Investopedia Vocabulary

10-k

10-k

a comprehensive report filed annually by a publicly-traded company about its financial performance and is required by the U.S. Securities and Exchange Commission (SEC)

form 1040

a document individual taxpayers use to file their annual income tax returns with the IRS

183-day rule

criteria used by many countries to determine if someone should be considered a resident for tax purposes

51% attack

an attack on a cryptocurrency blockchain by a group of miners who control more than fifty percent of the network’s mining hash rate

401(a) plan

an employer-sponsored retirement plan available to employees of government agencies, educational institutions, and non-profit organizations

401(k) plan

a defined-contribution, tax-advantaged retirement savings plan that is sponsored by one’s employer

403(b) plan

a tax-advantaged retirement account for certain employees of tax-exempt organizations

457 plan

a tax-advantaged retirement plan offered to government and nonprofit organization employees

501(c)(3) organization

a tax-exempt nonprofit organization

8-k

a form companies must file with the Securities and Exchange Commission to announce major events of importance to shareholders

80-20 rule

a principle that asserts that eighty percent of outcomes (or outputs) result from twenty percent of all causes (or inputs) for any given event

83(b) election

a U.S. tax provision that gives an employee, or startup founder, the option to pay taxes on the total fair market value of restricted stock at the time of granting

2-1 buydown

a mortgage agreement that provides a low interest rate for the first year of the loan, a somewaht higher rate for the second year, and then the full rate

triple a (aaa)

the highest possible rating that may be assigned to an issuer’s bonds by any of the major credit-rating agencies

absolute advantage

the ability of an individual, company, region, or country to produce a greater quantity of a good or service with the same quantity of inputs per unit of time

absolute return

the percent amount that an investment rises or declines in value in a given period

absorption costing

a managerial accounting method for capturing all costs associated with manufacturing a particular product

accelerated depreciation

any method of depreciation used for accounting or income tax purposes that allows greater depreciation expenses in the early years of the life of an asset

acceptable quality level

a statistical measurement of the maximum acceptable number of defective goods in a particular sample size

bank account number

a unique string of characters used to identify a particular bank account and grant access to it

accounting conservatism

a set of bookkeeping guidelines that call for a high degree of verification before a company can make a legal claim to any profit

accounting information system

a system for the collection, storage, and processing of financial and accounting data

accounting method

the rules a company follows in reporting revenues and expenses

accounting policies

the specific principles and procedures implemented by a company’s management team thata re used to prepare its financial statements

accounting principles

the rules and guidelines that companies and other bodies must follow when reporting financial data

accounting profit

a company’s total earnings, calculated according to generally accepted accounting principles

accounting rate of return

a formula that reflects the percentage rate of return expected on an investment or asset, compared to the initial investment’s cost

accounting ratio

a comparison of two line items in a company’s financial statements

accounting standard

a common set of principles, standards, and procedures that define the basis of financial accounting policies and practices

accounting theory

a set of assumptions, frameworks, and methodologies used in the study and application of financial reporting principles

accounts payable

an account within the general ledger that represents a company’s obligation to pay off a short-term debt to its creditors or suppliers

accounts payable turnover ratio

a short-term liquidity measure used to quantify the rate at which a company pays its suppliers

accounts receivable

the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers

accounts receivable aging

a periodic report that categorizes a company’s accounts receivable according to the length of time an invoice has been outstanding

accounts receivable financing

a type of financing arrangement in which a company receives financing capital related to a portion of its accounts receivable

accredited investor

an individual or business entity that is allowed to trade securities that are not registered with financial authorities

accretion

the gradual and incremental growth of assets and earnings due to business expansion, a company’s internal growth, or a merger or acquisition

accrual accounting

a financial accounting method in which revenues and expenses are recorded when a transaction occurs rather than when money is exchanged

accruals

a method of accounting in which revenues and expenses are recorded as they are incurred

accrued expense

an accounting term that refers to an expense that is recognized on the books before it has been paid

accrued income

money that’s been earned but has yet to be received

accrued interest

the amount of interest that has been incurred, as of a specific date, on a loan or other financial obligation but has not yet been paid out

accrued liability

an expense incurred but not yet paid for by a business

accrued revenue

revenue that has been earned by providing a good or service, but for which no cash has been received

accumulated depreciation

the cumulative depreciation of an asset up to a single point in its life

accumulation/distribution indicator

a cumulative indicator that uses volume and price to confirm price trends

acid-test ratio

a method to gauge whether a firm has sufficient short-term assets to cover its immediate liabilities

acquisition

a transaction in which one party buys some or all of a company’s ahres, potentially leading to consolidation or merger with the parent company

acquisition accounting

a set of formal guidelines describing how assets, liabilities, non-controlling interest, and goodwill of a purchased company must be reported by the buyer on its consolidated statement of financial position

activity-based budgeting

a rigorous budgeting approach in which cost-incurring activities are recorded, researched, and analyzed

activity-based costing

a costing method that assigns overhead and indirect costs to related products and services

activity-based management

a method of analyzing a company’s efficiencies using activity-based costing

activity cost driver

an action that causes variable costs to increase or decrease

activity ratio

indicators of how efficiently a company uses its assets to generate revenues and cash

actuarial gain or loss

the difference between an employer’s actual and expected pension payments

actuarial science

a discipline that assesses financial risks in the insurance and finance fields, using mathematical and statistical methods

ad valorem tax

a tax imposed on an item based on its assessed value

additional paid in capital

an accounting term referring to money an investor pays above and beyond the par value price of a stock

adjudication

a legal ruling or the process of settling a legal case or claim through the court or justice system

adjustable-rate mortgage

a home loan with an interest rate that can fluctuate

adjusted EBITDA

a non-GAAP profit metric widely used to analyze a company’s true operating cash flow

adjusted gross income

a measure of income used by the internet revenue service to assess a taxpayer’s tax liability

adjusted present value

the net present value of a project or company if financed solely by equity plus the present value of any financing benefits

adjusting journal entry

an entry in a company’s general ledger that occurs at the end of an accounting period to record any unrecognized income or expenses for the period

administrative expenses

expenses an organization incurs that are not directly tied to a specific core function

adverse possession

a legal principle that allows a person who possesses someone else’s land for an extended period of time to claim legal title to that land

adverse selection

when sellers have information that buyers do not have, or vice versa, about some aspect of product quality

affiliate marketing

an advertising model in which a company compensates third-party partners for promoting products and services and generating business

after-tax real rate of return

the actual financial benefit of an investment after accounting for the effects of inflation and taxes

agency costs

a type of internal company expense, which comes from the actions of an agent acting on behalf of a principal

agent

a person legally empowered to act on behalf of another person or an entity

aggregate demand

the total demand for all finished goods and services produced in an economy

aggregate supply

the total supply of goods and services produced within an economy at a given price level within a certain period

aleatory contract

an agreement that the parties involved do not have to perform a particular action until a specific, triggering event occurs

alpha

a term used in investing to describe an investment strategy’s ability to beat the market

altcoin

all cryptocurrencies other than bitcoin

alternative investment

a financial asset that does not fall into one of the conventional investment categories

alternative minimum tax

a floor on the percentage of taxes that a filer must pay to the government

amalgamation

a combination of two or more companies into a new entity

amortization

an accounting technique used to periodically lower the book value of a loan or an intangible asset over a set period of time

amortized loan

a loan with scheduled periodic payments of both principal and interest

analysis of variance

an analysis tool used in statistics that splits an observed aggregate variability found inside a data set into two parts: systematic factors and random factors

annual equivalent rate

the interest rate for a savings account or investment product that has more than one compunding period

annual percentage yield

the real rate of return earned on an investment, taking into account the effect of compounding interest

annualize

converting a short-term calculation or rate into an annual rate

annualized total return

the geometric average amount of money earned by an investment each year over a given time period

annuity

an insurance contract issued and distributed by financial institutions with the intention of paying out invested funds in a fixed income stream in the future

anti money laundering

the web of laws, regulations, and procedures aimed at uncovering efforts to disguise illicit funds as legitimate income

appropriation

the act of setting aside money for a specific purpose

arbitrage

the simultaneous purchase and sale of the same asset in different markets in order to profit from tiny differences in the asset’s listed price

arbitrage pricing theory

a pricing model that predicts a return using the relationship between an expected return and macroeconomic factors

arc elasticity

the elasticity of one variable with respect to another between two given points

asset allocation

an investment strategy that aims to balance risk and reward by apportioning a portfolio’s assets according to an investor’s goals

asset-based approach

a business valuation that focuses on a company’s net asset value

asset coverage ratio

a finanicial metric that measures how well a company can repay its debts by selling or liquidating its assets

asset financing

the use of a company’s balance sheet assets to borrow money or get a loan

asset turnover ratio

an efficiency metric that represents a company’s ability to generate revenue from its assets

audit

a thorough review of a company’s financial statements to ensure the financial records are fiar and accurate

autocorrelation

a mathematical representation of the degree of similarity between a given time series and a lagged version of itself over successive time intervals

average annual growth rate

the mean increase in the value of an individual investment, portfolio, asset, or cash flow on an annualized basis