Lecture: Startup Financing, Markets, and Federal Reserve - Vocabulary Flashcards

Vocabulary flashcards covering key terms from the lecture notes on startup financing, financial markets, and the Federal Reserve.

PEO (Professional Employer Organization)

A firm that outsources and manages HR functions for a client company.

Moat

A durable competitive advantage that protects a company from competition (e.g., strong brand, network effects).

Investment bank

A financial firm that helps companies raise capital, provides valuation, underwrites securities, and may trade.

Valuation

An estimate of a company’s worth used to price securities or attract investment.

Equity

Ownership stake in a company; a security representing ownership.

Bond

A debt security where an issuer borrows money from investors and pays interest until maturity.

IOU

I owe you — a simple acknowledgment of debt.

Investment grade bond

A high-quality bond with low default risk and typically lower interest rate.

Junk bond

A high-yield bond with a lower credit rating and higher default risk, typically offering higher interest.

Credit rating

A letter-grade assessment of a borrower’s creditworthiness by rating agencies (e.g., AAA, A, B, junk).

FICO score

A credit score used for individuals to gauge creditworthiness.

Capital structure

The mix of debt and equity a company uses to finance its operations and growth.

Tranche

A slice or class of a structured financial product with a specific risk/return and payment priority.

CDO (Collateralized Debt Obligation)

A packaged pool of debt assets sold in tranches to distribute risk.

Bank spread

The difference between interest earned on assets (loans) and interest paid on liabilities (deposits).

Inflation

Sustained rise in the general price level, reducing purchasing power.

Unemployment

The share of the labor force that is jobless and actively seeking work.

Misery index

A combined measure of unemployment and inflation indicating economic hardship; higher values mean worse conditions.

Federal Reserve (Fed)

The U.S. central bank responsible for monetary policy, aiming for maximum employment and price stability.

Dual mandate

The Fed’s goal to achieve both maximum employment and price stability.

Inflation target

The annual inflation rate a central bank aims to achieve; for the Fed, commonly around 2%.

Maximum employment

The Fed’s goal to maintain the highest sustainably achievable level of employment.

Lack of capital

Insufficient funding to start or scale a business.

Lack of knowledge

Insufficient expertise or know-how to run a business effectively.