Basic terms definitions Flashcards
What is the definition of ‘Asset’?
An asset is any resource owned by an individual or entity that is expected to provide future economic benefits.
True or False: Liabilities are debts or obligations that a company owes to outside parties.
True
Fill in the blank: The ______ is a financial statement that summarizes the revenues, costs, and expenses during a specific period.
income statement
What does ‘Equity’ represent in finance?
Equity represents the ownership interest in a company, calculated as assets minus liabilities.
Which of the following is an example of a current asset? a) Land b) Inventory c) Bonds
b) Inventory
What is ‘Cash Flow’?
Cash flow is the total amount of money being transferred into and out of a business, especially as affecting liquidity.
True or False: Depreciation is the process of allocating the cost of a tangible asset over its useful life.
True
What is the formula for calculating ‘Net Income’?
Net Income = Total Revenues - Total Expenses
What is a ‘Budget’?
A budget is a financial plan that estimates income and expenses over a specified future period.
Fill in the blank: A _____ is a financial instrument that represents an ownership share in a company.
stock
What is ‘Return on Investment (ROI)’?
ROI is a measure used to evaluate the efficiency of an investment, calculated as (Net Profit / Cost of Investment) x 100.
Which of the following is NOT a type of financial market? a) Stock Market b) Bond Market c) Weather Market
c) Weather Market
True or False: A ‘Mutual Fund’ pools money from many investors to purchase securities.
True
What does ‘Diversification’ mean in an investment context?
Diversification is the strategy of spreading investments across various financial instruments to reduce risk.
What is ‘Credit Score’?
A credit score is a numerical expression of a person’s creditworthiness, based on their credit history.
Fill in the blank: The _____ is the amount of money that an individual or business owes to lenders.
debt
What is ‘Interest Rate’?
The interest rate is the percentage of a loan charged as interest to the borrower, typically expressed on an annual basis.
Which of the following is a long-term liability? a) Short-term loans b) Bonds payable c) Accounts payable
b) Bonds payable
True or False: A ‘Bear Market’ refers to a market condition where prices are rising or are expected to rise.
False
What is ‘Inflation’?
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power.
What does ‘Liquidity’ refer to in finance?
Liquidity refers to the ease with which an asset can be converted into cash without affecting its market price.
Fill in the blank: A _____ is a legal entity that is separate and distinct from its owners.
corporation
What is ‘Capital Gain’?
Capital gain is the increase in the value of an asset or investment over time, realized when the asset is sold.
Which of the following is an example of a fixed expense? a) Rent b) Groceries c) Entertainment
a) Rent
What is the purpose of ‘Financial Statements’?
Financial statements provide an overview of a company’s financial performance and position, helping stakeholders make informed decisions.
True or False: A ‘Dividend’ is a payment made by a corporation to its shareholders, usually in the form of cash or additional shares.
True
What does ‘Market Capitalization’ represent?
Market capitalization represents the total market value of a company’s outstanding shares, calculated as share price multiplied by the number of shares.
