Financial Terms and Concepts: A Comprehensive Glossary, Quizzes of Public Relations

Download Financial Terms and Concepts: A Comprehensive Glossary and more Quizzes Public Relations in PDF only on Docsity! TERM 1 Annual Equivalent Rate (AER) DEFINITION 1 The interest received on a savings account is referred to as the Annual Equivalent rate (AER). Any interest rate quoted as an Annual equivalent rate will only be accurate if you do not withdraw money from your account during the year in question. The reason for this is that the AER illustrates what the interest would be if the interest was paid and compounded (added to the interest from previous payouts). Therefore, any withdrawals that you make from the account can affect the rate you will receive at the end of the year. TERM 2 APR Annual Percentage Rate (APR) DEFINITION 2 A measure of the cost of credit, expressed as a yearly rate. This reflects the annual cost of the loan over the repayment period. The Annual Percentage Rate includes specific costs of financing, both those paid at the time of borrowing and those paid over the term of the loan. TERM 3 Assets DEFINITION 3 Anything owned by a company having a monetary value; e.g., fixed assets such as buildings, plant and machinery, vehicles (these are not assets if rented and not owned) and potentially including intangibles such as trademarks and brand names, and current assets, such as stock, debtors and cash. TERM 4 Assurance - Life DEFINITION 4 A specific type of life insurance policy that can be linked with a mortgage or loan for individuals and small companies. A percentage of the premium goes toward insuring your life, and would pay off the loan in the event of your death. The rest is invested and would pay you a lump sum at the end of the term. TERM 5 Assurance - Level Term DEFINITION 5 Life assurance that pays out a lump sum if you should die during the term. This is suitable for interest only loans as the amount owed on the loan remains the same throughout the period of the loan. TERM 6 AVCS DEFINITION 6 Additional Voluntary Contributions (AVCs): Schemes that allow individuals to try and enhance their pensions - they allow tax relief. TERM 7 Balance sheet DEFINITION 7 One of the three essential measurement reports for the performance and health of a Credit Union along with the Profit and Loss Account and the Cash flow Statement. The Balance Sheet is a snapshot in time of who owns what in the Credit Union, and what assets and debts represent the value of the Credit Union. (It can only ever be a snapshot because the picture is always changing.) The Balance Sheet is where to look for information about short-term and long-term debts, gearing (the ratio of debt to equity), reserves, stock values (materials and finished goods), capital assets, cash on hand, along with the value of shareholders funds. The term balance sheet is derived from the simple purpose of detailing where the money came from, and where it is now. The balance sheet equation is fundamentally: (where the money came from) Capital + Liabilities = Assets (where the money is now). Hence the term double entry - for every change on one side of the balance sheet, so there must be a corresponding change on the other side - it must always balance. The Balance Sheet does not show how much surplus the organization is making (the P&L does this), although previous years retained profits will add to the companys reserves, which are shown in the balance sheet. TERM 8 Budget DEFINITION 8 In a financial planning context the word budget (as a noun) strictly speaking means an amount of money that is planned to spend on a particular activity or resource, usually over a trading year, although budgets apply to shorter and longer periods. An overall organizational plan therefore contains the budgets within it for all the different departments and costs held by them. The verb to budget means to calculate and set a budget, although in a looser context it also means to be careful with money and find reductions (effectively by setting a lower budgeted level of expenditure). The word budget is also more loosely used by many people to mean the whole plan. In which context a budget means the same as a plan. For example, the governments annual plan is called The Budget TERM 9 CAR (Compound Annual Rate) DEFINITION 9 A measure of the rate of annual return on deposit or investment. You can use it to compare different accounts. If there is $110 in an account a year after $100 was lodged in it the return, or CAR, is 10 percent. Your account may have certain terms and conditions that can stop you from getting the full rate, for example you cant make any withdrawals. TERM 10 Cashflow DEFINITION 10 The movement of cash in and out of an organization from day-to-day direct trading and other non-trading or indirect effects, such as capital expenditure, tax and dividend payments.