Finance terms
Finance is a method of providing funds to an individual or a business. It is a branch of economics, which deals with the study of money and the other financial assets. The terms, which are related to finance, are used for the transactions, which are conducted by all the organizations. There are varieties of terms and they are quite confusing for an individual, who is completely ignorant about the happenings in the financial market.
Balance sheet
It is a statement, which shows the financial stature of a business on a particular date. This particular date generally comes at the end of the fix period. The basic concept is that to have a single document, which simply offers a method of measuring the financial position of the business. It is a method to judge the creditworthiness and value of the business as an investment. The balance sheet provides with the stability of the business accounts, which are divided into liabilities and assets. The assets include the machinery, the amounts due from the debtors, cash, buildings, stock, land and the investments. While the liabilities include creditors, provisions for staff pensions, reserves for tax bills, capital invested, etc.
Bonds
It is an agreement as per which a certain amount is being repaid to the investor after the decided duration. They have a number of characteristics, like the market in which they are issued, the method of paying the interest, the currency that they are payable in, their legal status and their protective features. Bonds are issued by corporations, governments, special trusts and many times even by the non profit organizations. The bonds can be categorized on the basis of the issuer or the type of bond that has been issued. The types of bonds are: corporate bonds, convertible bonds, government bonds, Eurobonds, retractable bonds, etc. Bonds are generally issued with the sole purpose of repaying the amounts which are borrowed. The loans make a payment by the fixed rate of interest, which lasts for a specified duration of time. The original amount which is invested is also paid after the bond matures.
When an individual gets a credit card, the issuing company sets a limit for the usage of the card. This means the maximum amount that the card owner can use on the card. This limit is determined as per the information that is being provided by the card owner on the application form. In case the card owner tries to go over the credit limit, the retailer refuses the credit card. And in case the transaction is conducted, the card owner is charged with penalties by the issuer. Credit scoring is a system which is being engaged by the lenders, to check if the loan that they give to an individual will be repaid or not. It is a method by which the lenders can determine if the applicant is fit for the customer profile they wish to lend to. It works by comparing the personal monetary details provided, with those of the previous customers who have made payments on time.
Overview
Finance is a very broad field, so are the terms used in it. It is difficult to explain all the terms at once. Finance has become a major part of an individuals life. Hence, it becomes necessary to have knowledge of the terms, which are being used in daily transactions. There are many online glossaries, which provide the individuals, with detailed explanation of all the financial terms used in the finance market.
Other Articles
