Fin 201 Brau All Key Terms

401K

A tax-sheltered retirement plan offered by some employers.

Accounting

The systematic recording, reporting, and analysis of financial transactions.

Asset Manager

A firm or individual that manages investments on behalf of clients.

Asset Pricing

The method of determining the fair value of an asset.

Business Finance

The management of funds and capital for business operations.

Capital Budgeting Analysis

The process of planning and managing a firm's long-term investments.

Cash Management

The process of collecting, managing, and investing cash.

Certified Financial Planner

A professional who helps individuals manage their finances and investments.

Chief Financial Officer (CFO)

The executive responsible for managing the financial actions of a company.

Commercial Bank

A financial institution that accepts deposits and provides loans to individuals and businesses.

Consumer Bank

A bank that offers financial services to individual consumers.

Corporate Finance

The area of finance dealing with funding sources, capital structuring, and investment decisions.

Cost of Capital

The return rate that a company must earn on its investment projects to maintain its market value.

Debt

An amount of money borrowed by one party from another.

Discounted Cash Flow

A valuation method used to estimate the value of an investment based on its expected future cash flows.

Equity

The value of an ownership interest in a company, represented by shares.

Fair Return

The return that is considered reasonable for the risk taken.

Financial Management

The planning, organizing, directing, and controlling of financial activities.

Free Cash Flows

Cash generated by a company that is available for distribution to investors.

Initial Public Offering (IPO)

The first sale of stock by a private company to the public.

Investment Banking

A segment of the banking industry that helps companies raise capital.

Managerial Finance

The branch of finance that focuses on the managerial aspects of finance.

Mergers and Acquisitions (M&As)

The process of consolidating companies or assets through various types of financial transactions.

Mutual Funds

Investment programs funded by shareholders that trade in diversified holdings.

Net Income

The total profit of a company after all expenses and taxes have been deducted.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return.

Return on Investment (ROI)

A measure used to evaluate the efficiency of an investment.

Weighted Average Cost of Capital (WACC)

The average rate of return a company is expected to pay its security holders to finance its assets.

Historical financial statements

The business function responsible for creating the historical financial statements.

Portfolio manager

A professional who makes a living managing a portfolio of assets.

Valuing assets

The process of valuing assets.

Corporate finance

Another word for corporate finance.

Asset acquisition

The process of deciding what assets to buy.

Day-to-day finance operations

Managing the day-to-day finance operations of a firm.

Certified Financial Planner (CFP)

A professional who has passed the CFP examination.

Chief Financial Officer (CFO)

The highest ranking corporate finance officer in a firm.

Commercial bank

A bank that focuses mostly on mid to large sized companies.

Equity research analysts

Professionals who produce reports on specific firms and industries.

Retail bank

A bank that focuses mostly on individuals, families, and small business.

Insurance

Life and property insurance.

Finance function

The finance function within a business.

Main areas of finance

One of the three main areas of finance.

Business insurance

Insurance sold to businesses.

Cost of capital

How much it costs the firm (in percentage terms) to finance its operations through debt and/or equity.

Certified Public Accountant (CPA)

A Certified Public Accountant.

Loan officer

A bank position which involves deciding who qualifies for a loan and who does not.

Market value

What someone would pay right now for an asset.

Debt financing

Money lent by a creditor to provide financing for the borrower.

Time value of money

The process of using time value of money skills and forecasting to value assets.

Dollar-cost averaging

Automatically investing a fixed percentage or amount every certain period, such as a month.

Equity

Ownership in an asset such as a company.

Estate planning

Legal structures used in estate planning.

Acceptable return

An acceptable return for a passive investor.

Finance subfields

Specific areas within finance such as insurance, personal finance, financial planning, asset management, etc.

Payment

To pay for something.

Derivatives

Financial assets that derive their value based on an underlying asset.

Investment funds

Lightly regulated investment funds that have fewer restrictions than mutual funds pertaining to investment choice.

Index fund

A mutual fund that tracks an already established index such as the S&P 500.

Initial Public Offering (IPO)

When a company goes out to raise money from the public for the first (initial) time by 'offering' a share of its company.

Financial services

Professional banking services not regulated by federal banking regulations.

Asset management

Portfolios of assets professionally managed for others to invest in.

Equity or debt issuance

The market for firms issuing equity or debt for the first time.

No-load mutual fund

A mutual fund that does not charge a fee to get into it or to leave it.

Production function

The business function responsible for the production of the good or service being sold.

Human resources

An organization's business function responsible for interacting with the organization's employees (staff, faculty, etc.).

Passive investing

Investing without active management.

Retirement investment plans

A firm that provides retirement investment plans.

Private placement

Company financing without having to file the necessary public regulatory documents.

Auto insurance

Insurance required if you own a car.

Real estate portfolios

Portfolios that own real estate assets such as buildings and mortgages.

Insurance for insurers

Insurance sold to insurance companies.

Insurance finance

The area in finance that deals with insurance.

Tax-sheltered retirement plan

A tax-sheltered retirement plan individuals can use to avoid taxes on portfolio returns.

Seasoned equity offering

Any public equity offering after the IPO.

Asset selling

Selling an asset.

Fields

Another word for fields.

Operations management

The business function of managing the strategies and tactics of business operations.

Value chain management

A subset of operations responsible for managing the value chain.

Tax minimization

Minimizing the taxes a business pays.

Tax-deferred investment plan

An investment plan that either defers or eliminates income tax.

Entry level bank position

An entry level bank position.

Estate planning structures

Legal structures used in estate planning.

Supply chain

The chain of suppliers and customers the business relies on.

Current Liability

A current liability that represents any money the firm owes suppliers and other firms.

Accounts Receivable

A type of current asset which represents any money owed to the firm for services rendered.

Historical Cost Accounting

Accounting system based on recording accounts based on historical prices and the matching principle.

Accrued Wages

Wages that the company owes to employees, but has not paid yet.

Paid-in Capital

A type of equity on the balance sheet which equals the proceeds from a stock offering minus the common stock.

Balance Sheet

One of the three main financial statements. It is a snapshot of the firm's assets, liabilities, and equity at any point in time.

Accounting Equation

Assets = Liabilities + Equity.

Current Asset

The most liquid current asset on the balance sheet.

Cash Flow Statement

One of the three parts of the cash flow statement.

Common Stock

A type of equity on the balance sheet which represents equity sold to common shareholders at par value.

Contra Asset

An account on the asset side of the balance sheet that reduces the value of the asset, such as accumulated depreciation.

Service Cost

Similar to cost of goods sold, but applies to service companies.

Current Liabilities

Liabilities on the balance sheet with a short life span (typically less than one year).

Non-Cash Expense

A non-cash expense used to approximate the decrease in value of an asset.

Net Income

Another word for net income.

EBIT

Stands for 'Earnings Before Interest and Taxes'. EBIT is found on the income statement.

FASB

Federal Accounting Standards Board.