401(k) – A retirement savings plan sponsored by an employer, which allows employees to save and invest a piece of their paycheck before taxes are taken out.
Amortization – Similar to depreciation but for intangible assets, spreading out the cost over time.
Annuity – A financial product that pays out a fixed stream of payments to an individual, typically used as an income stream for retirees.
APR (Annual Percentage Rate) – The annual rate charged for borrowing or earned through an investment, including fees or additional costs.
APY (Annual Percentage Yield) – The real rate of return earned on an investment or savings account, considering the effect of compounding interest.
Asset – Any resource owned by an individual or company that has economic value.
Bankruptcy – A legal proceeding involving a person or business that is unable to repay outstanding debts.
Bear Market – A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining.
Bonds – A fixed income instrument representing a loan made by an investor to the issuer.
Budget – A financial plan for a defined period, often one year, that includes planned expenses and revenues.
Bull Market – A financial market of a group of securities in which prices are rising or are expected to rise.
Capital – Financial assets or the net worth of a business, including cash and equivalents.
Capital Gain – Profit from the sale of property or an investment.
Capital Loss – The loss incurred when an asset is sold for less than its purchase price.
Collateral – An asset pledged by a borrower to secure a loan.
Compound Interest – Interest calculated on the initial principal and also on the accumulated interest of previous periods.
Credit – The ability to borrow money or access goods or services with the understanding that payment will be made in the future.
Credit Limit – The maximum amount of credit that a financial institution extends to a client.
Credit Score – A numerical expression based on a level analysis of a person’s credit files, representing the creditworthiness of an individual.
Debit – An accounting entry that either increases an asset or expense account, or decreases a liability or equity account.
Default – Failure to meet the legal obligations (or conditions) of a loan, such as not making required payments.
Deflation – A decrease in the general price level of goods and services.
Depreciation – The allocation of the cost of a tangible asset over its useful life.
Diversification – A risk management strategy that mixes a wide variety of investments within a portfolio.
Dividend – A distribution of a portion of a company’s earnings to its shareholders.
Equity – The value of an ownership interest in property, including shareholders’ equity in a company.
ETF (Exchange Traded Fund) – A type of investment fund and exchange-traded product, traded on stock exchanges, similar to stocks.
Expense – Costs incurred in carrying out a business’s operations.
Fiscal Policy – Government policy relating to taxation and public spending.
Fixed Rate – An interest rate on a loan or mortgage that does not change over the life of the loan.
Gross Profit – Revenue minus the cost of goods sold (COGS).
Inflation – The rate at which the general level of prices for goods and services is rising, eroding purchasing power.
Interest – The cost of borrowing money, typically a percentage of the principal.
IRA (Individual Retirement Account) – A form of “personal” retirement savings plan in the U.S. where individuals can make pre-tax or after-tax contributions, depending on the type.
Liability – An obligation that legally binds an individual or company to settle a debt.
Liquidity – The ease with which an asset can be converted into cash without affecting its market price.
Loss – The opposite of profit, where expenses exceed revenue.
Monetary Policy – The policy adopted by the central bank to control the supply of money in an economy.
Mutual Fund – An investment vehicle made up of a pool of funds collected from many investors to invest in securities like stocks, bonds, etc.
Net Income – The amount of money remaining after all operating expenses, taxes, and interest have been deducted from revenue.
Pension – A fund into which a sum of money is added during an employee’s employment years, out of which payments are drawn to support the person’s retirement from work.
Principal – The initial amount of money borrowed or invested, before interest.
Profit – The financial gain when revenue exceeds expenses.
Recession – A significant decline in economic activity spread across the economy, lasting more than a few months.
Refinance – The process of revising and replacing the terms of an existing credit agreement, typically to take advantage of lower interest rates.
Revenue – The total income generated from sales before any expenses are subtracted.
ROI (Return on Investment) – A performance measure used to evaluate the efficiency or profitability of an investment.
Simple Interest – Interest calculated only on the principal amount.
Stocks – Shares in the ownership of a company, representing a claim on part of the company’s assets and earnings.
Variable Rate – An interest rate that can change based on market conditions.
This list provides a foundation for understanding basic financial concepts, though each term can have nuances depending on context.
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