UNIVERSIDAD DEL BÍO-BÍO

SEDE CHILLÁN

FINANCIAL CONCEPTS- INGLÉS PARA NEGOCIOS III

13 Mar 2019

 FINANCE

10 Financial concepts you should be familiar with

So, you have served as a competent professional for the past 15 years
and you are reasonably business savvy. Now you’re shifting to a new
managerial position and you have no idea what a bear market is or what
CAPM stands for. No matter how specialised professionals have
become over the last decade, it is important for people in any business
to be well acquainted with a few vital financial concepts.

Net worth
An easy one to start with. You should have heard financial experts
discussing an organization's net worth or what are the measures you’re
taking to ensure your net worth is increasing, they actually mean the
difference between your total assets and total amount you owe to your
creditors and other stakeholders.
A positive net worth indicates good financial health, whereas negative
net worth means your company is at loss.

Inflation
In generic terms, inflation is the sustained increase in the price of
goods and services. One of the main indicators that professionals need
to take account of is if their income is rising proportionately with the
rises in price of goods and services.

Liquidity
This simple term indicates how accessible your assets are i.e., what
monetary value your assets will generate if sold today. Corporations
usually need to have a balanced liquidity since creditors can demand
their money at anytime, which in turn could increase liability of the
banks or corporations.

Bull market
You must have heard traders and Wall Street experts mouthing such
words and you must have questioned your entire university education
several times. Well, bull market is simply an indicator of how much the
market is currently rising. In other words, how profitable the market
is and how are the prices changing.

Bear market
This is the opposite of bull and indicates that the market is declining.
The other takeaways from this include high unemployment, falling
share prices of the market and downtrend economy. The market
continuously shifts between bull and bear positions, owing to the
dynamic nature of the economy.

Risk tolerance
This is a simple indicator of how aggressive one can go with their
investments and indicates how to react to the changes or ups and
downs in the economic cycle. It determines the amount of investment
professionals make, your earning potential and the value of the assets
invested.

Asset allocation and diversification

This is one of the most common terms used by professionals regardless
of what sector they work in. Asset allocation determines the number
and type of assets people invest in and include in the portfolio.
Diversification counts for the balance of money in the portfolio. This is
basically an investment strategy which makes use of the existing
assets and analyses the most profitable move for the company, by
taking in many other factors into account such as investor's risk
tolerance, goals and investment time frame.

Interest
While saving money, interest is a good thing. In borrowing, it becomes
the opposite. Essentially, a fee paid by credit borrowers for utilising
the asset, in most cases, cash.

Compound interest
Compound interest is an important concept of learning for retiring
professionals and gives an indicator of yearly earnings. In simple terms,
it is the interest on interest and makes the loans or deposits grow a
faster rate than simple interest.
Capital Asset Pricing Model (CAPM)
One of the most common terminologies used in business gives an
indicator value of money and risk in investing in new assets. This model
is mostly used by corporations to describe the relationship between
expected returns and risk, used in the pricing of risky securities.
Financial concepts are some of the most commonly used terminologies
and principles in businesses-big or small. Whether you work in the
corporate sector or not, you need to keep yourself updated with these
concepts.
Develop Your Skills in Finance
Finance is a big world, with countless specialised areas. If you are
not satisfied with just the basics, dive into a training course
on advanced financial topics like private banking, accounting, wealth
management, regulatory finance and more.