Key Financial Terms Flashcards

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Something of value. Anything you own is an asset. Assets can be something big (like a house) or something small (like a piece of jewelry). A security is a financial asset, meaning a piece of paper that represents ownership and is worth money.

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Assets

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Cash, publicly traded stocks, government bonds, or corporate bonds that can be quickly turned into cash. They can be turned into cash at predictable values available to all holders. Example: Apple stock is a cash instrument because it can be sold immediately for its current market price.

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Cash Instruments

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Equipment, inventory, or other goods pledged to a bank if the company cannot make a loan payment.

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Collateral

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Money earned when something is sold. Example: A real estate agent who sells you a house might earn a 2% commission on the sale.

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Commissions

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A person or business with a strong credit score and financial resources, making it likely they can repay a loan.

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Credit-Worthy

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Money a company pays to shareholders. Not all companies pay dividends. Typically paid quarterly or annually.

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Dividend

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An obligation to pay someone else money; also called debt or a loan.

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Liability

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The right to take possession of collateral until a debt is repaid. Example: If the bank has a lien on your inventory, they can take and sell it if you don’t repay the loan.

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Lien

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Cash or securities that can be immediately turned into cash to repay loans. A person or company “has liquidity” if they have lots of liquid assets.

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Liquid Assets

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The date a loan or debt is fully repaid. Example: If you buy a car with a 5-year loan, the maturity date is 5 years from purchase.

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Maturity