Credit is an arrangement in which you gain something of value now in exchange for your promise to pay the lender back at some later time (usually with added interest). For example, when you buy a pair of jeans with your credit card, you agree to pay the credit card company later in return for the money you need to buy the jeans now.
Archive for the ‘Daily Definition’ Category
Credit is…
Wednesday, June 17th, 2009The IRS is…
Wednesday, June 17th, 2009The IRS stands for “Internal Revenue Service” and is the government organization responsible for handling everyone’s taxes. If something is wrong with your taxes, you may have a friendly run-in with one of its auditors.
Profit is…
Wednesday, June 17th, 2009Profit is the positive monetary gain after subtracting the amount earned and the amount spent over the course of a period of time. For example, if you bought a pair of sneakers for $80 and then sold them on eBay for $120, your profit would be $120 (income) – $80 (expense) = $40 (profit).
Currency is…
Tuesday, June 16th, 2009Currency is any object or set of objects designated as money – usually by the government. Currency must be in public circulation, have a predetermined value, and be exchangeable for other objects, goods, or services.
An Index is…
Tuesday, June 16th, 2009An index is an estimate of the value of several different properties (such as stocks, bonds, art, commodities, etc.) taken together. In other words, an index is a bunch of different items that are combined and assigned a monetary value. For example, the S&P 500 is an index that tracks 500 individual stocks and translates their performance into one number. So instead of you tracking all 500 of those stocks, you can just look at the S&P 500 to get the gist.
A Bond is…
Tuesday, June 16th, 2009A bond is an instrument of debt sold by governments and corporations to raise money. Basically, when you buy a bond, you’re buying the seller’s promise to pay you back (usually with a fixed interest) on a predetermined date.
A Stock is…
Tuesday, June 16th, 2009A stock is a unit of ownership in a corporation representing a share in the corporation’s assets and profits. For instance, if a company has 1,000 shares of stock available and you own 100 of those shares, you have a 10% ownership of the company. Stocks are traded (bought and sold) on a stock market, and there are two types of stocks: common stock and preferred stock. Capital stock is the total ownership of a business and includes common stock and preferred stock.
A Fixed Income Security is…
Friday, June 12th, 2009A fixed income security is an investment that promises to pay interest at a set rate for a certain amount of time. Think of it as buying an IOU plus a bonus. If you give me $10 today, in three months, I’ll pay you back your $10 plus 5% interest.
A Bear Market is…
Friday, June 12th, 2009A bear market is a market in which prices of securities are decreasing or are expected to decrease by 20% or more within the length of a year. In general, the term is used to describe a market that is seeing a downward trend. It’s named “bear” because of the way bears claw the ground when showing aggression. It is the opposite of a bull market.
A Bull Market is…
Friday, June 12th, 2009A bull market is a market in which prices of securities are increasing or are expected to increase by 20% or more within the length of a year. In general, the term is used to describe a market that is seeing an upward trend. It’s named “bull” because of the way bulls thrust their horns into the air when showing aggression. It is the opposite of a bear market.