Dictionary

Absolute advantage: It defines the capacity of a person or party to produce greater and better output using fewer inputs, than another party or an individual. Ability to carry out economic business more organize and systematic than another group. 

Accounting Equation: Assets = liabilities + equity 

Assets of a company are the total liabilities and owners’ equity. This is the basic accounting equation also called the balance sheet equation, displaying the relationship between the assets, liabilities, and equity which ensure that every debit entry should have a corresponding credit entry.

Accounting Rate of Return (ARR)

ARR = average revenue/initial investment
It calculated as asset’s average net income by average investment from the Company. To simply put, It is a formula which shows total income excluding total investments to see the total gain.

Acid-Test Ratio: Quick Ratio = Current assets/Current liabilities 

It is also called quick ratio which measures to indicate if the company holds enough assets to extinguish its liabilities. Current assets can be cash, Marketable securities and account receivable, so on.

Acquisition:  When an individual or a company buys most or all of another company’s Shares. Purchasing more than 50% of the firm’s stock in order to gain control over the company. The acquisition is very common in business.

Adverse Selection: It generally refers to a certain situation or a state where seller and buyer have asymmetric or different information about the product. This is also called information failure, which means a seller has more information than buyers or vice versa.

After-Hours Trading: This basically refers to extended times where stock is traded either before or after the stock market is either open or close respectively. This usually starts at 4 p.m. U.S. Eastern time after the major U.S. stock exchanges are close. This is also called Extended-Hours trading.


Alpha: It is a term to display investment Plan, ability to gain more return compare to the market return index of the same period of time. This term is used when there is an excess return or abnormal rate of return. Alpha can be either positive or negative where negative represent investment underperformed the market.


Amalgamation: It defines as when two or smaller companies into a new entity or few lagers once where all of their assets and liabilities of every company are acquired or combine together.


American Depositary Receipt (ADR): This represents numbers or shares of foreign company’s stock and allows that shares to trade in the U.S. financial market which is authorized by the U.S. depository bank. It basically allows the individual or a company to purchase foreign stock.


American Dream: It is an ideology or belief system that anyone can achieve success in their own community or society regardless of race, gender, or religion. This can attain not merely a luck but sacrifice and hard work. 

Analysis of Variance (ANOVA): This is an analysis tool which exploits the variance between two data sets by analyzing the differences among the group means in Sample.


Angel Investor: Those who support and provide capital or assets to small Startup Company or business in exchange for ownership of the company. This helps the business ongoing and carry the company through difficult early stages by financially backing.

Annual Percentage Rate (APR): It is the rate at which the interest charges are applied annually rather than monthly on money borrow or took a loan from the investors.

Annuity: It is a series of payment paid to other individual or party at equal intervals of time like mortgage, insurance and pension payments etc. This kind of stream income is primarily used for retirees.

Applicable Federal Rate (AFR): It is the interest rate applies to personal loans at the minimum rate under U.S. law which is enforced by the Internal Revenue Service (IRS). Artificial Intelligence (AI): AI is an imitation or simulation of human intelligence, combine by machine and software of millions of codes, to process and act like humans, having the ability to solve problems on their own without external help.

Asset: It is a resource like a fund, bonds, shares, real estate or capital, own by an individual or organization which has economic value. It can be utilized to gain income and will provide a future benefit.

Asset Management: It is a management process where assets are maintained and sell via a systematic approach and cost-effective manner perform by asset manager on behalf of the owner.

Asset Turnover Ratio: ATR = Net Sales/Average Total Assets 

It is a financial ratio measuring the sales or income relative to a firm’s assets. This ratio indicates the revenue generated by the company’s assets. 

Assets Under Management (AUM): It measures the total market value of investment or all financial assets which a financial company like mutual funds manages on behalf of clients or individuals.


Automated Clearing House (ACH): This is the electric base transfer of funds system Via network run by NACHA. This system provides services like payroll, tax payments, refunds, deposits, bills and many more. 

Automated Teller Machine (ATM): It is an electronic base machine providing basic banking services to the consumer like cash withdrawal, balance inquiry, access to deposits, and many more depending on the service provider.

Average True Range (ATR): It is an indicator which measures the volatility of the asset by analyzing the entire range of its price at the specific time period. This basically measures the unpredictable and rapid change of market price rather than the trend. 

A-B Trust: A and B represent a couple and with the help of trust, the couple can bypass or minimize the estate taxes. In case one spouse dies, all the assets owned by death spouse will be transfer and control by the other exempting the taxes. 

AAA: This represents the highest rating assign to money lenders or issuer by rating agencies like S&P and Fitch rating. This means that the investor will have the lowest risk of default and issuers will be able to meet any financial commitments. 

AARP: It stands for “American Association of Retired Persons” which is a Non-profitable organization mainly focusing on the retired person who is older than 50 years old. It works to address the needs and interests of elderly people in the U.S. providing member benefits like jobs, health, and Medicare. 

Abenomics: It is economic policies name after the Shinzo Abe who is a Japanese prime minister from 2012 to 2020. The purpose of Abenomics is to increase the national money supply boosting government spending which helps to reform the japan economy. 

Ability-To-Pay Taxation: It is an ideology or philosophy that taxes must be paid if the taxpayer can afford it. The main idea is that those with more income and wealth should pay more taxes to give back to society or the community. 

Abnormal Return: It describes the abnormal or unexpected profit gain or returns from its actual return of a given security over a specified period. This kind of return is sometimes triggered by events like interest rate increase, merger, and lawsuits and so on. 

Absorption Costing: Also called Full absorption cost or Total absorption cost which is an accounting method to enlist all the cost that is related to the manufacturing of the product, labour, materials, and services etc. 

Absorption Rate: AR = Home sold / Home Available In real estate, it defines the rate at which the home is sold comparing with an available home at a given time in the market. 

Accelerated Depreciation: This represents how much of assets market value has been used up or decreases at faster rate at early years and this generally leads to minimizing taxable income. 

Acceleration Clause: Also called Acceleration covenant, which is kind of like an agreement or provision in the contract that borrower must repay all of the loans like mortgages or purchase of real estate if certain requirements are not met. 

Acceptable Quality Level (AQL): This concepts tells the quality limit or control the quality of the product. During the manufacturing of a certain product, the numbers of faults in the product should be less than AQL otherwise the entire branch of product is rejected.

Accepting Risk: It is a risk management concept also called risk retention, occurs when individual or business identifies risk and acknowledges certain losses but bearable, hence making no effort to reduce or eliminate the risk.

Accidental Death and Dismemberment Insurance (AD&D): It is an insurance policy that provides benefits in case of unintentional death or accident of someone. If someone dies accidently having this insurance than all the benefit will go to beneficiary but if the victim live through and cause dismembered, he/she themselves will be the recipient of the benefit.

Accidental Death Benefit: This is an insurance policy where the accidental death of someone gets benefits to their beneficiary by payment.


Account Balance: It’s a number representing the amount of money person or party has in their financial inventory such as saving or checking account.


The account in Trust: Also call trust account, which means that financial account created by an individual is operating and managed by a designated trustee.


Account Number: It is a series of numbers and sometimes it also contains letters and character that act as unique or identification of account that own by the person which gives access to their account.


Account Statement: It gives the report or summary of account activity within the set of date. Commonly use in checking account statement and brokerage account statement.


Accountability: It is the consequence or result of someone action. A person organization must face the outcome base on their performance and must be responsible.

Accountant: It refers to a person who is expertise in accounting activity like account analysis, auditing, or financial statement analysis etc.
Accountant Responsibility: Being an accountant comes with great responsibility since they work with financial and with the small mistake can cause trouble to the whole company. Account has much responsibility such as giving information to management by analyzing data, preparing reports and so on. 

Accounting: Also call accountancy, it’s the process of recording all the transaction that concern the business. It includes summarizing, analyzing and reporting. 

Accounting Conservatism: It is an accounting principle that mainly concerns about and legitimacy of financial statement of a person or party. Without this concept, the accountant can manipulate the records and the financial statement becomes unreliable which will effect on users of the statement. 

Accounting Cycle: It is a bunch of process working one after another which are identifying, analyzing and recording of the company. It starts with the transaction and ends with a financial statement.