Financial Terminologies

Dictionary For Financial Terms

Section One

“Accounting”

In this section, you will learn about the concepts and calculations related to a company’s financials. The section will start up with an introduction to the three financial statements. Then, detailed description will be demonstrated on each of the elements under the three statements. By the end of this section, you will form a basic understanding on the three financial statements and will be able to conduct financial analysis through Excel.

Debt

Corporate debt.

Net Working Capital (NWC)

Measurement of financial health.

Cash Flow From Operations

A section in cash flow statement.

Accounting Overview

A summary on accounting.

Balance Sheet

One of the three financial statements.

Retained Earnings

An item under equity section.

Account Receivable

An item in current asset.

Cash Flow Statement

One of the three financial statements.

Dividend

A "reward" to shareholders.

Account Payable

An item under current liabilities.

Income Statement

One of the three financial statements.

Depreciation

Cost-spreading accounting strategy.

Operating Income & EBIT

Reflects a company's operation.

Amortization

Cost-spreading strategy.

Net Income

An indicator of profitability.

Connect Financials

Relationship in the three statements.

Inventory

An item in current asset.

Revenue

The first item on income statement.

Cash Flow From Investing

A section in cash flow statement.

EBITDA

An item for profitability.

Cash Flow From Financing

A section in cash flow statement.

SG&A

A company's indirect cost.

COGS

COGS: direct cost.

Gross Profit

An indicator for profitability.

PP&E

Property, plant, and equipment.

Section Two

“Valuation”

In corporate finance, valuation means the calculation of the value of a company. In other words, we determine whether a company is correctly valued by the market. However, it is also important to understand that overvaluation or undervaluation does not directly link to the performance of a stock in the future since valuations are often subject to many variables and external conditions. This chapter will introduce keys of valuation.

Internal Rate of Return

A type of discount rate.

EV/EBITDA

A financial valuation metric.

Free Cash Flow (FCF)

Company operation efficiency.

Beta (β)

Measurement of volatility.

Discount Rate

Financial valuation metric.

Earnings Per Share (EPS)

A profitability metric.

Weighted Average Cost of Capital (WACC)

Discount rate of companies in DCF.

Present Value (PV) and Net Present Value (NPV)

Two calculations in DCF.

Quick Ratio

Financial metric for liquidity.

Alpha (α)

Excess return, abnormal return.

Time Value of Money (TVM)

The foundation for DCF Model.

Price-To-Earning (P/E)

A financial valuation metric.

Excel: Income Statement

Breakdown of income statement.

Enterprise Value (EV)

A metric for company's net worth.

Current Ratio

Financial metric for liquidity.

Debt-to-Capital Ratio

Liquidity and leverage ratio.

Risk-Free Rate (Rf)

Zero-risk return.

Price-to-Sales (P/S)

A financial valuation metric.

Corporate Valuation Overview

Introduction to corporate valuation.

Excel: Balance Sheet

Breakdown of balance sheet.

Return On Assets (ROA)

A measurement of profitability.

DCF: Using Excel

Application of DCF.

Return On Equity (ROE)

A measurement of profitability.

Price-to-Book (P/B)

A financial valuation metric.

Section Three

“Trading”

Buy low, sell high. This is a typical strategy for many new investors. However, in the actual financial world, there are many more exciting and complex trading rules. Understanding how these rules work and how they can help us form various investment decisions are essential to increasing potential investment returns. Therefore, this section will discuss different trading strategies.

Leverage

Trading strategy.

Trading Overview

Overview on trading section.

Candlestick Graph

How to read candlestick graphs.

Ask Bid Order Book

Indicator for supply and demand.

Hedge Fund Strategies

Common hedge fund strategies.

Initial Public Offering (IPO)

Process of becoming public.

Section Four

“Portfolio”

In this chapter, many portfolio management-related topics will be introduced. A portfolio is a collection of financial assets. The goal by the end of this section is for all readers to understand the fundamental ideas of some of the most commonly seen portfolio management approaches and be able to construct our own portfolios according to the concepts. Therefore, several modeling strategies will also be introduced.

Types of Risk

Risk-Averse, -Neutral, -Seeking

CAPM

Capital Asset Pricing Model

Efficient Frontier

Find efficient portfolio.

StDev and Correlation

Standard Deviation and Correlation

Portfolio Overview

Overview on portfolio management.

Modern Portfolio Theory

Portfolio management theory.

Portfolio: Using Python

Portfolio management.

Risk-Return Tradeoff

Volatility and return.

EMH

Efficient Market Hypothesis

Sharpe Ratio

An calculation to analyze risk.

Mean, Var., Cov.

Mean, variance, covariance.

Section Five

“De-Fi”

Decentralized finance is a novel version of the financial system. A decade after Bitcoin was first introduced, many new applications of De-Fi were deployed. In the section, we will first walk through some fundamental knowledge on decentralization and blockchain technologies. Then, interesting applications of De-Fi will be introduced.

Initial Coin Offering (ICO)

IPO in De-Fi world.

PoW, PoS

Proof of work/stake.

DAO & dAPP

Organizations in De-Fi.

Blockchain

Tech behind De-Fi.

Decentralized Finance

Intro to De-Fi.

Decentralization

Intro to decentralization.

Smart Contract

"Monitor" in De-Fi.

NFT

Non-fungible token.

Cryptocurrency

Part I: Applications of De-Fi

Hash

Secure feature of De-Fi.

Yield Farming

De-Fi trading strategy.

Decentralized Derivatives

Part II: Applications of De-Fi

51% Attack

Potential danger in De-Fi.

Metaverse

Part III: Applications of De-Fi

Section Six

“ESG”

Environmental, social, governance = ESG. This keyword has grown increasing popularity in recent years. Many investors, including professional fund managers, started to include ESG as a part of their investment strategy. On the one hand, ESG is a measurement of 'justice.' On the other hand, ESG also gives an indication of a company's risk. Check out this section if you are interested in ESG investment!

ESG Rating

How to rate ESG?

Why Is ESG Important?

Introduction to ESG.

Section Seven

“OTHER”

This section will contain the miscellaneous topics in finance. Some of the covered topics include commonly used qualitative framework and introduction to computational models. These topics are small but are either popular or essential in finance, therefore, it is important to understand these concepts and incorporate them in our financial analysis. In the future, it is possible that these topics will form their own categories.