Financial Terms Main Page

This site contains comprehensive definitions for a wide range of terms that cover topics such as financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit...

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Monthly Financial Term Picks:

Balance of trade

Net flow of goods (exports minus imports) between countries.

Economic exposure

The extent to which the value of the firm will change because of an exchange rate change.

Equivalent annual cash flow

Annuity with the same net present value as the company's proposed investment.

Euro-note

Short- to medium-term debt instrument sold in the Eurocurrency market.

Make a market

A dealer is said to make a market when he quotes bid and offered prices at which he stands
ready to buy and sell.

Regulatory pricing risk

Risk that arises when regulators restrict the premium rates that insurance companies
can charge.

Without recourse

Without the lender having any right to seek payment or seize assets in the event of
nonpayment from anyone other than the party (such as a special-purpose entity) specified in the debt contract.

Yield curve strategies

Positioning a portfolio to capitalize on expected changes in the shape of the Treasury yield curve.

accounts receivable

Short-term, non-interest-bearing debts owed to a
business by its customers who bought goods and services from the business
on credit. Generally, these debts should be collected within a month
or so. In a balance sheet, this asset is listed immediately after cash.
(Actually the amount of short-term marketable investments, if the business
has any, is listed after cash and before accounts receivable.)
Accounts receivable are viewed as a near-cash type of asset that will be
turned into cash in the short run. A business may not collect all of its
accounts receivable. See also bad debts.

straight-line depreciation

This depreciation method allocates a uniform
amount of the cost of long-lived operating assets (fixed assets) to each
year of use. It is the basic alternative to the accelerated depreciation
method. When using the straight-line method, a business may estimate a
longer life for a fixed asset than when using the accelerated method
(though not necessarily in every case). Both methods are allowed for
income tax and under generally accepted accounting principles (GAAP).

Discount Rate

The interest rate at which the Fed is prepared to loan reserves to commercial banks.

FICA

The acronym for the Federal Insurance Contributions Act, also used to describe
the combined amount of Social Security and Medicare deductions from
an employee’s pay.

Business Expansion Investment

The use of capital to create more money through the addition of fixed assets or through income producing vehicles.

Financial Assistance

Economic assistance provided by unrelated third parties, typically government agencies. They may take the form of loans, loan guarantees, subsidies, tax allowances, contributions, or cost-sharing arrangements.

Policy Date

Date on which the insurance company assumes responsibilities for the obligations outlined in a policy.