100

Most Important
Finance Terminologies
“that are essential to be familiar with”

VARUN SONI
1. Asset: Anything valuable owned by an individual or
business.

2. Liability: Financial obligations or debts.

3. Equity: Ownership interest in a company.

4. Revenue: Total income generated by a business.

5. Expenses: Costs incurred to generate revenue.

6. Profit: Positive financial gain after subtracting expenses

from revenue.

7. Loss: Negative financial result when expenses exceed

revenue.

8. Cash Flow: Movement of money in and out of a

business.

9. Balance Sheet: Financial statement showing assets,

liabilities, and equity.

10. Income Statement: Financial statement summarizing

revenue, expenses, and profit over a period.
VARUN SONI
11. Dividend: Distribution of a portion of a company's
earnings to shareholders.

12. Interest: Cost of borrowing money or return on

investment.

13. Amortization: Gradual reduction of a debt over time.

14. Depreciation: Decrease in the value of an asset over

time.

15. Liquidity: Ability to convert assets into cash quickly.

16. Diversification: Spreading investments to manage risk.

17. Portfolio: Collection of investments held by an individual

or institution.

18. ROI (Return on Investment): Measure of profitability on

an investment.

19. Bull Market: Period of rising stock prices and optimistic

investor sentiment.

20. Bear Market: Period of falling stock prices and

pessimistic investor sentiment.
VARUN SONI
21. Hedging: Strategy to offset potential losses in
investments.

22. 401(k): Retirement savings plan in the U.S.

23. Stock: Ownership share in a company.

24. Bond: Debt security representing a loan to a company or

government.

25. Mutual Fund: Investment vehicle pooling money from

multiple investors.

26. ETF (Exchange-Traded Fund): Investment fund traded

on stock exchanges.

27. Derivative: Financial contract whose value is derived

from an underlying asset.

28. Capital Gain: Profit from the sale of an investment.

29. Debt-to-Equity Ratio: Comparison of a company's debt

to its equity.

30. Risk Management: Process of identifying and mitigating

potential financial risks.
VARUN SONI
31. Net Income: Total earnings after subtracting all expenses.

32. P/E Ratio (Price-to-Earnings Ratio): Valuation ratio

comparing a company's stock price to its earnings.

33. Dividend Yield: Annual dividend income expressed as a

percentage of a stock's price.

34. ROA (Return on Assets): Measure of a company's

profitability relative to its total assets.

35. ROE (Return on Equity): Measure of a company's

profitability relative to its equity.

36. CFO (Chief Financial Officer): Executive responsible for

managing a company's finances.

37. SEC (Securities and Exchange Commission): U.S.

government agency overseeing securities markets.

38. Market Capitalization: Total value of a company's

outstanding shares.

39. Leverage: Use of debt to finance investments.

40. Blue Chip Stocks: Shares in large, stable, and financially

sound companies.
VARUN SONI
41. IPO (Initial Public Offering): First sale of a company's
stock to the public.

42. Fiscal Year: 12-month accounting period used by a

company for financial reporting.

43. Treasury Bonds: Debt securities issued by the U.S.

Department of the Treasury.

44. Risk Tolerance: Investor's ability to withstand market

fluctuations.

45. Bonds Rating: Evaluation of the creditworthiness of a bond

issuer.

46. Market Order: Instruction to buy or sell a security at the

current market price.

47. Limit Order: Instruction to buy or sell a security at a

specified price or better.

48. 401(b): Non-profit organization's retirement savings plan.

49. Blue Sky Laws: State regulations governing the sale of

securities.

50. Tax Liability: Amount of taxes owed by an individual or

business.
VARUN SONI
51. Yield: Measure of income return on an investment.

52. Coupon Rate: Interest rate on a bond's face value.

53. Face Value: The nominal value of a security stated by the

issuer.

54. Maturity Date: Date when a bond or other investment

becomes due for payment.

55. Yield to Maturity (YTM): The total return anticipated on a

bond if held until it matures.

56. Beta: Measure of a stock's volatility in relation to the

market.

57. Alpha: Measure of investment performance compared to a

market index.

58. Gamma: The rate of change in an option's delta for a one-

point move in the price of the underlying security.

59. Theta: Measure of the rate of time decay of an option's

premium.

60. Delta: Sensitivity of an option's price to a change in the

price of the underlying asset.
VARUN SONI
61. Earnings Per Share (EPS): Portion of a company's profit
allocated to each outstanding share of common stock.

62. Price/Sales Ratio: Valuation ratio comparing a

company's market capitalization to its revenue.

63. Cyclical Stocks: Stocks whose performance is tied to

economic cycles.

64. Defensive Stocks: Stocks that remain stable during

economic downturns.

65. Dow Jones Industrial Average (DJIA): Stock market

index measuring the performance of 30 large companies.

66. S&P 500: Stock market index measuring the performance

of 500 large companies.

67. NASDAQ: Stock market index dominated by technology

and internet companies.

68. Dividend Aristocrats: Companies with a history of

consistently increasing dividends.

69. Market Index: Measurement of the value of a section of

the stock market.
VARUN SONI
70. Liquidity Ratio: Measure of a company's ability to meet
short-term obligations.

71. Quick Ratio: Measure of a company's ability to meet

short-term obligations with its most liquid assets.

72. Current Ratio: Measure of a company's ability to cover

short-term liabilities with its short-term assets.

73. Debt Ratio: Proportion of a company's assets financed by

debt.

74. EBITDA (Earnings Before Interest, Taxes, Depreciation,

and Amortization): Measure of a company's operating
performance.

75. Free Cash Flow: Cash generated by a company's

operations available for distribution to its creditors and
investors.

76. Market Capitalization Weighted: Index components

weighted based on their market capitalization.

77. Book Value: Value of a company's assets minus its

liabilities.

78. Enterprise Value: Measure of a company's total value.

VARUN SONI
79. EBIT (Earnings Before Interest and Taxes): Measure of
a company's profitability.

80. DCF (Discounted Cash Flow): Valuation method

estimating the value of an investment.

81. Stock Split: Division of a company's existing shares into

multiple shares.

82. Dividend Payout Ratio: Percentage of earnings paid out

as dividends.

83. Preferred Stock: Equity security with a fixed dividend.

84. Common Stock: Ordinary shares representing ownership

in a company.

85. Callable Bond: Bond that can be redeemed by the issuer

before maturity.

86. Convertible Bond: Bond that can be converted into

shares of the issuing company.

87. Coupon Payment: Periodic interest payment to

bondholders.

VARUN SONI
88. Coupon Frequency: The number of times per year that a
bond pays interest.

89. Intrinsic Value: True value of an asset based on

fundamental analysis.

90. Market Value: Current price of an asset in the market.

91. Dividend Reinvestment Plan (DRIP): Program allowing

shareholders to reinvest dividends in additional shares.

92. Liquidity Risk: Risk associated with the inability to buy

or sell an asset quickly.

93. Systematic Risk: Market-related risk affecting an entire

market.

94. Unsystematic Risk: Risk specific to a particular company

or industry.

95. Securities Broker: Professional who buys and sells

securities on behalf of clients.

96. Financial Analyst: Expert analyzing financial data to

guide investment decisions.

VARUN SONI
97. Capital Market: Market for buying and selling long-term
financial instruments.

98. Fixed Income: Investment that pays a fixed interest or

dividend.

99. Floating Rate: Interest rate that changes with market

conditions.

100. Risk-Free Rate: The theoretical rate of return on an

investment with zero risk.

VARUN SONI
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