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Principles of Finance
financial terms
26
Accounting
Not Applicable
02/03/2004

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Cards

Term
Capital
Definition
permanently invested money
Term
Undercapitalized
Definition
not enough money
Term
Illiquid
Definition
not enough cash to pay bills
Term
Profit
Definition
revenues over cost
Term
Profit Margin
Definition
cents out of a dollar kept
Term
Compound Interest
Definition
time value
Term
Business Finance
Definition
how enterprises are managed
Term
Investments
Definition
assests held to conserve capital
Term
Financial Managers Dilemma
Definition
profitability over liquidity
Term
Suitability
Definition
never borrow short and lend long
Term
Opportunity Cost
Definition
return on best available alternative use
Term
Capitalize
Definition
convert an amount into a future or present amount
Term
Compounding
Definition
present to future
Term
Discounting
Definition
future to present
Term
Simple Interest
Definition
interest=principleXrateXtime
Term
Annuity
Definition
payment of a fixed amount of money for years
Term
Cyclical
Definition
2 to 5 years (cycle)
Term
Secular
Definition
several cycles
Term
Term Structure
Definition
interest rates plotted against time to maturity
Term
Quality Structure
Definition
links interest rate to risk
Term
Productivity
Definition
make money while using the loan, repay principle, pay a fee to lender, and have profit left over
Term
Time Preference
Definition
tendency to want money now rather than later
Term
Nominal Rate
Definition
ratio of dollars repaid to dollars borrowed
Term
Deflated Rate
Definition
ratio of buying power borrowed and repaid
Term
Money Illusion
Definition
failure to recognize nominal and deflated rates
Term
Risk
Definition
likelihood actual return will differ from expected value
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