Finance & Investment Questions

Capital Gains are the profits realized from the sale of a non-inventory asset that was purchased at a lower price. The most common capital gains are realized from the sale of stocks, bonds, precious metals, and property. It is only "realized" when the asset is actually sold; until then, it is an "unrealized" gain.

Human Capital is an intangible asset representing the economic value of a worker's experience and skills. This includes education, training, intelligence, health, and other qualities that employers value, such as loyalty and punctuality. Investing in human capital (through better schooling or healthcare) is considered essential for increasing the productivity and long-term income of a nation.

A Bear Market is a condition in which securities prices fall and widespread pessimism causes the stock market's self-sustaining downward spiral. The term comes from the way a bear swipes its paws downward when attacking.

Credit is a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at a later date, generally with interest. Credit is based on the "creditworthiness" of the borrower.

A Liability is something a person or company owes, usually a sum of money. On a balance sheet, liabilities are the opposite of assets; they include loans, mortgages, and unpaid bills. If a company's liabilities become much larger than its assets, it may face bankruptcy.

A Bear Market is a period where stock prices are falling (usually by 20% or more) and investors are feeling pessimistic. The term "bear" comes from the way a bear swipes its paws downward when it attacks.

Fixed costs are business expenses that do not change as with an increase or decrease in the number of goods or services produced. Examples include rent, insurance, and interest on loans.

Venture Capital (VC) is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. VC investors often provide not just money, but also technical or managerial expertise.

Bonds are units of corporate or government debt that are securitized as tradable assets. When you buy a bond, you are essentially "loaning" money to the issuer for a fixed period of time in exchange for regular interest payments.

A Mortgage is a type of loan used to purchase or maintain a home, land, or other types of real estate. The borrower agrees to pay the lender over time, typically in a series of regular payments that are divided into principal and interest. The property itself serves as collateral to secure the loan.

ROI stands for Return on Investment. It is a performance measure used to evaluate the efficiency or profitability of an investment or compare the efficiency of several different investments. It is calculated by dividing the profit of an investment by its cost.

A T-Bill (Treasury Bill) is a short-term U.S. government debt obligation backed by the Treasury Department with a maturity of one year or less. They are sold in denominations of 1,000.

A Stock Market is a public marketplace where shares of publicly held companies are issued, bought, and sold. It provides companies with access to capital in exchange for giving investors a slice of ownership. The market is often used as a barometer for the overall health of the economy.

A Portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed-end funds. A diversified portfolio is key to reducing risk.

Net profit (often called the "bottom line") is the amount of money a business has left over after all of its operating expenses, interest, taxes, and other costs have been paid.

A Hedge Fund is an investment fund that pools capital from accredited individuals or institutional investors and invests in a variety of assets, often with complex portfolio-construction and risk-management techniques. They are called "hedge" funds because they often take positions that "hedge" against market downturns.

Market share is the percentage of total sales in an industry generated by a particular company. It is calculated by taking the company's sales over a period and dividing it by the total sales of the industry over that same period.

Revenue is the total amount of money a company receives from selling its goods or services. It is the "top line" on an income statement.

A Dividend is a distribution of some of a company's earnings to a class of its shareholders, as determined by the company's board of directors. It is a way for investors to earn "passive income" from their stocks without selling them.

Profit is the financial gain realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity. It is the primary motivation for entrepreneurs to take risks and start businesses. "Gross profit" only looks at the cost of goods, while "net profit" looks at all costs.