| 1. | CD | (Certificate of Deposit) A time deposit or familiar financial products, commonly offered to consumers by banks, thrift institutions, and credit unions. CDs are similar to savings accounts in being insured by a governmental deposit insurance scheme and thus virtually risk-free; they are "money in the bank." CDs are different from savings accounts in that the CD has a specific, fixed term—often three months, six months, or one to five years—and, usually, a fixed interest rate. It is intended |
| 2. | EVA | (Economic Value Added) The value of an activity that is left over after subtracting from it the cost of executing that activity and the cost of having lost the opportunity of investing consumed resources in an alternative activity. In business terms, one could calculate EVA as Income from Operations minus potential income from investing the amount of working capital and equity in sovereign debt, if sovereign debt can be considered an alternative opportunity to invest working capital and |
| 3. | FX | (Foreign eXchange) The exchange of currency from one to another . FX market is the largest market in the world, in terms of cash value traded, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. Retail traders (small investors or speculators) are a minute part of this market, may only participate indirectly through brokers or banks. Synonym: Forex |
| 4. | IOU | (I Owe You) A promise of money, goods, services, or other items of value, which may be either written or verbal. It is commonly held that the name derives from the phonetic pronunciations of the respective letters, which sound like the phrase "I owe you". An IOU is less formal than a contract such as a promissory note, and, unless in the form of a written document stating that the value discussed will be repaid within a certain time, is generally not held to be legally binding (in addition |
| 5. | IPO | (Initial Public Offering) The first sale of a company's common shares to public investors, any other issuance by the company being called a Secondary Market Offering. The company will usually issue only primary shares, but may also sell secondary shares. Typically, a company will hire an investment banker to underwrite the offering and a corporate lawyer to assist in the drafting of the prospectus. The sale of stock is overseen by financial regulators and where relevant by a stock |
| 6. | IRR | (Internal Rate of Return) The discount rate that gives a net present value (NPV) of zero. The NPV is calculated from an annualized cash flow by discounting all future amounts to the present. See also: NPV |
| 7. | LC | (Letter of Credit) A document issued by a financial institution which essentially acts as an irrevocable guarantee of payment to a beneficiary. This means that if the applicant obtaining the LC fails to perform its obligations, the bank must pay. The LC can also be the source of payment for a transaction, meaning that an exporter will get paid by redeeming the letter of credit. LCs are used nowadays almost exclusively in international trade transactions of significant value, for deals |
| 8. | NAV | (Net Asset Value) A term used to describe the value of an entity's assets less the value of its liabilities. The term is commonly used in relation to collective investment schemes. However, while the above definition is simple, there are many different types of entity, and different ways of measuring the value of assets and liabilities. In the context of collective investments (mutual funds), net asset value is the total value of the fund's portfolio less liabilities. The NAV is usually |
| 9. | NPL | (Non-Performing Loan) A loan that is in default or close to being in default. Many loans become non-performing after being in default for 3 months, but this can depend on the contract terms. “A loan is nonperforming when payments of interest and principal are past due by 90 days or more, or at least 90 days of interest payments have been capitalized, refinanced or delayed by agreement, or payments are less than 90 days overdue, but there are other good reasons to doubt that payments will be |
| 10. | NPV | (Net Present Value) A valuation method based on discounted cash flows. NPV is calculated by discounting of a series of future cash flows, and summing the discounted amounts and the initial investment (a negative amount). |
| 11. | OTC | (Over-The-Counter) Trading of financial instruments such as stocks, bonds, or derivatives directly between two parties. OTC is the opposite of exchange trading which occurs on futures exchanges or stock exchanges. An over-the-counter contract is a bi-lateral contract in which two parties agree on how a particular trade or agreement is to be settled in the future. For derivatives, these agreements are usually governed by an International Swaps and Derivatives Association agreement. An |
| 12. | PE | (Price/Earning; earnings multiple, multiple) A ratio used to measure how cheap or expensive share prices are. PE is probably the single most consistent red flag to excessive optimism and over-investment. It also serves, regularly, as a marker of business problems and opportunities. By relating price and earnings per share for a company, one can analyze the market's valuation of a company's shares relative to the wealth the company is actually creating. A PE ratio is calculated as: Price |
| 13. | PN | (Promissory Note) A contract detailing the terms of a promise by one party (the maker) to pay a sum of money to the other (the payee). The obligation may arise from the repayment of a loan or from another form of debt. For example, in the sale of a business, the purchase price might be a combination of an immediate cash payment and one or more promissory notes for the balance. The terms of a note typically include the principal amount, the interest rate if any, and the maturity date. |
| 14. | ROI | (Return on Investment) A measure of a corporation's profitability, equal to a fiscal year's income divided by common stock and preferred stock equity plus long-term debt. ROI measures how effectively the firm uses its capital to generate profit. The analysis of the return on investment is either done by static or dynamic formal methods, which may be distinguished by the role of time in the model chosen. Dynamic models take account of the fact that a later date of payment may be valued |
| 15. | TCO | (Total cost of ownership) A financial estimate designed to help consumers and enterprise managers assess direct and indirect costs related to the purchase of any capital investment, such as (but not limited to) computer software or hardware. A TCO assessment ideally offers a final statement reflecting not only the cost of purchase but all aspects in the further use and maintenance of the equipment, device, or system considered. This includes the costs of training support personnel and the |
| 16. | VC | (Venture Capital or Venture Capitalist) Capital provided by outside investors for financing of new, growing or struggling businesses. Venture capital investments generally are high risk investments but offer the potential for above average returns. A venture capitalist is a person who makes such investments. A venture capital fund is a pooled investment vehicle (often a partnership) that primarily invests the financial capital of third-party investors in enterprises that are too risky for |
| 17. | WACC | (Weighted Average Cost of Capital) A method to measure firm's cost of capital. Corporations raise money from two main sources: equity and debt. Thus the capital structure of a firm comprises two main components: equity and debt. The WACC takes into account the relative weights of each component of the capital structure and presents the expected cost of new capital for a firm. The formula for calculating WACC is as follows: (Total Equity Total Capital cost of equity) (Total Debt |
