| 1040 | The base form to file federal income taxes in the United States. It may be supplemented with additional forms for complex tax returns. |
| 1099 | A form provided to contractors to report their income in the United States. |
| 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. |
| 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. |
| 401(K) | A type of tax-advantaged retirement account, where an employer can make contributions alongside an employee as part of a retirement savings scheme. Contributions made by an employer into a 401(k) are generally not taxable unless withdrawn before retirement. |
| Acceptance (Contract) | When one party to a contract formally accepts the offer that was presented, making the contract binding to both parties. |
| 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. |
| Accountant | A licensed professional who prepares financial statements, assists people with filing their taxes, and / or conducts financial investigations. Accountants are certified professionals that need to obtain both advanced degrees and professional designations to maintain their role. |
| 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. |
| Accounting Equation | Assets – Liabilities = Shareholder’s Equity. This is a fundamental equation stating that the final amounts for each type of account must balance. |
| Accounts Payable | The outstanding bills for an organization that need to be paid to vendors or employees. This is a liability |
| Accounts Receivable | The outstanding bills an organization has sent to other businesses or individuals that they are waiting to be paid and convert into cash. This is an asset. |
| 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. |
| Active Trading | The action of buying and selling stocks or other securities on a regular, ongoing basis (usually at least 1 trade per week). |
| 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. |
| 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. |
| Advertising | A marketing function of a business to make consumers or other businesses aware of their products and services in a positive light. |
| Advisory Fees | Fees charged by a financial advisor in exchange for their advice, usually regarding investments. |
| 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. |
| 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. |
| American Opportunity Tax Credit | A tax credit made available for education expenses in the United States |
| Amortization | The act of dividing the repayment of a loan over the course of several years with equal payments each month. An “Amortized” loan payment goes mostly towards interest near the beginning of the loan, mostly towards principle near the end of the loan. |
| Analyst | A professional who researches stock price movements to provide insight on what has happened before and what might happen in the future. |
| Analyst Ratings | A professional opinion from an analyst on the merit of a stock or other security to another investor (buy, sell, or hold) |
| 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. |
| Applicant Tracking Software | A tool used by Human Resource departments to log resumes and over 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. |
| APR | Annual Percent Rate. 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. |
| Artificial Barrier | A barrier of entry into a market imposed by a government or other legal entity to put a limit on competition. |
| 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 |
| Ask Price | The minimum price a seller would be willing to take in order to make a trade. |
| 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. |
| Assets | Anything of monetary value that can be bought or sold. |
| 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. |
| Audit | An exercise of reviewing financial information to detect and correct errors or identify fraud. |
| 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. |
| 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. |
| Average Cost | An accounting system that bases the calculation of profit or loss on the average purchase price of the assets being sold. |
| 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. |
| B2B | When a business primarily sells to other businesses. |
| B2C | When a business primarily sells to individual customers. |
| 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. |
| Bad Debt | Debt that is taken out for non-productive purposes, not increasing total wealth. |
| Balance Sheet | A fundamental financial statement showing a company’s assets, liabilities, and shareholder’s equity. |
| 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. |
| Balanced Budget | A budget that exactly balances incoming revenues and outgoing expenses. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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 bank deposit is used as the basis of the transaction. |
| 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. |
| Barrier Of Entry | Any factor that may prevent a new competitor from entering a market. It could be natural barriers, like a required technology or skill that is hard for competitors to get, or artificial, like a legal protection of a monopoly. |
| Bear Market | A period of general market uncertainty, usually accompanying declining stock prices or pessimism. |
| Beat The Market | To achieve returns on investment greater than some other standard benchmark, usually compared to the S&P 500 |
| Beneficiary | In life insurance, the person who receives the insurance payment if the insured person dies. |
| Benefits | Additional compensation from a job beyond base salary or wages. This can include health insurance, vacation time, flexible working hours, and other perks. |
| 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. |
| Bid Price | The highest price a potential buyer of a good, service, or security would be willing to pay. |
| Billionaire | A person with a net worth of more than one billion dollars. |
| 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. |
| 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. |
| 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. |
| Blue Chip | An extremely large and stable publicly traded corporation with a reputation for reliability. These are typically the largest companies in a country. |
| 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. |
| Bond | A type of loan where a bank, company, or government sells its debt to individual investors in exchange for regular interest payments. Bonds are typically denominated in $1000, and pay interest monthly, annually, quarterly, or semi-annually. At the expiration of the bond, the original loan amount is also paid back. |
| 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. |
| 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. |
| 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. |
| Break Even | The price point where an investor is neither earning a profit nor loss. |
| 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. |
| 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. |
| Brokerage | A company consisting of one or several stock brokers and maintain individual investor’s brokerage accounts to facilitate trading of securities. |
| 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). |
| 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. |
| 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. |
| 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. |
| Bull Market | A period of general market optimism, typically marked by a general increase in stock prices. |
| 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. |
| Bureaucratic Management | A management style that focuses on success through clear organizational structure, well-defined roles, and refinements to workflow processes. |
| Burrito | A type of meal originating in Mexico, including any combination of rice, beans, meats, and vegetables wrapped in a tortilla. |
| 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). |
| 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 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. |
| 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. |
| Buy Now, Pay Later | A financing option where the purchaser buys an item immediately, and pays it off with monthly installments, usually over 4 months. |
| 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”. |
| 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. |
| 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. |
| 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”). |
| 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. |
| Capital Gains Tax | A type of income tax charged on the realized gains from the sale of an asset, like a stock. Capital Gains taxes typically have one rate for short-term gains (earned in less than 1 year) and long-term gains (realized gains longer than 1 year). |
| Capital Investment | The purchase of an asset with an aim for growth. This usually involves purchasing stock in a company. |
| Capital Preservation | The concept that an investor should be principally concerned with not losing their initial investment, more than chasing gains. |
| Capital Property Rights | The legal protection of investments and other assets from government seizure. Strong capital property rights are necessary to encourage investment, as people are unlikely to invest if they fear government seizure. |
| Capitalism | An economic system based on a market economy and an emphasis on continuous re-investment of profits in future growth. |
| Car 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. |
| Car Loan | A type of amortized loan used to purchase a vehicle. Compared to a mortgage, the loan term is typically much shorter, and interest rates higher. |
| CARD Act | The Credit Card Accountability Responsibility and Disclosure Act. This law introduced a number of consumer protections specific to credit cards, such as increasing interest rates with no notice, excessive fees, and confusing billing cycles. It also restricts credit cards for people under 21. |
| Card Verification Value (CVV) | A security feature on both credit and debit cards. This is an extra 3- or 4-numbers on the back on a credit card that must be entered for most types of online purchases as an additional verification mechanism. |
| Career | The road a person takes through their professional life. This includes both the actual jobs held, but also education and other training you acquire. |
| Career Plan | An action plan to build one’s career. This usually includes identifying a long-term goal (such as a dream job), and a series of milestones one would need to achieve to get there. |
| Cartel | An arrangement between several companies to coordinate their pricing and market strategies for their mutual benefit. The formation of cartels is typically illegal in capitalist economies. |
| Cash | This can refer to actual physical currency (like dollar bills and coins), but also on-demand bank deposits that can be immediately spent. |
| Cash Advance | The action of converting your credit card’s line of credit into cash. Unlike most types of credit card purchases, cash advances usually start accumulating interest immediately, instead of after a grace period. |
| Cash Basis Accounting | A method of accounting based only on when cash transactions occur, regardless of when it was “earned”. For example, if you conduct some work in January but are only paid in February, you will recognize the transaction in February. |
| Cash Flow Statement | A fundamental financial statement showing the flow of cash in and out of a company over a specified time frame. |
| Catch A Falling Knife | The concept stating that investors must be wary when trying to “buy low” and should wait until a stock’s price and stops falling before “buying in”. |
| Centralized Management | A management style that focuses all decision making in a small group of upper management, with the rest of the organization executing the plans made at the top. |
| Certificate Of Deposit | A type of investment issued by a bank, similar to a savings account. The bank pays a higher interest rate than a savings account, but the depositor typically cannot withdraw until a set expiration date. |
| Chartered Financial Analyst (CFA) | A professional certification offered by the CFA institute that focuses on advanced investment analysis. |
| Certified Financial Planner (CFP) | A professional certification that allows the certified person to legally give investment and wealth management advice and planning services. |
| Certified Public Accountant (CPA) | A professional designation for accountants showing a high level of expertise and ethical training. A CPA designation is required to create financial statements accepted by investors. |
| Day’s Change | The amount a stock’s price changes from the previous day’s closing price. |
| Chapter 13 Bankruptcy | A type of bankruptcy where your assets are not sold off. Instead, you must create a payment plan approved by a court, and for several years all income is seized to enforce the payment plan. |
| Chapter 7 Bankruptcy | A type of bankruptcy where your assets and income are taken over by a trustee, who sells off some assets and garnishes some income to pay off your debts. After as much of the debt as possible is paid, the remainder is discharged. |
| Charitable Giving | The act of giving away money or assets to non-profit charitable organizations or religious groups. |
| Charity | A non-profit organization or religious group with an operating goal of some societal good, not earning profits and growth. |
| Charles Schwab | The first “Discount Broker” that focused on providing no-frills, low-cost stock investing brokerage accounts for individual investors. |
| Check Clearing | The act of a system of banks to transfer funds from one account to another based on the instructions on a check. |
| Checking Account | A type of bank account used for ease of making transactions. Checking accounts are “demand deposits”, designed for frequent deposits and withdrawals. |
| Checks | A document used to provide authorization to transfer money out of one’s checking account to some other bank account. It includes the account to be transferred from, the amount to be transferred, the name of the person or company to transfer to, and a signature for authorization. |
| Chicago Board Options Exchange (CBOE) | A securities exchange based in Chicago that focuses exclusively on option contracts. |
| Chicago Mercantile Exchange (CME) | A securities exchange based in Chicago that trades in commodities and futures contracts. |
| Children’s Health Insurance Program (CHIP) | A federally sponsored health insurance program for children, specifically for families that earn too much money to qualify for Medicaid. |
| Classes Of Stock | Types of stock offered by a company to raise money for growth. Common Stock is the most frequent and is what is purchased by individual investors. This gives voting rights for some important management decisions. Preferred Stock is usually held by the company’s original management team and has preference for dividends. However, preferred stock holders do not have voting rights. |
| Closing Costs | The fees incurred as part of closing a loan, typically a mortgage. This can include legal fees and recorder fees. Depending on the type of loan, this can be a considerable addition to the total cost of the loan. |
| Co-Insurance | A percentage of the cost of covering an expense that is paid by the insured person. This is most common in health insurance, where after the deductible is fully paid the insured person will still pay some amount (typically 20%) of the healthcare costs until their out-of-pocket maximum. |
| Collateral | An asset that is used to secure a loan. If the loan goes into default (meaning it is not being paid on time), the person or company who issued the loan can seize the asset and sell it to satisfy the debt. |
| Collision Coverage | A type of auto insurance that covers damage to the insured vehicle in case of a crash. This is more expensive than liability coverage, which only covers the damage to the other person’s vehicle. |
| Command Economy | An economic system that bases production based on directions from a central planning agency, rather than market forces and prices. |
| Commercial Loan | A type of loan issued from a bank to a business to finance growth. These are most common with small to medium sized businesses. |
| Commercial Paper | A type of short-term corporate bond issued by a corporation to cover immediate cash flow needs. Commercial paper usually is paid off within a number of months. |
| Commissions | A transaction cost charged by many brokerages in exchange for executing a trade. Commissions can be a flat fee per trade, a fee per share traded, or a percent value of the total transaction amount. |
| Commodity | A fundamental input of production, which generally is of the same quality wherever it comes from. This can include things like lumber, crude oil, refined copper, cattle, and many other raw inputs. |
| Commodity ETF | An exchange traded fund invested in a specific commodity, and companies that produce these commodities. This is a mechanism for which an investor that can only trade stocks and ETFs can add commodities to their portfolio. |
| Common Stock | The most frequently traded stock that is accessible to individual investors. This type of stock has voting rights for some important management decisions for the company. While it also is eligible for dividends, it is paid only after preferred stock. |
| Communism | A type of command economy based in principle on common ownership of all assets in a country, with resource allocation determined by a central planning agency. |
| Company | A for-profit business. A company can be organized as a sole proprietorship (owned by one person), partnership (owned by a handful of people), or corporation (which sells stock to many small owners) |
| Comparative Advantage | An advantage one country or economy has over another in terms of the production of one type of good or raw material. By exploiting comparative advantages and engaging in trade, multiple countries can increase their total wealth compared to trying to produce everything themselves. |
| Competition | A feature of a market economy where multiple producers of a similar good or service compete for customers and businesses. This usually results in lower prices and more innovation than systems where there is only one producer. |
| Competitive Advantage | An advantage of one company over another’s in one aspect of operations or production. Companies in competition with each other try to improve their own competitive advantages and reduce the advantages held by other companies. |
| Compound Interest | Interest that is paid or earned each period, being added to the principal balance. That means interest paid in one month is based both on the principal and interest earned in a previous month, causing an investment to grow exponentially over time. |
| Comprehensive Coverage (Car Insurance) | A premium type of car insurance that includes liability and collision coverage, plus additional coverage for other types of damage (for example, if you simply damage your car by hitting a pole). |
| Consensus Estimate | The average of all professionally issued earnings estimates for a company. This is “Wall Street’s Best Guess” of what a company will announce in the next quarter’s earnings call. |
| Consideration | The payment or reward, an essential part of a contract. To make a legally binding contract, both parties must exchange something, called consideration. If one party just agrees to give something to the other party, this would be a gift and is not legally enforceable. |
| Consumer Finance Protection Bureau | A formal agency of the US government that focuses on consumer protections in finance. |
| Consumer Price Index (CPI) | A method to measure inflation, which is based on taking a “basket” of goods and comparing its prices over time. |
| Consumer Surplus | An economic concept that measures the total value of goods or services that are purchased by consumers at a price below the maximum price they would have been willing to pay. |
| Consumerism | A concept as part of a market economy where the consumers or purchasers of goods and services are the primary drivers of the economy and have certain expectations to make reasonable decisions. |
| Contract | A legal document that binds to or more parties together to exchange some good, services, and payment (known as “consideration”). |
| Contractor | A person or business hired by another person or business as a vendor who provides a specific good or service over a specific period of time. This does not grant the same rights and privileges as a full employee but does grant greater independence. |
| Co-Payment | A concept in insurance where the insured person would make a small payment (usually a fixed dollar amount) for a service, with the remainder of the total cost covered by the insurance company. |
| Corporate Bond | A formal debt instrument issued by a company to raise money. Corporate bonds are typically issued in denominations of $1000 and pay out a fixed interest payment at regular intervals. At the expiration of the bond, the final interest payment is made, plus the original $1000 returned. |
| Corporate Culture | The interior atmosphere of a company and how they do business. The corporate culture defines the day-to-day life of their employees and general attitude of their management team. |
| Corporate Debt | Loans taken out by businesses, usually to fund growth. This can either be in the form of loans from banks, or by issuing corporate bonds. |
| Corporation | A type of company that is organized with shareholders and a board of directors. |
| Cost Allocations | An accounting concept of how to divide the costs of doing business across different categories to calculate profit, particularly direct vs indirect costs. |
| Cost Of Goods Sold (COGS) | The cost to produce a given unit of output for a business. This can be a mix of direct and indirect costs. |
| Costs | The total amount of resources required for a business to operate and produce valuable output. |
| Cost-Volume-Profit (CVP) | A process used to predict future financial performance given various output levels. It breaks down to Pre-tax profit = Revenue – Variable Costs – Fixed Costs |
| Cottage Industry | An economic system where finished goods are produced small scale at home, typically during winter months while farmers are not needed in the fields. |
| Coupon | The annual interest payment a bondholder receives until the bond expires. |
| Coupon Rate | The interest rate that determines a bond’s coupon payment. |
| Coverage Limit | The maximum an insurance company will pay out over the course of a single year on a single policy. |
| Covered Call | The act of selling a “call” contract while owning the underlying stocks. |
| 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. |
| Credit | The act of borrowing money. |
| 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”. |
| Credit Counselling | A professional service aimed to helping people improve their credit. This can include recommendations of debt consolidation, negotiation, or even bankruptcy. |
| 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 Limit | The maximum amount of money a person can borrow through a single line of credit. For example, the maximum amount of money you can put on a credit card. |
| 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. |
| Credit Report | A report containing a person’s credit history and line-item details about each line of credit and most recurring bills this person has received, and which have not been paid, typically over a 7-year period. |
| Credit Score | A numerical score that attempts to simplify a Credit Report into a single number for creditors to use to determine a person’s creditworthiness. |
| 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 Union | A type of financial institution owned by all depositors. Credit unions specialize in lending to individuals, with relatively low amounts of business loans. |
| Creditor | An institution who lends money to another person or business. |
| 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. |
| Currency | A medium of exchange that facilitates trade between people and businesses. |
| Current Liabilities | The liabilities, or obligations, that a company which are due, or will become due within the next financial reporting period. |
| Current Ratio | The ratio of a company’s current assets divided by current liabilities. |
| Custodian | A person or business who has legal responsibility for another person, particularly financially. |
| Customer Profiles | The customer profile is a description of a set of customers that includes T variables such as buying patterns, brand loyalty, credit worthiness and purchase history. |
| Cyclical Unemployment | The fraction of all unemployment that is due to shifts in the business cycle. |
| Day Trading | The act of buying and selling a stock or other security multiple times in the same day. |
| Debit Card | A financial tool that allows spenders to make purchases deducting money from their checking account instead of writing a physical check. |
| Debt | The state of owing money to another person or institution, typically with interest. |
| 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. |
| Debt Management Plan | A step-by-step action plan to pay off one’s debt over a specific time horizon. |
| 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. |
| Debt-To-Equity Ratio | A company’s ratio of total corporate debt divided by the total value of all stocks in the company. |
| 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. |
| Deductible | The amount an insured person must pay towards their insured expenses before their insurance policy starts making payments out. |
| Default | The act of failing to pay back a loan. This generally triggers lawsuits, a collection process, and potentially a seizure of assets. |
| Deficit Spending | The act of a government spending more money than they earn through taxation. This is financed by borrowing money. |
| Deflation | A general trend of a decline in prices, usually associated with economic recession or depression. |
| 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. |
| Demand | A description of how much of a good or service would be purchased by consumers at a given price level. |
| Demographic Segmentation | The act of dividing marketing strategies by characteristics of potential customers, such as age, gender, income, education level, ect. |
| Dental Insurance | A type of health insurance that explicitly covers oral health and cleanings, which is typically excluded from most health insurance policies. |
| 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. |
| Depreciation | The concept that a good will typically lose value over time. This applies both in personal finance (i.e., your car’s value decreases over time due to wear and tear), and businesses, which depreciate equipment for the purposes of calculating their total assets. |
| 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. |
| 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. |
| Direct Costs | The immediate costs of fulfilling production. For example, if you run a restaurant, the uncooked food you purchase from your suppliers would be a direct cost. |
| Directing | A leadership style categorized by giving concrete direction on the actions of the organization. |
| Directorship | The concept of operating through solid planning and strategy with concrete goals when running an organization. |
| Disability Insurance | A type of insurance that covers loss of income due to injuries or illness that prevents a person from working or reduces their ability to earn their former income potential. |
| 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. |
| 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. |
| 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. |
| Discretionary Income | Income that a person has to spend after taxes and other fixed expenses have already been paid. |
| Disposable Income | Income that a person has to spend after taxes have been paid. |
| 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. |
| Diversify | The act of rebalancing a portfolio to be spread across a greater asset pool. |
| Dividend | A share of a company’s profits that is distributed as payments to its shareholders. |
| 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 Yield | The percentage of a stock’s price that is paid out in dividends per share each year. |
| 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. |
| Donations | A charitable contribution made by a person or organization to an individual, non-profit, or religious institution. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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. |
| Earnings Estimate | A financial analyst’s “best guess” for what a company will announce for their quarterly earnings report before the official announcement. |
| Earnings Per Share | A company’s net earnings for the previous fiscal year, divided by the total number of outstanding shares of stock. |
| 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 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 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 | The net profit of a business. |
| EBITDA | It stands for “Earnings Before Interest, Taxes, Depreciation and Amortization.” This line item on the Income Statement throws out all the extraneous activity in a company and reduces the core business operations into the number that is most used to evaluate the operating performance of a company. |
| Economic Growth | The total increase in economic activity in a country, sector, or economy over the course of one year. |
| Economics | The “Dismal Science” that analyzes trade-off decisions to improve the allocation of resources. |
| Economies Of Scale | The concept that the average cost to produce a given good or service decreases as the total quantity produced increases, taking advantage of bulk effects. |
| Efficient Equilibrium | A price level where the total quantity supplied and the total quantity demanded are equal. |
| Emergency Care | The most expensive type of medical care, when the patient is facing a life-or-death healthcare emergency and utilizes emergency services. |
| Emergency Fund | A type of savings that is specifically set aside in case of emergencies. The “Emergency Fund” is typically considered separate from “normal” savings, with the hope that it will not need to ever be spent. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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 a lottery system to determine who receives benefits. |
| 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. |
| 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. |
| Equifax | One of the three major credit rating agencies that issues consumer credit reports. |
| 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. |
| Equity Compensation | A type of benefit offered to employees that gives that employee some stake of ownership, typically stock options. |
| 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. |
| Exchange Traded Fund | 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. |
| 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. |
| 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. |
| Executor Of Estate | A person responsible for fulfilling the terms of another person’s will after they die. |
| 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. |
| 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). |
| Expansion | An economic phenomenon when the total economic activity increases over a period of time. |
| Expenses | A cost that a company or person incurs over a period of time. All cash outflows, other than investments, are considered “expenses”. |
| Experian | One of the three major credit rating agencies that issues consumer credit reports. |
| 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. |
| 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. |
| Export | The act of a country selling goods or services it has produced to buyers in another country. |
| 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. |
| 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. |
| Extrinsic Incentives | Extrinsic incentives are incentives that come from outside – the most common example is price. |
| Fair Credit Reporting Act | The Fair Credit Reporting Act is a law that provides all consumers with certain rights to their credit report, and it includes restrictions on what businesses can include in the report and how they can use that information. |
| Fair Debt Collection Practices Act | The Fair Debt Collection Practices Act is a consumer protections measure that helps protect individuals from unfair harassment by their creditors. |
| Family Planning | The act of a family planning when and how many children they plan to have, along with how to manage a household’s budget. |
| Federal Income Tax | Income tax in the United States that is paid to the federal government. |
| Federal Reserve | A government institution in the United States charged with managing the country’s money supply and fostering economic growth through management of interest rates. |
| Federal Trade Commission | The regulatory body in the United States largely responsible for regulating large businesses to ensure healthy competition is preserved. |
| Feudalism | An economic system based on land ownership of large estates by high nobility, which are sub-divided into smaller estates with lower nobility in exchange for loyalty, all the way down to small plots for peasants. |
| FHA Loan | A type of loan backed by the Federal Housing Administration, which assumes some of the risk of the borrower defaulting on the loan. FHA loans are a type of subsidized loan. |
| Fiat Currency | A type of currency that is not backed by a hard asset like gold. Fiat currencies have value because people in that economy give them value. |
| FICA | A federal payroll tax that pays for Social Security and Medicare. |
| FIFO | The “First In, First Out” method of accounting gains and losses where the cost of the first-purchased assets is considered first when calculating profit or loss when selling. |
| Finance Charge | The cost of using borrowed money. “Finance Charges” can include fees, but typically refers to the interest charge on a loan. |
| Financial Accounting | A type of accounting that focuses on producing financial statements and reports, typically for investors to identify the profit or loss of a business over time. |
| Financial Accounting Standards Board | The governing board of accounting standards in the United States, but also recognized globally. FASB sets the rules under which accountants prepare financial statements to ensure a high degree of consistency and ethical standards. |
| Financial Advisor | A licensed professional who can assist a person with financial planning and investing. |
| Financial Durable Power of Attorney | A person who is granted the legal authority to act on another person’s behalf for all financial matters in the case that they are incapacitated but does not have say over medical care. This is typically part of a Living Will. |
| Financial Leverage | The act of a person or business to take out a loan to purchase additional assets to fuel growth. Using leverage increases risks involved in expansion, but it also unlocks more capital and potential rewards. |
| Financial Records | Paper or digital records of financial accounts and transactions. This can be as simple as a purchase receipt, or as complicated as insurance policies and bank statements. |
| Financial Statements | The collection of a company’s Income Statement, Cash Flow Statement, and Balance Sheet that is prepared annually and quarterly, and distributed to investors. |
| Financing Activities | Activities a company undertakes to raise funds to launch a business or fund expansion. This can include taking out loans, issuing bonds, or selling stocks. |
| FINRA | The Financial Industry Regulatory Authority, a professional organization that issues requirements for stock brokers and financial advisors. It is not an official government body but does collaborate with the SEC and other government organizations. |
| Fiscal Policy | The economic policy of a government concerned with how government money is spent to fuel economic growth. |
| Fixed Expense | An expense a business must pay for every month or other fiscal period regardless of how much it outputs. An example of a “fixed expense” would be rent on office space. |
| Fixed Interest | An interest rate that stays constant over the entire duration of a loan. |
| Fixed Rate Mortgage | A type of mortgage that uses a fixed interest rate over the entire duration of the mortgage. |
| Flat Fee | A type of fee that is a set dollar amount regardless of the size of the transaction. This is commonly used in the context of commission fees for trades. |
| Foreclosure | An event that can happen on a home or building if a mortgage is unpaid. A foreclosure is the act of your bank or creditor taking legal possession of the property and selling it to settle the outstanding debt. |
| Foreign Corrupt Practices Act | An ethics law in the United States that formally prohibits US citizens or corporations from issuing bribes to foreign governments. This was already illegal to bribe officials in the United States, but this law made it legal to bribe anyone, anywhere. |
| Foreign Exchange | An exchange of currencies that trade in a financial market. Foreign Exchange, or FX, markets determine the exchange rate of one currency to another based on global supply and demand. |
| Forensic Accounting | A type of accounting practice that is concerned with tracing individual transactions through various accounts, usually to identify fraud. |
| FOREX | The foreign exchange markets, where individual investors and financial institutions buy and sell currencies. |
| Franchise | A type of business that offers a “template” to individual business owners. The “Franchisee” wholly owns and operates their own establishment but must operate within the rules of the “Franchisor” in order to receive marketing, logistical, training, and other support services (and the right to use the brand’s name). Most McDonald’s restaurants operate on the Franchise model. |
| Fraud | Purposeful misleading of another person or individual to secure one’s own financial gain. |
| Free Application for Federal Student Aid | A free form that applies a student to a variety of federal financial assistance programs to subsidize the cost of education. |
| Free Trade Agreement | An agreement between two or more countries to remove trade barriers like tariffs to facilitate trade between the countries. |
| Frictional Unemployment | A type of unemployment caused by a transition of a single person between jobs – after they leave one job and while they are searching for the next. |
| Fringe Benefit | A type of employment benefit that may not be expressed in dollars. This may be things like on-site childcare, extra vacation time, paid lunches, and other perks. |
| Front Load | A type of mutual fund when the advisor’s fees for managing the fund is paid when an investor first buys their shares. |
| Full-Service Brokerage | A type of stock broker that offers advisory services and personalized financial planning in addition to just the ability to buy and sell investments. |
| Fund Expenses | The percentage of a fund’s total value that is spent on managing the fund itself over the course of a year. |
| Fundamental Analysis | A type of investment research that focuses on analyzing a business’s financial statements and operations to determine if it is worth buying. This is sometimes considered “researching what to buy”, as opposed to trying to time when exactly to buy or sell. |
| Future Value | The cash value of an asset at some future date, usually calculated by using interest rates to project growth. |
| Futures | A type of contract for a commodity or other asset to be delivered at some specified date in the future. Futures contracts are frequently used so producers know the exact price of what their inputs will be when they need them, to “lock in” favorable pricing. |
| GAAP | Generally Accepted Accounting Practices, GAAP is the industry standard for how companies need to prepare their financial statements. Adherence to GAAP standards ensures that an outsider can compare the financial statements from different companies apples-to-apples. |
| Gains | The increase in value of an asset since the time it was purchased. In GAAP accounting, all assets are logged at the price they were purchased (minus depreciation). Only when the asset is sold can the company record a “gain” due to increased value. |
| Gambling | An act where a person makes a wager on a game of chance, without having a direct impact on the outcome of the wager. Investing is different from gambling because an investor purchases a part of a company, and so gets a vote in that company’s corporate structure. A gambler would have no direct connection to what is being wagered upon. |
| Geographic Segmentation | A marketing concept where different types of marketing campaigns or promotions are presented to different geographic areas (for example, countries, states, or cities). |
| Gift Cards | A medium of exchange that converts cash into a certificate that can only be redeemed at specific stores or outlets. A gift card usually has the same value as cash at those businesses that accept it, but no value outside those businesses. |
| Going Concern | An accounting concept where a business is assumed to be continuing to operate for the foreseeable future. If a business is not assumed to have a “going concern” (for example, if they intend to dissolve on a specific date), different accounting method are required. |
| Gold | A precious metal with the atomic symbol Au. Gold has been prized since ancient times for jewelry because it does not rust or corrode and is easily forged with basic tools. It is also useful in the manufacturing of electronics. Because of its useful value, gold is frequently purchased as an investment under the assumption it will continue to gain value over time. |
| Gold Standard | A type of monetary standard where every unit of paper money is directly redeemable for a specific amount of gold that is held in the issuing country’s National Bank. A country adopting the Gold Standard cannot issue any money if they do not have more gold held in reserves to back it up. |
| Good Debt | Debt that was taken out to fuel growth or appreciation. For example, a mortgage to buy a house is typically considered “good debt”, since it allows the purchaser to stop paying rent and build value in their home. |
| Good Till Cancelled | A type of order term placed to purchase stock or other securities at a brokerage, with instructions that it should remain open until it executes, or the investor manually cancels the order. Good Till Cancelled, or GTC, orders cannot be used on Market Orders. |
| Good Till Date | A type of order term placed to purchase stock or other securities at a brokerage, with instructions that if it does not execute by a certain date, the order should be cancelled at the end of that date. Good Till Date, or GTD, orders cannot be used on Market Orders. |
| Good Till Day | A type of order term placed to purchase stock or other securities at a brokerage, with instructions that if it does not execute by the end of the current (if the markets are open) or next (if the markets are closed) trading day, it should be cancelled. All market orders are Good till Day, and investors can also place other order types as Good till Day. |
| Government | A public institution with the power of taxation. Governments can be national, state, local, or even sub-local (like a school board) |
| Government Bond | A type of debt that is issued by a government to finance large expenses that must be paid back over time. Government bonds are sold to investors, who receive the regular interest payments until the bond is paid off at its expiration date. |
| Grace Period | For certain types of unsecured credit (like credit cards), the grace period is the time between the end of a billing cycle and when the full amount of the amount borrowed must be paid off before financing charges are applied. |
| Gross Domestic Product (GDP) | A measure of all finished goods and services have been exchanged in an economy over the period of one quarter or one year. This is the most frequently used measure of economic activity to determine if the economy is expanding or shrinking. |
| Gross Domestic Product Deflator | A measure of inflation that compares the prices of goods and services traded in one year compared to the year before, weighted by how many of those goods and services were exchanged. Many economists prefer to use the GDP Deflator to measure inflation instead of the Consumer Price Index. |
| Gross Income | The total income a company took in over a given period of time, usually a quarter or year. Gross Income does not take out any expenses or taxes. |
| Gross Margin | This is the simple profit margin a company has on its sales, defined as “(Revenue – Cost of Goods Sold) / Revenue”. The gross margin can be a good indicator on how much profit a business is earning on the average transaction, but it does not include taxes or other expenses and so is not the final measure of profitability in a business. |
| Gross Output | The total value of all outputted goods and services in an economy in a given year. This is different from Gross Domestic Product because Gross Output includes unfinished products as well. For example, a mine producing iron ore would be included in Gross Output, but not Gross Domestic Product because iron ore is not a “finished” product, just an input for another stage of production. |
| Gross Profit | This is the Total Revenue of a business, minus the total Cost of Goods Sold over the course of a specific time period (usually a quarter or year). This does not include taxes or other fixed costs. |
| Group Health Insurance | A type of health insurance that is purchased for a large group of people, usually a company purchasing a health plan that applies to all of their employees. Because Group Health Insurance brings together many different types of people into one plan, it is almost always significantly cheaper than purchasing individual health insurance. |
| Growth At a Reasonable Price (GARP) | An investing strategy that mixes concepts of Growth Investing (looking for companies with high potential to increase their price) and Value Investing (companies that likely are under-valued). GARP investors usually do not look at the most expensive blue-chip companies but show consistent earnings. |
| Growth Hacking | A field of marketing focused on rapidly growing the customer base of a small company. This often relies on networking effects from current customers to reach their contacts, attempts at the creation of viral content to rapidly expand brand awareness, and other low-cost, high-impact brand awareness strategies. |
| Hardship | A term in finance to refer to an unexpected strain a person is experiencing that may temporarily make them unable to pay back their debts. An important part of a “hardship” is that it should be temporary, and so creditors may waive fees or grant leniency to original loan terms until the hardship has passed. |
| Hardship Assistance Program | An organized program provided by creditors to provide leniency for their clients experiencing temporary hardship. While these programs are not usually advertised, they are organized to allow clients to recover after a period of hardship then continue to make payments, rather than force the customer into bankruptcy. |
| Hazards | Elements of a place, lifestyle, or business that can cause accidents or other damage. Hazards are recognized by insurance providers as a reason why an insurance policy may be risky. |
| Health Insurance | A type of insurance that covers medical expenses for the insured person. Most health insurance still requires the insured person to pay some costs before the insurance kicks in, with some exceptions for preventative care. |
| Healthcare Durable Power of Attorney | A binding document that grants someone else the ability to make critical, life-or-death decisions about your health care in the event that you are not able to yourself (for example, if you are in a coma). |
| Hedge | The act of insuring against a risk. |
| High | The maximum price a stock reaches during a given time period, usually the day or year. |
| High Pressure Selling | The act of a salesperson to increase the stress level during a sales process, usually through limited time offers or heavily insisting that some harm will come to the person being sold to. This sales tactic is often used to convince the customer to buy something just to get out of the sales process, or to prevent them from seeking alternative sources of information. |
| Homeowner’s Association | A legal entity formed by the owners of condominiums in the same building, or houses in a subdivision. This entity is usually classified as a non-profit, and is charged with maintenance of common buildings, streets, sidewalks, and other areas. |
| Homeowner’s Insurance | A type of insurance that protects against damage to a home, or damage caused by a home. For example, homeowner’s insurance can protect against burglaries, storm damage, or the medical bills if someone is injured in your home. |
| Horizontal Management | A type of management structure that has few layers of management and typically larger team sizes. Individual employees typically have a lot of freedom in how they carry out their work, with limited oversight from managers. This management structure works best in fields where most employees are experts or have vary widely in the type of work performed. |
| Hyperinflation | A type of runaway inflation where prices rise very rapidly, making savings useless. Countries experiencing hyperinflation typically have individual consumers resort to black markets dealing in some other currency or bartering. |
| Identity Theft | The act of a fraudulent person to use another person’s personal information to engage in financial transactions. One common form of identity theft is to use stolen social security numbers to take out credit cards in someone else’s name, max out those credit cards, then move on to a new victim. |
| Implied Rights | Rights that a person has but are not specifically outlined in a contract or other document. The “Right to complain” is perhaps the most frequently used implied right – a company cannot stop you from complaining about their product or service (so long as your claims are true). |
| Implied Volatility | In options trading, this is the part of the movement in an option’s price based on how much investors think the underlying stock’s price will change over the life of the option. |
| Import | A good or service that a person or company from one country buys from another country. |
| Income | The cash or other assets that are acquired by a person through work, or by a company through sale of their goods and services. |
| Income Reports | A report that shows the total income and total expenses from a person or business over a period of time, with a clear indication of the profit or loss over that time period. |
| Income Statement | A formalized financial report prepared by a business in accordance with GAAP principles. The income statement shows the income earned and expenses incurred over a given period (usually a quarter or year), along with the total profit or loss from that period. |
| Income Tax | A tax a government imposes on the income of a person or business to fund governmental activities. |
| Index ETF | A type of exchange traded fund that seeks to replicate the movements of a specific stock index. Index ETFs tracking the S&P 500 are popular ways to invest in a diversified array of stocks with a single trade. |
| Index Fund | A type of mutual fund that seeks to replicate the movements of a specific stock index. Index Funds tracking the S&P 500 are popular ways to invest in a diversified array of stocks with a single trade. |
| Indirect Costs | A type of cost incurred by a business or organization that is not directly tied to one single activity. One example would be a non-profit organization that provides both meals for the needy and rental assistance – the rent the organization pays on their office space would be an “indirect cost”, since it cannot be solely attributed to either program. |
| Individual Health Insurance | Health insurance purchased by an individual or single family. Individual health insurance is priced more in line with the actual age and lifestyle of the person being insured. Individual health insurance is usually much more expensive than group health insurance. |
| Industrial Revolution | A turning point in history when the economic output transitioned from being based mostly on human- and animal-power to coal, steam, and oil-powered. This was characterized by mechanization of farming and the establishment of factories, and a huge increase in total economic output. |
| Industry | A group of companies that share similar characteristics and are often competitors. Companies within the same industry can be compared apples-to-apples by their financial statements. |
| Inflation | The phenomenon where prices tend to increase over time. The inflation rate is how much prices, on average, have increased from one year to the next. |
| Initial Public Offering | The first time a company’s shares of stock are made available for purchase to the general public. |
| In-Network | A term in health insurance to refer to health care providers (doctors, clinics, hospitals, or pharmacies) that the insurance provider has already established contracts for pricing and payment terms. A provider who is “in network” is greatly preferred by health insurance providers, and the insurance provider usually provides much better benefits (and easier access) to these providers. |
| Insider Transactions | A transaction of stock or stock options by someone in a company who has knowledge that is not available to the general public (insider information). While this is not illegal, insider transactions carry special notification and reporting requirements. |
| Insolvent | A status where a person or company does not have enough liquid assets (like cash) to pay their immediate bills due. |
| Insurance | A financial product a person can purchase to protect against some type of risk. The most common types of insurance are health (protecting against medical expenses), auto (protecting against incidents involving vehicles), homeowner/renter (protecting against incidents at home), and life (providing a payout in case of death to help support surviving family members). |
| Insurance Claim | An action where a person or company notifies their insurance company that some damage or cost has taken place that their insurance policy should cover. This is the first step in getting an insurance company involved in an event, usually with an expectation the insurance company will make a full or partial payment towards the cost of the expense. |
| Insured | A person or company that is protected with an insurance policy |
| Insurer | A company that issues an insurance policy |
| Intangible Wealth | A type of wealth that cannot be easily converted into money. An example of intangible wealth may be a university degree, a loving family, or specialized skills that have some value, but cannot be sold. |
| Intellectual Property Rights | The concept where an idea or invention can be owned by a single person, and anyone who seeks to replicate that invention must get permission from the original owner (or whoever the original owner sold their rights to). This includes copyrights and patents. |
| Intent (Contract) | A key component of a contract that stipulates that both parties must have been fully aware and purposefully entered into the contract in order for it to be valid. For example, if an agreement was clearly made as a joke, intent was not established and so the contract is not valid. |
| Interest | A type of financing charge that is paid to the lender as a percentage of the total amount borrowed. This can be a charge paid to a credit card company or an amount you earn on a savings account. |
| Interest Coverage | A financial ratio that measures how easily a company can make payments on its existing debt. It is defined as “Earnings before interest, taxes, and depreciation” / “Interest Expense”. |
| Internal Controls | A concept in risk management where a company’s internal management team and systems it has in place safeguards to ensure financial reporting is accurate, fraud is not taking place, and the company is complying with all relevant laws and regulations. |
| Internal Rate of Return | A measure of business profitability that discounts a company’s cash flows over time (either going back into the past or estimates going forward into the future) to determine what the return on investment has been over that time. |
| Internal Revenue Service (IRS) | The federal bureaucracy in the United States that is responsible for collecting income taxes. |
| International Trade | The engagement of multiple countries in exchanging goods and services across borders. |
| Internship | A type of short-term employment that focuses equally on providing the intern (employee) with valuable experience and education as much as for the company to derive benefits from the intern’s labor. Internships may be paid or unpaid. |
| Intrinsic Incentives | Incentives that come from the act of doing some specific activity, rather than a consequence of that activity. For example, going hiking and to enjoy the outdoors would have an intrinsic incentive – a person wants to engage in this activity just for the sake of doing it. |
| Inventory | The goods that a company has in stock and available for sale to potential customers. |
| Inverse ETF | A type of exchange traded fund that seeks to move in the exact opposite direction of some other benchmark. For example, an inverse gold ETF would seek to increase its price as the price of gold falls. |
| Investing | The act of providing a business with cash or other capital in exchange for a share of ownership in that business. |
| Investing Activities | The act of buying, selling, and redistributing a range of investments across several companies. |
| Investment Banks | A type of bank that engages in funding the expansion of small, growing companies in exchange for shares of stock in those businesses. Investment banking is considered risky – as many of the businesses will fail, but with huge rewards when some of the invested businesses start to seriously grow. |
| Investor | A person or organization that uses their available resources to fund the expansion of other businesses in exchange for a share of the future assets and profits. |
| IRA | A type of retirement fund in the United States where the retiree pays no income tax when money is first invested in the fund but must pay income tax at a later date when withdraws are made. Since the withdraws are usually after the person has retired, the income at that time is lower, which is a tax advantage. |
| Issuer | An organization that sells bonds to investors and must make payments towards those bonds until they are fully repaid. |
| Job Creation | The impact of public policy that incentivizes businesses to hire more employees. |
| Joint Stock Corporations | An organization which has shares of stock available for sale to investors. Once the shares are issued and sold, investors can sell their shares to other investors. |
| Journal Entries | The method by which transactions are recorded by a company’s accounting team. Journal entries are made in the double-entry bookkeeping system, where every transaction is recorded on two sides of a ledger showing from where it came and where it went, allowing easy error detection and correction. |
| KISS | “Keep It Simple, Stupid” – a concept where it is much easier to use a simplified system that is easily understood than an overly complex system that has too many objectives at once. |
| Labor Productivity | An economic indicator that measures how much output is produced in an economy from one hour of labor. Higher labor productivity means that workers are more efficiently using technology to produce output. |
| Labor Union | An organization of employees in a company that collectively make agreements with their employer in regard to pay and working conditions, instead individual agreements with each employer. |
| Land Property Rights | The concept where a person can own a piece of land and have exclusive use of it. Some countries do not allow perpetual land ownership – the land is owned by the government, and only leased to individuals for some (usually very long) period of time. |
| Large-Cap | A company that has a combined value of stock worth over $10 billion. |
| 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. |
| Leading | The concept of a senior manager inspiring and motivating their team towards the accomplishment of a common goal. |
| 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. |
| Ledger | The official accounting record of a business, listing all transactions. |
| 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 sign are null and void. |
| 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. |
| 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. |
| Liabilities | The financial obligations of a person or company. Liabilities are the opposites of assets. |
| 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. |
| 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 of time, even if the insured person does not die (but for a much lower amount), which is considered a form of investment. |
| Lifetime Earnings | The total income a person has earned over the course of their working life. |
| Lifetime Learning Tax Credit | A type of tax credit that is granted to persons earning additional education beyond a bachelor’s degree. |
| 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. |
| 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 price rises above a specific threshold. |
| 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 amount in the line of credit that was not spent is returned with no interest to the lender. |
| Liquidity | A measure of how quickly an asset can be converted into cash and spent to pay off bills. Cash is considered the most liquid asset. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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. |
| Long-Term Liabilities | Liabilities of a company that are not due to be repaid within the next year. |
| Long-Term Purchase | A type of purchase that a person expects to pay for or use over the course of several years. |
| 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 purchases while at the store. |
| Losses | The value an asset loses after it has been purchased. |
| Low | The lowest price a stock or other investment reached over the course of a period of time, typically day or year. |
| 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. |
| Management | The decision makers of a company, who oversee teams of employees. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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. |
| Market Cap | The total value of a company’s stock at the current market price. |
| 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 Equilibrium | A condition where supply and demand for all goods and services are balanced at the current prices. |
| Market Failure | A condition where pricing, supply, and demand fail to produce an outcome desired by society. For example, if food prices rise to the point where the needy cannot afford to eat, it would be considered a market failure. |
| 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 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. |
| Market Outcomes | The allocation of resources that results from a market economy. |
| Market Segmentation | A marketing concept where a target market is divided into smaller parts, with a different marketing strategy for each part. Common types of market segmentation include geographic (different strategies for different countries or cities) and age (different approaches for different age groups of potential customers). |
| Market Sentiment | The current ‘attitude’ of the financial markets, usually called “bull” (optimistic) or “bear” (pessimistic). |
| 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 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 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 Timing | The act of trying to “buy low” and “sell high” – timing individual trades based on the time of day when prices fluctuate. |
| Market Tops | The concept of a general “peak” in the stock market as a whole, before experiencing a period of decline. |
| Market | A place of exchange of goods, services, or financial products. |
| Marketing | The act of helping connect providers of goods and services with people who would be interested in purchasing them. |
| Marketing Mix | The different channels used in a marketing plan. The most common elements are product, price, place, and promotions. |
| 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. |
| 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. |
| 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. |
| 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. |
| Medicare | A healthcare program in the United States that provides health insurance for the elderly and disabled. |
| 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. |
| 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”. |
| Millionaire | A person with a net worth of more than one million dollars. |
| Minimum Payment | A stipulation of most credit cards that at least this amount must be paid towards any outstanding balance every month for the account to remain in good standing. |
| 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). |
| Mission Statement | A single sentence (or two) by an organization that succinctly defines their goals and objectives. |
| 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). |
| 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. |
| Money | Any item that serves as a unit of account and medium of exchange within an economy. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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 money to compete. |
| 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. |
| 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. |
| 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 information to improve product offerings or break into a new market. |
| 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 get the “true cost” applied. |
| 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. |
| 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 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 do not want to wait this long. Instead, you sell these future payments for someone else for $400 today. That $400 would represent the Net Present Value. In the real world, this is calculated by discounting the future payments by some interest rate. |
| Net Worth | A person or family’s total assets minus their total liabilities |
| 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. |
| 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. |
| 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. |
| 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) |
| 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. |
| 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. |
| 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-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. |
| 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. |
| 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. |
| 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 from this action, selling property is not a “normal” part of their business, and so it would not be considered part of their operating activities. |
| 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 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 operate. |
| 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. |
| 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. |
| Opportunity Cost | An economic concept that every choice you make means there are other choices you did not make. An example is that if you spend $5 on a cup of coffee, you cannot also spend that $5 on a sandwich, or invest it for later. |
| 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. |
| 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. |
| Order Term | The length of time a limit or stop order should try to fill before it automatically cancels. Popular order terms are Day (lasts for 1 day), Date (lasts until a specific calendar date), or Cancel (it stays open forever, until it either executes or it is manually cancelled by the person who placed the order). |
| Out-Of-Network | A health insurance term to refer to a medical care provider that does not already have pre-arranged agreements in place with a health insurance provider. This usually makes it much more expensive for the insurer to pay for any care, and so less (and more expensive) coverage is available. |
| Out-Of-Pocket Maximum | A health insurance term that specifies the maximum amount of cash an insured person can pay over the course of 1 year. If medical care exceeds the out-of-pocket maximum, the insurance company covers 100% of the cost above that point. |
| Outsourcing | The act of taking some element of a company’s operations and hiring a separate company or contractor to fulfill that role. Outsourcing can mean hiring expert consultants to work on a specific project or moving an entire production plant to a different country with lower labor costs. |
| 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. |
| 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. |
| Overdraft | A feature offered by many banks to allow users to spend more money than they currently have in their bank account, but with overage charges and interest fees. Overdraft is becoming less commonly offered, as many consumer protection groups argue that it places even greater financing charges on those who can least afford it – and they would be better off simply having the transactions declined. |
| 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, ect). Generally speaking, a lower overhead ratio is preferred. |
| 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. |
| 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 is impossible to convert into a physical item. A stock certificate or a bond is considered a paper asset – it represents something real that has value but cannot be converted directly into what it represents. |
| 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. |
| 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”. |
| 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). |
| 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. |
| Pay Yourself First | A savings strategy where a person takes money from their income and puts it into savings first, before paying any other bills or expenses. Pay Yourself First typically results in healthier financial habits and stronger savings than a “save what is left over” savings strategy. |
| 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. |
| Payday Loan | A type of loan with a very short term, usually due to be repaid within one or two weeks of being issued (on the day the borrower gets their next paycheck). Payday loans typically have extremely high interest rates and are a factor in trapping a person in a cycle of poverty. |
| 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 accommodate payment plans because they would prefer to get paid at all than force the borrower into bankruptcy. |
| 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. |
| 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? |
| 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”. |
| 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 fake news, then sell their stocks when the price rises by a few cents (which may mark a very high percentage of the stock’s price). |
| 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. |
| 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. |
| Personal Budget | A budget to manage one’s personal finances over a period of time. |
| 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. |
| 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 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 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. |
| 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 not buy). |
| Physical Asset | A type of asset that can theoretically be sold for cash. Physical assets include cash, properties, inventories, and equipment. |
| 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. |
| 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 the sale does not cover the full amount of the loan, PMI covers the rest. PMI is typically required for borrowers to purchase if they have a down payment of less than 20% of the total loan amount, and borrowers usually want to eliminate the PMI as quickly as possible. |
| Policy Owner | The person or business that is protected by an insurance policy. |
| 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. |
| 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 offer subsidies to encourage these activities and gain the maximum spillover benefits. |
| 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. |
| 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 loans with precomputed interest. |
| 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. |
| 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. |
| 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 can be used almost anywhere (or online) or are also used by people who do not have bank accounts in order to make online purchases. |
| 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. |
| 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. An example of a price control would be a city specifying the maximum rent for certain apartments be much lower than the “market rate” – the demand for these cheap apartments is usually much greater than the available apartments to rent. |
| 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 Elasticity | An economic measurement of how much the quantity supplied or demanded of a good changes when the price of that good changes. Goods with low price elasticity are considered “essentials” (people need to buy it regardless of the price). Goods with high price elasticity are considered “luxuries” (the amount bought and sold depends heavily on the current price). |
| 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 that if the market price of milk falls below a certain price, they will step in and buy any excess production at a price minimum to prevent dairy farmers from going bankrupt. |
| 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 can no longer afford to sell at such low (or negative) profits, forcing them out of business (or at least out of this particular market). |
| Principle | The initial amount borrowed on a loan. |
| 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 network to give the same procedure for cheaper, or if it is medically necessary or cosmetic. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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 each other. |
| 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 what they are making today. |
| 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. |
| 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. |
| 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. |
| 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 | The amount of revenue earned by a company over a certain period minus their total costs. |
| 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. |
| 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 program will evolve over time. |
| Progressive Tax | A type of tax that has a higher tax rate the higher income a person receives. For example, income tax in the United States is progressive – a person earning $1 million per year will pay a greater percentage of their total income in taxes than a person earning $100,000 per year. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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 of investment fraud and is illegal. |
| 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 Big Mac at McDonald’s in both countries and using that price difference compared to total GDP. |
| 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. |
| 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 higher price later if necessary. |
| Quantity Demanded | The number of units of a good or service that the public is willing to buy at a specific price. |
| Quantity Supplied | The number of units of a good or service that producers are willing to make and sell at a specific price. |
| 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. |
| 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). |
| 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”. |
| Raise Capital | The act of a business to sell shares in order to raise money to fund future growth. |
| Rate Of Return | The amount of growth in an asset’s price over one year. |
| Real Estate | Property, land, and buildings that are bought and sold either for use, or as an investment. |
| 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 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. |
| 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. |
| Realized Gains | The increase in value of a stock or other investment from when an investor purchased it to when it was sold. |
| Realized Losses | The decrease in value of a stock or other investment from when an investor purchased it to when it was sold. |
| 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. |
| 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 “Crunch berries” were not real fruit, the courts sided with the manufacturer – a “reasonable person” would not assume crunch berries were a real fruit. |
| Recession | A period of time characterized by low (or negative) growth in GDP and job losses. |
| 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. |
| Reconcile | The act of evaluating financial records and entering missing data or correcting errors so the records accurately reflect the transactions that took place. |
| 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 savings), so they will be taxed $800 (8% of $10,000). However, a person who earns $100,000 and puts $10,000 into savings will only spend $90,000. 8% tax on $90,000 is $7,200 – only 7.2% of this person’s total income. |
| 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. |
| 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. |
| Renter’s Insurance | A type of liability insurance that protects a person renting a building or apartment, protecting against theft or damage to their stuff. This is significantly cheaper than homeowner’s insurance, because the renter would never need to pay for damage caused to the rented property itself (only their stuff inside it). |
| 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. |
| 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. |
| 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. |
| 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 loans are not able to be repaid, without threatening the deposits of savers at that bank. |
| 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”. |
| 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. |
| 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. |
| 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. |
| 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. |
| 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 accounts. |
| Return On Equity | Return on Equity, or ROE, is a profitability measurement that divides the total profit made by a business by the total shareholder’s equity in the business. The formula is Net Income / Shareholder’s Equity |
| Return On Investment | Return on Investment, or ROI, is a profitability measurement that divides total profit by the total amount invested. |
| Revenues | Cash and other income brought in by a business over a specific period of time. |
| Reverse Mortgage | A type of investment typically offered to the elderly, where a homeowner can take a loan out against the value of their home without making monthly payments to repay the loan. The loan balance increases every month based on the loan’s interest rate and is only paid back in one lump sum after the borrower dies or the home is sold. Proponents of reverse mortgages argue that it allows retired persons to take the value built up in their home and use it to fund their retirement (without needing to tell their home). Opponents argue that it is a complex financial instrument that frequently confuses the borrowers. |
| Right To Complain | A fundamental implied right in countries with Freedom of Speech that says that a customer always has the right to publicly complain about a service or product provided by a company, so long as their complaints are factual. |
| Risk | The chance of loss in an endeavor. Investments with the highest possible payoff also tend to have higher risks in something going wrong and experiencing a loss. |
| Risk Appetite | The individual preference of an investor for their balance between risk and reward. Conservative investors usually prefer lower risk and lower rewards, aggressive investors prefer higher potentials for reward and are willing to take bigger risks to get it. |
| Risk Aversion | An economic concept that observes that given two options with the same expected value, the average person will usually take the least-risky route. For example, when most people are offered $20 in cash, or a coin flip with $40 if it is heads, they will take the sure bet of $20. |
| Roth IRA | A type of retirement fund in the United States where the retiree pays the full income tax on their income when they earn it and deposit it into the account but pay no income tax on the growth on their investments when they withdraw it after retiring. |
| Roundtrip Transfer | A deceptive action of a business to funnel transactions between different parts of a business or its subsidiaries in order to show higher total revenues in a given period, and make the company look like it has greater revenues than it actually does. |
| Routing Number | A number that appears on a check that refers to a specific bank. Checks will include both a routing number (referring to the bank of the person who writes the check) and an account number (the specific bank account from which the check is paying). |
| Running A Surplus | The status of a government to currently have more revenues than expenses. This allows the government to bring some of today’s revenues forward to the next year. |
| S&P 500 | A stock index of 500 of the largest securities on the New York Stock Exchange from a wide range of economic sectors, frequently used as a gauge for the performance of the stock market as a whole. |
| Safe Deposit Box | A physical box located in a bank’s vault that is rented by individuals or business to save crucial physical documents or objects in a secure location. |
| Sales Strategy | The general approach of a person or business to present products or services to potential customers in a way that is likely to encourage that customer to make a purchase. This can include what types of customers to pursue, specific “pitches” of how to present the product, or discussions on pricing to make the product more affordable (or increase profits). |
| Sales Tax | A tax levied on the sale of all finished goods and/or services. Sales taxes make up an important component of government revenues, and can vary significantly by city, state, and country, and even on different types of products. |
| Sallie Mae | The largest providers of student loans in the United States. Sallie Mae was originally created as a government entity but was privatized and now is a publicly traded company. |
| Savings & Loan | A type of financial institution that specializes in savings accounts and home mortgage lending. Savings & Loans are required by law to have the vast majority of its assets in mortgage loans. As other types of loans and investment vehicles became more profitable, fewer of Savings & Loan institutions still exist. |
| Savings Account | A type of bank account used for long-term savings of cash. Banks use savings account deposits to fund loans they issue to people and businesses and pay the savers interest on their savings. Savings accounts do have a return on investment, but it is much lower than most other investment vehicles. |
| Scarcity | An economic concept that states that humanity has unlimited wants, but limited resources. Because all resources have some limit, nothing is ever “Free”. |
| Scientific Management | An approach to management pioneered by Fredrick Taylor that analyzes workflows in order to improve efficiency. A scientific manager would be interested in how much time it takes for a worker to accomplish some specific task, or points where miscommunication take place to identify areas of improvement in the workflows of the company as a whole. |
| Seasonal Unemployment | Periods of unemployment experienced by certain professions during certain times of the year. For example, many farm laborers or theme park workers will become unemployed during the winter months. |
| SEC | The Securities and Exchange Commission – the primary regulatory body in the United States that regulates financial markets and imposes reporting requirements and disclosure rules for publicly traded companies. |
| SECA | The Self-Employed Contributions Act is a law that requires self-employed people to report their income (and pay income taxes) to the federal government. |
| Section 8 | A federal housing subsidy program that offers market-rate rent vouchers for low-income families. “Section 8” vouchers allow rents to be paid to private landlords. |
| Sector | A division of the economy of businesses that engage in roughly similar types of activities. Sectors include agriculture, healthcare, heavy industry, and others. |
| Sector Diversification | An investing concept where an investor would want to spread their portfolio across multiple economic sectors to minimize risk of one sector losing value, while being able to capture gains in value across a wider range. |
| Secured Loan | A type of loan that has some type of collateral that the creditor can repossess if the borrower stops paying the loan. Secured loans typically have lower interest rates than unsecured loans. Car loans and mortgages are types of secured loans. |
| Securities | A type of investment made in a paper asset, like a stock, bond, mutual fund, future contract, or option contract. |
| Security Type | The type of investment of a paper asset. Stocks, bonds, and mutual funds are different security types. |
| Security Type Diversification | An investment concept where an investor spreads their investments across multiple security types to protect against swings in overall financial markets. |
| Self-Selection Problem | A concept in insurance where the people who are most likely to require large insurance pay-outs are the ones most likely to buy insurance. This drives up the price of insurance (since the price of a policy is based on the average amount the insurance company will need to pay to cover costs), which forces healthy people out of the insurance pool (farther driving up prices). |
| Series 6 | A financial exam required by investment professionals to be licensed to buy and sell certain types of investment products and time series contracts. |
| Series 7 | A financial exam required by investment professionals to be licensed to buy and sell stocks and is a prerequisite to be licensed to work at a brokerage firm. |
| Settlement | A concept where a lawsuit is “settled” between the parties involved before it goes to court to be decided by a judge or jury. Settlements are cheaper than court-mandated resolutions and can include confidentiality or no-fault provisions of the settlement agreement (so the person or company being sued can pay out the settlement without ever legally admitting wrongdoing). |
| Shareholders | The persons or businesses who own stock in a corporation. These are the legal owners of the corporation itself. |
| Shareholder’s Equity | The total value of a business as measured in its financial statements. Shareholder’s Equity is the total assets minus the total liabilities. |
| Shares | The number of stock certificates issued by a company, sold to raise capital to fund the expansion of the business. |
| Shares Outstanding | The total number of shares of stock that are currently circulated between investors of a company. This can increase if the company issues more stock or decrease if the company buys back its own stock. |
| Sharpe Ratio | A risk-adjusted measurement of a portfolio’s performance. High Sharpe Ratios both have strong returns, but also consistent returns (few highs or lows – just a consistent growth in value). |
| Short Sales (Real Estate) | The act of a home owner (or bank repossessing the home if the borrower stopped paying) selling a home for less than is currently owed on a mortgage. Short sales are not preferred by anyone involved and are usually only done if it is not possible to sell the home for a higher price due to declines in property values. |
| Short Sell | The act of borrowing a share of stock, immediately selling it, then buying it back later to return it to the person or business it was borrowed from. This allows the investor to profit from a decrease in the stock’s value – they need to pay back a stock at a cheaper price than they sold it for. |
| Short Squeeze | A coordinated financial maneuver by a group of investors that identifies a stock that is currently heavily short-sold by large investors, and purposefully buying up shares of this stock to drive up the stock’s price. This forces the large short-selling investors to experience large losses – and forces them to buy back shares at the now-higher prices. Short squeezes are illegal if coordinated by large investment groups but can happen when large numbers of individual retail investors act together. |
| Short Term Gains | The increase in the value of an investment over a period of less than one year. Short-term gains are typically taxed at a higher rate than long-term gains. |
| Short-Term Investments | Investments that are purchased with the intention to sell after a period of less than one year. |
| Shortage | The quantity demanded exceeds the quantity supplied. |
| Simple Will | A basic will that outlines how a person’s assets should be distributed to survivors in the event of death. Ideally a simple will should also include provisions for how any outstanding debts should be repaid. |
| Skilled Labor | A person or group of people that has some specialized skill or abilities that makes them uncommon in the job market, and unable to be replaced with any other random person off the street. Most jobs are considered “skilled” in some way and require some prerequisite education or training. |
| Small-Cap | A publicly traded company with a total value of stock less than $1 billion. |
| SMART Goals | A management concept that states that goals created by a company should be Specific, Measurable, Attainable, Relevant, and Time-Based. Using SMART goals ensures that a business has effective tools to measure the success or failure of an objective. |
| Social Responsibility | The concept that a business has a duty to society at large to act in a fashion that promotes equity, environmental responsibility, and fairness. Social Responsibility is the opposite of the Profit Maximization philosophy, where a business’s only objectives are to maximize profit for their shareholders. |
| Social Security | A public pension system in the United States, which pays benefits both to retired persons and those with disabilities that prevents them from working. Social Security is funded by a payroll tax. |
| Social Security Number | A person’s unique identification number in the United States. Social Security Numbers were first used solely for identification for Social Security benefits but have since expanded to be used as an identifier for practically all federal services. |
| Sole Proprietorship | A type of business entirely owned by a single person. |
| Solvency | The ability for a business or government to be able to pay its bills with its liquid assets. An “insolvent” business is one that is facing bankruptcy. |
| SOX Act | A financial regulation law in the United States that imposed stricter financial reporting requirements and independent auditing of accounting information in the United States to protect investors in publicly traded companies from internal fraud (i.e., dishonest activities by the company’s own management or accounting teams). |
| Specialization | An economic concept where persons, markets, or entire countries invest more resources into becoming very good at making certain types of goods and services and trading the surplus with other persons or countries that are good at something else. By specializing, efficiency is increased, and by trading both parties to the trade have greater benefit than if they tried to produce everything themselves without specializing. |
| Specialty Goods | Types of goods that serve a small niche market, rather than having broad appeal. Specialty goods are typically more expensive and/or custom made. |
| Speculation | The act of buying securities in the hope that the price will rise quickly to be re-sold for a large short-term profit. Speculation in investing is a major source of price instability. |
| Spending Plan | A document created by a person that outlines all of the spending that will be done over the course of a month (or longer) and compares against expected income. Spending plans are usually based on previous spending to make them more realistic. |
| Spending Shock | An unexpected event that requires a person to spend money that was considerably outside their budget or spending plan and must rely on tapping into emergency funds or credit cards to pay for. |
| Spreads | Spreads refer to the action of placing two or more option trades at the same time on the same underlying security, seeking to profit off of the changes in that underlying security’s price under different scenarios. Some spreads even maximize profit if the stock’s price does not move at all. |
| Standard Deduction | An amount defined in law in the United States that can be subtracted from a person or household’s total income before taxes are applied. Households can also choose to instead use an Itemized Deduction, where they list out specific tax-except purchases they may have made during the year, but the Standard Deduction is almost always easier and provides a greater benefit. |
| State Income Tax | The income tax levied in the United States by individual states. Not all states have an income tax, and instead fund their government through sales taxes or taxes on natural resource extraction. |
| Stock | A certificate that entitles its owner to a percentage of ownership of a business, including all assets and profits. Stocks are typically traded between investors on Stock Exchanges. |
| Stock Crash | A situation where investors broadly lose confidence in stock prices and try to sell all at once, causing the prices across an entire stock market to rapidly fall over a short period of time. This can be triggered by poor broad economic news, or a short-term panic by investors. |
| Stock Exchange | An organized place of exchange where investors buy and sell stock in publicly traded companies. Stock exchanges are very highly regulated to ensure investors have equal information and trading occurs under fair conditions. |
| Stock Index | A number that represents the combined value of several (usually dozens or hundreds) of stocks in a stock market’s prices. A stock index is used to measure how much the market as a whole is rising or falling. The S&P 500 is the most widely cited stock index. |
| Stock Market | See “Stock Exchange”. |
| Stock Market Crash Of 1929 | An event in the fall of 1929 when the stock prices on the New York Stock Exchange rapidly fell over a short time – losing nearly 25% of its value in just 2 days. There were many causes of the initial panic, but as prices started to fall it caused a general fear, and more investors trying to sell, driving prices even farther down. This is considered the starting point of the Great Depression. |
| Stock Options | 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. |
| Stock Screener | A tool used by an investor to filter down stocks by specific criteria that they are looking for in their portfolio and compare several stocks that meet those criteria. For example, a stock screener can filter down stocks from a specific sector, worth more than $10 billion dollars, and have at least a certain P/E ratio to help an investor find a stock that fits the needs of their portfolio. |
| Stock Split | The act of a company dividing (or merging) shares of its stock. A stock split has no impact on the shareholder’s equity. One reason a company may issue a stock split is because the stock’s price has increased to a point where investors may have a hard time purchasing just one share, so by splitting the shares in half it can become more affordable. |
| Stop Order | An order type that is used to protect against loss. With a buy-stop order, the order would execute if the stock’s price went above the stop price. With a sell-stop order, the order would execute if the stock’s price fell below the stop price. |
| Stored Value | The value represented by money. For example, “one dollar” can be exchange for any number of goods, with most people having a strong idea of what value that represents. |
| Strategic Planning | A management activity that sets long-term goals for a company for how they believe it should be positioned (between products offerings, staff, and organizational goals) at some point in the future. The activities of the company should be aligned with this strategic plan, rather than unfocused activities that may be pulling in different directions. |
| Strike Price | A dollar value on an options contract that specifies the price for which it can be exchanged for the underlying stock. For example, a “call” option with a strike price of $10 could be executed to buy that underlying stock for $10, no matter what the current market price is. |
| Structural Unemployment | A type of unemployment caused just by the fact that there is sometimes time between when someone leaves one job and starts another job. Structural unemployment is considered unavoidable – which is why an unemployment rate around 3% is still considered “Full Employment”. |
| Student Loans | A type of loan taken out by a student to finance their education. Student loans are often subsidized by the government, and the borrower only starts to make payments after they begin work after finishing school. |
| Subsidy | An amount of money provided by the government to help pay for some good or service. Subsidies are used to fund projects that provide some public good but are too expensive under free market conditions. |
| Supplemental Health Insurance | A type of secondary health insurance used to pay for smaller costs incurred before primary health insurance kicks in. This would include things like deductible and co-pay fees. Supplemental health insurance is usually inexpensive but has very low limits on what it will pay out. |
| Supplemental Nutrition Assistance Program (SNAP) | A federal program that provides funding for food for needy families. SNAP benefits used to be on stamps distributed to families who qualify, and so it is sometimes called “Food Stamps”. |
| Supply | An economic concept describing the relationship between market price and how much of a product will be produced and put for sale by businesses. |
| Support Lines | A technical analysis term that looks for a trend in the minimum prices a stock falls to before the price starts to rise again. Day traders will often try to buy shares with prices near the support line in the expectation that the price is about to increase. |
| Surplus | The quantity supplied exceeds the quantity demanded. |
| Swing Trading | A short-term investing strategy that holds stocks usually for less than 1 week. Swing traders rely on market sentiment and attitudes around a particular stock but try not to get too invested in up-to-the-second technical analysis charts. |
| SWOT Analysis | A type of marketing (or other type) of analysis that breaks the current situation of a business or project into Strengths over the competition, Weaknesses that need to be improved upon, Opportunities for new growth, and Threats that would threaten core business (or loss of some opportunities). |
| Symmetrical Triangle | A technical analysis pattern where support lines are increasing, and resistance lines are decreasing at the same rate. A symmetrical triangle implies that the price is about to have a strong change in one direction or the other but does not give any indication of which direction. |
| Systemic Risk | The threat of a problem arising from an entire system, rather than one specific part of that system. Systemic risks are typically very expensive to correct – but catastrophic if they are realized. |
| Tangible Wealth | A type of wealth expressed in money, physical assets, or property. Tangible wealth can be seen or touched and converted (if necessary) into cash and spent. |
| Trade Execution | The act of an order placed by an investor being sent to market, a pairing trader found, and the exchange of securities for cash taking place. |
| Target Markets | A marketing term that refers to where a product is being marketed. The target market can be a geographic location, a target age group of consumers, or other subsets of people with similar characteristics that the marketing team is trying to reach. |
| Tastes And Preferences | The individual attributes of a person that dictate style, fashion, and what a person likes or dislikes. Tastes and preferences can change over time – a product that is very popular one year can be found unpopular the next year due to a general change in consumer’s tastes and preferences. |
| Tax Credit | An incentive provided by governments to encourage certain behaviors in exchange for a rebate on some type of taxes. Unlike a tax deduction, tax credits can be refundable if the total tax owed is less than zero. |
| Tax Deductions | An incentive provided by governments to encourage certain behaviors in exchange for reduction in their taxable income, and thus the total tax that must be paid. Unlike a tax credit, tax deductions can only reduce your tax owed to 0 – it cannot be refunded as cash if your total tax owed would be negative. |
| Tax Preparation Software | A type of software that exists to help people prepare and file their income taxes at the end of each tax year. Tax prep software are a popular alternative to using the services of a professional accountant while still having a high level of guidance on what tax credits or deductions exist you may qualify for. |
| Tax Rate | The percentage rate that is charged on income as income tax. Tax rates increase as income increases, making income taxes a “Progressive Tax”. |
| Taxable Income | Income that is earned and can be taxed. Taxable income is found by taking a person’s net income for the year and subtracting any tax deductions the person qualifies for. |
| Technical Analysis | A type of investment research that focuses on analyzing the movements in a stock’s price to find patterns, typically over a very short period of time (minutes to days). Technical analysts attempt to “buy low” and “sell high” on very small up and down movements of a stock’s price. |
| Technology | An economic term to refer to the machinery and other capital used by labor to produce some output. Increases in technology increases the output produced by a given hour of labor – improving total efficiency. |
| Ten-Bagger | A term used to refer to a stock that increases its price by over 10x. |
| Term | The length of a loan or contract. This may be expressed in years, months, weeks, or days. |
| Term Life Insurance | A type of life insurance that expires after a certain number of years, and only has a pay-out if the insured person dies before the expiration. Term life insurance is the most basic type of life insurance. |
| Terminal Value | A calculation used to give some value to a business or asset beyond the scope of the current analysis. For example, if I have a business that I know is growing at 10% per year, I might try to estimate the value of this business over the next 10 years. The Terminal Value would be the dollar value I would give the company at the end of those 10 years (beyond my forecast period), so it does not show up as worth $0 at the end of my analysis. |
| Theft | The act of taking something that belongs to someone else. This can be stealing a good or taking and using someone else’s intellectual property without permission. |
| Ticker Symbol | A short code used on a stock exchange to refer to a company’s stock. In the United States, ticker symbols are between 1 and 5 letters long. They are called “Ticker Symbols” because the short form made it faster to transfer information about many stocks quickly using a ticker tape connected to a telegraph machine in the early 1900’s. |
| Time Decay | The amount of an option’s value that is lost the closer the current date moves to the option’s expiration date. The Time Decay refers to the lost value because someone who would be buying this option has less time for it to generate a potential profit. |
| Time Value of Money | The financial concept that time is worth some amount of money. While this also applies to personal finance (such as paying a cleaner to clean your home to save yourself a few hours), it is stronger in higher-level finance and is based on liquidity. If there is a restriction that prevents you from getting back the amount you invested, that time where you do not have access to those funds is worth something, and so should offer a greater rate of return. |
| Tips | Extra payment made to workers in the service industry in appreciation of their individual efforts. Tipping is customary in the United States (and wages of many service workers is low because tipping is expected) but is not in many other countries (where worker wages are higher to compensate). |
| Tit-For-Tat | A concept originating in game theory where a player always repeats back whatever was done to them in the previous turn. This was made most famous in an experiment of the “Prisoner’s Dilemma” game, where the Tit-for-Tat strategy had the highest total reward of thousands of different strategies tested in simulations pitting them with each other. |
| Tort | A “penalty” in the legal sense. For insurance purposes, a “tort” state is one where every accident must establish some level of fault between the people involved, with insurance companies only paying out relative to how “at fault” their insured customer was in the accident. |
| Total Surplus | An economic concept combining the Producer’s Surplus and the Consumer’s Surplus to find the total economic benefit of a particular allocation coming from a specific price and quantity. |
| Trade Barrier | An artificial restriction on trade between two or more countries. This can be an absolute barrier (some good or service may not ever be traded with some country), or simply a high tax placed on the import. |
| Trade Capture | The process where a brokerage registers that an investor has placed an order on their front-end system. After trade capture, the order is passed to back-end systems and onto the stock exchange itself for order execution. |
| Trade Deficit | A concept from international trade where one country may import more goods or services from another country than it exports in return. |
| Trade Fulfillment | The act of an order that was placed from an investor being executed on the open market, and the shares of stock (or cash in exchange for stock) is transferred back to that investor’s account. |
| Trade Reporting | A reporting requirement that orders that are executed on a stock exchange by major investment banks (“market makers”) must be reported within 90 seconds of order execution to prevent asymmetric information. |
| Trade School | A type of post-secondary education that seeks to train students in a particular skill. Trade Schools often focus on specific technical skills, like construction, plumbing, or automotive repair. |
| Trade Surplus | A concept from international trade where one country exports more goods or services from another country than it imports in return. |
| Trade Validation | An action as part of an electronic trading system for investments that validates the trade the user did indeed enter the details of the trade about to be processed and will be properly sent to the market for execution. |
| Trade-In | The act of taking one asset and using its value towards the down payment of another. This is most commonly used when purchasing a car – a person’s existing car can be “traded in” towards the down payment on the new car. |
| Trailing Stop Order | A type of order for a stock or other security that specifies that the “stop price” of the order moves to match the peak of the stock as the price changes. |
| Transunion | One of the three major credit rating agencies that issues consumer credit reports. |
| Treasury Bond | A bond issued by the federal government to fund government activities. The largest holder of treasuries is the Social Security Administration, which uses the interest payments on treasury bonds to fund the system. |
| Treasury Stock | Stock that has been re-purchased by the company that issued it. Companies hold treasury stock until the stock’s price increases, then re-sells it on the open market. |
| Trend Lines | Lines on a chart that “smooth out” variations by using a moving average of a subset of the data points. Trend lines allow an analyst to see longer-term trends without being distracted by short-term changes. |
| Trial Balance | A first attempt of an accountant to prepare financial statements for a company. The trial balance is used to ensure all credit and debits are equal before any adjusting entries are made to prepare the finalized financial statements. |
| Trust Fund | A type of entity that exists and can hold assets but acts as a fiduciary agent for some other beneficiary. An example of a trust is a Real Estate Investment Trust, which uses the funds provided by its investors only to invest in real estate to provide a return for its investors. Trusts are very limited in the types of actions they can perform. |
| Ultimate Consumers | Ultimate Consumers are the final consumers in the chain of a resource life. An example would be potash mined as fertilizer – it is first mined by a mining company, then sold to fertilizer companies, then sold to farmers, who use it on their crops, who sell their crops to grocery store chains, who finally sells the finished vegetable to individuals and families, who eat it. The person who ate the vegetable would be the Ultimate Consumer of the original potash. |
| Uncollectable Accounts | Accounts that exist on a company’s balance sheet as an account receivable that the company acknowledges will never be collected, usually due to the person who owes the money having been declared bankrupt. Uncollectable accounts are typically written off the balance sheet at the end of the period. |
| Underemployment | An economic concept where a skilled person can only find employment in jobs that do not utilize their skills, and so their actual income is considerably lower than what they theoretically could earn with the skills they possess. An example of this would be a doctor working as a taxi driver – while she does have a job, it pays a lot less than the skills she has theoretically should be worth. |
| Underlying Security | The investment instrument that a derivative product’s value is based on. For example, the underlying security of an options contract would be the stock this option was written for. |
| Unemployment Insurance | A type of government program that protects against short periods of unemployment. Unemployment insurance is a payroll tax charged to employers and can be collected by people if they lose their job through a layoff or firing. If an employee quits, they are not eligible for unemployment insurance benefits. |
| Unemployment Rate | The rate of number of people who are currently unemployed divided by the total number of people in the labor force (people who either have jobs or are looking for jobs). |
| Unit Investment Trust | A type of closed-ended fund that has a specific set of securities, but with a specific lifespan. At the end of the life of the Unit Investment Trust, the investors can redeem their shares for the holdings of the trust, or the holdings are sold off and the investors receive cash payments equivalent to their percentage investment. |
| Unit Of Account | One of the major concepts of money that says that a certain amount of money should be consistent over time. For example, $1 is always $1 – you would not go into the store tomorrow and they would tell you that your dollar from yesterday is worth only $0.50 today. While the value of what the dollar itself can purchase may change, the amount dollar itself does not. A counterexample would be a barter economy – trading a sea shell one day may be worth radically different things tomorrow, with no consistency. |
| University | A post-secondary educational institution that offers not just specialized degrees in a variety of fields, but also more advanced degrees (Master and Ph. D level) and extensive research facilities. |
| Unrealized Gains | The value increase from an investment from when it was purchased until today, but the stock is not yet sold. Unrealized gains are not recorded as revenue by a business or taxed. |
| Unrealized Losses | The value decrease from an investment from when it was purchased until today, but the stock is not yet sold. Unrealized losses are not recorded as losses by a business or taxed. |
| Unsecured Loan | A type of loan that is issued without any underlying collateral. Unsecured loans typically have higher interest rates than secured loans. One example would be a credit card. |
| Unskilled Labor | A type of worker who does not have specialized skills. Unskilled labor is characterized as easy to replace with minimal training if a worker leaves their position. |
| Unsought Goods | A marketing term that refers to items that a customer considers buying that they did not even realize they wanted. This can refer to things like candy bars at the check-out line of a store, or add-on purchases. |
| Unsystemic Risk | A type of risk that does not risk being catastrophic to a system as a whole, but instead may be a risk to a specific process or business unit. Unsystemic risks are typically easier and cheaper to address. |
| Upper Class | A socioeconomic group characterized by controlling the majority of wealth and power in a country or economic system. It may be legally enforced (like a nobility class) or arise economically. |
| Use Tax | A type of tax that is applied by using a particular public good or service. A toll on a highway is a type of use tax. |
| Value Investing | An investing strategy based on finding companies that appear to be priced lower than their competitors, based primarily on metrics like PE ratios or another fundamental metric. |
| Variable Expenses | Types of expenses that will vary significantly from month to month. Holiday shopping would be a variable expense. |
| Variable Interest | A type of interest rate applied to loan that changes over time in line with some external index. Variable interest rate loans are typically offered at an interest rate below a fixed interest rate, but the interest rate may increase over time. |
| Vertical Management | A type of management structure characterized by several layers of management between front-line employees and top decision makers. Vertical management is characterized by clear divisions of business units, with low levels of autonomy for front-line workers and low-level managers. |
| Vision Insurance | A type of insurance that covers the cost of eye exams, glasses, contact lenses, and corrective vision surgery. |
| Volatility | A measurement of how much an investment or portfolio’s price moves up and down over a given period of time. |
| Volatility ETF | A type of ETF that gains value as some underlying index’s price becomes more volatile. Investors buy volatility ETFs during periods of great uncertainty when stock prices experience a lot of up and down movement. |
| Volume | The total number of shares of a security that have traded during the current (or last, if the markets are closed) trading day. |
| Voting Rights | The right of common stock holders of publicly traded companies to vote on key issues facing the company. The most common type of vote is whether to approve a merger or acquisition of another company, or to elect the Board of Directors. |
| VRIO Framework | A strategic thinking exercise that examines if a company or product is Valuable, Rare, Imitatable, and Organized. If the company or product answers “no” to any of these questions, it is not likely going to be able to maintain a strong competitive advantage over competition. |
| W-2 | A document provided by employers to employees of companies in the United States detailing the total income paid during the previous tax year, including the amount that was withheld by the company and paid to the government as taxes. This is usually the starting point to filing a tax return. |
| Wage Garnishment | The act of a creditor gaining the right to a portion of a person’s paycheck to pay back a previous debt before it is ever paid to the employee itself. This is frequently a consequence of structured bankruptcy procedures or lawsuits. |
| Wall Street | A street in downtown New York City that is home to the New York Stock Exchange. |
| Wants | The endless goods or services that a person wants, but not needs, to have. Managing “wants” against income and savings is a central conflict of personal finance. |
| Warranty | A written guarantee of work, customer satisfaction, or product reliability offered by a seller or manufacturer to a buyer. Warranties are offered to increase customer confidence in a product. |
| Warren Buffet | One of the world’s richest men and most famous investor, and proponent of the Buy and Hold investing strategy. |
| Wealth | The total net worth of a person, including intangible assets. |
| Wealth Management | The act of a business to help a person or family to manage their wealth in such a way that it is properly invested to grow over time. |
| Whole Life Insurance | A type of life insurance that expires after a certain number of years if the policy holder does not die. When the policy expires, there is a cash payout. Whole life insurance is considered a type of investment. |
| Working Class | A socioeconomic group characterized by filling most working roles in a society but having very little total wealth or power. |
| Yield | The amount a bond pays out in interest every year. |