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Business & Finance > Keywords in Business & Finance > Flashcards

Keywords in Business & Finance Flashcards

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1
Q

What is Dollar-Cost Averaging (DCA)?

A

DCA is an investment strategy where an investor regularly invests a fixed amount of money into a particular asset or portfolio, regardless of its price.

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2
Q

What does ERP stand for?

A

Enterprise Resource Planning.

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3
Q

What is the function of an ERP system?

A

ERP is a software solution that integrates and manages core business processes across an entire organization.

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4
Q

What does CRM stand for?

A

Customer Relationship Management.

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5
Q

What is the primary purpose of a CRM system?

A

CRM helps businesses manage and analyze their interactions with current and potential customers.

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6
Q

What is lump sum investing?

A

Lump sum refers to investing a large amount of money all at once into an asset or portfolio.

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7
Q

What is Asset Allocation?

A

The process of dividing an investment portfolio among different asset categories to balance risk and reward.

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8
Q

What is Diversification in investing?

A

A risk management strategy that mixes a wide variety of investments to reduce risk.

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9
Q

What is Risk Tolerance?

A

The degree of variability in investment returns that an investor is willing to withstand.

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10
Q

What is Compound Interest?

A

Interest that is calculated not only on the initial principal but also on the accumulated interest from previous periods.

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11
Q

What is an Index Fund?

A

A type of mutual fund or ETF designed to replicate the performance of a specific market index.

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12
Q

What is a Mutual Fund?

A

An investment vehicle that pools money from many investors to invest in a diversified portfolio of stocks, bonds, or other securities.

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13
Q

What is an ETF (Exchange-Traded Fund)?

A

An investment fund traded on stock exchanges like a regular stock, offering diversification and lower fees.

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14
Q

What are Blue-Chip Stocks?

A

Shares in large, well-established companies with a history of reliable performance.

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15
Q

What are Bonds?

A

Debt securities issued by entities like governments or corporations to raise capital.

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16
Q

What is a Dividend?

A

A portion of a company’s earnings paid out to shareholders regularly.

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17
Q

What is Market Capitalization (Market Cap)?

A

The total market value of a company’s outstanding shares of stock.

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18
Q

What is a Bull Market?

A

A financial market condition where prices are rising or are expected to rise.

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19
Q

What is a Bear Market?

A

A market condition characterized by falling prices and a general pessimism among investors.

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20
Q

What is Volatility in the market?

A

A measure of the dispersion of returns for a given security or market index.

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21
Q

What is Inflation?

A

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

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22
Q

What is Liquidity in financial terms?

A

The ability to quickly convert an asset into cash without significantly affecting its price.

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23
Q

What is Yield in investments?

A

The income return on an investment, often expressed as a percentage.

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24
Q

What is the P/E Ratio?

A

Price-to-Earnings Ratio, a valuation metric comparing a company’s share price to its per-share earnings.

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25
Q

What is a REIT (Real Estate Investment Trust)?

A

A company that owns, operates, or finances income-producing real estate.

26
Q

What are Capital Gains?

A

Profits realized when an asset is sold for a price higher than its purchase price.

27
Q

What is a Hedge Fund?

A

A pooled investment fund that employs various strategies to earn active returns for its investors.

28
Q

What is an IPO (Initial Public Offering)?

A

The process by which a private company offers shares to the public for the first time.

29
Q

What is a Stop-Loss Order?

A

An order placed with a broker to buy or sell once the stock reaches a certain price.

30
Q

What is Margin in stock trading?

A

Borrowing money from a broker to purchase stock, with the margin being the difference between the investment value and loan amount.

31
Q

What is Time Horizon in investing?

A

The expected timeframe over which an investment will be held before being liquidated.

32
Q

What is the primary advantage of Dollar-Cost Averaging (DCA)?

A

DCA reduces the impact of market volatility by spreading investments over time.

33
Q

What is the main risk of lump sum investing?

A

The entire investment is exposed to market downturns if prices fall soon after investing.

34
Q

What is the goal of asset allocation?

A

To balance risk and reward based on an investor’s goals, risk tolerance, and investment horizon.

35
Q

How does diversification reduce risk?

A

By spreading investments across various assets, it minimizes the impact of a single asset’s poor performance.

36
Q

Why is risk tolerance important in investing?

A

It helps determine the appropriate asset allocation and investment strategy.

37
Q

How does compound interest benefit long-term investments?

A

Compounding allows interest to grow on both the initial principal and accumulated interest, significantly increasing returns over time.

38
Q

What type of market index might an index fund replicate?

A

An index fund could replicate the performance of indexes like the S&P 500.

39
Q

What is the difference between a mutual fund and an ETF?

A

A mutual fund is actively managed, while an ETF is traded like a stock and generally has lower fees.

40
Q

What makes blue-chip stocks attractive to investors?

A

They are considered lower-risk due to their established track record and reliable performance.

41
Q

How do bonds generate returns for investors?

A

Bonds pay periodic interest and return the face value at maturity.

42
Q

Why are dividends attractive to investors?

A

Dividends provide a steady income stream, often on a quarterly or annual basis.

43
Q

How is market capitalization calculated?

A

Market capitalization is calculated by multiplying a company’s current stock price by the number of outstanding shares.

44
Q

What signifies a bull market?

A

A bull market is signified by rising prices and investor optimism.

45
Q

What typically characterizes a bear market?

A

Falling prices and investor pessimism characterize a bear market.

46
Q

What does high market volatility indicate?

A

High volatility indicates that an asset’s price can change dramatically in a short period.

47
Q

How does inflation affect investments?

A

Inflation erodes the purchasing power of money, reducing the real value of returns over time.

48
Q

What is an example of a highly liquid asset?

A

Stocks are an example of highly liquid assets, as they can be quickly sold without significant price changes.

49
Q

What does yield measure in an investment?

A

Yield measures the income return, such as interest or dividends, expressed as a percentage.

50
Q

Why is the P/E Ratio used?

A

The P/E Ratio helps investors determine if a stock is overvalued or undervalued.

51
Q

What type of investments do REITs focus on?

A

REITs focus on income-producing real estate.

52
Q

How do short-term capital gains differ from long-term capital gains?

A

Short-term capital gains apply to assets held for one year or less, while long-term gains are on assets held for more than a year.

53
Q

What strategies might a hedge fund use?

A

Hedge funds may use leverage, derivatives, and short-selling to achieve their investment objectives.

54
Q

What is the purpose of an IPO?

A

An IPO allows a private company to raise capital by offering shares to the public for the first time.

55
Q

When is a stop-loss order used?

A

A stop-loss order is used to limit losses by automatically selling a stock once it reaches a certain price.

56
Q

What is the risk of trading on margin?

A

Trading on margin involves borrowing money, which can amplify both gains and losses.

57
Q

Why is time horizon critical in investment strategy?

A

A longer time horizon typically allows for greater risk tolerance and potential for higher returns.

58
Q

What is the difference between CRM and ERP?

A

CRM focuses on customer-facing business aspects, while ERP manages internal business processes.

59
Q

How does Dollar-Cost Averaging help during market volatility?

A

By investing a fixed amount regularly, DCA averages the cost of purchases over time, potentially lowering overall risk.

60
Q

Why might an investor choose an ETF over a mutual fund?

A

An investor might prefer an ETF for its lower fees, flexibility in trading, and tax efficiency.

61
Q

What are the potential tax benefits of long-term capital gains?

A

Long-term capital gains are often taxed at a lower rate than short-term gains.

Business & Finance (32 decks)

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