Term's definitions
Investment
An asset/item acquired with the goal of generating income/appreciation over time.
2 ways shareholders may earn money
Capital gains, divedends
what does YIS stand for
Youth investment society
What is the emergency fund rule?
saving 3–6 months of living expenses.
What are the 3 Financial statements
Balance sheet, Income (PNL), Cash flow
Shareholder
A ___ that owns at least one share of a company's stock
What is diversification
This strategy involves spreading investments across many assets to reduce risk.
What is opportunity cost
This term describes the cost of missing out on gains because your money wasn’t invested
What is debt?
money you owe, like loans or credit card balances.
What cash flow in simple terms
Cash flowing in and out of a business.
Interest Rate
The amount a lender charges a borrower - is a percentage of the amount loaned.
Buy and holding
Carefully selecting assets you believe in holding for the long haul
Powerful way to build wealth steadily
Why do stock prices change
Company performance, Future expectations, Economic conditions, Investor behavior
If you deposit $1,000 in a savings account with 5% annual interest compounded annually, how much money will you have after 3 year
$1,000 × (1 + 0.05)³ = $1,157.63
1 way a company grows revenue
Taking market share
Market growth
Opening new stores
Acquiring other companies
Need and want
Needs = essential, Wants = extra
Dollar-cost averaging
Practice of adding money to your investments at regular intervals
What is the P/E ratio?
Calculated as share price divided by earnings per share, is used to value companies.
inflation risk?
long-term risk happens when your savings lose purchasing power because prices rise faster than your interest rate
What is a fixed asset?
Long term assets such as property, plan and equipment
Inflation
the rate of increase in prices over a given period of time
index investing?
This strategy involves buying a broad market index (like the S&P 500) instead of picking individual stocks
What does time horizon arbitrage mean?
making gains by thinking long-term, while others focus on the short-term
What is liquidity
how easily and quickly an asset can be turned into cash
Basic formula for forecasting the future revenue:
Future revenue = Average selling price X number of of units sold