Financial terms and definitions you should be familiar with, and why🧐
Learn📚✍
🧵 THREAD🧵 ⬇️
Learn📚✍
🧵 THREAD🧵 ⬇️
The eight terms you should know ,but they are not limited.
1. Asset allocation: refers to how you choose to spread money across different investment types,ETFs markets understands this a lot, known as asset classification, which include:
1.1 Bonds
1.2 Stocks/shares and etc...
1. Asset allocation: refers to how you choose to spread money across different investment types,ETFs markets understands this a lot, known as asset classification, which include:
1.1 Bonds
1.2 Stocks/shares and etc...
2. Cash and cash equivalents: this refers to any assets thats in the form of cash or can be easily be converted into cash within a short period, to take care of expenses or emergencies you might face🚨
3. Capital gains- a capital gain is an increase in the value of an asset or investment above the price you paid for, make a profit and it's important in markets 📈 😀,
4. Compound interest- refers to "interest on interest", which grows your investments over time( working for you)
-compound interest is also applied when you take up loan(working against you).
-compound interest is also applied when you take up loan(working against you).
5. Forecasting- the process of using available data and assumptions to develop a set of future incomes and experience in your Finances💰📈🗓
6. Liquidity- Liquidity describes how quickly your assets can be converted into cash with a period of time
E.g cash is the most Liquid asset.
-least Liquid assets are things like real estate or land, which can take weeks or months to sell on the market 🤔 🏠🏡
E.g cash is the most Liquid asset.
-least Liquid assets are things like real estate or land, which can take weeks or months to sell on the market 🤔 🏠🏡
7. Net Worth- indicates the overall state of your financial health, subtracting what you owe from what you own, the remainder should be positive growth.
8. Time value of money- the time value of money is the concept that a unit of currency received today is worth more than the same unit of currency received in the future
( has to do with inflation)
( has to do with inflation)
Thanks for reading until the end😎
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Please do follow me on my account and engage, it motivates me alot👊🏿👊🏿
Please do leave a rate,if you find the thread helpful or adds value, below ⬇️,stay tuned
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Expenses*
Update!!! Still continuing 📚✍
9. Dividends: A portion of a company's profits paid out to investors within a period of time, they can choose reinvest the Dividend or receive a cash payout🤑
10. Exchange traded fund: a type of fund that holds multiple underlying assets,which offers nice diversity to investors, it's share price fluctuates throughout the day as it is bought and sold on an exchange
E.g @SATRIX_SA EFTs📈📉
E.g @SATRIX_SA EFTs📈📉
11.Dividend yield: A percentage reflecting the amount of money paid to shareholders for owning shares in a company Dividend by the company's current stock price
12. Market capitalization: short for market cap, this is a company's worth determined by the stock market- a sum market value of all owned shares. Amazon's current market cap is around $1 trillion, while Netflix is around $245,421 billion as of 2021
13. Price-to-earnings ratio: The P/E ratio is a company's share price relative to its earnings per share. A high P/E ratio could mean that the company's stock is overvalued and the other way around
14. Profit and loss statement: shows how much the company has earned and spent over a specific, also known as income statement
15. Profit Margin- the percentage of revenue left after paying business expenses, what's left on the table 🤔
*key financial ratios to analyze Retail banks (Also applies in S.A)
1. NET interest margins
2. the loan-to-asset ratio
3. Return-on-asset ratio
Take a research on them📚✍👨💻
1. NET interest margins
2. the loan-to-asset ratio
3. Return-on-asset ratio
Take a research on them📚✍👨💻
16. Technical analysis- studying price history, primarily through the use of charts, for the purpose of forecasting future price trends/fluctuations in stock markets
17. Fundamental analysis: focuses on the economic forces of supply and demand that affect prices movements in stocks markets.
Looking at the company's cash flow state, balance sheet, and the value growth metric of the shares against competitors
Looking at the company's cash flow state, balance sheet, and the value growth metric of the shares against competitors
18. Limited liability (Ltd): an extremely important feature of shares is their Limited liability, which means that as an owner of a share, you are not personally responsible if the company is not able to pay its debts, should anything happen in the future
19) Bond- debt instrument, when buying a bond from a government or corporation, you are essentially lending them money and you will receive periodic interest payments, until the bond reaches maturity when you get your money back.
20.Stocks/shares- a share is a piece of ownership in a public traded company. When you buy stock, you become a shareholder of that company and you may receive dividends based on profits when declared.
21. Balance sheet- a Financial document of a company designed to communicate all of a company's assets, liabilities and owner's as of a particular reporting date.
22. Debt-to-Equity ratio- measures how much a company finances it's self using equity vs using debt.👇
The ratio provides insights by reflecting the ability of shareholders equity to cover all debt in the event of business downturn.
The ratio provides insights by reflecting the ability of shareholders equity to cover all debt in the event of business downturn.
23. Total assets turnover- ratio that measures how efficiently a company uses it's asset to generate revenue.
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Note: the higher the turnover ratio, the better the company's performance.
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Note: the higher the turnover ratio, the better the company's performance.
24. Return-on-equity: profitability ratio measured by dividing net profit over shareholders equity.
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It indicates how well the business can utilize equity investments to earn profits for investors.
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It indicates how well the business can utilize equity investments to earn profits for investors.
25. Return-on-assets: also a profitability ratio similar to ROE, it is measured by dividing the net profit by the company's average assets.
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It an indicator of how well the company is managing it's available resources and assets to net higher profits.
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It an indicator of how well the company is managing it's available resources and assets to net higher profits.
26. ALL SHARE INDEX: index designed to reflect the movement of an entire equity market on stock exchange.
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the FTSE/JSE all share index represents 99% of the Full market capital value of all ordinary shares listed on the main board of JSE.
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the FTSE/JSE all share index represents 99% of the Full market capital value of all ordinary shares listed on the main board of JSE.
27. What to understand about Bond before buying: 👇
-Face value: amount of money that the bond will be valued at maturity.
-The coupon rate: the rate of interest the bond issuer will pay on the face value of the bond, stated as a percentage.
-Also dates of the coupon payments.
-Face value: amount of money that the bond will be valued at maturity.
-The coupon rate: the rate of interest the bond issuer will pay on the face value of the bond, stated as a percentage.
-Also dates of the coupon payments.
28. Capital: money that is being put into work for productive or investment purposes in a company.
29. Acid-test ratio: ratio that compares a company's short-term assets to its short-term liabilities to see if a company has enough cash to pay its liabilities, such as short-term debt.
30. Acquisition- is when one company purchases most or all of another company's shares to gain control of that company.
31. Asset Financing: refers to the use of a company's balance sheet assets to borrow money or get a loan.
32. Asset Valuation: the process of determining the FAIR market value of an asset in interest.
33. Annual general meeting(AGM): a yearly meeting of a company's interested shareholders.
34. Authorized shares: The maximum number of shares of stock that a company can issue.
35. Bidding: the highest price any buyer is willing to pay for a given security at a given time.
36. B-ordinary shares- these shares are of a different class to ordinary shares; holders have fewer or no voting and may not have a right to payment of capital if a company is dissolved.
37. Bulls and bears: a bull market indicates prices are rising while a bear market indicates prices are falling.
38. Capped index: the Capped index limits the weight of individual companies on the indices to a predetermined level.
39. Companies Act: legislation that governs the manner in which Companies in south africa can operate.
40. Capital markets: Financial markets on which securities are bought and sold.
41. Corporate governance: the relationship between all stakeholders in company, which includes shareholders, directors and management of a company as defined by the corporate charter.
42. Corporation: business organizations which is chartered by a state and given many legal rights as an entity separate from its owners.
43. Coupon: the annual rate of interest payable by the issuer on the face value of a debt instrument.
44. Currency risk: the risk that the operations of a business or the value of an investment will be affected by changes in exchange rates.
45. Debt: A financial obligation that one party owes a second party as a result of borrowing.
46. Dividend ETFs: any exchange traded fund that seeks provide high yield by investing in a basket of high-Dividend-paying common stock, preferred or REITs.
47. Dividend yield: A measure how much cash you are getting for each rand investing in a company's share, i.e your Dividend received as percentage of the company's share price.
48. Portfolio Exposure- the degree to which a Portfolio or other investment is susceptible to risk from certain factors.
49. Fixed income: describes a debt instrument that pays an unchanging amount of money to it's holder at prescribed times.
50. Index: simulated portfolio of securities that represents a particular market or a portion of that market.
@rattibha unroll.
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