Please Explain! Jargon Vs Terminology in Financial Matters

Written on the 27 July 2015 by Janet Culpitt

June 2, 2015 | Janet Culpitt

Financial jargon explained - It's necessary to have at least some financial knowledge, regardless of whether you hire someone to manage your finances or you manage your own.

Financial skills can help you make the right decisions, and help you discuss your finances with your accountant, advisor, financial institution, the Australian Taxation Office (ATO).

Ever found your accountant asking you questions when requesting things for your BAS/Tax return, quite often using their jargon ,and making you feel confused and making the process that little bit more painful?

Have you spoken to your Bank Manager or Financial adviser, and terms you are unfamiliar with come into the conversation and leave you a bit lost?

I thought I would share some jargon and their meanings so you have a basic comprehension:

Asset something you own. It can be cash or something that can be converted into cash, such as property.
Liability what you owe on something of value, financially
Debtors a person or business that owes you money
Creditors a person or business you owe money to. This person or business would have agreed to provide to you with something and you are to pay at a later date.
Income the stream of, or amount of cash or monetary value received from work over a specified time (wage or salary), capital (interest or profit), or land (rent)
Dividend earnings from an investment in a share of a company.
Premium cost of an insurance policy
Risk the degree of exposure to change for a particular investment or activity. (For example- Walking low risk of being injured vs Mountain climbing. Term deposit equals low risk where have Share Investments equals higher risks.)
Return the nett increase on an investment
Financial Position the net worth of an individual or business -assets minus liabilities.
Cash Flow the measure of actual cash go into a business and going out of a business
Capital Gain or Capital Loss the difference between what you paid for an asset compared to what you received when selling or disposing of the same asset.
Gearing positive, negative or neutral. Basically the difference between income and outgo of a specific investment.
Depreciation the reducing value of an asset for taxation
Equity the value of ownership in a property or business (value of that asset less value of liability owed against that asset)
Tax a percentage calculated from amount of income earned which is paid to Government body
Interest can be either the cost of borrowing money or the amount of money earned from money invested in an interest bearing account.