Skip to main content
Notes by Sara
Learning path
Notes
Dictionary
Formulas
About
Contact
11
And many more
Every term has a plain-English meaning and a difficulty level, so you know where to start.
Free PDF
Sign up to get it.
1
Compound Interest
Beginner
Interest calculated on both the original amount and the interest already earned.
Example
1,000 at 5% a year becomes 1,628.89 in 10 years.
2
Diversification
Beginner
Spreading money across different assets so one loss does not sink the whole portfolio.
Example
Holding shares in 20 industries instead of one.
3
P/E Ratio
Beginner
Share price divided by earnings per share. A quick way to compare how richly shares are priced.
Example
Price 50, earnings per share 5: the P/E is 10.
4
Opportunity Cost
Beginner
What you give up by choosing one option over the next best one.
Example
Spending 500 on a trip means not investing 500.
5
Working Capital
Beginner
Current assets minus current liabilities: the cash a business has to run day to day.
Example
Assets 600, liabilities 400: working capital is 200.
6
Inflation
Beginner
A general rise in prices over time, so each unit of money buys less.
Example
At 3% a year, today's 100 buys about 97 worth next year.
7
Net Present Value
Intermediate
The value today of future cash flows, minus what the investment costs. Above zero means it adds value.
Example
Pay 900 now for 1,000 in a year at 5%: NPV is 52.38.
8
Current Ratio
Intermediate
Current assets divided by current liabilities. Above 1 means short-term bills are covered.
Example
600 divided by 400 gives a current ratio of 1.50.
9
Beta
Intermediate
How strongly a share moves compared with the whole market. Above 1 means it swings more.
Example
Beta of 1.5: it tends to rise 15% when the market rises 10%.
10
Put Option
Advanced
The right, but not the obligation, to sell an asset at a set price before a set date.
Example
Right to sell at 100 when the price falls to 80 gains 20, before the premium.
Financial Dictionary
Quick Reference
Plain-English finance terms
Free Financial Dictionary Quick Reference
Keep the key finance terms in your pocket
A plain-English meaning for every term
A difficulty level so you know where to start
Works on your phone or printed out
Email address
Send me the free PDF
Yes, email me the free PDF and the occasional study update. Unsubscribe at any time. See the
Privacy Policy
.
How it works
1
Enter your email.
Tick the box to agree.
2
Download the PDF.
The button appears on this page straight away.
3
Check your inbox.
A copy of the link is sent to your email too.