Finance Glossary (A–Z)

📘 Finance Glossary (A–Z)

Learn common financial terms, simplified for quick reference.

A

  • Asset – Anything of value you own that can generate cash or benefits, like stocks, real estate, or savings.
  • Arbitrage – Buying and selling the same asset in different markets to profit from price differences.
  • Amortization – Spreading loan payments or intangible asset costs over time.

B

  • Bear Market – A period when stock prices fall 20% or more, often signaling pessimism.
  • Bond – A loan you give to a company or government, earning fixed interest.
  • Broker – A person or platform that helps you buy and sell stocks or investments.

C

  • Capital Gain – The profit from selling an asset for more than you paid.
  • Compound Interest – Interest calculated on both the principal and past interest (interest on interest).
  • Cryptocurrency – Digital currency secured by blockchain technology (e.g., Bitcoin).

D

  • Dividend – A company’s profit paid to shareholders, usually in cash or extra shares.
  • Debt-to-Equity Ratio – A measure of a company’s financial leverage (debt vs. shareholder equity).
  • Diversification – Spreading investments across assets to reduce risk.

E

  • ETF (Exchange-Traded Fund) – A basket of securities that trades like a stock.
  • Equity – Ownership in a company (your shares represent equity).
  • EPS (Earnings Per Share) – Company profit divided by the number of shares outstanding.

F

  • Futures – Contracts to buy/sell an asset at a set price in the future.
  • Fiscal Year – A 12-month accounting period for reporting finances.
  • Forex (Foreign Exchange) – The global market for trading currencies.

G

  • Gross Domestic Product (GDP) – The total value of goods/services a country produces.
  • Growth Stock – A stock expected to grow faster than average.
  • Gross Margin – Revenue minus the cost of goods sold, expressed as a percentage.

H

  • Hedge Fund – An investment fund that uses advanced strategies to maximize returns.
  • Hedging – Protecting against risk by offsetting potential losses (e.g., using options).
  • High-Yield Bond – A “junk bond” that pays higher interest but carries more risk.

I

  • Inflation – The rise in prices of goods and services over time.
  • Index Fund – A fund that tracks a market index (e.g., S&P 500).
  • Initial Public Offering (IPO) – The first time a company sells stock to the public.

J

  • Junk Bond – A bond with high risk and high return due to low credit rating.
  • Joint Account – A bank or investment account shared by two or more people.
  • Jobless Claims – A measure of the number of people filing for unemployment benefits.

K

  • Keynesian Economics – Economic theory emphasizing government spending to boost demand.
  • K-1 Form – A tax form used for partnerships to report income.
  • KYC (Know Your Customer) – Rules requiring financial institutions to verify clients.

L

  • Liquidity – How quickly an asset can be turned into cash.
  • Leverage – Using borrowed money to increase potential returns.
  • Limit Order – A stock order to buy or sell at a specific price or better.

M

  • Mutual Fund – A pool of money from investors used to buy a mix of securities.
  • Market Capitalization (Market Cap) – The total value of a company’s shares.
  • Margin Call – A broker’s demand to deposit more funds when using borrowed money.

N

  • NASDAQ – A major U.S. stock exchange focused on technology companies.
  • Net Worth – Assets minus liabilities = what you truly own.
  • NAV (Net Asset Value) – The value per share of a mutual fund or ETF.

O

  • Option – A contract giving you the right (not obligation) to buy/sell stock at a set price.
  • Over-the-Counter (OTC) – Trading securities directly between parties, not on an exchange.
  • Outstanding Shares – Total shares a company has issued and are in the market.

P

  • Portfolio – A collection of investments owned by an individual or institution.
  • P/E Ratio (Price-to-Earnings) – A valuation measure: stock price ÷ earnings per share.
  • Penny Stock – Low-priced, highly speculative stock (usually under $5).

Q

  • Quantitative Easing (QE) – Central bank policy of buying assets to inject money into the economy.
  • Quarterly Earnings – Company profits reported every three months.
  • Quick Ratio – A liquidity measure showing if a company can meet short-term obligations.

R

  • Recession – A period of declining economic activity (two quarters of GDP decline).
  • Return on Investment (ROI) – Profit from an investment compared to its cost.
  • Risk Tolerance – An investor’s ability to handle losses without panic.

S

  • Stock – Ownership share in a company.
  • Short Selling – Betting a stock will fall by selling borrowed shares and buying them back cheaper.
  • Stop-Loss Order – An order to sell a stock when it falls to a set price, limiting losses.

T

  • Treasury Bond – A U.S. government debt security with long-term maturity.
  • Ticker Symbol – Unique letters identifying a stock (e.g., AAPL for Apple).
  • Technical Analysis – Using charts and patterns to predict stock movements.

U

  • Unicorn – A private startup valued at over $1 billion.
  • Unsecured Loan – A loan not backed by collateral (higher interest risk).
  • Utility Stock – Stocks of utility companies (water, electricity, gas), usually stable.

V

  • Volatility – How much a stock or market moves up and down.
  • Venture Capital – Money invested in startups with high growth potential.
  • Value Stock – A stock considered undervalued compared to its fundamentals.

W

  • Wall Street – Term for the U.S. financial industry, centered in New York City.
  • Wealth Management – Financial planning service for high-net-worth individuals.
  • Withholding Tax – Taxes withheld from wages or investment payments.

X

  • Ex-Dividend Date – The cutoff date to own a stock and receive its next dividend.
  • X-Efficiency – Economic concept: how well firms minimize costs under competition.
  • XBRL (eXtensible Business Reporting Language) – Digital standard for financial reporting.

Y

  • Yield – Earnings (interest or dividends) from an investment as a percentage of its cost.
  • Yield Curve – Graph showing interest rates of bonds with different maturities.
  • Year-to-Date (YTD) – Performance measure from the start of the year to today.

Z

  • Zero-Coupon Bond – A bond sold at discount, pays no interest, but matures at face value.
  • Z-Score – A measure used to predict the likelihood of bankruptcy.
  • Zombie Company – A firm that barely earns enough to cover debt interest, but not grow.