Accounting and Finance Vocabulary

Flashcards based on lecture notes.

Assets

Things you own.

Liabilities

Things you owe.

Accounting Equation

Assets + Liabilities = Owner's Equity

Balance Sheet

A statement of a firm’s financial position - what it owns and the claims against its assets - at a particular point in time.

Income Statement

A record of the company’s expenses over a period of time.

Current Assets

Cash and other liquid assets that can/ will be converted to cash or used within one year.

Long-Term Assets

Assets expected to last for more than one year.

Current Liabilities

Claims of creditors to be repaid within one year.

Long-Term Liabilities

Debts paid off one year or longer after the date on the balance sheet.

Capital Loss

If you sell a security for less than you bought it.

Profit Margin

Profit / sales

Earnings Per Share

Profit / # of shares

Return on Equity

Profit / owner's equity

Treasury Bills

The “risk free” asset.

Short-Term Sources of Funds

Sources of funds are repaid within one year; examples are: Accounts payable

Long-Term Sources of Funds

Sources of funds are repaid over many years and consist of: long-term loans and equity

Leverage

Making money by using money borrowed from other people.

Investments

Things you invest in.

Asset Allocation

The percentage of your assets in each asset class.

Money Market Instruments

U.S treasury bills and Certificates of Deposit.

Types of Bonds

Corporate bonds, Municipal Bonds, Government bonds.

Bond Prices and Interest Rates

When interest rates increase; bond prices decrease.

Municipal Bonds

Bonds that are tax-free and pay for cities, roads, and buildings.

Corporate Bonds

Bonds issued by businesses.

Government Bonds

Bonds issued by governments with a promise to pay but no revenue stream.

Securities (asset classes)

Stocks, Bonds, Money market instruments.

Types of equities

Preferred stock, Common stock

Common Stock

Stock that shares the ownership in a company and allows the owners to vote on major company decisions. Also has optional dividends.

NYSE

The largest stock exchange.

NASDAQ

The stock market for many technology companies.

Market order

Instructs a brokerage firm to obtain the highest price possible at that moment – if the investor is selling – or the lowest price possible at that moment – if the investor is buying.

Limit order

Instructs the brokerage firm not to pay more than a specified price for stock if the investor is buying, or accept less than a specified price if the investor is selling.

Mutual Fund

When the financial institution pools investment money to acquire diversified portfolios of securities consistent with the fund’s investment objective.

Load funds

Funds that charge a fee to buy and sell a stock.

No-load funds

Funds that have no fee.