Assam ASSEB Higher Secondary Finance key terms

The set of institutions, markets, instruments and rules that move funds from people who save to people who need capital, enabling payments, investment and risk transfer across an economy.

The process by which banks and similar institutions collect small deposits from many savers and lend or invest them in larger amounts, reducing search costs and sharing risk between surplus and deficit units.

Contracts that create a financial asset for one party and a financial liability or equity claim for another, such as shares, debentures, deposits, bills and derivatives, each with defined cash flow and ownership rights.

The segment where securities are issued and sold for the first time by a company or government to raise fresh capital, with proceeds going to the issuer rather than to an existing holder.

A trading venue such as a stock exchange where already-issued securities change hands between investors, providing liquidity and price discovery without giving the issuer new funds.

The market for short-term debt instruments with maturities usually up to one year, such as treasury bills, commercial paper and call money, used to manage temporary cash surpluses and deficits.

The market for long-term securities such as equity shares and long-maturity bonds, where firms and governments raise permanent or long-dated funds and investors accept higher price risk.

A licensed institution that accepts demand and time deposits from the public, extends loans and advances, and provides payment services, earning mainly from the spread between lending and deposit rates.

A company registered to carry on financial business such as lending, leasing, hire purchase or investment, but which cannot accept demand deposits and is not part of the payment settlement system like a bank.

India's central bank, responsible for issuing currency, conducting monetary policy, regulating banks and payment systems, and acting as lender of last resort to maintain financial stability.

The interest rate at which the central bank lends short-term funds to commercial banks against government securities, used as the main policy lever to influence liquidity and market interest rates.

The principle that a sum of money available today is worth more than the same sum received later, because today's money can be invested to earn a return and because of inflation and uncertainty.

The process of calculating future value by applying interest to an initial principal and then to accumulated interest, so that earnings themselves earn further earnings over successive periods.

The reverse of compounding: converting a future cash flow into its equivalent value today by dividing by a factor that reflects the required rate of return and the number of periods.

The amount that a future cash flow or stream of cash flows is worth today when discounted at a given rate of return, used to compare payments occurring at different dates.

The amount to which a present sum or series of payments will grow after earning interest for a stated number of periods at a stated rate, found by compounding.

A series of equal cash payments or receipts made at regular intervals for a fixed number of periods, such as loan instalments or pension payments, valued using annuity factors.

A unit of ownership in a company that carries voting rights, a residual claim on profits through dividends and on assets at winding up, and no fixed promise of return.

A class of share capital that receives a fixed dividend before equity holders and ranks ahead of equity on repayment of capital, usually carrying limited or no voting rights.

A long-term debt instrument issued by a company acknowledging a loan, paying a stated rate of interest and repayable on a fixed date, usually secured by a charge on assets.

Profits kept in the business instead of being distributed as dividends, forming an internal source of finance with no issue costs but an opportunity cost equal to shareholders' required return.

Finance obtained when a supplier allows a buyer to pay later than delivery, effectively a short-term loan embedded in normal purchasing, often with a cash discount for early payment.

An unsecured short-term promissory note issued by large, highly rated companies to raise working capital, sold at a discount and maturing within a year, usually without a secondary market.

A statement at a point in time listing what a business owns, what it owes and the owners' residual interest, following the identity that assets equal liabilities plus equity.

A statement covering a period that reports revenues, expenses and the resulting profit or loss, showing how the business performed between two balance sheet dates.

Assets expected to be converted into cash, sold or consumed within the normal operating cycle, typically within a year: cash, receivables, inventory and short-term investments.

Obligations due to be settled within a year or the operating cycle, such as trade payables, short-term borrowings, accrued expenses and the current portion of long-term debt.

Current assets divided by current liabilities; it measures how many times short-term obligations are covered by short-term resources, with roughly 2:1 often treated as comfortable.

Cash, marketable securities and receivables divided by current liabilities; it tests short-term solvency while excluding inventory, which may be slow or difficult to convert into cash.

The sum of a project's expected cash flows discounted at the required rate of return, less the initial outlay; a positive figure means the project adds value to the firm.

The discount rate at which a project's net present value equals zero, representing the annual percentage return the investment is expected to earn; accept if it exceeds the hurdle rate.

The time taken for cumulative cash inflows from a project to recover the initial investment, a simple measure of liquidity and risk that ignores cash flows after the cut-off.

The process of evaluating and selecting long-term investment projects whose returns extend beyond a year, involving estimating cash flows, applying appraisal techniques and ranking competing proposals.

The minimum return a firm must earn on its investments to satisfy lenders and shareholders, reflecting the weighted average cost of each source of long-term finance used.

The overall required return calculated by weighting the after-tax cost of debt and the cost of equity by their proportions in the firm's capital structure.

The mix of debt and equity a firm uses to finance its assets; changing the mix alters financial risk and the weighted cost of capital, and so affects firm value.

The use of fixed-cost debt in the capital structure; it magnifies the effect of changes in operating profit on earnings per share and raises the risk borne by equity holders.

The funds tied up in day-to-day operations, measured as current assets minus current liabilities, covering inventory, receivables and cash needed to keep the operating cycle running.

The period from buying raw material to collecting cash from customers, made up of inventory holding days plus receivable collection days, less the credit period taken from suppliers.

The possibility that a borrower or counterparty fails to meet interest or principal obligations on time, leading the lender to assess character, capacity, collateral and conditions before lending.

A pooled investment vehicle that collects money from many investors and invests it in a diversified portfolio according to a stated objective, issuing units priced at net asset value.

The value of a fund's assets minus its liabilities, divided by the number of units outstanding; it is the price at which investors buy or redeem mutual fund units.

A contract in which an insurer, in exchange for a premium, promises to compensate the insured for specified losses, pooling many similar risks so that the few who suffer are covered by the many.

The amount a policyholder pays, usually periodically, to keep an insurance contract in force; it is set from expected claims, expenses and a margin for profit and contingencies.

Combining many independent exposures into one group so that total losses become more predictable, allowing the insurer to set premiums and hold reserves with confidence.

Spreading money across assets, sectors or regions whose returns do not move together, so that poor results in one holding are partly offset by others and overall risk falls.

The degree of possible loss or volatility an individual is willing and financially able to accept in pursuit of returns, shaped by goals, time horizon, income stability and temperament.

The ease and speed with which an asset can be converted into cash without a significant loss in value; cash is most liquid, property and unlisted shares least.