Financial Planning Vocabulary

Account

A banking service allowing a customer's money to be handled and tracked. Common bank accounts are savings and checking accounts

Trend

A change or development in a certain direction

Public company

A company whose shared are traded on the stock exchange

Credit Rating

A credit rating is an assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money — an individual, corporation, state or provincial authority, or sovereign government

Deposit-taking

A deposit-taking financial institution is one into which people can pay money so that it can be held there and earn interest

Time Log

A detailed record of how you spend your time

Variance

A difference or discrepancy

Commission

A fee that brokers earn by completing trades for investors

Income Statement

A financial record that measures a company's performance during a certain period of time

Capital structure

A firm's mix of financing, usually some combination of debt and equity

Rate of return

A gain or loss on an investment over a certain period of time

Blue Chip Stock

A large, stable company with a track record of quality and profitability

Contract

A legally binding agreement between two parties

To-do list

A list of activities that an individual plans to accomplish during a certain period of time

Return on capital

A measure of how well a business generates cash flow in relation to the capital it has already invested in itself

Stress

A mental, physical, or emotional feeling of pressure or tension

ABC principle

A method used to rank goals in order of importance; goals identified with an "A" are most important, "B" signifies somewhat important, and "C" represents least important

S&P 500

A popular measure of stock prices consisting of 500 large companies

Capital budgeting

A process in which a firm's financial managers determine which projects it should invest in

Bear Market

A prolonged period of falling stock prices

Bull Market

A prolonged period of rising stock prices

Semi-government

A semi-government organization is defined as an institution by the meaning of both public and private perspectives that combines the elements of government bureaucracy as well as a private company

GAAP (Generally Accepted Accounting Principles)

A set of guidelines and procedures governing accounting practices

IFRS (International Financial Reporting Standards)

A set of international guidelines and procedures governing accounting practices

Automated Teller Machine (ATM)

A specialized computer used by bank customers to manage their money, for example, to get cash, make deposits, or transfer money between accounts.

Balance sheet

A statement of a business's assets and liabilities

Dividend

A sum of money paid to an investor or stockholder as earnings on an investment

Profitability

Ability to yield a financial gain

Acquisition of funds

All Finance activity involving making decisions about financing owed to a firm by its customers

Financial Intermediary

An entity that helps to ensure that the funds supplied by the sources of capital are made available to those that need them (the users of capital). The best example is a commercial bank. The use of such an intermediary is called intermediation

Budget

An estimate of income and expenditures over a certain period of time

Limit Order

An order to buy or sell stock at a given (or better) price

Market Order

An order to buy or sell stock at the current market price

Administration of assets

Finance activity involving making decisions about a firm's investments

Financing

Funding a business activity or project through debt, equity, or venture capital

Compound Interest

Growth from earnings received on reinvested earnings as well as on the initial amount invested

Dividend

Part of a company's profits (earnings) that it pays as money or shares to stockholders

Determining which projects a business should invest in is known as

capital budgeting

Which of the following is a key component of managing working capital:

cash conversion cycle

Selling shares in the company to raise money for a new venture is referred to as __________ funding.

equity

Short sell stock

selling stock you don't own

Objectives

Concrete tasks that help you on your way to achieving your goals

Assets

Anything of value that a business or individual owns

Relevant

Appropriate to the matter at hand

Dollar-Cost Averaging

Averaging the cost of multiple trades (buying or selling) of the same stock over time

Liabilities

Debts

Capital investment decisions

Decisions that determine which projects a business will invest in, how the investment(s) will be financed, and whether to pay dividends to shareholders

Data

Facts and figures

Time management

How people use the 24 hours in their day

Which of the following is a capital investment decision:

How to finance investments

Neutral

Impartial; unbiased

Finance

In business, the function that involves all money and money management matters

Venture capital

Invested money used for new business opportunities (Venture Capitalist - Think SHARK TANK - Mr. Wonderful, Damon John, etc)

How does the finance function relate to company spending?

It plans and controls spending.

Information

Knowledge and facts in useful form

Working capital management

Management of a firm's current balance of assets and liabilities; involves accounts payable and receivable, inventory, and cash

Accounts payable

Money a company owes

Accounts receivable

Money that is owed to a company

Procrastination

Putting off until tomorrow what could have been done today

Cash conversion cycle

Ratio that refers to the number of days between a company paying for raw materials and receiving cash from selling the products made from those raw materials

Financial statements

Records that show a business's financial activities

Diversification

Reducing risk by combining different investments

Assets

Resources owned by a business or an individual

Goals

Statements that you make, telling yourself what you want to achieve

Available Balance

The amount of money in your account that you can use or withdraw. Your available balance may not reflect all transactions that you have made, for example checks you have written that have not yet been paid from your account.

Interest

The amount that someone earns by loaning money or pays for borrowing money

Dow Jones Industrial

The best-known measure of stock prices consisting of 30 large, well-known companies

Quote

The bid or ask price quoted for a stock at a given time

Long Position

The condition of owning stocks. The value of a long position is a stock's current share price multiplied by the number of shares owned.

Reward

The gain received for investment of money, time or effort

Bid

The highest quoted price buyers are currently willing to pay for a share of stock

Risk

The likelihood of loss

Ask

The lowest quoted price sellers are currently accepting (asking) for a share of stock

Open

The price of a stock on its first (opening) trade of the day

Close

The price of a stock on its last (closing) trade of the day

Accounting

The process of gathering, recording, organizing, and reporting financial data

Free Time

Time that is free of scheduled or planned duties and responsibilities

Acquire

To buy or obtain

Prioritize

To determine the order for completion of activities based on their importance

Consistent

Unchanging

Equity funding

Using money from investors to finance a project in exchange for shares in the company

Debt funding

Using money that is lent by a bank or other institution to finance a project

Valuation

Valuation is the process of determining the current worth of an asset or a company. There are many techniques used for doing a valuation. An analyst placing a value on a company looks at the business's management, the composition of its capital structure, the prospect of future earnings, and the market value of its assets.

Profit

Whatever remains after subtracting a company's cost from its revenue

Money the business owes is known as

accounts payable

Money owed to the business is known as

accounts receivable.

Decisions about financing refer to the

acquisition of funds.

The cash conversion cycle should be

as short as possible

The finance function is usually responsible for which of the following process

budgeting

When return on capital is positive, the company is

growing in value

The finance function ensures that the company's financial goals are

in line with organizational priorities.

To keep communication flowing with other departments, the finance function depends on

information systems

The administration of assets refers to decisions about

investments

Short sale

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Finance is the business function that involves managing

money

The finance function would definitely be involved in a decision regarding

new business projects and strategies.

Accounting is distinct from finance because its main focus is on

record-keeping activities

The goals of the finance function are to ensure profitability and

reduce risks

Which of the following is a measure of how well a business generates cash flow:

return on capital

A company's current balance of assets and liabilities falls under the focus of

working capital management