Finance glossary terms
Table of Contents
A
ACCEPT
To agree to pay a bill of exchange, inland bill, draft, or other financial instruments according to its usance. see also sight draft, time draft.
ACCEPTANCE
Any variety of a bill of exchange, inland bill, draft, or other financial instruments that have been accepted by the payer as a legitimate claim upon its assets but are not yet paid because the instrument has not yet matured or has not yet been presented for payment.
ACCOUNTS RECEIVABLE
An amount that’s owed to a business by a customer who purchased goods or services on credit.
ACCOUNT BOOKS
Books, or papers or computer files, where accounts are maintained. See: ‘Day Books’, ‘Double Entry’, ‘Journals’, ‘Ledgers’, ‘Single Entry’.
ACCOUNTS
A record of debits and/or credits maintained by an entity in its account books.
ACQUISITION
The purchase, takeover, and balance sheet consolidation of one business entity by another, typically larger surviving entity.
ACTUARIAL
The condition or state of being created by an actuary.
ACTUARY
An entity that computes insurance risks and premiums in a scientifically and statistically valid way.
ADVERSE SELECTION
A type of asymmetric information whereby the highest risks are the most eager to borrow or insure. See: ‘Lemons Problem’.
AGENCY COSTS
The costs are incurred by a principal when its agent does not act on its behalf but rather in the agent’s own interest. see also a principal‐agent problem.
AGENT
An entity enjoined to act on behalf of a principal in some business activity. See: ‘Agency Costs’, ‘Insurance Agent’.
AGGREGATE OUTPUT (Y)
The sum total of all final goods produced in an economy in some period, typically a quarter or a year. Consumption (c) plus Investment (i) plus Government spending (g) plus Net Exports (nx), as in the equation y = c + i + g + nx. See: ‘Gross Domestic Product’.
ALLOWABLE EXPENSES
Essential business costs that are not taxable.
AMORTIZATION
The process of amortizing a loan.
AMORTIZE
To repay a loan by making interest and partial principal payments each repayment period, typically a month.
ANNUAL
Another word that means year.
ANNUALLY
Once a year. See: ‘Semiannually’, ‘Quarterly’.
ANNUITANT
The owner or recipient of an annuity.
ANNUITY
A type of insurance policy that pays the annuitant a sum of money, previously annually but often today monthly, over a pre‐specified period or during the annuitant’s lifetime or that of his or her spouse.
ARTICLES OF ASSOCIATION
Written rules which set out how a business should be run and governed. They are agreed upon by a business’s shareholders, directors and secretary.
ASK PRICE
The price at which a dealer will sell a security from its inventory. See: ‘Bid Price’.
ASSET
Any good is owned by any entity and held on its balance sheet.
ASSET BUBBLE
The condition is when the price of an asset or asset class exceeds its fundamental value for an extended period.
ASSET CLASS
A group of similar assets like bonds, equities, or real estate.
ASSOCIATION
Any one of a number of types of business entity, a type of organization. See: ‘Building and Loan Associations’, ‘Savings and Loan Associations’.
ASYMMETRIC INFORMATION
When one party to a contract, buyer or seller, knows more than the counterparty, such as adverse selection, moral hazard, and the principal‐agent problem.
AUTHORISED SHARE CAPITAL
The maximum amount of capital that a business can issue to stakeholders as agreed in its articles of association. At times, the authorised share capital can also be called ‘authorised stock’, ‘authorised shares’, or ‘authorised capital stock’.
B
BAD
Anything that entities values at greater than zero, to which are willing to pay to reduce or eliminate. See: ‘Good’.
BALANCE SHEET
A type of financial statement that lists an entity’s assets, liabilities, and capital. So-called because assets must equal, or in other words be in balance with, liabilities plus capital, which can be negative.
BALANCE SHEET CONSOLIDATION
The act of combining the balance sheets of two or more entities, as in a merger.
BANK
One of a variety of financial intermediaries that accepts deposits and makes loans and/or that engages in brokerage, merger and acquisition consulting, or securities issuance. See: ‘Bank of Discount and Deposit’, ‘Building and Loan Association’, ‘Central Bank’, ‘Commercial Bank’, ‘Credit Union’, ‘Investment Bank’, ‘Savings and Loan Association’, ‘Savings Bank’, ‘Unit Bank’, ‘Universal Bank’.
BANK HOLDING COMPANY
A bank that holds one or more other banks as assets on its balance sheet.
BANKNOTES
A form of paper money issued by banks (banks of issue) and generally convertible into specie at their respective face values at current coin ratings at the bank of issue. See: ‘Suspension of Specie Payments’.
BANK OF DISCOUNT AND DEPOSIT
An archaic term for a commercial bank.
BANK OF ISSUE
An archaic term for a bank that issued its own banknotes.
BANK RUN
Historically, when holders of a bank’s demand liabilities, specifically its banknotes or deposits, request payment or conversion en masse. When creditors refuse to renew short‐term loans to a bank, also known as a ‘Silent Run’. See: ‘Liability Run’.
BANKED
To utilize one or more of the services of a bank, particularly to obtain a loan or make a deposit at a depository institution. See: ‘Unbanked’.
BANKER
An individual engaged in banking as a private banker or as an employee of a bank. See: ‘Financier’.
BANKING
The activities of a bank or banker such as making loans, taking deposits, and/or engaging in investment banking.
BANKRUPT
An entity in a state of bankruptcy.
BANKRUPTCY
Generally, the condition of an entity that has a negative net worth, with the monetary value of its liabilities exceeding the monetary value of its assets. The state of an entity that has filed for protection from its creditors under bankruptcy law. See: ‘Insolvency’.
BANKRUPTCY LAW
A statute that determines how a bankrupt entity’s assets shall be used to pay its liabilities.
BARRIERS TO EXIT
Problems a business faces when trying to leave a particular industry or market.
BASE MONEY
Any type of money that banks can count as reserves. See: ‘Cash’, ‘Specie’.
BENEFITS
The non‐monetary compensation of an employee, such as health insurance. The utility or resources derived by an entity from some good or activity. See: ‘Costs’.
BEARER SHARE
A type of share that doesn’t need to be registered under a specific individual or business. The share will not be registered on any share registry and whoever holds the share certificate has full ownership of the share.
BID PRICE
The price at which a dealer will buy a security for its inventory. See: ‘Ask Price’.
BILL
A short‐dated bond, especially one issued by a treasury. See: ‘Commercial Paper’.
BILL OF CREDIT
A type of medium of exchange or paper money issued by the colonial governments of mainland Britain, North America, and often, though not always, made a full legal tender.
BILL OF EXCHANGE
A short‐dated international financial instrument is drawn on a foreign entity in a foreign currency. See: ‘Inland Bill’.
BOND
Generically, any loan. A negotiable, long‐dated, interest‐bearing financial instrument. See: ‘Bill’, ‘Coupon Bond’.
BONDHOLDER
The owner of a bond. Any lender or creditor whose loan is secured by a bond.
BOOKKEEPING
The systematic recording and organising of financial transactions in a business
BOOM
A state of the economy during which aggregate output, typically as measured by gross domestic product, increases past all previous levels. See ‘Expansion’.
BORROWER
Any entity that receives principal from a lender in exchange for a promise to repay the principal plus interest in the future.
BRANCH
An office of an intermediary, typically a bank, where financial services are provided to customers remotely from the financial institution’s headquarters.
BROKER
Any entity that brokers.
BROKER
To match the buyers and sellers of financial instruments in exchange for a commission. See: ‘Broker’, ‘Brokerage’, ‘Deal’, ‘Dealer’, ‘Dealing’, ‘Stockjobber’, ‘Stockjobbing’.
BROKER‐DEALER
A brokerage.
BROKERAGE
An intermediary that brokers and deals. See: ‘Broker‐Dealer’.
BUDGET DEFICIT
The difference between an entity’s, typically a government’s, income and its expenditures must be financed through the sale of assets or the issuance of securities, usually bonds or money.
BUILDING AND LOAN ASSOCIATION
A type of mutual corporation that specialized in financing the construction of homes that were replaced following the great depression by the savings and loan association.
BULLION
Gold or silver in the form of bars or ingots. See: ‘Specie’.
BUSINESS
An entity whose primary goal is to earn profits. A for‐profit firm. Of or pertaining to the activities carried out by businesses.
BUSINESS ACTIVITY
Any actions undertaken by any business entity such as buying, selling, brokering, dealing, lending, borrowing, collateralizing, exchanging, or trading.
BUSINESS ANGEL
An independent individual who provides capital for the development of a business.
BUSINESS ENTITY
An association, corporation, partnership, sole proprietor, or other entity that buys and/or sells goods in an attempt to earn profits. See: ‘Business’, ‘Organization’.
BUSINESS NAME
The name a business is known by. It might be the business owner's own individual name, or it might be something entirely different and unique to the business.
BUSINESS RATES
Also known as ‘non-domestic rates’, these are a tax on the occupation of the property for non-domestic purposes.
BUSINESS STRUCTURE
Refers to how a business is organised, in regard to its legal status.
BUSINESS-TO-BUSINESS (B2B)
Business-to-business is the process of businesses selling to other businesses, typically in an online setting.
BUST
A state of the economy during which aggregate output, typically as measured by gross domestic product, declines. See ‘Recession’.
BUYER
The entity in a trade that gives up money and receives a non‐monetary good in exchange.
BY-PRODUCTS
Secondary products that result incidentally from the manufacturing of the main product.
C
C-SUITE
A collective term used to refer to the C-level, senior executive, positions in a business, notably those that begin with ‘Chief’.
CALL
To demand repayment of a sum due or payable. See: ‘Calling’.
CALL LOAN
A loan, typically an overnight one collateralized by stock, that the lender can be calling at any time.
CALL OPTION
A type of option derivative that gives the option holder the right but not the obligation to purchase some predetermined asset at a predetermined strike price. See: ‘Option’, ‘Put Option’.
CALLABLE
Lawfully capable of being called. Subject to a call.
CALLING
When a demand is made for the payment of a liability owed to a creditor. See: ‘Call’, ‘Call Loan’, Call Option’.
CAPITAL
An entity’s net worth. The contributions of stockholders to a joint‐stock corporation. Productive physical assets such as factories. See: ‘Human Capital’.
CAPITAL REQUIREMENTS
Capital mandated by some regulator or law. Typically expressed as a percentage of a bank’s assets.
CAPITALISM
An economic and political system characterized by lockean government, a modern financial system, open access entrepreneurship, and modern management but also by some level of corruption, rent-seeking, and the exploitation of taxpayers and workers.
CARD PAYMENT
The use of a credit or debit card to make payment for a sale of goods or services.
CARD READER
A device used in the sales process to read the payment data stored in a credit or debit card magnetic stripe or chip.
CASH
Any physical medium of exchange that circulates or passes easily hand to hand to make exchanges. Slang for short‐dated commercial paper. The most liquid asset is vital for the solvency of a business.
CASH ACCOUNTING
An accounting method that records income when it’s received and records expenses in the period in which they are paid.
CASH DISCOUNT
An incentive offered by a seller to a buyer for paying an invoice ahead of the scheduled due date.
CASH FLOW
The movement of cash into and out of an entity during some finite period such as a month or a quarter.
CASH ON DELIVERY (COD)
A payment term that indicates that payment for the order is collected when the products/services are delivered to the customer/client.
CASH VALUE
The sum of money that can be obtained for relinquishing a whole life insurance policy.
CASH-IN
To convert a financial instrument like a check or a whole life insurance policy into money.
CENTRAL BANK
A bank established by a government to develop and implement monetary policy and/or act as a lender of last resort during crises and/or regulate financial firms and markets.
CERTIFICATE OF DEPOSIT (CD)
A type of time deposit whereby the depositor agrees to pay a penalty if an individual withdraws the principal before maturity, a pre‐specified date some months or years after making the deposit. See: ‘Negotiable Certificate of Deposit’.
CHARITY
An organisation that is set up to help people in need and is for a specific cause.
CHARTER
A statute or special act of incorporation authorizing the creation of a business.
CHECK
A type of draft or written request for payment, typically to a third party, by a depositor in a bank.
CHIP AND PIN
Refers to the technology used in debit and credit cards in order to process payments or to withdraw cash from cashpoints.
CIRCULATION
The passing of physical cash from hand to hand circulating outside the bank of issue. See: ‘Banknotes’.
CLICK AND MORTAR
Also known as ‘Click and Bricks’, is a type of business model that incorporates both online and offline channels, usually combining a website and a physical store.
COIN RATING
The monetary value assigned by governments or other entities to specific specie coins, typically full‐bodied.
COINS
Pieces of metal, typically formed into the shape of thin round discs and embossed with information about its origin, issuer, date of issue, denomination, and so on. See: ‘Full‐Bodied Coins’, ‘Token Coins’.
COLLATERAL
Any asset pledged for the repayment of a loan.
COLLATERALIZE
To pledge collateral for the repayment of a loan.
COLLATERALIZED
Backed by collateral.
COMMERCIAL BANK
A type of bank that primarily makes loans, traditionally discounts, to businesses and that issues mainly checking or other transaction deposits.
COMMERCIAL INVOICE
Used in foreign trade as a customs document. A commercial invoice is created by the seller as proof of purchase between the buyer and seller.
COMMERCIAL PAPER
A generic term for any type of short‐dated financial instrument, such as a bill of exchange, issued by a business entity. See: ‘Bill’.
COMMISSION
Also known as 'Sales Commission', a percentage of the sale price of an asset paid to an employee or a broker for its brokering services.
COMMODITY MONEY
Cash or media of exchange that derives their liquidity from the monetary value of the commodities, such as copper, silver, or gold, that comprise them.
COMMONWEAL
For the benefit of the community writ large.
COMMUNITY BANK
Any relatively small bank that provides financial services to a relatively small geographical area. See: ‘Building and Loan Association’, ‘Country Bank’, ‘Credit Union’, ‘Savings and Loan Asociation’, ‘Savings Bank’, ‘Thrift’.
COMMUNITY INTEREST COMPANY (CIC)
A type of business designed for social enterprises that want to use their profits and assets for the public good.
COMPANY REGISTRATION NUMBER (CRN)
A unique combination of numbers and, in some cases, letters assigned to businesses. It might also be referred to as a businesses House number.
CONSUMER
The final user of a purchased product or service.
CONSUMER RIGHTS ACT
Outlines the rights that consumers have when a product or service they have bought is faulty.
CONSUMPTION
The use, using, or using up of a good. One of the major components of aggregate output (y).
CONTRACT
An agreement, written or oral but typically legally binding, between two or more parties specifying precise terms for the sale or exchange of one or more products/services.
CONTRACTOR
An individual or business that works on a contractual basis, negotiating deals with different clients to work on specific jobs or projects.
CONVERSION
The act of changing, converting, one type of asset into another.
CONVERTIBLE
Subject to being changed (converted) from one type of asset to another. See: ‘Bank Notes’, ‘Convertible Bonds’.
CONVERTIBLE BONDS
A type of bond that can be changed, converted, into another security, typically equity.
CONVERTIBLE MONEY
Any type of money that can be changed, converted, into another type of money, such as banknotes into specie. See: ‘Credit Money’.
CORPORATION
A legal entity that is distinct from its owners. It’s a body of individuals authorized by law to act as one individual and has rights and liabilities that are separate from the individuals who form the corporation. See: ‘Charter’.
CORRUPTION
Manipulation of the political system by special interests for special interests. The abuse of power by government officials, typically through rent-seeking activities such as taking bribes.
COST OF GOODS SOLD
Also known as ‘COGS’, refers to the costs that go into creating the products that a business sells or the costs of acquiring goods to sell.
COSTS
The expenditure of resources, including cash. See: ‘Opportunity Costs’, ‘Sunk Costs’.
COUNTERPARTY
The other party to a contract like a derivative or a loan.
COUNTRY BANK
An archaic term for a community bank located in a rural or non‐money centre urban/suburban area.
COUPON
The physical piece of a coupon bond that bondholders clipped off and presented for payment to the bond’s issuer or its redemption agent. An interest payment on a coupon bond.
COUPON BOND
Specifically, a type of bond upon which interest was paid when the bondholder clipped off a section of the bond called a coupon and presented it to the issuer or its redemption agent. Generically, any bond that pays interest periodically, such as quarterly or semiannually.
CREDIT CRUNCH
A period characterized by a general dearth of liquidity and a decline in the volume of bonds and loans.
CREDIT MONEY
Any type of money, such as banknotes and deposits, the value of which is dependent on the creditworthiness of the issuer. See: ‘Convertible Money’.
CREDIT NOTE
Also known as 'credit memo', is issued to indicate a return of funds in the event of an invoice error, incorrect or damaged products, purchase cancellation or otherwise specified circumstance.
CREDIT UNION
A type of community bank, depository institution, or thrift owned by its depositors and chartered as a credit union. See: ‘Mutual Corporation’.
CREDITOR
An entity, business or individual that has provided goods, services or a monetary loan to a debtor.
CREDITS
Generically, an accounting term for things received by an entity. Typically stated in terms of their monetary value. In banking, a deposit or other payment by a customer to the bank.
CREDITWORTHINESS
The condition of being creditworthy.
CREDITWORTHY
An entity that is thought willing and able to meet all of its current financial obligations. See: ‘Creditworthiness’.
CRISIS
A period characterized by rapid reductions in the monetary value of financial assets and the market capitalization of financial institutions and, typically, non‐financial entities as well. See: ‘Bank Run’, ‘Credit Crunch’, ‘Financial Panic’, ‘Stock Market Crash’.
CURRENCY
Cash. The prevailing unit of account or coin rating.
CURRENT MONEY
An archaic term for cash.
CUSTOMER LIFETIME VALUE
Also known as 'CLV/CLTV ', is a metric that allows a business to see how much revenue a customer might bring in overtime.
CUSTOMS DUTY
An authority or agency in a country that is responsible for collecting tariffs and for controlling the flow of goods, including animals, transports, personal effects, and hazardous items, into and out of a country.
D
DATA PROTECTION ACT
A law that governs the processing and handling of individual information.
DAYBOOK
A type of single entry account book that records exchanges on a chronological basis without categorization, much like a cash register roll.
DEAL
To offer to buy securities at a bid price and simultaneously offer to sell the same securities at an offer price and profiting from the difference or spread between the two prices.
DEALER
An entity that deals or engages in dealing.
DEALING
The act of buying and selling securities at the stated bid and ask prices, respectively.
DEBIT NOTE
Also known as a 'Debit Memo', is issued from a buyer to their seller to request a return of funds due to incorrect or damaged goods, purchase cancellation or other specified circumstances.
DEBITS
Things that have been given up by an entity, typically stated in terms of their monetary value. A loan or other payment by a bank to a customer.
DEBT
Anything owed to another entity, typically money.
DEBT INSTRUMENT
Any of a variety of financial instruments representing a debt suggest as an ‘iou’. See: ‘Bill’, ‘Bond’.
DEBTOR
An entity that owes something, typically money, to its creditor.
DEDUCTIBLE VAT
Refers to expenses for business purposes that you can claim all (or a portion) of the VAT back. Examples include mobile phones, computers or your home office.
DEFAULT
The failure of an issuer or other lender to make one or more contractual payments of principal or interest due on a bond or other debt instrument.
DEFAULT RISK
The probability of default.
DELIVERY NOTE
A document that businesses a shipment of goods. It provides a list of the products and quantity of the goods included in the delivery.
DEMAND
To request a payment or conversion that has fallen due. The quantity of a product/service that customers/clients desire to purchase at any given price. A request for immediate payment or conversion. See: ‘Call’, ‘Demand Liabilities’.
DEMAND LIABILITIES
Liabilities that lenders can call, demand the payment of, on-demand with no or short notice. See: ‘Banknotes’, ‘Checking Deposits’
DENOMINATION
The face value of a banknote, bills of credit, or coin.
DEPARTMENT
A part of a larger organisation and can be organised around a number of different parameters such as function.
DEPENDENT SELF-EMPLOYED (TRADE)
A dependent self-employed or trade is one whose income depends, in more than 75 percent, on the same client. you must formalize your provision of services with a commercial contract. Known as Autónomo Dependiente in Spain.
DEPOSIT
A sum owed by a bank to a depositor. An amount of money paid by a buyer to a seller at the beginning of a sales process in order to secure the sale. See: ‘Checking Deposits’, ‘Savings Deposits’.
DEPOSITOR
An entity that owns a bank deposit.
DEPOSITORY INSTITUTION
Any type of bank that issues deposits, including building and loan associations, commercial banks, credit unions, mutual savings banks, savings and loan associations, savings banks, and universal banks but not investment banks.
DERIVATIVE
A financial instrument where the monetary value of which is linked to the price of some underlying asset. See: ‘Forwards’, ‘Futures’, ‘Options’, ‘Swaps’.
DIGITAL CERTIFICATE
The digital certificate or electronic certificate is a means that technically and legally guarantees the identity of a person on the internet. Known as Certificado Digital in Spain.
DIMINISHING MARGINAL UTILITY
The decrease in satisfaction a consumer has from the consumption of each extra unit of a good or service.
DIRECT DEBIT
A payment method in which a third party is granted permission to take payments from a bank account.
DIRECT PUBLIC OFFERING (DPO)
An offering of shares in itself by a business entity to members of the public directly, to wit without the services of an investment bank or other intermediary.
DIRECTOR
An elected individual who, along with other directors, is responsible for a business’s corporate policy. Collectively, directors form the board of directors.
DISCOUNT
A type of loan whereby a bank or other lender pays the borrower the discounted present value of a promissory note or bill of exchange in exchange for the right to collect the face value of the discounted instrument at its maturity.
DISCOUNTED PRESENT VALUE
Is the price, present value, of an asset.
DISHONOUR
An archaic term meaning to default. See: ‘Honour’.
DISINTERMEDIATION
The process or condition of reducing exchanges between borrowers and lenders. See: ‘Intermediation’.
DISPLACED SELF-EMPLOYED
A displaced self-employed person is one who is under the protection of social security legislation but works temporarily in a foreign country. Known as Autónomo Desplazado in Spain.
DISTANCE SELLING
Refers to the sale of goods or services without the buyer or seller being physically present simultaneously.
DOUBLE ENTRY
A method of keeping accounts that is more sophisticated than single entry because it involves describing both the credit and debit aspects of each exchange.
DOWN PAYMENT
An advance in payments made at the beginning of a sale is commonly involved in purchasing expensive goods or services that will require ongoing instalments.
DRAFT
A written request for payment, typically to a third party, drawn by a creditor of the payer. See: ‘Check’, ‘Sight Draft’, ‘Time Draft’.
DRAW ON
To formally request a putative debtor to make payment per the terms specified in a check, draft, or bill of exchange.
DRAWEE
The entity being drawn upon by a drawer or putative creditor. The acceptor. The payer.
DRAWER
The entity drawing on its money in the possession of its putative debtor or drawee.
DUE DATE
The latest a payment can be made on an invoice or debt before it’s considered overdue.
DUE DILIGENCE
An investigation should be carried out before finalising important business decisions. The aim of due diligence is to check the valuation of assets and liabilities, assess the risks within a business and identify areas for further investigation.
E
ECONOMIC CONTRACTION
A state of the economy during which aggregate output, typically as measured by gross domestic product, declines.
ECONOMIC HISTORY
The study of past states of the economy using the analytical tools of economists and the source material of historians. See: ‘History of Economic Thought’.
ECONOMICS
Social science devoted to the study of the economy, especially the production and consumption of goods. See: ‘Economists’
ECONOMISTS
Individuals who study economics.
ECONOMY
The sum total of all the interactions of entities in markets at any given time. See: ‘Aggregate Output’, ‘Gross Domestic Product’.
ELECTRONIC INVOICING
The electronic delivery of invoices and other related details from a business to its customers.
ENDING INVENTORY
The value of the stock or product that remains at the end of an accounting period. Ending inventory is determined by the value of the beginning inventory plus purchases, minus the cost of goods sold.
ENTITY
A firm, government, individual, organization, or business entity. An economic unit of production and/or consumption.
ENTITY SHIELDING
A privilege that protects the assets of corporations from seizure by the creditors of bankrupt owners, typically stockholders.
ENTREPRENEUR
Any entity that attempts to increase its utility by innovating. An individual who establishes a new business entity. A business entity that attempts to invent a new product/service, develop a new market, introduce a new method of production or distribution, discover a new source of supply, reorganize an existing industry, or engage in rent‐seeking.
ENTREPRENEURSHIP
The state or condition of being an entrepreneur.
EORI NUMBER
Also known as 'Economic Operator Registration Identification', European Union registration and identification number for businesses that undertake the import or export of goods into or out of the EU.
EQUITY
A share in a corporation. Net worth.
EQUITY MARKET
A market where equities or shares are exchanged. See: stock exchange
EXCHANGE
To give one thing for another, typically money for a non‐monetary good.
EXCHANGE GAIN OR LOSS
A change in the exchange rate between when an invoice was issued and when it was paid. When an invoice is entered in at one rate and paid at another, this will generate an exchange gain or loss.
EXCHANGING
The process of engaging in exchange. A physical location for trading securities. An entity than maintains an exchange.
EXCISE DUTY
A tax that’s designed to discourage the purchase of particular goods.
EXPANSION
A state of the economy during which aggregate output, typically as measured by gross domestic product, increases past all previous levels.
EXPENDITURES
Money that flows out of one entity and, typically, into another. See: ‘Income’, ‘Revenue’.
EXPENSE
An outflow of money or assets to another individual or business as payment for an item or service.
EXPLOITATION
The stealing of resources from another, typically weaker, entity.
EXPORT VAT
A tax on goods and services provided to customers inside of the EU. VAT isn't charged on exports of goods to countries outside the EU. In these cases, VAT is charged and due in the country of import and you don't need to declare any VAT as an exporter. However, when exporting goods you will need to provide documentation as proof that the goods were transported outside the EU.
EXPORTS
Goods produced domestically but consumed abroad or consumed by foreign entities domestically, such as tourism.
EXTERNALITIES
A type of market failure created when prices do not reflect the full costs or benefits of a good to society. See: ‘Negative Externalities’, ‘Positive Externalities’.
F
FACE VALUE
The monetary value that is expressed on, the face of, a financial instrument, banknote, or coin.
FIAT MONEY
A type of non‐commodity money, typically made of paper or token coins, that derives its value from legal tender provisions. Fiduciary money. See: ‘Paper Money’, ‘Token Coins’.
FIDUCIARY MONEY
A type of non‐commodity money composed of substances with a monetary value far below the face value of the fiduciary note or coin that derives its value from the public’s belief that they will be able to exchange the money at its face value due to its current widespread acceptance. Fiat money. See: ‘Paper Money’, ‘Token Coins’.
FINAL GOODS
Goods that are consumed or invested and not used in the production of other goods.
FINANCE
To obtain the money necessary to attempt completion of some project. The science of managing assets, including money.
FINANCIAL CONDITION
The overall status of an entity’s assets, liabilities, equity, capital, income, and cash flow at any given time.
FINANCIAL CRISIS
A period characterized by rapid reductions in the monetary value of financial assets and the market capitalization of financial institutions and, typically, non‐financial entities as well. See: ‘Bank Run’, ‘Credit Crunch’, ‘Financial Panic’, ‘Stock Market Crash’.
FINANCIAL GUARANTEE
A type of financial obligation whereby the guarantor or surety promises to pay some third party if a guaranteed entity defaults on its debt or otherwise fails to perform according to contract.
FINANCIAL INDUSTRY
The sum of all business entities serving any financial market.
FINANCIAL INSTITUTION
A business entity that provides financial service(s); 2) broadly, any business or government entity involved in any way in any financial market.
FINANCIAL INSTRUMENT
Any variety of financial contract, including cash, bond, equity, or derivative.
FINANCIAL MARKET
Any market for any financial instrument or financial service.
FINANCIAL OBLIGATIONS
Anything owed, owing, or potential owing, such as liabilities, endorsements, and financial guarantees.
FINANCIAL PANIC
A period characterized by the panicked selling of assets to increase the reserves of banks or the cash balances of other types of entities.
FINANCIAL SERVICE
Any of a range of services related to financial instruments, derivatives, insurance, money, intermediation, or any other financial good.
FINANCIAL STATEMENT
A generic term for any type of account of any entity’s financial condition, including balance sheets and income and cash flow statements.
FINANCIAL SYSTEM
All financial institutions and markets and their multifarious interconnections.
FINANCIER
A banker or other individual who provides one or more financial services on behalf of himself/herself or a bank, broker, or other intermediary.
FINISHED GOODS
Finished goods are Products that have completed the manufacturing process but have yet to be sold to customers.
FIRM
Any business entity. A small or private business entity such as a sole proprietorship or partnership, as in a law firm.
FISCAL IDENTIFICATION CODE
A unique number or alphabetical code that identifies an individual or business to the tax authorities. Known as Código de Identificación Fiscal (CIF) in Spain.
FISCAL IDENTIFICATION NUMBER
Identification documents for individuals who reside or work in a country. Known as Número de Identificación Fiscal (NIF) in Spain.
FIXED EXCHANGE RATES
Also known as 'Pegged Exchange Rate', is a system of currency exchange in which the value of one currency is tied to another.
FOB DESTINATION
Also known as 'Freight On Board', a shipping term that means that the legal title to the goods remains with the seller until the goods reach the location of the buyer.
FOR PROFIT
An organization, typically a business entity, with the common goal of earning a profit. See: ‘Non‐Profit’, ‘Not‐For‐Profit’.
FORWARD CONTRACT
Singular version of forwards.
FORWARDS
A type of derivative whereby a buyer and seller agree to exchange a specific quantity of some asset or other good at a future date for predetermined price. See: ‘Futures’.
FREE RIDE
To enjoy the benefits of a good without paying for it.
FREE RIDER
Any entity that collects products/services without any payment, is also referred to as free rides.
FREELANCER
Also known as 'soletrader', a self-employed individual who offers products/services, who regularly performs a job to obtain remuneration, without an employment contract that binds him to work on behalf of the employer. Known as Autónomo in Spain.
FULL‐BODIED COINS
Specie. Coins that derive their monetary value from the intrinsic value of the gold, silver, copper (or occasionally other metal) they contain rather than from a legal tender provision; non‐token coins.
FUNDAMENTAL VALUE
The rational value of an asset based on its intrinsic characteristics and interest rates.
FUTURE VALUE
The principal, par value, or face value of a bond or other debt instrument, so-called because that is the monetary sum promised to be paid in the future.
FUTURES
A type of derivative, specifically a forward contract that has been standardized and trades on an exchange.
G
GLOCALISATION
Refers to a product or service that has been developed to meet both local and global needs of intended customers.
GOLD
A metallic element with symbol au and atomic number 79 used, among other things, to create full‐bodied and token coins. See: ‘Specie’.
GOOD
A product or service that someone values greater than zero, that people are willing to pay in order to obtain. See: ‘Bad’.
GOODWILL
An intangible asset represents non-physical items that add to a business’s value but can’t be easily identified or valued.
GOVERNMENT BOND
A bond issued by a national or municipal, sub‐national, government. See: ‘Municipal Bond’; ‘Sovereign Bond’.
GOVERNMENT EXPENDITURE
Money spent by the government on final goods, such as not simply redistributed to citizens via social security or other social programs. One of the major components of aggregate output.
GOVERNMENT FAILURE
The inability of a government to meet one or more of its goals due to its own inadequacy. See: ‘Regulatory Capture’.
GROSS DOMESTIC PRODUCT (GDP)
One of the most widely used estimates of aggregate output.
GROUP CONSOLIDATION
The merging of two or more business entities.
H
HEALTH INSURANCE
An insurance policy that indemnifies policyholders if a covered event, such as an illness or hospitalization, occurs while the policy is in effect.
HISTORY OF ECONOMIC THOUGHT
The study of past beliefs of economists. See: ‘Economic History’.
HONOUR
Archaic term meaning to make payment.
HUMAN CAPITAL
The ability of individuals to create goods.
HYBRID CORPORATION
A corporation that is partly owned by stockholders and partly by customers. A corporation that is part joint‐stock and part mutual.
HYBRID FAILURES
Intricate combinations of market failures and government failures.
I
IBAN
The IBAN stands for International Bank Account Number, that is, the international bank account code. it is an alphanumeric code that identifies a bank account.
ILLIQUID
The condition of an asset that cannot be sold in timely manner at or close to its fundamental value. See: ‘Illiquidity’, ‘Liquid’, ‘Liquidity’.
ILLIQUIDITY
The state of being illiquid. See: ‘Liquid’, ‘Liquidity’.
IMPORT DUTY
Refers to a number of different taxes due on goods purchased from abroad.
IMPORT VAT
A tax paid on goods bought in one country and imported into another. In the case of European Union (EU), import VAT is the tax paid on goods bought from any country outside the EU and imported into the territory of the union.
IMPORTS
Goods produced abroad but consumed domestically or purchased abroad by citizens of the importing nation, such as tourism.
IN‐KIND LOAN
The lending of a specific good rather than of money.
INCOME
Money that is incoming, that flows into an entity. See: ‘Expenditure’.
INDEMNIFY
To compensate for a damage or loss actually incurred.
INFLATION
Sustained increases in the price level.
INITIAL PUBLIC OFFERING (IPO)
An offering of shares in itself by a business entity to members of the public with the aid of an investment bank or other intermediary.
INLAND BILL
A short‐dated financial instrument drawn on a domestic entity. See: ‘Bill Of Exchange’.
INSOLVENCY
The inability of an entity to pay legitimate demands on it, either from bankruptcy or illiquidity.
INSTALMENT PAYMENTS
Refer to a customer paying a bill in small portions throughout a fixed period of time.
INSTRUMENT
A financial instrument. A monetary policy tool.
INSURANCE
A mechanism for spreading risks, typically in an actuarially or scientifically sound manner, through the issuance of insurance policies.
INSURANCE AGENT
An agent hired by an insurance company or other insurer to sell its insurance policies and to provide basic customer service.
INSURANCE COMPANY
A business entity, typically in the form of a corporation, that acts as an insurer.
INSURANCE POLICY
A contract specifying the terms upon which an insurer promises to indemnify the policyholder or insured for some loss.
INSURED
The entity reimbursed when/if some contingency specified in an insurance policy occurs. See: ‘Policyholder’.
INSURER
The issuer of an insurance policy.
INTELLECTUAL PROPERTY
Also known as 'IP', refers to the ownership of unique intellectual goods such as inventions, logos, brand names, and product designs.
INTEREST
The opportunity cost of money. A rental charge for the use of money.
INTEREST RATE
The interest, promised or received, over some period, typically a year, divided by the principal of a bond or other loan, generally expressed as a percentage. Yield. See: ‘Rate Of Return’.
INTEREST‐ONLY LOAN
A loan in which the borrower repays no principal, only interest, forever (perpetuity) or for some pre‐specified period.
INTERMEDIARY
Any entity, but typically a business entity, that brokers exchanges between lenders and borrowers. See: ‘Banks’, ‘Insurers’.
INTERMEDIATION
The function of an intermediary. The process of brokering exchanges between borrowers and lenders. See: ‘Disintermediation’.
INVESTMENT
An asset purchased by an investor with the aim of earning a profit. A major component of aggregate output that measures purchases of machines, factories, and inventory by businesses.
INVESTMENT BANK
A type of bank owned and/or run by investment bankers that engages in brokerage, issuance of securities, and merger and acquisition consulting.
INVESTMENT BANKER
A banker primarily engaged in brokerage, issuance of securities, and merger and acquisition consulting.
INVESTMENT BANKING
The activities of an investment banker.
INVESTOR
An entity that intends to earn a profit by buying, holding, or selling a financial instrument such as a bond or equity.
INVOICE
A document that a business sends to a buyer. It lists the products and services that the business has provided the client. When an invoice is sent to a customer, it acts as an official request for payment for these products or services.
INVOICE FORMAT
Refers to the layout of an invoice’s different sections. An invoice format breaks an invoice down into different parts, allowing you to better arrange it, whilst also ensuring that you include all of the mandatory invoice fields.
INVOICE NUMBER
A unique, sequential code that is systematically assigned to invoices. Each invoice issued should be assigned a unique invoice number. The invoice number should always be clearly stated on the invoice, without an invoice number, an invoice is not considered a legal document.
IOU
A short‐dated debt instrument, like a promissory note, so-called because ‘I owe you’.
ISSUANCE
The act of issuing.
ISSUE
To emit, put into circulation, or put into effect. A thing, typically a banknote, coin, deposit, insurance policy, or security, issued.
ISSUER
Any entity that issues any type of issue.
J
JOINT PRODUCTS
Two or more products are generated within a single production process. They can’t be produced separately and will incur undifferentiated joint costs.
JOINT‐STOCK COMPANY
An unincorporated or unchartered business entity owned by stockholders. See: ‘Joint‐Stock Corporation’.
JOINT‐STOCK CORPORATION
A type of corporation owned by stockholders. See: ‘Hybrid Corporation’, ‘Joint‐Stock Company’, ‘Mutual Corporation’.
JOURNAL
A type of double‐entry account book that tracks transactions chronologically first, then by category.
L
LEDGER
A type of double‐entry account book that tracks transactions by category first, then chronologically within each category.
LEGAL TENDER
An obligation created and enforced by governments on entities to accept a specific medium of exchange at its face value in either for all debts public and private, full tender or for all public debts, public tender. Any medium of exchange that enjoys full legal tender status. See: ‘Fiat Money’.
LEMONS PROBLEM
A famous example of adverse selection and asymmetric information wherein buyers of used vehicles pay too much for unreliable automobiles, trucks, and so forth.
LENDER
Any entity that provides principal to a borrower in exchange for repayment of the principal plus interest in the future.
LATE FEES
An extra amount is charged for payment on a bill that’s made after the due date.
LENDER OF LAST RESORT
A central bank or other monetary authority charged with lending to entities in the wake of a financial crisis or panic when other sources of loans are less or completely unavailable due to high degrees of risk and/or uncertainty.
LIABILITIES
A debt owed by an entity to another that requires the entity to give up an economic benefit, cash, assets, to settle past transactions or events. See: ‘Demand Liabilities’.
LIABILITY RUN
When depositors, lenders, or other creditors call or refuse to renew loans to an entity, such as a bank. See: ‘Bank Run’.
LIFE INSURANCE
An insurance policy that indemnifies a policyholder or beneficiary if a covered event, such as the death of the insured, occurs when the policy is in effect. see term life, whole life.
LIMITED COMPANY
A type of business structure whereby a business is considered a legally distinct body.
LIMITED LIABILITY
A form of legal protection for shareholders and owners personal wealth that prevents individuals from being held individually responsible for their business’s debts, financial losses or in the event of the corporation’s bankruptcy.
LIQUID
The condition of an asset that can be easily or quickly sold for cash at close to its monetary value. See: ‘Illiquid’, ‘Liquidity’.
LIQUIDATION
The process of bringing a business to an end. When the process is complete, the business is officially closed and its assets will have been distributed to claimants. The distribution of assets will depend on whether the business is solvent or insolvent.
LIQUIDITY
The state of being liquid. Cash issued by a central bank or other monetary authority to render assets more liquid. See: ‘IIliquid’.
LOAN
A type of contract whereby a borrower promises to repay to a lender the principal sum borrowed plus interest.
LOCKEAN GOVERNMENT
A government ostensibly dedicated to the protection of the lives, liberty, and property of its citizenry.
LONG‐DATED
Having more than a year to maturity but not a perpetuity.
LOSS
The sale of an asset at less than its purchase price. Diminution of the monetary value of an asset for which indemnification from an insurer on an insurance policy is sought; 3) the negative difference between a business entity’s total revenues and its total costs. See: ‘Profit’.
M
MADISONIAN CONSTITUTION
A frame of government that limits tyranny through the use of checks and balances or the diffusion of power over multiple branches or levels of government.
MANAGEMENT
All of the managers of an entity. The art and science of efficiently operating large, complex organizations, especially joint‐stock corporations.
MANAGER
An individual charged with administering, running, or operating a business entity or organization.
MARKDOWN
A reduction in the price and value of an asset.
MARKET CAPITALIZATION
The monetary value of a corporation calculated by multiplying the price of one of its shares by the total number of shares outstanding.
MARKET FAILURE
The inability of a market to achieve one or more of its goals due to its own inadequacy. See: ‘Asset Bubbles’, ‘Asymmetric Information’, ‘Externalities’, ‘Market Power’, ‘Public Goods’.
MARKET POWER
Refers to the ability of a firm to influence the price at which it sells a product or service to increase economic profit.
MARKETS
Wherever or how ever entities exchange goods at prices determined primarily by supply and demand.
MARKUP
The process of a retailer adding to the price of a product after purchasing from a manufacturer.
MATURITY
The date when a debt instrument’s principal falls due and needs to be paid lest a default be declared.
MEDIA OF EXCHANGE
Anything that circulates hand to hand as cash money. See: ‘Banknotes’, ‘Bills Of Credit’, ‘Checking Deposits’.
MERCHANDISE
An inventory asset that a retailer, distributor or wholesaler purchases from a supplier to sell for profit.
MERCHANT ACQUIRER
A bank that processes payments on behalf of a merchant.
MERGER
Also known as ‘Mergers and Acquisitions (M&A)’, the balance sheet consolidation of two business entities, typically of similar size, the result of which is a new, larger entity.
MONETARY AUTHORITY
The central bank, currency board, or other government agency charged with developing and implementing a nation’s monetary policy, including the money supply and interest rates.
MONETARY POLICY
The actions of monetary authorities, such as central banks, designed to influence the money supply and interest rates.
MONETARY VALUE
The price or worth of something in terms of money, as opposed to use value.
MONEY
Physical media of exchange. Abstract unit of account. Long‐term store of value. See: ‘Base Money’, ‘Bills Of Credit’, ‘Cash’, ‘Circulation’, ‘Coins’, ‘Commodity Money’, ‘Currency’, ‘Deposits’, ‘Fiat Money’, ‘Specie’.
MONEY OF ACCOUNT
Monetary values represented in account books.
MONEY SUPPLY
The total monetary value of all the money in actual circulation or use in an economy.
MORTGAGE
A type of loan wherein the borrower pledges real estate as collateral.
MUNICIPAL BOND
A type of government bond issued by a sub‐national government such as a state, county, or city.
MUTUAL CORPORATION
A type of for profit business corporation owned by its customers, typically its depositors or policyholders. See: ‘Credit Union’, ‘Mutual Savings Bank’.
MUTUAL SAVINGS BANK
A type of savings bank or thrift owned by its depositors but not chartered as a credit union. See: ‘Mutual Corporation’.
N
NET SALES
The sales figure after deducting the amounts for any discount given, any goods that may have been returned and any goods that have gone astray.
NEGATIVE EQUITY
When the net worth of an entity is less than zero. indicative of bankruptcy or insolvency.
NEGATIVE EXTERNALITIES
A market failure that occurs when the full costs of a good are not incorporated in its price, as in the case, for example, of pollution. See: ‘Positive Externalities’.
NEGOTIABLE
Transferable from one entity to another by sale, gift, inheritance, or other means.
NEGOTIABLE CERTIFICATE OF DEPOSIT (NCD)
A large denomination certificate of deposit that can be bought and sold like a bond.
NET EXPORTS
The monetary value of exports minus the monetary value of imports.
NET WORTH
The sum of the monetary value of an entity’s assets and liabilities. See: ‘Negative Equity’.
NOMINAL PRICE
The price of a good in current dollars. Prices of goods not adjusted for changes in the price level.
NON‐PROFIT
An organization that is designed not to earn any profits. See: ‘For Profit’, ‘Not‐For‐Profit’.
NOT‐FOR‐PROFIT
An organization that may earn profits but that is not primarily oriented toward doing so. See: ‘For Profit’, ‘Non‐Profit’.
O
OPPORTUNITY COST
The inevitable cost incurred by entities when they choose an activity, thereby precluding the completion of another activity at the same time.
OPTION CONTRACT
A class of derivatives including call options and put options.
OPTION HOLDER
The owner of one or more options.
OPTIONS
A class of derivatives including call options and put options.
ORGANIZATION
A group of individuals working closely together towards a common goal. See: non‐profit, not‐for‐profit
OVER‐THE‐COUNTER
Any market for trading securities outside of a formal exchange, typically coordinated by brokers and/or dealers.
OWE
To be obliged to repay, usually a sum of money. To possess but not have legal title of ownership of.
OWN
To possess. To have legal title to or the legal right to sell, lease, or enjoy.
OWNER
An entity that owns a business entity or asset. See: ‘Principal’, ‘Stockholder’.
OWNERSHIP
The state or condition of owning.
P
PACKING NOTE
An itemised document that acbusinesses a shipment of goods to describe the contents of the package. A packing note might also be referred to as a delivery note, a shipping list, a packing list or a packing slip.
PAPER MONEY
A generic term for any type of money composed of paper, including fiat monies and convertible monies such as banknotes.
PARTIAL PAYMENT
Refers to the payment of an invoice that is less than the full amount due.
PARTNERS
The individuals who own a partnership.
PARTNERSHIP
A type of business entity owned by two or more individuals called partners.
PARTNERSHIP AGREEMENT
A contract between all parties involved in starting a partnership structured business. The contract covers the rights & responsibilities of each partner.
PAYER
The entity upon which a draft is drawn, typically the drawer’s debtor.
PAYMENT GUARANTEE
Provides the beneficiary with financial security should the applicant fail to make payment for the goods or services supplied.
PAYMENT ON ACCOUNT
Any partial payment of an amount that is owed, either to you or by you, that’s not matched to a specific invoice.
PAYMENT RECEIPT
A document that was provided to a customer as proof of full or partial payment for a product or service.
PAYMENT TERMS
The conditions surrounding the payment part of a sale, typically specified by the seller to the buyer.
PERIODIC STOCK MANAGEMENT
Also known as 'Periodic Stock Taking/Periodic Inventory System', is a type of inventory valuation whereby a business conducts a physical count of the inventory at specific intervals.
PERPETUAL STOCK MANAGEMENT
Also known as 'Perpetual Stock Taking/Perpetual Inventory System', is a type of inventory valuation whereby a business uses electronic tracking systems to continually record inventory.
PERPETUAL SUCCESSION
A privilege of corporations to change their owners/stockholders without having to reconstitute, as partnerships traditionally had to do whenever a partner joined or left the business entity.
PERPETUITY
A financial instrument with no maturity date. An interest‐only loan.
PERSONAL ESTATE
Any asset owned by an individual that is not real estate.
PERSONAL INCOME TAX (IRPF)
Personal income tax is a tax that is levied on the income obtained during one year from self-employed work. Known as Impuesto sobre la Renta de las Personas Físicas (IRPF) in Spain.
PERSONAL SERVICE COMPANY (PSC)
A type of limited business used by self-employed people and contractors.
POINT OF SALE (POS)
A location or system where a sales transaction occurs. A POS system is the device and corresponding software that allows you to accept payments.
POLICYHOLDER
The owner of an insurance contract. See: ‘Insured’.
POSITIVE EXTERNALITIES
A market failure that occurs when the full societal benefits of a good are not incorporated in its price, as in the case, for example, of education. See: ‘Negative Externalities’.
PREMIUMS
The price a policyholder must pay to effect an insurance contract.
PREPAYMENTS
Amounts paid for by a business in advance of the goods or services being received later on. Any payment made in advance can be considered a prepayment.
PRESENT VALUE
The price of an asset or other good today, at the present.
PRICE
The monetary value of a product/service determined by the interaction of supply and demand in a market.
PRICE LEVEL
The average of all nominal prices in an economy. See: ‘Real Prices’, ‘Relative Prices’.
PRINCIPAL
A sum lent or invested upon which interest or rate of return are calculated. The, or one of the, owners of an entity.
PRINCIPAL‐AGENT PROBLEM
A specific type of moral hazard that occurs when an agent acts in its own best interest rather than in the interest of the owner(s). See: ‘Agency Costs’.
PRIVATE BANK
A bank operating without a charter. A bank that manages the assets of wealthy entities, typically individuals.
PRIVATE BANKER
An individual or a member of a partnership in an unchartered bank. A banker in a private bank.
PRODUCER SURPLUS
The difference between the amount that a seller would be willing to accept for their products/services versus what those products/services are actually worth on the market.
PRODUCT
A physical thing or contract that a business entity creates, produces, makes, manufactures, or grows.
PRODUCT LIST
A document or database cataloguing a business’s entire portfolio of products or services.
PROFIT
The positive difference between a business entity’s total revenues and its total costs. See: loss
PROFIT & LOSS STATEMENT (P&L)
Shows the revenue and losses of a business over a given period of time.
PROFORMA INVOICE
A document that is sent to a buyer under certain circumstances, usually before all details of the sale are known.
PROJECT
Any specific task aimed at achieving a goal. In business, any specific actions taken in an attempt to earn a profit.
PROMISSORY NOTE
A short‐dated negotiable debt instrument such as an iou.
PUBLIC
Government owned. Privately owned by stockholders who are members of the public, as in initial public offering or public company.
PUBLIC COMPANY
A business entity that is owned by private individuals, typically stockholders who can trade their equity stakes in the company publically. A joint‐stock company or corporation.
PUBLIC GOODS
A market failure that arises when it is not in the interest of any business entity to supply a specific good, like national defense, because the entity cannot easily profit from its provision because such goods are non‐excludable, there is no way to force free riders to pay, and non‐rivalrous, consumption by one does not prevent consumption by others.
PURCHASE ORDER
A document created by a buyer, indicating the items they wish to purchase from a seller. It's a contract that forms an agreement between a buyer and a seller, concerning the goods the buyer wishes to purchase.
PURCHASING POWER
Refers to the number of goods or services that a certain amount of money can buy at a given time.
PUT OPTION
A type of option derivative that gives the option holder the right but not the obligation to sell some predetermined asset at a predetermined strike price. See: ‘Option’, ‘Call Option’.
Q
QUARTER
A quarter of a year or three months, typically January to March, April to June, July to September and October to December.
QUARTERLY
Once every quarter. See: ‘Annually’, ‘Semiannually’.
QUOTATION
A document that a seller provides to a buyer to offer goods or services at a stated price, under specified conditions. Quotations are usually not legally binding unless they’re part of an official contract. However, it’s generally accepted that a customer has committed to a sale, and a specific price, if they accept the quote.
R
RATE OF RETURN (ROR)
The ratio of the money lost or gained on an investment relative to the principal invested over some period, typically a quarter or year.
REAL ESTATE
A type of asset consisting of land and any improvements thereto, such as buildings, drainage or sewage systems, roads, wells, and so forth. See: ‘Personal Estate’.
REAL PRICE
The price of a product/service adjusted for changes in the price level.
RECESSION
A state of the economy during which aggregate output, typically as measured by gross domestic product, declines.
RECOVERY
A state of the economy following a recession during which aggregate output, typically as measured by gross domestic product, increases toward a previous peak.
RECURRING INVOICE
An invoice that is sent to the same customer at regular intervals, containing the same invoice details. It might be more efficient for you to set up a recurring invoice, to allow your invoices to be sent to your customers automatically, hassle-free.
REFUND OR REIMBURSEMENT
A refund is an act of paying back a customer for goods or services purchased that they were not satisfied with.
REGISTERED SHARE
A share was issued in the owner’s name. If the owner later sells the share, the new owner must register it in their name.
REGULATED FIRM
A business entity that is subject to the regulations of one or more regulators.
REGULATIONS
A set of rules prescribed by a regulator describing the business activities that can and/or cannot lawfully be undertaken by a business entity.
REGULATOR
An entity, usually a government, that makes and/or enforces regulations.
REGULATORY BASE
It is the reference scale from which social security calculates the benefits of workers. Known as Base Reguladora in Spain.
REGULATORY CAPTURE
The condition of a regulated firm taking control of its regulator in whole or part.
RELATIVE PRICES
The ratio of the nominal price of one good to the nominal price of another.
REMINDER LETTER
Also known as 'Payment Reminder', is a document sent to a customer to prompt them to pay an overdue invoice.
RENT SEEKING
Attempts to gain something for nothing by manipulating the government to subsidize or otherwise support special interests at the expense of the commonweal.
RESERVE REQUIREMENTS
Reserves mandated by some regulator or law, typically expressed as a percentage of a bank’s demand liabilities.
RESERVES
Cash held by banks to meet calls on their demand liabilities, such as checking deposits and banknotes. Any asset that banks own to help manage their liquidity.
RESOURCES
Goods, such as copper, gold, silver, oil, diamonds, created by nature rather than by entities. In a loose sense, any asset or good, including more intangible ones like time.
RETURNS
Money that returns to an investor on an investment. See: ‘Rate Of Return’.
REVENUES
Income from any source, including the sale of goods or returns on investments.
REVERSE CHARGE
Refers to intra-community transactions when the VAT is recorded by the buyer instead of the seller.
RISK
Known volatility in the rate of return. See: ‘Uncertainty’.
RISK APPETITE
The amount of risk an investor can tolerate. See: ‘Risk Aversion’.
RISK AVERSE
Avoidance of risk even at a high cost.
RISK AVERSION
The practice of being risk averse.
RISKS
The risk represented by an entity seeking a loan or insurance. The entity itself.
RISKY
Characterized by excessive risk, either for the expected rate of return or for the investor’s risk appetite.
ROUNDING
The process of replacing a numerical value with a shorter, simpler, or more suitable representation of approximately the same value.
S
SALES
An exchange of money for goods, services or other property. In accounting, net sales refer to the operating revenues earned by a business by selling its products or services.
SALES DISCOUNT
A reduced price is offered by a business on a product or service.
SALES TURNOVER
The business's total amount of products or services sold over a given period of time, typically an accounting year.
SAVINGS AND LOAN ASSOCIATION
A type of savings bank with a savings and loan charter designed to modernize the older building and loan association form.
SAVINGS BANK
A generic term for any bank that focuses on making mortgage loans and issuing savings deposits, including but not limited to credit unions, mutual savings banks, and savings and loan associations.
SAVINGS DEPOSIT
A type of time deposit in a bank that earns interest in exchange for a decrease in its liquidity.
SECONDARY RESERVES
A sort of back up form of reserves held by banks that earns income but is liquid, readily convertible into cash.
SECURITIES
Any negotiable financial instrument, including debt, equity, and hybrid instruments.
SELF INVOICE
A self-invoice is an invoice issued by the recipient or a third party. the self-invoicing does not exempt the supplier from its tax obligations. Known as Autofactura in Spain.
SELF-EMPLOYED COLLABORATOR
A collaborating self-employed person is a self-employed person who is a relative of another self-employed person, for whom he works and with whom he lives. Known as Autónomo Colaborador in Spain.
SELF-EMPLOYED COMPANY
A self-employed company is a self-employed worker who has established a commercial company, that is, a company in any of its legal forms. Known as Autónomo Societario in Spain.
SELF-EMPLOYED CONTRIBUTION BASE
It is the reference monthly remuneration that a self-employed person chooses for the payment of their social security contributions. Known as Base de Cotización De Autónomos in Spain.
SELF-FINANCING
They are those resources from the company's own activity and that have not been distributed among the partners or owners. Known as Autofinanciación in Spain.
SELLER
The entity in a trade that gives up a non‐monetary good and receives money in exchange.
SEMIANNUALLY
Twice a year or every six months. see annually, quarterly.
SEPA
Also known as the 'Single Euro Payments Area', is an EU initiative that aims to simplify cashless payments and bank transfers.
SERVICE
A good consumed at the point of contact with the service provider including but not limited to consulting, education, healthcare, and retail. See: financial services
SHARE
A financial instrument representing an ownership or equity stake in a joint‐stock corporation. An equity. Issued by a business as a way to raise money for future development and reinvestment into the business, or for the owner’s benefit.
SHAREHOLDER
A party that legally owns shares of a business’s stock. They may also be known as a stockholder, subscriber, or member.
SHORT
To sell an asset under the expectation of buying it back later at a lower price. Borrowing assets, typically equities, selling them in the expectation of a price decrease, then buying them back later to repay the in‐kind loan.
SHORT
Having fewer shares, or other assets, than necessary to repay the in‐kind loan taken at the start of a shorting operation, as in the expression ‘caught short’.
SHORT SALE
Traditionally, a transaction whereby an entity shorts an asset. More recently, the sale of a home for less than the outstanding mortgage balance.
SHORT‐DATED
Having less than a year to maturity.
SHORTING
The process of making a short sale.
SIGHT DRAFT
A draft due upon its acceptance for payment by the payer. See: ‘Time Draft’.
SILENT RUN
A type of bank run or liability run characterized by the refusal of creditors to renew short-term loans to a bank or other entity.
SILVER
A metallic element with the symbol ag and the atomic number 47 used to create full‐bodied and token coins. See: ‘Specie’.
SINGLE ENTRY
A simple method of keeping accounts that entails listing the major attributes, such as date, price, counterparty, of exchanges.
SINGLE MARKET
An area where trade borders have been removed and free movement of goods, services, and people is permitted.
STOCK MANAGEMENT
The practice of ordering, storing, tracking, and controlling inventory. Stock management may also be called stock control, inventory management, or inventory control.
SOLE PROPRIETOR
Also known as 'Sole Trader', is a simple business structure in which one individual runs and owns the entire business. A sole trader is entitled to keep all profits after taxes have been deducted but is also liable for all losses the business incurs.
SOLE PROPRIETORSHIP
A type of business entity owned and operated by a single individual.
SOVEREIGN BOND
A government bond issued by a sovereign national government. See: ‘Treasury Bond’.
SPECIAL INTERESTS
Entities that engage in rent seeking or other activities designed to subsidize them at the expense of others, or the common weal.
SPECIALTY
A type of contract where the parties agree that payment will be made in a specific medium of exchange, such as gold or silver.
SPECIE
Full‐bodied, such as non‐token, gold or silver coins. See: ‘Bullion’.
SPECULATE
To engage in speculation.
SPECULATION
An attempt to earn quick profits by buying assets, typically securities, low and selling them high or vice versa, as in shorting.
SPREAD
The difference between a dealer’s bid price and its ask price for a security. The difference between what a bank receives for its assets and pays for its liabilities.
STANDING ORDER
An automated payment method set up by a customer through their bank. Standing orders automatically send a fixed amount of money on a regular basis, and they can be used to send money to other people, organisations, or another bank account.
STATEMENT OF ACCOUNT
Also known as 'Account Statement/Customer Statement', is a document that outlines the transactions between a buyer and a seller.
STOCK
Synonymous with equity and share. Archaic for government bond.
STOCK MARKET
Exchange. Any market in which stocks are traded, including exchanges but also over‐the‐counter or broker‐dealer markets.
STOCK MARKET CRASH
A type of financial crisis characterized by rapid decreases in the prices of a broad swath of equities.
STOCKHOLDER
An owner of one or more shares, stocks or equities, in a joint‐stock corporation.
STOCKJOBBER
An archaic term for any entity that engages in stockjobbing.
STOCKJOBBING
Buying and selling securities in order to speculate.
STORE OF VALUE
Any asset that maintains most or all of its monetary value over long periods of time, such as years.
STRIKE PRICE
The predetermined price at which an option derivative can be contractually exercised by the option holder.
SUBCONTRACTOR
A business or individual that’s employed to carry out part, or all, of another party’s contract.
SUBSCRIPTION
An arrangement whereby goods, services or stock are sold periodically rather than individually.
SUBSIDIZE
To grant a subsidy to an entity.
SUBSIDY
Resources, typically but not always money, given to an entity, usually by a government.
SUNK COSTS
Costs that have already been incurred and cannot be recouped.
SUPPLY
The quantity of a good that sellers make available at any given price. See: demand
SUPPLY AND DEMAND
An economic theory that's used to explain the relationship between the availability of a commodity and the willingness of consumers to buy that commodity.
SUSPENSION OF SPECIE PAYMENTS
When banks of issue ceased converting their banknotes and deposits into specie due to their bankruptcy, insolvency, or a general suspension of payments in times of war or financial panic.
SWAP
A type of derivative whereby two parties exchange one asset for another on an on‐going basis according to the value of some underlying asset, for example pounds for euros.
SWIFT/BIC CODES
Used to identify the bank in international money transfers.
T
TARIFF
A tax that’s set on products that are imported from another country, or exported to another country.
TAX
There are different types of taxes. all mandatory if the taxable event that taxes it is carried out. Known as Impuesto in Spain.
TAX BASE
The tax base on an invoice is the amount on which taxes are calculated. Known as Base Imponible in Spain.
TAX POINT
A transaction is a date on which the VAT becomes due.
TERM LIFE
An insurance policy that indemnifies a policyholder or beneficiary if the insured dies during the duration (term) of the contract. See: whole life
THRIFT
A depository institution with a community bank focus such as credit unions and savings banks.
TIME DEPOSIT
A type of deposit, like a savings deposit or a certificate of deposit, that cannot be withdrawn by the depositor until a specified period has elapsed or a penalty had been paid.
TIME DRAFT
A draft due some days, weeks, or months after its acceptance for payment by the payer. See: ‘Sight Draft’.
TOKEN COINAGE
A type of fiat money that takes the form of coins that contain metals worth considerably less than the coin’s face value.
TOUCH ID
A form of individual identification for electronic devices that reads your fingerprint and provides an added level of security and verification for app purchases.
TRADE
To engage in a trade.
TRADE
An exchange of goods, typically between two entities.
TRANSACTION
The business world refers to any event that can have an impact on the finances of the businesses involved.
TRANSACTION FEE
A charge that a business has to pay every time it processes a customer’s payment. The cost of the transaction fee will vary depending on the service used.
U
UNBANKED
Entities, typically individuals, who do not bank.
UNBUNDLING
Refers to the process of a business with multiple arms selling off certain lines of the business in order to focus on fewer, more focused lines of the business.
UNCERTAINTY
Unknown/unknowable volatility in the rate of return. See: ‘Risk’.
UNDERLYING ASSET
An asset that contractually determines the price of another asset.
UNIT BANK
A bank that does not, probably because it lawfully cannot, operate any branches.
UNIT OF ACCOUNT
The abstract measuring rod against which monetary values are determined. Money of account.
UNIVERSAL BANK
A type of bank that combines the functions of a depository institution with those of an investment bank.
UNLIMITED LIABILITY
The owner(s) of a business is entirely responsible for its debts.
USANCE
The period between the issuance or acceptance of a financial instrument, such as a bill of exchange, and its maturity or due date.
USE VALUE
The worth or utility of a good stemming from its actual utilization or consumption.
UTILITY
An economic concept measuring an entity’s relative satisfaction with a good.
V
VARIANCE
The difference between the budgeted/planned costs and the actual costs incurred.
VAT
Also known as 'Value-added Tax', is a tax charged on the value added to goods and services. In many countries, VAT is known as GST. Known as (IVA) in Spain.
VAT EXEMPTION
Refer to either goods and services that are not subject to VAT or to organisations that cannot register for VAT.
VAT INVOICE
A specific type of invoice that’s issued when a sale is subject to sales tax.
VAT NUMBER
A unique identification number that’s assigned to every business registered for VAT.
VAT RATE
Refers to the amount of VAT that’s placed on a product or service.
VAT REGISTRATION
The process of listing your business with the government as active in production and sales.
VAT REPORT
A financial document that summarises a business’s VAT-eligible transactions over a specified accounting period, helping the business complete their VAT Return.
VAT RETURN
Calculates how much VAT a business should pay or be reimbursed by tax authorities.
VAT TAXABLE TURNOVER
Refers to the total value of sales a business makes that is subject to tax after any VAT-exempt amounts are removed
VAT THRESHOLD
Also known as 'VAT Registration Threshold ', is the amount of money you can earn before you need to register for VAT.
W
WHOLE LIFE
A life insurance policy that indemnifies a policyholder or beneficiary when the insured dies, if the policy is current or has been paid up, and that can be cashed or borrowed against using the cash value of the policy as collateral. See: ‘Term Life’.
WHOLESALER
A business that earns money by buying large quantities of goods then selling in bulk to smaller businesses.
WORD OF MOUTH (WOM)
The unpaid spread of information from one individual to another through conversation, specifically advising on a particular business or product.
WORK IN PROCESS
Also known as 'Work In Progress/Goods In Process', refers to the production cost of partially completed goods.
Y
YIELD
The current yield, or the income, typically the annual dividends or coupons, from some investment divided by the investment’s current price. The yield to maturity or discounted cash flow rate of return.
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