Finance is a broad term that refers to the management of money and financial resources.

It involves the study, creation, and management of wealth and investments.

Finance encompasses a range of activities and disciplines, and it plays a crucial role in both personal and business contexts.


AssetsThings you own that have value.
LiabilitiesThings you owe or need to pay.
EquityOwnership in a company or the value of what you own after subtracting what you owe.
RevenueMoney your business makes.
ExpenseMoney your business spends.
ProfitMoney your business makes after expenses.
LossMoney your business loses when expenses are more than income.
Balance SheetA snapshot of your money situation at a specific time.
Income StatementA summary of how much money your business earned and spent over a period.
Cash Flow StatementTracks how changes in your balance sheet and income affect your cash.
BudgetA plan showing how much money you expect to earn and spend.
Return on Investment (ROI)How much money you make from an investment compared to what you spent.
DividendA payment you get for owning shares in a company.
InterestThe cost of borrowing money or the return on investment for lending money.
DiversificationSpreading investments to reduce risk.
Bull MarketA financial market with rising asset prices.
Bear MarketA financial market with falling asset prices.
LiquidityThe ability to convert assets to cash quickly.
PortfolioA collection of financial assets held by an investor.
RiskThe chance of investment return differing from expectations.
Market CapitalizationThe total value of a company’s outstanding shares.
Credit ScoreA numerical representation of creditworthiness.
Asset AllocationThe distribution of investments among different asset classes.
Capital GainProfit from the sale of an asset that increased in value.
DepreciationReduction in the value of an asset over time.
AmortizationGradual repayment of a debt through regular payments.

Finance advance terminology

ArbitrageExploiting price differences of a financial instrument in different markets to make a profit.
DerivativeFinancial instrument whose value depends on the underlying asset, often used for risk management.
HedgingUsing financial instruments to offset or reduce the risk of adverse price movements in an asset.
LeverageUsing borrowed capital to increase the potential return of an investment.
Margin CallDemand by a broker for an investor to deposit more money to cover potential losses.
OptionA financial contract giving the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price.
Futures ContractAn agreement to buy or sell an asset at a future date for a price agreed upon today.
SwapsFinancial agreements between two parties to exchange cash flows or other financial instruments.
Basis Point (BPS)One-hundredth of a percentage point, used to express differences in interest rates.
Yield CurveA graphical representation of the relationship between the interest rates and the time to maturity of debt.
Liquidity RiskThe risk that an asset cannot be sold or traded quickly without impacting its price.
Default RiskThe risk that a borrower will fail to repay a loan or meet contractual obligations.
AlphaA measure of investment performance, indicating returns above or below a benchmark.
BetaA measure of an asset’s sensitivity to market movements.
Standard DeviationA statistical measure of the dispersion of returns for a given security or market index.
Sharpe RatioA measure of risk-adjusted performance, indicating return per unit of risk.
Capital Asset Pricing Model (CAPM)A model that calculates the expected return on an investment based on its risk compared to the market as a whole.
Efficient Market Hypothesis (EMH)The theory that asset prices reflect all available information, making it impossible to consistently achieve higher-than-average returns.
Quantitative Easing (QE)A monetary policy in which a central bank buys financial assets to increase the money supply.
Private EquityInvestments in private companies or assets not traded on public markets.
Venture CapitalFunding provided to early-stage companies with high growth potential.
Mezzanine FinancingA hybrid of debt and equity financing often used for expansion or buyouts.
Initial Public Offering (IPO)The first sale of a company’s stock to the public.
Market Capitalization WeightedA method of constructing indices where the weight of each component is based on its market value.