a publication by vittshala - the financial literacy cell of SRCC
ABNORMAL RETURN Abnormal return is the return on a stock over and above the expected return as per the market movements. Example: the expected return on an investment was 15%. However, the investment returned 25% instead of the expected 15%. Such a situation is called abnormal return on investment. When the total interest due on a loan as per the interest rate is added to the principal amount to calculate the periodic payments, then such loan is called add on loans. Here, the payments are decided by dividing the total of principal and interest with the number of payments. Audit is a review of a company's financial statements to ensure accuracy and fairness. It can be done internally or externally. An unqualified audit means no material mistakes were found. ACCOUNTING CYCLE FINCYCLOPEDIA ADD ON LOANS AUDIT It is the process of recording and analysing transactions, determine a business' financial position. Now done using computer. ABNORMAL RETURN Abnormal return is the return on a stock over and above the expected return as per the market movements.
Annual return is the financial gain an investment yields over a year, including dividends, interests, and capital appreciation. It's a key metric for comparing investment performance. Example: if an investment's initial value is ₹100,000 and it grows to ₹150,000 in 5 years, the annual return is 50%. ARBITRAGE Arbitrage is the simultaneous buying and selling of an asset in different markets to profit from price discrepancies. ASSIGNMENT The transfer of property, or of a right or interest in property, by one person to another to be used for the recipient's own benefit is called assignment. Appreciation refers to an increase in the market value of the assets due to fluctuating market conditions. Example: the price of a share of Reliance industries increased from 2500 to 3000, then the share value is said to be appreciated by 20%. ASSET An asset is a resource that holds economic value and is expected to provide future benefits. Examples: cash (current asset), machinery (fixed asset), shares (financial asset), and goodwill (intangible asset). ARREAR Arrear is a financial term that is used to describe an obligation that has not been paid on its due date. This term is generally used when one or more payments have been missed where regular payments were contractually required. FINCYCLOPEDIA Example: Traders exploit price differences in a stock listed on multiple exchanges, buying where it's lower and selling where it's higher. APPRECIATION
An auction market is a place where the interested buyers and sellers enter competitive bids and offers simultaneously. The price at which the security trade reflects the highest price the buyer is interested to pay and the lowest price at which the seller is interested to sell. The acid test ratio, also known as the quick ratio, measures a company's ability to pay its short-term obligations with its most liquid assets. It is calculated by dividing current assets (excluding inventory) by current liabilities. The ideal ratio is considered to be 1 or higher. ASSET ALLOCATION ACTIVITY RATIOS Asset allocation is the strategy of dividing investments among different asset classes (like stocks and bonds) to balance risk and return. Activity ratios are used to measure how well a firm is using its resources. There are four types of activity ratios1. Inventory turnover ratio 2. Average collection period 3. Fixed-asset turnover ratio 4. Total asset turnover ratio . Example: a portfolio with 60% stocks and 40% bonds demonstrates a balanced risk-return profile through strategic asset allocation. ACCRUED INTEREST Accrued interest refers to the interest income that has been incurred but not yet received. In such a case, it’s a right of the firm to receive their accrued interest and therefore these are classified as current assets. ARBITRAGEUR FINCYCLOPEDIA AUCTION MARKET An individual engaging in arbitrage is called arbitrageur. They make profits from the price differences of an asset in different markets, buying low in one market and selling high in another to exploit market inefficiencies.
Annuity is a financial product that provides regular payments, typically for retirement. An immediate annuity could be used by someone who wants to receive fixed monthly payments after retiring, while a deferred annuity could be used by someone who wants to invest now and receive payments at a later date. ACCRUAL ACCOUNTING Accrual accounting records revenue and expenses when earned or incurred, regardless of when the cash is received or paid. Example: Recognizing sales when the product is shipped, even if payment is received later. Agency bonds are debt securities issued by government-sponsored entities (GSEs), like Fannie Mae and Freddie Mac, to fund specific public programs. Example: Fannie Mae issues agency bonds to finance affordable housing initiatives. Absolute return measures an investment's performance without comparing it to a benchmark, focusing on positive returns in any market condition. Example: A hedge fund aiming for absolute returns seeks positive gains regardless of broader market trends. ASSET BUBBLE An asset bubble occurs when the prices of assets, such as stocks or real estate, rise significantly above their intrinsic values. Example: The dot-com bubble in the late 1990s saw inflated stock prices of related companies.. AMORTIZATION The process of reducing the value of an intangible asset or the book value of a loan over a specified period. It can refer to the regular payment of principal and interest on a loan or spreading the cost of an intangible asset over time. FINCYCLOPEDIA AGENCY BONDS ABSOLUTE RETURN
Accounting liquidity refers to how easily an asset can be converted into cash. Current assets, like cash and inventory, are considered liquid as they can be quickly converted, while fixed assets, like machinery, are less liquid because they take longer to convert into cash. ACCOUNTS PAYABLE Accounts payable is the amount of money a company owes to its suppliers for goods or services purchased on credit. It's a current liability on the balance sheet, representing the company's obligation to pay its creditors. Austrian Economics is a school of economic thought that emphasizes individual action, free markets, and entrepreneurship's role in economic development. Advocates argue for minimal government intervention and stress the importance of sound money and private property rights. Accounts receivable is the money owed to a company by its customers for goods or services provided but not yet paid for. It's considered a current asset on the balance sheet, representing the company's right to receive payment. AVERAGE COLLECTION PERIOD The average time required to collect money from accounting receivables like debtors, bills receivable is called average collection period. AMERICAN OPTION An American option allows the holder to exercise the option at any time before or on the expiration date. A stockholder might exercise an American call option early to capture gains before the stock price falls. ADJUSTABLE-RATE MORTGAGE An ARM is a mortgage with an interest rate that adjusts periodically, often based on changes in a corresponding financial index. FINCYCLOPEDIA AUSTRIAN ECONOMICS ACCOUNTS RECEIVABLES
Fleepit Digital © 2021