Economic & Financial Glossary 1

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power

Interest Rate

The percentage charged on a loan or paid in savings, usually expressed annually

Gross Domestic Product (GDP)

The total value of all goods and services produced within a country’s borders in a specific period

Liquidity

It is the ability of an entity to meet its short-term obligations, referring to how easily assets can be converted into cash

Solvency

It is the long-term ability of an entity to meet its financial obligations, meaning it has more assets than liabilities

Budget

A financial plan that estimates income and expenses over a specific period

Credit

The ability to borrow money or access goods and services with the understanding that payment will be made in the future

Asset

Any good owned by an individual or corporation that is expected to provide future economic benefits

Liability

A financial obligation or debt that an individual or company owes to another entity

Equity

The value of an ownership in a company, calculated as assets minus liabilities

Capital

Wealth in the form of money or other assets owned by a person or organization, available for investment or production

Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation’s assets and earnings

Bond

Debt securities issued by entities such as governments or corporations to raise capital, with a promise to repay the principal along with interest

Dividends

A portion of a company’s earnings distributed to shareholders, typically in cash or additional shares

Risk

The potential for loss or the variability of returns associated with an investment

Cash Flow

The net amount of cash being transferred into and out of a business

Portfolio

A collection of investments owned by an individual or organization

Profitability

Is the ability of a company to generate profit relative to its revenue, assets, or equity

Leverage

The use of borrowed money to increase the potential return of an investment

Debt

Money borrowed by one party from another, typically under the condition that it will be paid back with interest

Exchange Rate

The value of one currency for the purpose of conversion to another

Monetary Policy

The process by which a central bank manages a country’s money supply and interest rates

Fiscal Policy

The use of government spending and taxation to influence the economy

Financial Ratio

Are quantitive measures used to evaluate and compare the financial performance of a company

Financial Statement

A formal record of the financial activities and position of a company, including the balance sheet, income statement, and cash flow statement

Depreciation

Is the gradual reduction in the value of an asset over time, often due to wear and tear or obsolesce

Amortization

Is the process of gradually paying off a debt over time through regular payments, which cover both interest and principal

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

Is a financial metric that measures a company’s operating performance by excluding interest, taxes, depreciation, and amortization expenses