Financial Terms Glossary Easy-to-Understand Definitions
Credit Card — A card issued by a financial company which enables the cardholder to borrow funds. A credit limit is predetermined and has the condition that the cardholder will pay back the original borrowed amount plus any additional agreed upon charges. Certificates of Deposit — CDs are a short- to medium-term investments (usually one to five years) offered by banks or credit unions that pay a higher interest rate than regular savings accounts. A process where a creditor can roll-back an account record with the credit bureaus. This is commonly used when cardholders request that late payment records are removed because they are incorrect or resulting from a special circumstance.
How to Automate Financial Reports The Easy Way
Can also mean the degree to which an asset or security can be quickly bought or sold in the market without adversely affecting the asset’s price. Borrowers should verify with a state or federal regulator that a lender is licensed before signing a contract. Investment Advisors (IAs) — People or organizations that manage clients’ securities portfolios or provide investment advice. IAs have a fiduciary responsibility to their clients – meaning their priorities are to the best interests of their client, regardless of their own. Depending on the amount of assets being managed, investment advisers are required to be registered with the SEC or the California Department of Financial Protection and Innovation.
Adjustable Rate Mortgage (ARM)
When a fund has a high standard deviation, the predicted range of performance is wide, implying greater volatility. Morningstar computes standard deviation using the trailing monthly total returns for the appropriate time period. An investment fund that seeks to preserve principal and provide consistent returns and liquidity. Stable value funds include collective investment funds sponsored by banks or trust companies, as well as contracts issued by insurance companies. A mutual fund that invests in short-term, high-grade fixed-income securities.
Refinancing is an efficient way of accessing the value of a business’s assets, such as existing machinery or equipment. This allows the business to release working capital, and then use this value elsewhere within the business. The funds can come in the form of a loan, invoice finance facility, overdraft, or other type of alt-fi option.
Average Price
Early payment, pre-payment, or cash discounts that are listed in the invoice’s “Terms financial terms glossary of Sale.”.2. A trade discount offered by the client to all, or select, customers especially for volume-based reasons. Learn how to choose a wealth manager who aligns with your goals, offers transparent fees, and helps grow and protect your financial future. Whether you’re exploring financial terms in business, reviewing your portfolio, or preparing for a conversation with your adviser, this glossary will serve as a practical reference point.
Debt Reduction Services, Inc. (DRS) has put into place policies and procedures to protect the security and confidentiality of your nonpublic personal information. Negative Amortization — Occurs when a repayment that is made is less than the interest charged on a loan, causing the outstanding balance of the loan to increase. Mortgage — An agreement to borrow money from a bank or similar organization to buy a home. Fixed Rate — An interest rate that stays the same for the life of a loan, or for a portion of the loan term, depending on the loan agreement. Co-Signer — A person, other than the principal borrower, who also signs for a loan. In the event the principal borrower defaults, the co-signer(s) assumes liability to repay the loan.
- Technically defined as nominal interest rates minus the expected rate of inflation.
- A delinquent payment or failure to deliver a loan or debt payment on or before the time agreed.
- R-squared measures the relationship between a portfolio and its benchmark.
- Year-End StatementAn annual summary of account activity, performance, and income for investors or account holders.
- An unmanaged, free float-adjusted, market capitalization-weighted index.
Loan Origination Fee
Treasury, government-sponsored, collateralized and corporate debt with remaining maturities of one year or more. Delinquency — A situation where a borrower is late or overdue on a payment for a debt, such as a mortgage, credit card account, or other types of loans. This differs from a default (see “Default” above) as most creditors will allow a loan to remain delinquent for a period of time before considering it in default. Asset valuation is the process of determining the current worth of a financial asset or company. It might involve methods such as discounted cash flow analysis, comparable company analysis, or using market values for assets like stocks and bonds to establish their fair market value.
An unmanaged index that measures the returns of six-month Treasury bills. Consists of a single issue purchased at the beginning of a month and held for the full month. At the end of that month, that issue is sold and rolled into a newly selected issue.
Equal Credit Opportunity Act (ECOA)
Faster, more accurate, and easier decision-making for your business. That’s why understanding accounting is crucial to keeping your finances organized. A trend seen over time wherein business supply and/or demand predictably changes in certain patterns each year. This is commonly seen in a large number of industries, each with their own “busy” and “slow” seasons throughout a calendar year.
- When a loan is set into default status, the creditor may demand the remainder of the loan’s balance be paid in full.
- Secured credit cards are easier to obtain than standard credit accounts and are helpful for borrowers with poor credit or no credit.
- Interest rate futures contract on a notional very long German government bond (Bundesanleihe) with a remaining term comprised between 24 and 35 years.
- Undervalued AssetAn asset believed to be trading below its intrinsic value, often presenting a buying opportunity for investors.
- Fund Manager A professional responsible for making investment decisions and managing portfolios on behalf of clients or institutions.
- Collection agencies attempt to recover past-due debts by contacting the borrower via phone and mail.
An investment fund that seeks growth in share prices by investing primarily in stocks whose share prices are expected to rise. A measure of the difference between a fund’s actual returns and its expected performance, given its level of risk as measured by beta. A positive alpha figure indicates the fund has performed better than its beta would predict.
Joint Life AnnuityAn annuity that provides income payments to two individuals, typically spouses, continuing until both have passed away. Fixed Interest Securities Investments, such as government or corporate bonds, that pay a fixed rate of interest over a specific term. Risk Tolerance — The degree to which an investor is willing to risk losing some (or all) of their original investment in exchange for a chance to earn a higher rate of return.
This may also refer to the repayment of a bond on or before the agreed upon pay-off date. R-squared can be used to ascertain the significance of a particular beta or alpha. Generally, a higher R-squared will indicate a more useful beta figure. If the R-squared is lower, then the beta is less relevant to the fund’s performance. R-squared measures the relationship between a portfolio and its benchmark. If it doesn’t move at all like the benchmark, it has a low R-squared.