This page provides a brief snapshot of financial terminology for students who may not be focused on business studies.

Overview

BOND: A long-term debt security, issued by a corporation or government, with a stated interest rate and fixed due dates when interest and principal must be paid. A bondholder receives a fixed income through the interest payments.

COMMODITIES: Raw materials that are used as basic food and/or in making manufactured products.

EQUITY: 1) Ownership in a corporation by stockholders (this word is sometimes used as a synonym for stock).
2) The monetary value of a real estate property or of an interest in property.

STOCK: A unit of company ownership, usually referred to as shares, that represent a claim on the company's earnings and assets. Stocks are divided into common and preferred stocks.

Common stock is a unit of ownership of a company in which the owner receives dividends (which vary according to the company's performance in the market).

Owners of common stock have voting rights in company matters. Common stock carries the highest risk and the greatest possibility for appreciation of securities issued by a company.

Preferred stock is a unit of company ownership in which the dividend normally carries a fixed (not variable) rate, and is considered a fixed-income security (like a bond). In the event of corporate dissolution or bankruptcy, holders of preferred stock are paid ahead of holders of common stock. Unlike common stock, preferred stockholders rarely have voting rights.


  Resources
 

We've searched the Internet and culled a few sites that we think may be of interest for both "non-financial types" as well as for "financial types" who aren't exactly sure of the nuances between industries and job types.

  • Careers in Business: Designed to help you get started on a satisfying career in the business world. Contains information on a variety of business career fields, listings of current jobs and a variety of reference materials.
  • Wet Feet Press: The Information Source for Job Seekers: A nice collection of career profiles and direct links to companies and organizations prominent in a variety of business fields, which you can access for free from our online subscriptions page.
  • Vault Reports: The Job Seeker's Secret Weapon: An excellent site to begin your research on companies and organizations for whom you might like to work.

A concise glossary of financial terms is provided below. For additional definitions, you may want to visit InvestorWords.

Glossary

Alphabetical Index

A
B
C
D
E
F
G
H
I
L
M
N
O
P
Q
R
S
T
U
V
             


ACQUISITION: The purchase of one company (the bidder or acquiring firm) of a substantial part of the assets or securities of another (target firm), normally for the purpose of restructuring the operations of the target company. The acquisition may take the form of a divisional buyout or of the purchase of a substantial part of the target firm's voting shares, for example, in the case of a merger.

ARBITRAGE: The buying and selling of stocks, foreign exchange, precious metals, bonds or other commodities to be sold for profit from one market to a separate market without risk.

ASSET LIABILITY MANAGEMENT: Matching items on either side of the balance sheet. A Corporation that wishes to acquire an asset must decide whether to 1) pay cash, thereby reducing an asset, or 2) take out a loan, thereby increasing a liability.

ASSET: Everything owned by a corporation or individual, from cash and financial securities, to buildings and equipment, and intangible goods, such as patents and reputation.

BOND: A long-term debt security, issued by a corporation or government, with a stated interest rate and fixed due dates when interest and principal must be paid. A bondholder receives a fixed income through the interest payments.

CLOSED-END MUTUAL FUND: A mutual fund that has a specific, fixed number of outstanding shares, is priced according to supply and demand, and is traded on the major stock exchanges (an ordinary mutual fund usually sells unlimited shares).

CONVERTIBLE BOND: A bond which may be exchanged by the owner for common stock or other security. Time and price of the conversion are specific.

COMMODITIES: Raw materials that are used as basic food and/or in making manufactured products.

CREDIT RISK: The degree to which a financial obligation will not be met, with the result being a financial loss.

DEBENTURE BOND: A bond which is backed only by the good credit of the company issuing it. There is no specific security for the debenture bond.

DEBT: Money, goods, or services that one party is obligated to pay to another in accordance with an agreement.

DERIVATIVE PRODUCT: An asset or security whose value depends on one or more basic variables (called bases). In the simplest derivative products, there is a single base whose value at some time in the future determines the payoff to the derivative product. Traditionally, bases are just stock or commodity prices, and the derivative products themselves are options, futures contracts, and convertible bonds.

DISTRESS SELLING: The process of selling a security out of necessity.

DIVESTITURE: The compulsory transfer of title and/or disposal of stock of a company upon government order.

DUE DILIGENCE: The process by which representatives of an underwriting syndicate (group of investment bankers) ensure that all available information on a new issue is released.

EQUITY: 1) Ownership in a corporation by stockholders (this word is sometimes used as a synonym for stock).
2) The monetary value of a real estate property or of an interest in property.

EXCHANGE: A center where securities and commodities may be bought or sold. Instruments and products bought and sold there can be referred to as exchange-listed or exchange-traded.

FIXED-INCOME MARKET: A market in which fixed-income securities are bought and sold.

FIXED-INCOME INVESTMENT: An investment that pays a predetermined, regular rate of return until it matures; for example, a bond that pays a fixed rate of interest.

FLOOR TRADER: A stock or commodity exchange member who trades only for his or her own account or for the accounts in which he/she holds some financial interest.

FUTURES CONTRACT: A contract establishing the delivery of a commodity or financial instrument at a specific time in the future, for a specific price (which is determined by the Commodities Futures Exchange).

GAME THEORY: The study of situations in which individuals use strategy to achieve their goals, usually at the expense of other individuals. In finance, this commonly means for one individual to try to manipulate the behaviors of competitors in the market.

GROWTH STOCK: A stock that financial experts predict will rise significantly in price because the issuing company is in an expanding industry.

HEDGE: A strategy used to offset business or investment risk due to uncertain future prices. For example, gold and oil are commodities often used as investments to hedge, or offset, inflation.

HOLDING COMPANY: A company that owns enough shares of another company to hold voting control over company decisions.

INDEX: A statistical composite that tracks the changes in the economy or in financial markets.

INDEXING: The organizing and weighing of a person's investments in line with one of the major stock indexes.

INTEREST-RATE SWAPS: A contract in which two parties agree to swap interest payments for a predetermined period of time. Borrowers and investors have turned to swaps to help them speculate on and hedge risks associated with interest rate volatility. The interest rate swap market has been growing globally.

INVESTMENT COMPANY: A firm that pools investors' money and puts the funds into securities (e.g. mutual fund).

ISSUE: A security issued by a company or government for purchase by investors.

LEVERAGED BUYOUT (LBO): A person, company, group of companies or employees that borrows money to buy controlling interest in a company. This is usually accomplished by using the company's assets as security for the loans taken out by the acquiring party and repaying the loans from the company's cash flow.

LIABILITY: Any debt, both current and potential.

LIQUIDATION ANALYSIS: Analysis of companies who may be forced to go out of business and sell their assets.

MATURITY (of a bond): The date the principal amount of a bond or other debt instrument becomes due and must be paid to the bondholder.

MERCHANT BANK: A type of financial institution that engages in investment banking, portfolio management, negotiation of mergers and other financial services. Often uses its own capital to complete transactions.

MERGER: The process whereby two or more companies voluntarily combine to form one new company.

MORTGAGE-BACKED BOND: A bond secured by a mortgage.

MUTUAL FUND: A collection of stocks, bonds, or other securities purchased by a group of investors and managed by a professional investment company. "Mutual fund" also describes an investment company.

NET ASSET VALUATION: An appraisal of the financial health of a company, determined by the difference between its assets and liabilities, which is calculated by subtracting the liabilities from the portfolio value of a fund's securities and dividing that figure by the number of outstanding shares.

OPEN-END MUTUAL FUND: A mutual fund that continually issues new shares to the public. The proceeds are then put into a portfolio of investments. The company must buy back the shares on demand.

OPTION: A contract that provides the right, but not the obligation, to buy or sell a specific amount of a particular security within a certain time period at a predetermined price.

PORTFOLIO: A combination of assets or investments.

PROXY: An absentee ballot that a stockholder uses to vote on major impending proposals of a firm when he/she cannot attend the firm's annual meeting.

QUOTE: The latest market data on individual stocks, bonds, mutual funds, yields, dividends, indexes, and other company statistics.

RECAPITALIZATION: The process whereby a company changes its financial structure (e.g.: an exchange of bonds for stock, or bonds for another type of bond). Companies often restructure in the event of a bankruptcy or when a healthy company is seeking to improve its performance.

REVENUE BOND: A bond backed only by revenues from the specific project being financed.

RISK CAPITAL: Venture capital or financing used for start-up or turnaround ventures that entail high risk and potentially high returns.

RISK ASSESSMENT: The analysis of risk in a financial situation or investment with multiple, uncertain outcomes. The foundation for much of risk assessment lies in probability theory, supplemented by economics, psychology, and mathematics.

SECONDARY MARKET: A market in which investors look to buy previously issued bonds and securities.

SECURITIES ANALYST: Someone who reviews and judges securities investments and the financial condition of publicly held companies.

SECURITIES: Securities usually imply stocks and bonds, but can also include any financial instrument.

STOCK ANALYST: One who tries to predict whether a stock's value will rise or fall.

SWAP: The exchange of one security for another.

TRADER: An individual, employed by a financial institution, who is responsible for giving brokers orders to purchase or sell securities in behalf of the institution. Note: On a securities exchange, traders either trade on the behalf of a brokerage firm and its clients or they use their own money to trade; the latter are "trading for their own account."

UNDERWRITER: An investment banker who guarantees to buy the securities of a firm at an agreed price and then sells them on the market to the public at the best possible price.

VALUATION: An appraisal or analysis to determine value.

VENTURE CAPITAL: The money provided by investors to a new or growing company whose stock is not yet publicly traded. See Risk Capital.

Prepared by Young J. Lee, CAS '96 in April 1995. Updated by Career Services, February 2003.