![]() Cash Flow Statement: A cash flow statement is a financial statement prepared to provide a detailed analysis of what happened to a company’s cash during a given period of time. Financing Cash Flow: The net cash generated financing a business, including debt payments, shareholders’ equity, and dividend paymentsĨ.Investing Cash Flow: The net cash generated from investing activities, such as securities investments and the purchase or sale of assets.Operating Cash Flow: The net cash generated from normal business operations.Cash flow is commonly broken into three categories, including: Cash Flow: Cash flow refers to the net balance of cash moving in and out of a business at a specific point in time. ![]() ![]() ![]() Hedge funds: A hedge fund is another type of institutional investor, which controls risk through hedging-a process of buying one stock and then shorting a similar stock to make money from the difference in their relative performanceħ.Mutual funds: A mutual fund is an institutional investor that manages the investments of thousands of individuals.Institutional investors: Investors who purchase stocks and bonds on behalf of a large capital base.Companies: Firms that sell stocks and bonds to investors.Capital markets feature several participants, including: Capital Market: This is a market where buyers and sellers engage in the trade of financial assets, including stocks and bonds. Related: 6 Ways Understanding Finance Can Help You Excel ProfessionallyĦ. If you sell the asset for less than the original purchase price, that would be considered a capital loss. Capital Gain: A capital gain is an increase in the value of an asset or investment above the price you initially paid for it. The Balance Sheet Equation: Balance sheets are arranged according to the following equation: Assets = Liabilities + Owners’ Equityĥ.Balance Sheet: A balance sheet is an important financial statement that communicates an organization’s worth, or “book value.” The balance sheet includes a tally of the organization’s assets, liabilities, and shareholders’ equity for a given reporting period. Cash and Cash Equivalents: This refers to any asset in the form of cash, or which can be converted to cash easily in the event it's necessary.Ĥ.When you buy stock in a company, you become a shareholder and can receive dividends-the company’s profits-if and when they are distributed. Stocks: A stock is a share of ownership in a public or private company.You receive periodic interest payments and get back the loaned amount at the time of the bond’s maturity-or the defined term at which the bond can be redeemed. When you buy a bond, typically from the government or a corporation, you’re essentially lending them money. Bonds: Bonds represent a form of borrowing.Asset Allocation: Asset allocation refers to how you choose to spread your money across different investment types, also known as asset classes. Fixed Assets: Which can’t immediately be turned into cash, but are tangible items that a company owns and uses to generate long-term incomeģ.Current Assets: Which can be converted to cash within a year.There are different types of assets, including: Assets: Assets are items you own that can provide future benefit to your business, such as cash, inventory, real estate, office equipment, or accounts receivable, which are payments due to a company by its customers. Intangible assets are non-physical assets that are essential to a company, such as a trademark, patent, copyright, or franchise agreement.Ģ. Amortization: Amortization is a method of spreading an intangible asset's cost over the course of its useful life. Here are 20 financial terms and definitions you should know. But first, you need to grasp the terminology. Understanding the financial implications of your decisions and clearly communicating those decisions to key stakeholders can help advance your career. Narayanan, who teaches the online course Financial Accounting: ![]() To learn more about why you should further your financial knowledge if you're in a non-finance role, watch the video below featuring Harvard Business School Professor V.G. Quite frankly, it’s what keeps your company afloat an organization can’t operate successfully if it’s not financially sound. It’s what helps you balance short-term expenses with long-term goals, and meaningfully measure your team’s performance. It’s what determines the number of employees you can hire, and dictates your annual budget. But developing your financial skills so that you have a financial fluency can help you excel professionally and make a greater impact on your company.įinance affects every business function. For non-finance professionals, the thought of talking data, forecasts, and valuations can seem daunting. ![]()
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