Principles of finance -deca

Terms in this set (32)

Accrual
A type of accounting system that reports income when earned and expenses when incurred
Advisory stockbroker
A broker who gives advice on what shares or investments to buy
Amortization
Repayment of a loan by monetary installments
Arbitrage
The process of buying securities at a low price in one market and then selling them at a higher price in another market
Basic point
A hundredth of one percent (.01%)
Bear market
A widespread decline in security prices causes bears to believe share prices will fall. Bears sell securities, which they do not presently own hoping they can buy them at a lower price later after the price has fallen
Blue chip
A large and creditworthy company
Collateral
Property that is offered to secure a loan or other credit and that becomes subject to seizure on default
Compliance
The act of accepting and meeting specific standards
Compound interest
Interest earned on the principal amount and then accumulated over a period of time
Consolidation
The combining of two separate companies into one
Corporate bond
Bonds issued by a company
Data mining
Sifting through large amounts of data to find the necessary information
Deferred shares
Shares that do not receive income until they have reached a certain level
Dividends
Money distributed to the owners of a business as profits
Economies of scale
The decrease of cost per unit that is a direct result from and increase in production. This can be accomplished because as production increases, the cost of producing each additional item falls. Businesses often buy in volume to take advantage of the discounted rate due to economies of scale
Face value
A bond when it a matures
Financial institution
An establishment that provides financial services to clients. For example : banks, insurance brokers and investment firms
Hedging
Buying one security and selling another with the goal of reducing risk
Indemnity insurance
Insurance designed to protect a mortgage lender against the risk of the borrower not being able to repay their loan
Junk bond
A high risk bond
Maturity
An investment that comes to an end
Money market
Trade in short term and low risk securities resulting in dividend earnings
Nominal value
The value of security when it is first issued
Portfolio
A collection of different investments that make up the total investment holding
Risk control
Taking precautionary measures to prevent and minimize risk. Purchasing insurance is just one example
Securities
Stocks and shares
Share
A slice of ownership in a company
Stock exchange
A main place of trading stocks , shares etc
Term insurance
A life insurance policy set up for a certain number of years. If you survive the term policy then you do not receive any payout
Trustee
A business or individual that looks after and manages the assets for the benefit of another
Yield
The annual income received expressed as a percentage
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