interest plus part of the amount borrowed. Early payments go mostly toward interest, and later payments go mostly toward principal, until the balance is gone. A mortgage works this way. Amortization also means spreading a cost over the Read More…

American Opportunity Tax Credit A tax credit made available for education expenses in the United States. Click Here for our lesson on Tax Credits and Deductions

Age Of Exploration The historical time period from approximately 1400 through 1700 when European explorers established trade routes to Asia, Africa, India, and the Americas. This period was dominated by the Mercantilist economic viewpoint.

After Hours Placing trades outside standard market hours. After-hours trading is generally riskier than trading during market hours, since there are far fewer investors participating.

Advisory Fees Fees charged by a financial advisor in exchange for their advice, usually regarding investments. Click Here for our lesson on What is a Brokerage?

Advertising A marketing function of a business to make consumers or other businesses aware of their products and services in a positive light. Click Here for our lesson on Planning and Evaluating Business Advertising

Advanced Premium Tax Credit A tax credit earned through the Health Insurance Marketplace to help offset the cost of insurance premiums. Unlike other tax credits, this is applied directly to your health insurance premiums instead of paid back as part of a tax return. Related Lessons

Adjustable Rate Mortgage A type of mortgage or home loan that has an interest rate that changes over the course of the loan, usually based on the change in interest rates or some other independent index. Click Here for our lesson on Mortgages

Active Trading The action of buying and selling stocks or other securities on a regular, ongoing basis (usually at least 1 trade per week). Click Here for our lesson on Building an Investing Strategy

Accrual Accounting The concept that expenses and revenues are counted for accounting purposes when they were earned, rather than when a cash transaction takes place. Click Here for our lesson on Cash Planning

Accounts Receivable Accounts receivable is money customers owe a business for goods or services it has already delivered but has not yet been paid for. It is an asset because it is expected to turn into cash. Selling on credit increases accounts receivable until the customer pays. It is less liquid than cash, and lenders Read More…

Accounts Payable Accounts payable is money a business owes to suppliers or vendors for goods and services it has already received but has not yet paid for. It is a liability, usually listed as a current liability because it is due within a year. For example, if a store buys inventory on credit, the unpaid Read More…

Accounting Equation Assets – Liabilities = Shareholder’s Equity. This is a fundamental equation stating that the final amounts for each type of account must balance. Related Lessons

Accounting Cycle A series of steps that businesses take to track transactions and consolidate financial information over a specific accounting period (month, quarter, year). The end result of the accounting cycle is the production of accurate financial statements for that period and preparedness for the next accounting period. Click Here for our lesson on The Read More…

Account Number A unique number for a bank account or brokerage account. For checking accounts, it appears on the check itself to designate which bank account to transfer money to or from. Click Here for our lesson on Banks, Credit Unions, and Savings and Loans

Acceptance (Contract) When one party to a contract formally accepts the offer that was presented, making the contract binding to both parties. Click Here for our lesson on Contracts

401 (K) A 401(k) is a U.S. workplace retirement plan. You put part of your paycheck into an investment account before income tax is taken out, and many employers add a match. The money grows tax-deferred until you withdraw it, usually in retirement. What you receive depends on the contributions and the investments. A 403(b) Read More…

10-Q A quarterly report containing unaudited financial statements for publicly traded companies. This form is filed with the SEC and is made available to investors. It contains a company’s Income Statement, Cash Flow Statement, and Balance Sheet, with other supplementary data. Click Here for our lesson on Creating Financial Statements

10-K An annual report containing audited financial statements for publicly traded companies. This form is filed with the SEC and is made available to investors. It contains a company’s Income Statement, Cash Flow Statement, and Balance Sheet, with other supplementary data. Click Here for our lesson on Creating Financial Statements

1099 Form 1099 reports income that did not come on a W-2. A business sends it to an independent contractor for pay, and banks and brokers send other 1099s for interest, dividends, and investment sales. The form tells you and the IRS what was paid. Tax is often not withheld, so you report that income Read More…

1040 Form 1040 is the United States form for filing your federal income tax return. It adds up income for the year, including W-2 and 1099 amounts, subtracts deductions, and compares that with tax already withheld. You then owe more tax or get a refund. Extra schedules are added when income or expenses are more Read More…