DECA Finance

Finance Events

Affinity Fraud

Scam where a scammer pretends to be part of an organization, then proceeds to trick members of said organization into giving them "investments."

Credit Requirements

Standards established by creditors that debtors must satisfy in order to get credit

Due Process

A requirement that legal matters be resolved according to established rules that treat people fairly

Duty of Control

Ensuring a company's financial data is accurate, on time, and complies with company rules

Fiduciary

a person who has been given legal authority to make transactions on behalf of a person/business

Fiduciary Responsibility

a Fiduciary making wise decisions and obtaining products to help clients reach their financial goals

Tax shelters

a financial arrangement made to minimize taxes

Compliance

following the laws, regulations, and standards that govern the financial sector

Procedure

Step-by-by-step process an employee follows when performing a specific task

Executive summary

a summary that provides an overview of the content in a long report

CRM

Customer Relationship Managment

CRM Software

a system that manages a company's interactions with current and potential clients

Scope

the number of tasks involved in a job and the frequency they occur at; Less tasks = Lower [vocab]

Depth

amount of control and decision-making involved in a job; Less decisions = Less [vocab] | Less personal control = Less [vocab]

Absolute advantage

When a company can provide a good or service at a greater output than another company while using the same amount of resources

Comparative advantage

the benefit a country obtains from specializing in and producing goods/services with the least opportunity cost

Trade surplus

When a country's exports are greater than their imports

Trade deficit

When a country's exports are less than their imports

Investment Bank

an institution that facilitates large financial transactions and offers advisory services for mergers and IPOs

Premiums

the amount you pay each month/year to keep your insurance policy active

Primary capital market

a capital market that sells new securities (Initial Public Offerings, Bond Markets issued directly from government)

Secondary capital market

a capital market where securities are bought from investors rather than issuing companies (Stock exchanges, Bond Markets where bonds are passed through investors)

Soft/Hard commodities market

a market that buys and sells various raw materials such as agricultural (soft/short-lived) and mined (hard/long-lived) goods, which are often used to create new things

Hedge fund

Actively managed investment pools where managers use many (often risky) strategies in an attempt to beat the average investment returns for their clients

Bond

A type of loan (essentially an IOU) where funds are borrowed from investors by a corporation/government in return for regular interest payments until the loan matures, where the principal is paid back.

Doctrine of Utmost Good Faith

a legal concept that requires buyer/seller or borrower/lender to be completely honest with each other about financial circumstances

The 80/20 Rule

a concept that suggests 80 percent of a firm's sales are obtained from 20 percent of its customers

Securities

fungible and trade-able financial instruments fused to raise capital (e.g. stocks, bonds)

Capital

anything that confers value or benefits to it's owners

Investment company

company that pools investor's funds and invests the funds based on the needs of the investors (mutual funds are a type of [this vocab])

Insurance companies

company that collects premiums for their insurance products

Deposit-taking companies

company that accepts deposits from savers and uses the deposits to offer loans to borrowers

Balance sheet

A financial document which reports what a company owns (assets), what it owes to others (liabilities), and the owners' stake (equity). Assets = Liabilities + Equity

Stock table

a document that contains information about stock quotes

Purchases journal

a document that records a company's purchase transactions

Income Statement

A financial document which reports a person or company’s profits (revenue) and losses (expenses)

Cash Flow Statement

A financial document which reports the source of income and destination of expenses or person or company

Gross Profit

A company’s profit after subtracting their cost of goods sold from their revenue

Operations Income

A company’s profit after subtracting their operating expenses from their gross profit

Operating expenses

The recurring expenses a company incurs in order to keep it’s daily operations up

Net Income

A company’s profits after subtracting all expenses from the gross income (taxes, operation expenses, cost of goods sold)

Reserve Ratio

The amount of deposits that the federal reserve requires commercial banks to keep in cash and not lend out in case of mass withdrawals.

Efficiency Ratios

Ratios that assess how quickly and effectively a company uses its assets to generate profit

Asset Turnover Ratio

Indicates how efficiently a company uses its assets to generate REVENUE

Inventory Turnover Ratio

Measures how often a company is restocking inventory over a period

Profitability Ratios

Ratios that show a company’s ability to generate profit

Net Profit Margin

The percentage of revenue that remains after all expenses and taxes are deducted

Return on Assets (ROA)

Measures how efficiently a company is using assets to generate PROFIT.

Liquidity Ratios

Ratios that measure a company’s ability to meet short-term obligations via short-term assets

Current Ratio

Compares current assets to current liabilities (Assets/Liabilities)

Cash Ratio

Measures the ability to pay short-term liabilities with only cash

Leasing

A contract by which one party agrees to rent property (car, house, etc.) for a specified long-term period.

Renting

A contract by which one party agrees to rent property (car, house, etc.) for a specified short-term period.

Financing

Taking out a loan to purchase an asset, specifically a car

Buy

To obtain property in exchange for payment

Vertical Analysis

Analysis, usually on an Income Statement, which expresses each line as a percentage based on the revenue (x/revenue) in order to create a more digestible and consistent data system

Horizontal Analysis

Analysis, usually on a Balance Sheet, which compares the financial performance of a company over multiple periods of time to determine financial trends in assets, liabilities, and equity

Equity

An ownership in a business, representing the amount that would be paid out to shareholders if all of that company’s assets were liquidated and the debt was paid off.

Mutual Fund

A managed fund that pools money from shareholders to invest in securities

Portfolio Diversification

A risk management strategy in investing that involved spreading investments across various asset classes (stocks, bonds, etc.), and sectors (technology, fashion) in order to reduce reliance on a single investment

Asset classes

A group of investments that exhibit similar characteristics and follow the same laws (e.g., stocks, bonds, etc.)

Stocks

Shares of ownership in a company (equity)

Corporate Diversification

A business strategy where a company expands it’s operations into new and different product lines, industries, and sectors in order to grow, reduce risk, and increase revenue

Dividends

The portion of a company’s profits which are distributed to it’s shareholders by the company’s Board of Directors

Revenue

The money generated from normal business operations

Assets

Anything of value owned by an individual/company, including but not limited to cash, property, and investments

Liabilities

Something an individual/company owes, usually being a sum of money

Lump Sum

A monetary sum paid to the recipient all at once rather than in installments (lottery, pension, insurance) Has more risk than annuity, but more flexibility in investment.

Annuity

A promised/guaranteed stream of income paid out in installments over a specified period of time rather than all at once (lottery, pension, insurance). Has less risk than lump sum, but less flexibility in investment.

Principal

The initial amount of money borrowed on a loan/invested

Investing

Deploying capital, usually money, towards a project which you believe will generate a positive return over time and generate revenue

Interest

The monetary charge for the privilege of borrowing money

Compound Interest

Interest on a loan/deposit where the interest is calculated based on the initial principal plus the accumulated interest from previous periods

Loan

A financial agreement where a lender gives money to a borrower, who commits to paying back the principal plus interest to account for risk

Deposit

Money held in a bank account

Risk Tolerance

The degree of risk an investor is willing to endure

401(k)

A defined-contribution, tax-advantaged retirement savings plan sponsored by a person’s employer

Roth IRA

A type of tax-advantaged individual retirement account where you can contribute after-tax dollars

Portfolio

A folder made up of various different investments that work together to generate revenue

Capital Gains

The increase in the value of an asset relative to the original price it was purchased at

Checking Account

An account held by a bank/credit union which allows the holder to make withdrawals and deposits. Very liquid.

Savings Account

An interest-bearing deposit held at a bank/credit union

Capital Market

The financial exchanges where companies and governments sell investments like stock and bonds to raise cash/market that sells securities. (Stock markets, bond markets)

Money Market

The financial market that deals in short-term borrowing and lending without promising significant returns, often used for emergencies. (Sells Certificate of Deposit’s, Treasury Bills, etc.)

Durable Power of Attorney

A legal document that gives a designated and trusted person power to act on the behalf of another individual

Direct Costs

A price that can be directly tied to the production of a good/service

Indirect Costs

A price that cannot be directly tied to the production of a good/service

Earnings Per Share (EPS)

A company’s net Profit divided by their total number of shares outstanding (Profit/Shares) which represents how much money a company makes per share of equity.

P/E Ratio (Price-to-Earnings)

A stock valuation ratio that divides a company’s closing stock price by it’s earnings per share (Price/EPS) usually used to see whether a stock is undervalued or overvalued (if the price is very low compared to the company performance or vice versa)

Sole Proprietorship

A business that has just one owner who pays personal income tax on profits earned from the business and takes on all company liability personally.

Partnership

An unlimited liability business that has two or more entities/individuals as owners who agree to manage and operate business whilst splitting it’s profits.

LLC

Limited Liability Company; A company that protects it’s owners from taking on personal liability for the company’s liability or debts, whilst also providing pass-through tax benefits where profit is taxed as personal income.

Corporation

A legal entity, usually a company, that is entirely separate and distinct form it’s owners.

Cooperative (Co-op)

An autonomous association of persons united voluntarily to achieve their common economic, social, etc. goals (common among labor workers).

Franchise

A business model where an individual (franchisee) buys the rights to operate a business using the branding and systems of an established company (franchisor)

C-Corporation (C-Corp)

The standard corporation setup, where owners are taxed separately from the entity (business).

S-Corporation (S-Corp)

A corporation that avoids double taxation by passing income, losses, deductions, and credits to shareholders to avoid corporate income taxation.