Finance & Business Vocabulary

The ease of converting assets to cash

“The company maintains high liquidity to meet short-term obligations.”

Using borrowed capital to increase potential returns

“Excessive leverage contributed to the firm's bankruptcy.”

Spreading payments over multiple periods

“The loan amortization schedule shows monthly principal and interest.”

Decrease in asset value over time

“Depreciation of equipment reduces taxable income.”

Ownership interest in a company; assets minus liabilities

“Private equity firms invest in companies not publicly traded.”

A portion of profits distributed to shareholders

“The company declared a quarterly dividend of two dollars per share.”

The degree of variation in trading prices

“Market volatility increased during the economic uncertainty.”

Profiting from price differences in different markets

“Currency arbitrage exploits exchange rate discrepancies.”

An investment to reduce risk of adverse price movements

“The company hedged against currency fluctuations using futures.”

A collection of investments held by an individual or institution

“Diversifying your portfolio reduces overall risk.”

The purchase of one company by another

“The acquisition expanded our market presence significantly.”

Comprehensive appraisal before a business transaction

“Due diligence revealed undisclosed liabilities.”

Legal obligation to act in another's best financial interest

“Financial advisors have a fiduciary duty to their clients.”

Inability to pay debts when they become due

“The company filed for bankruptcy after months of insolvency.”

Assets pledged as security for a loan

“The property serves as collateral for the mortgage.”

Funds used to acquire or upgrade physical assets

“Capital expenditure on new facilities exceeded projections.”

Ongoing business expenses not directly tied to production

“Reducing overhead costs improved profit margins.”

Income generated from normal business operations

“Annual revenue grew by fifteen percent year over year.”

The difference between cost and selling price

“Profit margins narrowed due to increased material costs.”

The process of determining a company's worth

“The startup's valuation reached one billion dollars.”

An official inspection of an individual's or organization's accounts

“The company passed the annual audit without issues.”

Relating to government revenue, especially taxes

“The government announced new fiscal policies.”