Investment

Holding Gain
A gain resulting from the length of time an asset has been held rather than its use in the operations of a business.
Holding Period
The holding period is the length of time an investment is owned or expected to be owned. It is critical in determining if a gain or loss from the sale or exchange of a capital asset is long-term or short-term for tax purposes.
Holdout
A holdout is an individual or entity that refuses to sell an asset or agree to terms in the early stages of negotiation, typically in an attempt to realize a higher price or more favorable conditions.
Homeownership
Homeownership refers to the state of living in a structure that one owns, rather than renting or serving as a tenant. Owning a home provides financial stability and potential asset appreciation over time.
Hot Issue
A newly issued stock that is in great public demand, often experiencing significant price increases at its initial public offering (IPO) due to high demand and limited availability of shares. Also known as a hot new issue.
Hybrid Annuity
A hybrid annuity is a contract offered by an insurance company that combines the benefits of both fixed and variable annuities, offering a balance between guaranteed returns and potential for higher earnings.
In the Money
This term is used in options trading to describe an option that would result in a gain if exercised at the current market price. It's the opposite of 'out of the money' where the option would result in a loss.
Index Fund
An index fund is a type of mutual fund designed to replicate the performance of a specific market index, such as the Standard & Poor's 500 Index (S&P 500). These funds aim to match the returns of the chosen index by holding identical proportions of the underlying assets.
Inflation Hedge
An investment designed to protect against the loss of purchasing power resulting from inflation, allowing investors to maintain the value of their money over time.
Inflation-Indexed Securities
Inflation-Indexed Securities are bonds or notes that guarantee a return exceeding inflation if held to maturity. These instruments include Treasury Inflation-Protected Securities (TIPS) and mutual funds owning such securities.
Initial Public Offering (IPO)
An Initial Public Offering (IPO) is a corporation's first sale of stock to the public. This event marks a pivotal moment for a company, transforming it from a private entity to a publicly traded company.
Interest Income
Interest income refers to the earnings obtained from various types of investments where the payment reflects the time value of money or from transactions where payments are made for the use or forbearance of money.
Internal Rate of Return (IRR)
The Internal Rate of Return (IRR) is the annualized effective compounded return rate or rate of return that makes the net present value of all cash flows (both positive and negative) from a particular project equal to zero.
International Organization for Securities Commissions (IOSCO)
Established in 1983, the International Organization for Securities Commissions (IOSCO) is an influential body dedicated to setting international standards for the regulation of global securities and futures markets. Based in Madrid, IOSCO promotes the adoption of internationally-agreed accounting standards, facilitating multinational share offerings.
Introduction of Securities
A method of issuing new securities in which a broker or issuing house takes small quantities of a company's shares and issues them to clients at opportune moments. This method is also used by existing public companies that wish to issue additional shares.
Invest
To allocate capital to an enterprise with the objective of securing income or profit for the investor.
Investment
Investment refers to the purchase of assets such as stocks, bonds, mutual fund shares, real property, collectibles, or annuities, with the expectation of obtaining income, capital gain, or both in the future. Investment tends to be longer term and less risky than speculation.
Investor
An investor is a party who allocates capital to purchase an asset with the expectation of financial returns. Generally, investors are more diligent and conservative compared to speculators.
J-Curve
In economics, the J-Curve illustrates the expected turnaround in an activity, such as foreign trade, where the initial deterioration is followed by a significant improvement.
Junior Issue
A junior issue refers to a type of debt or equity that is subordinate in claim to another issue, particularly in terms of dividends, interest, principal, or security in the event of liquidation.
Justified Price
Justified price refers to the fair market price that an informed buyer is willing to pay for an asset, whether it be in the form of stocks, bonds, commodities, or real estate.
Kangaroo Bonds
Kangaroo Bonds are bonds denominated in Australian dollars and issued in Australia by foreign firms, used to attract Australian investors while diversifying funding sources.
Kicker
A kicker is an added feature of a debt obligation, usually designed to enhance marketability by offering the prospect of equity participation. Common examples include convertible bonds, rights, and warrants. Kicker features may also be found in mortgage loans where ownership participation or a percentage of gross rental receipts is included. Kickers are also known as sweeteners.
Killing
In a financial context, 'killing' refers to a significant reward or huge profit gained from an investment. It can also imply the act of stopping or halting a project or endeavor.
Leverage
Leverage refers to the use of various financial instruments or borrowed capital—such as margin—to increase the potential return of an investment.
Limited Liability
Limited liability is a legal principle whereby a company's owners and shareholders are protected from being personally liable for the company's debts and liabilities, limited to the amount of their investment.
Limited Partner
A limited partner's liability is restricted to his or her investment in the partnership. Limited partners are often passive investors and do not participate in the day-to-day operations of the business.
Liquidity Risk
Liquidity risk refers to the potential risk that an investment cannot be liquidated during its life without significant costs or losses. This is particularly relevant in lending operations, where the ability to quickly convert an asset to cash is crucial.
Liquidity Trap
A liquidity trap is an economic situation where adding liquidity through increased money supply and lowered interest rates fails to stimulate borrowing, lending, consumption, and investment. It can sometimes be escaped through fiscal policy or distributing money directly to people.
Listed Company
A listed company is one that has a formal listing agreement with a major stock exchange, ensuring that its shares are publicly quoted and traded on that exchange. In the UK, these companies were once referred to as quoted companies.
Load Fund
A load fund is a type of mutual fund that requires investors to pay a sales charge, typically to compensate financial advisors and brokers who sell the fund’s shares.
Locked In
A term used in finance to denote secured rates of return, commodities positions in static markets, and investor withholding due to tax implications.
Long Coupon
In finance, a long coupon refers to the first interest payment of a bond issue, which covers a longer period than the subsequent payments or an interest-bearing bond maturing in more than 10 years.
Low (Bottom Price)
The lowest price paid for a security over a specified period, often a year, or since trading in the security began.
Macroeconomics
Macroeconomics is the branch of economics that studies an economy as a whole, focusing on large-scale factors such as national productivity and inflation, and how various sectors and factors interrelate to form a broader economic landscape.
Madrid Stock Exchange (Bolsa de Madrid)
The largest of the four stock exchanges in Spain, the others being located in Barcelona, Bilbao, and Valencia. All exchanges now use a centralized settlement system for trading and clearing.
Marginal Efficiency of Capital (MEC)
The Marginal Efficiency of Capital (MEC) is the annual percentage yield earned by the last additional unit of capital. It is crucial for determining the profitability of investment projects. Also known as marginal productivity of capital, natural interest rate, net capital productivity, and rate of return over cost, MEC indicates which projects exceed the market rate of interest and are thus profitable to undertake.
Marginal Propensity to Invest (MPI)
The Marginal Propensity to Invest (MPI) is a measure in economics that defines the proportion of additional national income that will be invested rather than consumed or saved.
Marginal Propensity to Save (MPS)
The Marginal Propensity to Save (MPS) represents the proportion of additional income that is saved rather than consumed by households. It plays a critical role in determining the economy's potential for investment and growth.
Market Order
A market order is a buy or sell order to be executed immediately at the current market prices. These orders guarantee execution but do not guarantee a specific price.
Market Order
A market order is an instruction given to a broker to buy or sell a security at the best available price at the moment the order is placed. This is executed immediately under current market conditions.
Master Limited Partnership (MLP)
A Master Limited Partnership (MLP) is a type of business organization that combines the tax benefits of a partnership with the liquidity of publicly traded securities.
Medium-Term Note (MTN)
A Medium-Term Note (MTN) is a type of debt security that generally matures in five to ten years, offering issuers flexible financing and investors a range of maturities and interest rate structures.
Mortgage Debt
Mortgage debt refers to the amount of money owed under a mortgage, which is a type of loan used particularly for financing the purchase of real estate.
Mortgage-Backed Security (MBS)
A Mortgage-Backed Security (MBS) is a type of asset-backed security that is secured by a collection of mortgages. These securities enable banks to lend more aggressively while transferring the associated risk to investors.
Municipal Bond
A bond issued by a state or local government body such as a county, city, town, or municipal authority. Typically, the interest earned on municipal bonds is generally not taxable by the U.S. government, nor in the jurisdiction that issued it.
Municipal Certificate of Accrual on Treasury Securities (M-CATS)
M-CATS, or Municipal Certificate of Accrual on Treasury Securities, is a type of zero-coupon bond issued by a municipality. These bonds do not pay periodic interest but are sold at a significant discount to their face value.
Negotiable Certificate of Deposit (NCD)
A Negotiable Certificate of Deposit (NCD) is a time deposit with a bank that can be sold in the secondary market. These large-denomination CDs are typically issued in amounts over $100,000 and pay interest either to the bearer or to the order of the depositor.
Net Asset Value (NAV)
Net Asset Value (NAV) is a measure used to value a mutual fund or an exchange-traded fund (ETF) and represents the market value of these investment assets minus their liabilities, typically expressed on a per-share basis.
Net Dividend
Net Dividend refers to the dividend paid by a company to its shareholders after excluding the tax credit received by the shareholders.
Net Proceeds
Net proceeds refer to the amount received from the sale or disposition of property, from a loan, or the sale or issuance of securities after the deduction of all costs incurred in the transaction.
New Money
New money refers to the additional long-term financing provided to a company or government through new issues or issues exceeding the amount of a maturing issue or by issues that are being refunded.
No-Load Fund
A no-load fund is a type of mutual fund offered by an open-end investment company that does not impose any sales charge (load) on its shareholders. Investors can buy shares in no-load funds directly from the fund companies, rather than through a broker, as is typical in load funds.
Offering Circular
An offering circular is a document used to provide details about a property or security offering when a prospectus is not required.
Official List
The Official List refers to two primary components within the London Stock Exchange framework: a comprehensive list of all traded securities and a daily record of transactions, dividends, rights issues, prices, and other relevant data.
Online Trading
Online trading involves the buying and selling of stocks or other securities over the Internet without the need for a physical broker, leading to lower fees and faster transactions.
Open Market Value (OMV)
OMV refers to the value of an asset or property in the open market, where a willing buyer and a willing seller, both knowledgeable about the item, complete a transaction without undue pressure.
Open Order
An open order refers to a buy or sell order for securities that has not yet been executed or canceled.
OPM (Other People’s Money)
A term frequently used on Wall Street to describe the use of borrowed funds by individuals or companies to increase the return on invested capital, as well as an acronym for the options pricing model.
Optionor
An optionor is a party who grants or sells an option, allowing another party, known as the optionee, the right but not the obligation to execute a transaction, typically involving the purchase or sale of an asset, under specified terms within a defined timeframe.
Original Equity
Original equity refers to the amount of cash initially invested by the underlying owner in a venture or business. It is distinct from sweat equity and capital calls.
Overvalued
A stock is considered overvalued when its current market price does not seem justified based on its earnings and growth potential, suggesting that it is likely to decrease in price.
Par Value
Par value, also known as face value or nominal value, is the minimum price at which shares or other securities are issued and can be redeemed. The par value is typically set by the company at the time of issuance and does not fluctuate.
Participation Certificate
A Participation Certificate is a financial instrument representing a share in a pool of funds or in other assets, such as mortgage pools. It provides investors with a means to invest in collective assets and receive proportional income from those assets.
Pass-Through Certificate
A Pass-Through Certificate is an investment instrument that allows investors to receive income that is derived from another entity, often a group of pooled assets such as mortgages. These pooled assets generate receipts or payments that are subsequently passed through to the certificate holders.
Passive Income Generator (PIG)
An investment or activity that generates passive income, typically seen in income-oriented real estate limited partnerships. This income can offset passive activity losses (PALs) for tax purposes.
Payback Period Method
The Payback Period Method is a capital budgeting technique that calculates the time required for projected cash inflows to equal initial investment expenditure, often used to gauge project risk.
Penny Stock
Penny stocks are securities trading at a low price, generally less than $5 per share, and are issued by small companies with short or erratic revenue and earnings histories, often traded over-the-counter.
Performance Fund
A type of mutual fund that primarily focuses on achieving high capital growth by investing in high-growth companies that typically pay small or no dividends.
Performance Stock
Performance stock, also known as growth stock, refers to equity in companies perceived by investors as having potential for significant value appreciation. These stocks usually either pay small dividends or no dividends at all.
Permanent Interest Bearing Shares (PIBS)
Permanent Interest Bearing Shares (PIBS) are a type of high-yield investment traditionally offered by UK building societies, providing fixed interest payments to investors.
Positive Carry
Positive carry is a financial situation in which the cost of borrowing money to finance an investment is lower than the yield earned from that investment.
Precious Metals
Precious metals such as gold, silver, platinum, and palladium are highly valued for their intrinsic value, role in backing world currencies, aesthetic appeal, and industrial applications. Their prices are influenced by supply and demand, political and economic considerations, and global events.
Preference Dividend
A preference dividend is a type of dividend that is paid to holders of preference shares and often carries preferential rights compared to common share dividends. This term is closely associated with cumulative preference shares, especially concerning unpaid dividends from prior periods.
Premium Bond
A premium bond is a type of bond that sells for more than its face or redemption value. For example, if a bond with a face value of $1,000 sells for $1,050, it is considered a premium bond. The premium can be amortized on a straight-line basis over the life of the bond for tax purposes.
Present Value (Discounted Value)
Present value, also known as discounted value, is the current worth of a sum of money or a stream of cash flows that will be received or paid in the future, calculated using a specific discount rate. It is an essential concept in finance, particularly in discounted cash flow (DCF) analysis.
Pricey
Pricey refers to products or services offered at prices at or near the top of what the market will bear, or in investment terms, offering or bidding prices that are significantly above or below the current market value.
Private Offering
A private offering, also known as private placement, refers to an investment or business offered for sale to a small group of investors, generally under exemptions to registration allowed by the Securities and Exchange Commission (SEC) and state securities registration laws.
Problem Child
In the context of the Boston Consulting Group (BCG) Matrix, a 'Problem Child' represents a business unit, product line, or project that holds a small market share in a high-growth market. These units or products have the potential to grow but require significant investment to gain market share.
Public Offering
A public offering refers to the sale of equity shares or other financial instruments by an organization to the public to raise capital. This process typically involves issuing stock through an initial public offering (IPO).
Public Offering
A public offering involves inviting the public to apply for a new issue of shares or other securities, typically through advertisements in the national press and at a price fixed by the issuing company.
Qualified Stock Option
An agreement in the USA that allows employees to purchase company stock at a future date at a specified price, often lower than the market price, and meeting the IRS's requirements.
Range
Range is a key metric used in various fields, such as investment and statistics, to measure the scope of data or price fluctuations within a specific period.
Rate of Interest
The rate of interest represents the cost of borrowing money expressed as a percentage of the principal amount. It is a fundamental concept in both personal and corporate finance, impacting loans, savings, investment decisions and the overall economy.
Rating
The process of systematically assigning ranks or evaluations to goods and services based on set criteria, encompassing various domains such as credit, investment, and insurance.
Raw Land
Acreage with no added improvements such as landscaping, drainage, streets, utilities, and structures.
Real Interest Rate
The real interest rate is the nominal interest rate adjusted for inflation. It represents the true cost of borrowing and the real yield on investments.
Recovery
The term 'recovery' in various fields refers to the period when economic activity picks up after a downturn, absorption of costs or collections in finance, and rising prices in investment markets.
Recovery Rate
The recovery rate is a measurement in finance that represents the extent to which principal and accrued interest of defaulted debt are reclaimed by a creditor. It is a crucial metric for risk assessment and investment decision-making in the realm of distressed securities and defaulted bonds.
Redeemable Bond
A redeemable bond, also known as a callable bond, is a type of bond that the issuer can redeem before its maturity date at a predefined call price.
Redemption Fee
A redemption fee is a charge imposed for the repurchase or release of an asset from creditor claims, commonly used in mutual funds and other types of investments.
Redemption Yield
Redemption yield, also known as yield to maturity, is a measure of the annual return an investor can expect to earn if a bond is held until maturity. It factors in both the bond's current market price and its interest payments.
Repatriation
Repatriation involves the movement of financial assets or profits of an organization or individual from a foreign country back to their home country, often for investment or distribution purposes.
Repurchase Agreement (Repo)
A repurchase agreement, or repo, is a form of short-term borrowing for dealers in government securities. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day.
Return
Return can have varied meanings in different contexts, including finance, investment, retailing, taxes, and trade. Generally, it refers to profits, exchanges, and refunds or credits, often associated with securities, merchandise, or taxpayer information.
Risk Premium
The risk premium represents the difference between the expected rate of return on an investment and the risk-free rate of return (such as those on government bonds) over the same period. It accounts for the compensation investors require to bear the additional risk associated with investment.
Risk-Free Rate of Return
The rate of return on an investment that has no risk. The return on US and UK Treasury bills is often regarded as a very close approximation to this rate. The risk-free rate is an important concept in the Capital Asset Pricing Model (CAPM).

Accounting Terms Lexicon

Discover comprehensive accounting definitions and practical insights. Empowering students and professionals with clear and concise explanations for a better understanding of financial terms.