Financial Terms


Term Meaning
Absolute (returns) The absolute return is a measure of the gain or loss on an investment portfolio expressed as a percentage of invested capital.
All Ordinaries Index The oldest index of shares in Australia, so called because it contains nearly all ordinary (or common) shares listed on the Australian Securities Exchange (ASX).
Annuity An Annuity is any continuing payment with a fixed total annual amount.
Australian Securities Exchange (ASX) The Australian Securities Exchange is Australia's primary securities exchange. It was created by the merger of the Australian Stock Exchange and the Sydney Futures Exchange in July 2006.


Term Meaning
Budget Deficit A deficit is an excess of expenditures over revenue in a given time period.
Bull/Bear Market A "bull/bear market"describes upward and downward market trends, respectively and can be used to describe either the market as a whole or specific sectors and securities.


Term Meaning
Cash Flow Cash flow is the movement of money into or out of a business, project, or financial product.
Closing Price The final price at which a security is traded on a given trading day.
Cumulative Return Cumulative return is the entire amount of money an investment has earned for an investor, irrespective of time.
Current Yield The current yield, interest yield, income yield, flat yield, market yield, mark to market yield or running yield is a financial term used in reference to bonds and other fixed-interest securities such as gilts. It is the ratio of the annual interest payment and the bond's current clean price.


Term Meaning
Default A default occurs when a debtor has not met his or her legal obligations according to the debt contract, e.g. has not made a scheduled payment, or has violated a loan covenant (condition) of the debt contract.
Dividend A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. When a corporation earns a profit or surplus, it can either re-invest it in the business (called retained earnings), or it can distribute it to shareholders.


Term Meaning
Earnings Per Share Earnings per share (EPS) is the dollar value of earnings per each outstanding share of a company's common stock.
Emerging Markets An emerging market is a nation with social or business activity in the process of rapid growth and industrialization.
Equity The value of an ownership interest in property, including shareholders' equity in a business


Term Meaning
Franked Dividend Fully franked shares have had Australian company tax deducted (30%).
Franking Credits The Australian tax system allows companies to attach franking credits to dividends paid. A franking credit is a nominal unit of tax paid by companies using dividend imputation. Franking credits are passed on to shareholders along with dividends.
FTSE The FTSE 100 Index, also called FTSE 100, FTSE, or, informally, the "footsie", is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization.


Term Meaning
Gross Domestic Profit (GDP) Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period of time.


Term Meaning
Hang Seng Index The Hang Seng Index (abbreviated: HSI, Chinese) is a free float-adjusted market capitalization-weighted stock market index in Hong Kong. It is used to record and monitor daily changes of the largest companies of the Hong Kong stock market and is the main indicator of the overall market performance in Hong Kong.
Hedge Funds A hedge fund is a collective investment scheme, often structured as a limited partnership, that invests private capital speculatively to maximize capital appreciation.


Term Meaning
Internal Monetary Fund (IMF) The International Monetary Fund (IMF) is an international organization that was initiated in 1944 at the Bretton Woods Conference and formally created in 1945 by 29 member countries. The IMF's stated goal was to assist in the reconstruction of the world's international payment system post–World War II. Countries contribute money to a pool through a quota system from which countries with payment imbalances can borrow funds temporarily.


Term Meaning
Leverage Leverage (sometimes referred to as gearing in the United Kingdom and Australia) is a general term for any technique to multiply gains and losses .Leverage exists when an investor achieves the right to a return on a capital base that exceeds the investment which the investor has personally contributed to the entity or instrument achieving a return.
Liquidity Liquidity is an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value. Money, or cash, is the most liquid asset, and can be used immediately to perform economic actions like buying, selling, or paying debt, meeting immediate wants and needs.


Term Meaning
Managed Fund A managed fund is a professionally managed investment portfolio. They can include investments in shares, property, fixed interest, cash and more.
Marginal Tax Rate A marginal tax rate is the tax rate that applies to the last unit of currency of the tax base (taxable income or spending), and is often applied to the change in one's tax obligation as income rises.
Market Value Market value is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with open market value, fair value or fair market value, although these terms have distinct definitions in different standards, and may differ in some circumstances.


Term Meaning
NASDAQ The NASDAQ Stock Market, commonly known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for National Association of Securities Dealers Automated Quotations.
Negative Gearing Negative gearing is a form of leveraged investment in which an investor borrows money to buy an asset, but the income generated by that asset does not initially cover the interest on the loan (interest > income).
Nominal Return The amount of money generated by an investment before expenses such as taxes, investment fees and inflation are factored in.


Term Meaning
P/E Ratio A P/E or "Price to earnings" ratio is calculated by dividing the price of the share by how much it is earning (note that earnings are not necessarily paid in dividends - they may be retained). It is essentially an estimate of how long it will take for the investment to pay for itself. i.e. If there is a P/E ratio of 10 then it would take 10 years (assuming earnings stayed the same), to make back the cost of buying the share. (Not taking in to account any taxation implications obviously). Analysts commonly use this figure as a means to try and assess the "fair price" of a stock.
Pension Fund A pension fund is any plan, fund, or scheme which provides retirement income. Pension funds are important to shareholders of listed and private companies.


Term Meaning
Quantitative Easing Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the national economy when standard monetary policy has become ineffective.


Term Meaning
Reserve Bank of Australia (RBA) The bank has the responsibility of providing services to the Government of Australia in addition to also providing services to other central banks and official institutions.


Term Meaning
S&P 500 The S&P 500, or the Standard & Poor's 500, is a stock market index based on the market capitalizations of 500 leading companies publicly traded in the U.S. stock market, as determined by Standard & Poor's. It differs from other U.S. stock market indices such as the Dow Jones Industrial Average and the Nasdaq due to its diverse constituency and weighting methodology


Term Meaning
Unfranked Dividends Unfranked dividends are gross dividends without prepaid tax.


Term Meaning
Volatility Volatility is a measure for variation of price of a financial instrument over time.


Term Meaning
Yield Yield is a measure of the percentage of income return you get from an asset. This measure applies to a number of assets, but especially shares and real estate.

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