Accountant
Has a formal accounting education, where a bookkeeper may not. An accountant will handle your day-to-day financial needs including the preparation of your financial statements. Accountants can also prepare tax returns.
Asset
Something that puts money in your pocket whether you work or not. Assets include real estate, businesses, and paper assets such as stocks, bonds, and mutual funds.
Bonds
May be tax-free Municipal Bonds, U.S. Government issued Treasuries, or Corporate Bonds which reflect debt by the issuing authority in exchange for interest payment to the purchaser.
Bookkeeper
Keeps track of your bookkeeping records. In most cases you’ll want a “full-charge” bookkeeper – one who can pay bills, properly code them, track accounts receivable and payable, do payroll and prepare financial statements. Some bookkeepers will organize the information for an accountant who then prepares the financial statements and tax returns.
Cash
Savings account, money market funds, certificates of deposit.
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Cash Flow
The difference between the money flowing into your pocket as income and the money flowing out as expenses and debt. Cash flow may be either positive or negative.
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Cash-on-Cash Return
The bottom line on any investment – how much you’ll make (or lose,) for the amount of cash you’ve invested.
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Capital Gain
The difference between the price at which you bought an investment and the price at which you sold it, less improvements made and other money invested in the investment.
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Commodities
Resources which include gold, silver, copper and other precious metals or food products such as pork bellies, wheat, corn, etc.
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Common Stocks
Equity issued by a company that gives the buyer ownership in the company. Stocks may or may not pay the buyer a dividend.
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CPA (Certified Public Accountant)
Has passed a state exam, which gives them the CPA designation. There are many types of CPA’s and specialties. Not all CPAs are tax specialists. CPAs may help you with management issues in your company (as a Comptroller or Chief Financial Officer), audit your financial statements for loan purposes (Auditor), or help you with tax planning. (Known as Chartered Accountant in other countries).
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Earned Income
Earned income is money received as pay for work performed, such as wages, salaries, bonuses, commissions, tips, and net earnings from self-employment. It can also include long-term disability, union strike benefits, and, in some cases, payments from certain deferred retirement compensation arrangements.
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Financial Statement
There are several types of financial statements. An income statement shows a detailed account of income and expenses for a fixed period of time. A balance sheet includes the assets and liabilities at a particular time. A statement of cash flow details cash coming in and cash going out. Individuals, properties, and businesses all have their own financial statements.
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Intellectual Property
An original creative work, such as an invention, a product or a company brand, that is tangible and can be protected by a patent, trademark or copyright.
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Leverage
Financial leverage results from using borrowed capital as a funding source when investing to expand the firm’s asset base and generate returns on risk capital. Leverage is an investment strategy of using borrowed money—specifically, the use of various financial instruments or borrowed capital—to increase the potential return of an investment. Leverage can also refer to the amount of debt a firm uses to finance assets.
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Liability
A liability is something a person or company owes, usually a sum of money. Liabilities are settled over time through the transfer of economic benefits including money, goods, or services. Liabilities takes money out of your pocket. Liabilities include items such as credit card debt, mortgages, car loans, school loans, etc.
Recorded on the right side of the balance sheet, liabilities include loans, accounts payable, mortgages, deferred revenues, bonds, warranties, and accrued expenses.
Liabilities can be contrasted with assets. Liabilities refer to things that you owe or have borrowed; assets are things that you own or are owed.
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Passive Income
Income you receive from businesses you invest in, royalties and rental real estate investments. It is income you are not working for.
Portfolio Income
Portfolio income is money received from investments, dividends, interest, and capital gains. Royalties received from investment property also are considered portfolio income sources. Income derived from paper assets such as stocks, bonds, mutual funds, etc. Most portfolio income gets favorable tax treatment. Dividends and capital gains are taxed at a lower rate than earned income. In addition, portfolio income is not subject to Social Security or Medicare taxes.
It is one of three main categories of income. The others are active income and passive income.
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Return on Investment (ROI)
The amount of income you receive from an investment dividend by the total amount invested into the investment. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.
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Wealth
As defined by R. Buckminster Fuller, the number of days you can survive without working for money, while still maintaining your same standard of living.
Wealth measures the value of all the assets of worth owned by a person, community, company, or country. Wealth is determined by taking the total market value of all physical and intangible assets owned, then subtracting all debts. Essentially, wealth is the accumulation of scarce resources.
Specific people, organizations, and nations are said to be wealthy when they are able to accumulate many valuable resources or goods. Wealth can be contrasted to income in that wealth is a stock and income is a flow, and it can be seen in either absolute or relative terms.
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