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| The name for the ability of one entity to engage in more efficient production than another entity. Assuming equal inputs, the entity with an absolute advantage will have a greater output. |
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| The systematic recording, reporting, and analysis of financial transactions of a business. |
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| Any item of economic value owned by an individual or corporation, especially that which could be converted to cash. Examples are cash, securities, accounts receivable, inventory, office equipment, a house, a car, and other property. On a balance sheet, assets are equal to the sum of liabilities, common stock, preferred stock, and retained earnings. |
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| An examination and verification of a company's financial and accounting records and supporting documents by a professional, such as a Certified Public Accountant. |
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| An accounting record of all transactions made by a country over a certain time period, comparing the amount of foreign currency taken in to the amount of domestic currency paid out. |
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| A country's exports minus its imports; the largest component of a country's balance of payments. |
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| A quantitative summary of a company's financial condition at a specific point in time, including assets, liabilities and net worth. The first part of a balance sheet shows all the productive assets a company owns, and the second part shows all the financing methods (such as liabilities and shareholders' equity). also called statement of condition. |
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| A prolonged period in which investment prices fall, accompanied by widespread pessimism. If the period of falling stock prices is short and immediately follows a period of rising stock prices, it is instead called a correction. Bear markets usually occur when the economy is in a recession and unemployment is high, or when inflation is rising quickly. The most famous bear market in U.S. history was the Great Depression of the 1930s. opposite of bull market. |
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| A written agreement between the issuer of a bond and his/her bondholders, usually specifying interest rate, maturity date, convertibility, and other terms. also called indenture. |
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| The owner of a bond. In addition to receiving regular interest payments and the return of principal, bondholders are given precedence over stockholders in case of asset liquidation. |
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| Forecasting an individual's or company's income and expenses expected for some period in the future. |
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| A prolonged period in which investment prices rise faster than their historical average. Bull markets can happen as a result of an economic recovery, an economic boom, or investor psychology. The longest and most famous bull market is the one that began in the early 1990s in which the U.S. equity markets grew at their fastest pace ever. opposite of bear market. |
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| A bond which the issuer has the right to redeem prior to its maturity date, under certain conditions. When issued, the bond will explain when it can be redeemed and what the price will be. In most cases, the price will be slightly above the par value for the bond and will increase the earlier the bond is called. |
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| The amount by which an asset's selling price exceeds its initial purchase price. A realized capital gain is an investment that has been sold at a profit. |
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| Chief Financial Officer. The executive who is responsible for financial planning and record-keeping for a company. |
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| A corporate bond, usually a junior debenture, that can be exchanged, at the option of the holder, for a specific number of shares of the company's preferred stock or common stock. |
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| Certified Public Accountant. An individual who has received state certification to practice accounting. |
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| A balance sheet item which equals the sum of cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that could be converted to cash in less than one year |
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| Current assets divided by current liabilities. An indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is. |
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| Unsecured debt backed only by the integrity of the borrower, not by collateral, and documented by an agreement called an indenture. One example is an unsecured bond. |
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| Financing by selling bonds, bills or notes to individuals or institutions. |
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| A substantial drop in the value of a currency, relative to the price of gold or the currencies of other countries. |
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| The rate at which member banks may borrow short term funds directly from a Federal Reserve Bank. |
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| A taxable payment declared by a company's board of directors and given to its shareholders out of the company's current or retained earnings, usually quarterly. |
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| Taxation of the same earnings at two levels. One common example is taxation of earnings at the corporate level and then again at the shareholder dividend level. |
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| Dow Jones Industrial Average |
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| The most widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials. The 30 stocks are chosen by the editors of the Wall Street Journal (which is published by Dow Jones & Company), a practice that dates back to the beginning of the century. |
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| Selling items below cost, to eliminate surplus, hurt competitors or gain market share. |
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| Total earnings divided by the number of shares outstanding. |
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| A mutual fund which invests primarily in stocks, usually common stocks. |
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| Rate at which one currency may be converted into another. |
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| To ship a product outside a country or region. |
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| The selling of a company's accounts receivable, at a discount, to a factor, who then assumes the credit risk of the account debtors and receives cash as the debtors settle their accounts. |
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| An investment professional who helps individuals set and achieve their long-term financial goals, through investments, tax planning, asset allocation, risk management, retirement planning, and estate planning. |
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| A written report which quantitatively describes the financial health of a company. This includes an income statement and a balance sheet, and often also includes a cash flow statement. Financial statements are usually compiled on a quarterly and annual basis. |
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| A long-term, tangible asset held for business use and not expected to be converted to cash in the current or upcoming fiscal year, such as manufacturing equipment, real estate, and furniture. |
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| The granting of permission to foreign companies to use intellectual property rights, such as trademarks, patents, or technology, under defined conditions. |
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| Generally Accepted Accounting Principles. A widely accepted set of rules, conventions, standards, and procedures for reporting financial information, as established by the Financial Accounting Standards Board. |
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| Securities issued by a government to raise the funds necessary to pay for its expenses. |
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| To have a product shipped into a country or region. |
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| An accounting of sales, expenses, and net profit for a given period. |
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| Trading by insiders; or illegal trading by insiders who trade based on insider information. |
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| An ongoing appraisal of the financial health of a company's operations by its own employees. |
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| An individual or institution which acts as an underwriter or agent for corporations and municipalities issuing securities. |
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| Laddering involves building a portfolio of bonds with staggered maturities so that a portion of the portfolio will mature each year. |
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| The degree to which an investor or business is utilizing borrowed money. Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt. |
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| A financial obligation, debt, claim, or potential loss. |
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| An order to a broker to buy a specified quantity of a security at or below a specified price, or to sell it at or above a specified price. |
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| An arrangement in which a bank or vendor extends a specified amount of unsecured credit to a specified borrower for a specified time period. |
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| The ability of an asset to be converted into cash quickly and without any price discount. |
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| Trading with borrowed money. |
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| A buy or sell order in which the broker is to execute the order at the best price currently available. |
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| A computerized system established by the NASD to facilitate trading by providing broker/dealers with current bid and ask price quotes on over-the-counter stocks and some listed stocks. |
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| An order to buy or sell securities that has not been executed (usually because some requirement, such as a specified price, has not been met) or canceled. |
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| Total assets minus total liabilities of an individual or company. |
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| The market for new securities issues. In the primary market the security is purchased directly from the issuer. This differs from the secondary market. |
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| Earnings not paid out as dividends but instead reinvested in the core business or used to pay off debt. |
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| A measure of how well a company used reinvested earnings to generate additional earnings, equal to a fiscal year's after-tax income divided by book value, expressed as a percentage. |
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| The normal unit of trading of a security; 100 shares of stock or 5 bonds. |
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| A market in which an investor purchases a security from another investor rather than the issuer. |
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| Bond backed by collateral, such as a mortgage or lien, the title to which would be transferred to the bondholders in the event of default. |
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| An investment instrument, other than an insurance policy or fixed annuity, issued by a corporation, government, or other organization which offers evidence of debt or equity. |
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| Borrowing a security from a broker and selling it, with the understanding that it must later be bought back and returned to the broker. |
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| Statement of Cash Flow (Cash Flow Statement) |
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| A summary of a company's cash flow over a given period of time. |
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| An individual or firm dealing with stocks that act as an intermediary between a buyer and seller, usually charging a commission. |
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| A tax imposed on a product when it is imported into a country. |
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| A stock of an individual unit of a company. |
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| An agreement between a buyer and a seller to exchange an asset for payment. |
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| An organization whose focus is on foreign exchange reserves and the balance of trade. |
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| An international agency which encourages trade between member nations, administers global trade agreements and resolves disputes when they arise. |
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| The annual rate of return on an investment, expressed as a percentage. |
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