12b-1 fees

Fees charged to mutual fund investors to cover sales and marketing expenses.

Absolute advantage

A situation in which a company can gain more benefits than another company (with the same amount of resources).

Accounting profits

The sales revenues minus the expenses of a firm over a period, generally one year.


American Depositary Receipt is a negotiable certificate representing a certain number of shares in a foreign corporation.

American option

A option that can be exercised at any moment through the expiration day.


An annuity is a promise from an insurance company to give you "the annuitant", payments for the rest of your life.

Ask price (offer price)

The price at which a dealer is ready to sell a specified quantity of a security.

Average collection period

(Average net receivable/ Credit sales)*365

It is the number of days it takes to a company to convert its receivable into cash.

Balance of payments

The sum of all economic transactions between a country and all other countries for a specific time period.

Back end load

Fees charged when an investor sells shares of a mutual fund.

Back office

All administrative functions at a bank or financial institution such as those pertaining to transaction processing, record keeping and regulatory compliance.

Basis point

Sometime denominated as a bp, is equal to one/hundred of a percentage point (0,01%).

Behavioral finance

An approach to finance based on the observation that psychological variables affect and sometime distort investment decisions.


Measure the sensitivity of an investment or portfolio to movements in the overall market.

Bid-ask spread

The difference between price of a security at which dealers are willing to buy or sell.


A bond is a debt investment in which technically the investor is lending money to an entity (the entity could be a corporation or a government).

Book value

Company’s net worth on a accounting basis.

Bottom up

Research an investment focusing on company fundamentals such as revenues, earnings and cash flow.

Business cycle

Variations in the general level of economic activity.

Buy-side analysts

Analysts employed by an asset management company (investment manager or institutional investor).

Capital gain

The difference between the purchase price and the sell price.

Cash ratio

Cash + marketable securities/Current liabilities

Central bank

An institution that controls the supply of money of a country and regulates the banking system.


Person that uses graphics and charts in order to forecast future prices.


Engaging in excessive buying and selling transactions for the sole purpose of generating commissions.

Closed End Funds

A closed end fund has a limited amount of shares. An investor can invest in a closed end fund by buying shares on a secondary market.


Cost of goods sold.


Articles coming from the nature like agricultural goods, metals and petroleum.


Measure of how interest rate sensitivity changes with a modification of interest rate levels.

Cost basis

The original cost of an investment.


The relationship between two variables.


Consumer price index is an indicator of the general level of prices.

Credit rating

An evaluation of the financial strength of a company or a government. This is usually done by a rating agency (S&P, Moody are among the largest).

Credit risk

The possibility that a counter party will not repay interest and/or principal in timely manner.

Current ratio

(Current assets-inventory)/current liabilities

The current ratio is helpful when determining the short-term risk of a company.

Cyclical stocks

In general, the shares of cyclical companies have their earnings more affected by business cycles.

Debt to asset ratio

Total Debt /Total assets

A ratio under 1 means that at least of half of assets is financed with equity.

Default risk

The risk of an issuer or counterparty does not fulfill its contractual obligation.


A general decrease in prices.


A diminution in the value of the domestic currency relative to foreign currencies.

A diminution in the value of assets.

The allocation of the cost of assets when producing goods or services.

Discount rate

The interest rate the Federal Reserve charges banks for borrowing funds.

Dividend yield

Dividend per share/stock price

Dollar cost averaging

The process of buying shares on a regular basis.


Measure approximately the sensitivity of a security (like a bond) to a change in interest rates.


Earnings before interest and taxes.


Earnings before interest, taxes, depreciation and amortization.

Economic profit

The firm’s total revenues less its total cost (including explicit and implicit costs)

Efficient frontier

A graphical representation of a set of portfolios that maximize expected return for their level of risk.

Efficient market

A theory that says securities prices are correctly priced thanks to information readily available and many participants on the market.

Enterprise value

Market value of equity + market value of debt-cash


Earning per share.

Escrow account

An account with a third partyin which a security or money is placed until specified conditions are met.

European option

An option that can be exercised only at expiration.

Exchange rate

The price of a foreign currency in terms of domestic currency.

Exchange Traded Notes

ETNs are senior, unsecured debt securities issued by a financial company generally a bank.

Exchange Traded Funds

An ETF is an index fund that trade like stocks. Generally an ETF is less expensive and more tax efficient than a mutual fund.

Ex-dividend date

The date at which the dividend coupon is detached. The corresponding stock usually drops by the same amount.

Expense ratio

The total percentage of fees paid by a fund’s net assets.

Family offices

An organized company owned by family. The goal the entity is to provide the family with financial planning, estate planning and asset management.

Federal funds rate

The interest rate on overnight deposits between U.S Federal Reserve member banks.

Federal Reserve

It is the central bank of United States. Like a central bank, the federal reserve is responsible to carry out banking regulatory policies and conducts monetary policy.

Federal funds rate

The interest rate on overnight deposits between U.S Federal Reserve member banks.

Fed Model

The Fed model says that market is overvalued if earning yield is less than the 10 year treasury bond yield.

Fiat money

Money with no intrinsic value. Paper currency is an example of fiat money.

Financial futures

Future contract to buy or sell a certain amount of an underlying security (stock, bond or currency).

Fixed asset turnover

Net sales/Average fixed assets

A low turnover means too much assets for few sales.A high turnover means a lack of productive capacity to meet sales demand.

Flexible exchange rate

Exchange rates that are determined by supply and demand.

Forward contract

An agreement between two parties in which one party agrees to buy (the buyer) from an another party (the seller), an asset in the future at a pre-established price.

Fund of funds

A fund that invest in other funds.

Futures contract

A regulated forward contract.

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