Finance & Business Vocabulary

The ease of converting assets to cash

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

Origin: From Latin `liquidus` (fluid, liquid), from `liquere` (to be fluid)

Using borrowed capital to increase potential returns

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

Origin: From French `levier` (a lever), from `lever` (to raise), from Latin `levare` (to lift)

Spreading payments over multiple periods

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

Origin: From Medieval Latin `admortizare` (to kill, alienate in mortmain), from Latin `ad-` (to) + `mors` (death)

Decrease in asset value over time

“Depreciation of equipment reduces taxable income.”

Origin: From Latin `depretiare` (to lower the price), from `de-` (down) + `pretium` (price)

Ownership interest in a company; assets minus liabilities

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

Origin: From Latin `aequitas` (equality, fairness), from `aequus` (equal, just)

A portion of profits distributed to shareholders

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

Origin: From Latin `dividendum` (thing to be divided), from `dividere` (to divide)

The degree of variation in trading prices

“Market volatility increased during the economic uncertainty.”

Origin: From Latin `volatilis` (flying, fleeting), from `volare` (to fly)

Profiting from price differences in different markets

“Currency arbitrage exploits exchange rate discrepancies.”

Origin: From French `arbitrage` (arbitration, judgment), from `arbitrer` (to judge), from Latin `arbitrari`

An investment to reduce risk of adverse price movements

“The company hedged against currency fluctuations using futures.”

Origin: From Old English `hecg` (fence, boundary); financial sense developed from the idea of protecting or fencing in

A collection of investments held by an individual or institution

“Diversifying your portfolio reduces overall risk.”

Origin: From Italian `portafoglio`, from `portare` (to carry) + `foglio` (leaf, sheet)

The purchase of one company by another

“The acquisition expanded our market presence significantly.”

Origin: From Latin `acquisitio` (accumulation), from `acquirere` (to seek in addition), from `ad-` (to) + `quaerere` (to seek)

Comprehensive appraisal before a business transaction

“Due diligence revealed undisclosed liabilities.”

Origin: From Latin `debita diligentia` (proper care owed), from `debere` (to owe) + `diligere` (to value highly)

Legal obligation to act in another's best financial interest

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

Origin: From Latin `fiduciarius` (held in trust), from `fiducia` (trust), from `fidere` (to trust)

Inability to pay debts when they become due

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

Origin: From Latin `in-` (not) + `solvere` (to loosen, pay), meaning unable to pay

Assets pledged as security for a loan

“The property serves as collateral for the mortgage.”

Origin: From Medieval Latin `collateralis` (accompanying, side by side), from Latin `col-` (together) + `lateralis` (of the side)

Funds used to acquire or upgrade physical assets

“Capital expenditure on new facilities exceeded projections.”

Origin: From Latin `capitalis` (of the head, chief), from `caput` (head) + `expendere` (to weigh out, pay)

Ongoing business expenses not directly tied to production

“Reducing overhead costs improved profit margins.”

Origin: From `over` (Old English `ofer`) + `head`; originally nautical term for rigging above deck

Income generated from normal business operations

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

Origin: From French `revenu` (returned), from `revenir` (to return), from Latin `re-` (back) + `venire` (to come)

The difference between cost and selling price

“Profit margins narrowed due to increased material costs.”

Origin: From Latin `margo` (edge, border, boundary)

The process of determining a company's worth

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

Origin: From Old French `value`, from Latin `valere` (to be strong, be worth)

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

“The company passed the annual audit without issues.”

Origin: From Latin `auditus` (a hearing), from `audire` (to hear); accounts were originally examined by oral report

Relating to government revenue, especially taxes

“The government announced new fiscal policies.”

Origin: From Latin `fiscalis` (of the public treasury), from `fiscus` (treasury, money basket)