Key Finance Terms

The major finance dictionary usually reflects key words and phrases applied to the worlds of finance, economics, accounting, banking, and investment. Such dictionaries play a very important role in learning money in one’s life and professional life. Such dictionaries include terms related to income, expenditure, budget, savings, investments, taxes, insurance, and wealth analysis. Familiarity with words enables one to make the right money decisions, businessmen can comfortably engage in monetary transactions and customers can buy and sell well. From balance sheet data to the understanding of coin circulation or the determination of interest rates, these terms form the basis of financial literacy. The terms are also the Money Lingua Franca of the professional, banker, analyst and economist enabling them to speak easily. Knowledge of basic finance terms is essential today not only for academic purposes but also for the circumstances of daily life, such as taking out loans, investing in stocks, paying taxes or doing business. Without such uniform word knowledge, it is quite difficult to achieve monetary understanding or success.

The following list is a complete collection of finance terminology, classified by function and type. These are the most widely applied and common private finance, corporate finance, banking, investment and financial studies terminology.

1. General Finance Terms

• Property – Any item owned that has a price (e.g., coins, real estate, stocks).
• Liability – A financial obligation or debt (e.g., debt, payment due).
• Equity – The value of ownership in an asset after deducting liabilities.
• Capital – money in the form of cash or assets used for investment.
• Investment – Allocation of resources (cash) with expectation of profit.
• Revenue – Total income generated through sale of goods/services.
• Profit – revenue minus expenditure.
• Expenditure – costs incurred within the method of earning income.
• Cash flow – the movement of cash in and out of an enterprise or account.
• Net Worth – Assets minus liabilities; It is also called fairness or money.

2. Personal Finance Terms

• Budget – an economic plan outlining income and expenditure.
• Savings – money set aside for future use.
• Emergency fund – savings reserved for unforeseen expenses.
• Credit score – a type that reflects a person’s creditworthiness.
• Loan – Money given to another party.
• Interest rate – the value of cash borrowing, usually expressed as a percentage.
• Mortgage – A mortgage used to purchase real estate.
• Loan Period – The period during which the mortgage must be repaid.
• Refinancing – replacing old mortgages with new mortgages, usually with higher terms.
• Annuity – Collection of continuous bills made at daily intervals.

 3.  Banking Terms

• Checking Account – A financial institution account for daily transactions.
• Savings Account – A financial institution account that earns interest on deposits.
• Certificate of Deposit (CD) – A fixed deposit with a fixed time period and interest rate.
• Overdraft – When withdrawals exceed the available balance.
• Routing number – a variety used to find a particular financial institution.
• Wire Transfer – Electronic switch of budget between banks or people.
• Bank Statement – Summary of economic transactions over a period.
• Direct Deposit – Electronic deposit of budget directly into the account of a financial institution.
• Online Banking – Management of financial institution loans through the Internet.
• ATM Fees – Fees for the use of an Automated Teller Machine no longer owned through your financial institution.

4.  Corporate Finance Terms

• Balance sheet – an economic statement showing assets, liabilities and equity.
• Income statement – a file showing the Agency’s sales and expenditure.
• Statement of cash flows – an economic file showing cash flows and outflows.
• Cost of capital – the value of an investment in an enterprise, such as debt and equity.
• Depreciation – The decrease in the price of an asset over time.
• Amortization – the gradual indemnity of a loan or a discount in the price of an intangible asset.
• Working capital – subtract modern liabilities from current assets.
• Return on Investment (ROI) – Profit or loss on an investment.
• Income before interest and taxes (EBIT) – a degree of agency profit.
• Dividends – income distributed to shareholders.

5. Investment conditions

• Stock – Percentage of ownership in a company.
• Bond – a fixed-profit investment representing a mortgage to an entity.
• Mutual funds – a pool of cash received from multiple traders that is used to purchase securities.
• Exchange-traded fund (ETF) – a fund that trades like a stock on stock exchanges.
• Portfolio – a series of economic investments.
• Asset Allocation – Diversification of investments among multiple asset classes.
• Risk tolerance – An investor’s capital capacity or willingness to bear a loss.
• Bull Market – A market situation in which fees are increasing.
• Bear Market – A market situation in which fees are falling.
• Yield – Profit goes back to an investment (hobby or dividend).

6. Economic and market conditions

• Inflation – an increase in well-known fee stages over time.
• Deflation – fall in famous fee stages.
• Gross domestic product (GDP) – the total price of goods and services produced in a country.
• Recession – Decline in financial activity for 2 or more consecutive quarters.
• Interest rate – the price of borrowing money.
• Monetary policy – central bank activities affecting cash supply and interest rates.
• Fiscal policy – Government policy on taxation and expenditure.
• Unemployment rate – percentage of labour pressure caused by unemployment.
• Exchange rate – the value of one currency in terms of another.
• Trade balance – the difference between a country’s exports and imports.

 7. Terms of taxation

• Tax deduction – amount deducted from taxable profits.
• Tax credit – direct rebate in the amount of tax due.
• Capital gains tax – tax on income from the sale of assets.
• Income tax – a tax levied on private or business profits.
• Tax Deductions – Taxes withheld from salaries and paid promptly to officials.
• Tax bracket – a variety of income taxed at a fixed rate.
• Gross income – total profit before taxes and deductions.
• Net income – income after taxes and deductions.
• Tax return – a form filed with the authorities to record profits and calculate taxes due.
• Payroll Tax – A company withholds taxes from employees’ salaries.

 8. Insurance terms

• premium – payment made for insurance coverage.
• deductible – amount paid out of pocket before insurance starts.
• coverage – scope of protection offered through an insurance policy.
• claim – request for price from insurance company.
• beneficiary – person designated to receive insurance benefits.
• liability insurance – covers criminal obligations for accidents or damage.
• term insurance – life insurance for a particular period.
• Whole life insurance – Permanent life insurance with cash cost component.
• method of comparing risk for underwriting – insurance.
• policyholder – person who owns an insurance policy.

9. Financial ratios and analysis conditions

• current ratio – current assets ÷ current liabilities.
• quick ratio – (current assets – inventory) ÷ current liabilities.
• Debt-to-equity ratio – total liabilities ÷ shareholder’s equity.
• Price-to-earnings (P/E) ratio – market value by share ÷ earnings by share.
• return on equity (ROE) – net profit ÷ shareholder’s equity.
• Gross margin – (revenue – value of products sold) ÷ revenue.
• operating margin – operating profit ÷ revenue.
• Net profit margin – net profit ÷ revenue.
• interest coverage ratio – EBIT ÷ hobby expense.
• inventory turnover – cost of products sold ÷ general inventory.

10. Accounting words

• Double-entry bookkeeping – accounting gadget recording both debits and credits.
• Journal Entry – Record of monetary transactions.
• Laser – An e-book or gadget in which transactions are posted.
• Profit accounting – recognizing profits and charges after they occur, not when coins are bought or paid.
• Accounts payable – Arrears owed by the enterprise to suppliers.
• Accounts receivable – dues paid to the enterprise through customers.
• Test Balance – A worksheet that lists all bills and their balances.
• Chart of accounts – List of all account names used in accounting.
• General ledger – master accounting report with all transactions.
• Financial year (financial year) – 12-month period for accounting purposes.

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