Investing terms can often feel confusing, especially for beginners. This glossary is designed to give you clear, simple definitions of the most important concepts in fundamental investing so you can understand how markets work and make better financial decisions.
Fundamental investing focuses on analyzing businesses based on their financial performance, competitive advantage, and long-term value. To do that effectively, you need to understand the language investors use—from basic terms like assets and cash flow to more advanced concepts like return on invested capital (ROIC) and discounted cash flow (DCF).
In this investing glossary, each term is explained in plain language with a focus on real-world understanding—not technical jargon. Whenever possible, definitions are connected to broader investing concepts so you can see how each idea fits into the bigger picture.
You’ll learn key terms related to:
Financial statements and accounting concepts
Business analysis and valuation methods
Stock market fundamentals and investment strategies
Risk, return, and long-term decision-making
If you’re just getting started, this glossary is the perfect place to build your foundation. If you’re already learning, it will help reinforce and clarify the concepts that matter most.
Start with our complete guide: What Is Fundamental Investing
Then explore deeper topics in Investing Basics and Business Analysis
What Is Compounding? Compounding refers to the growth in the value of an investment when the return is being reinvested. Compound growth is exponential rather than linear. This means that the value of a compounded investment becomes disproportionally larger as time passes. This concept is a core part of fundamental investing. Example of Compounding Suppose […]
What Is Discounting? Discounting refers to calculating the present value of a future sum. Discounting is the inverse operation to compounding. This concept is a core part of fundamental investing. Discounting and Compounding For example, suppose we invest $1,000 into an account that earns 10% per year for five years. We can find the value
What Is the Time Value of Money? Time value of money is a concept in finance that states that money received in the future is worth less than money received in the present. The difference in value between current and future money is due to the interest that could be earned on the present amount.
Time Value of Money Read More »
What Are Current Liabilities? Current liabilities are obligations to the firm which must be settled within the greater of one year or an operating cycle. Typical current liabilities include accounts payable (also called trade payables), current portion of long-term debt, and taxes (income, sales, payroll) payable. Current liabilities are presented on the balance sheet before
Current Liabilities Read More »
What Are Current Assets? Current assets are economic resources which the firm expects to sell, convert to cash, or consume within the greater of one year or the firm’s operating cycle. Current assets include cash and equivalents, accounts receivable (also called trade receivables), notes receivable, inventory, and prepaid expenses. Items on the balance sheet are
What Is an Annuity? An annuity is a series of fixed, equal cash flows. Annuity streams have three characteristics: Types of Annuities There are two types of annuity streams: ordinary annuities and annuity dues. An ordinary annuity is a fixed payment stream where the payment occurs at the end of each period. An annuity due
The accounting cycle is the step-by-step process businesses use to record transactions and turn them into accurate financial statements. Below, we’ll discuss the key stages—journal entries, posting to the general ledger, preparing a trial balance, making adjusting entries to align with GAAP, and closing the books. This concept is a core part of fundamental investing.
What is the Trial Balance? A trial balance is an internal report a company runs at the end of an accounting period that shows the balances of all the accounts in the company’s accounting system. It is one of the key steps in a company’s accounting cycle. New to investing? Start with our guide to
An adjusting entry is a journal entry made at the end of an accounting period. Unlike most accounting entries, which correspond to immediate external transactions, adjusting entries are made to modify past transactions. The primary purpose of adjusting entries is to record unrecognized revenues and expenses and to adjust the carrying value of certain balance
A debit entry is an accounting entry that increases the balance of certain accounts and decreases the balance of others. Debit Entries in Double-Entry Bookkeeping In a double-entry bookkeeping system, all transactions are recorded into an accounting journal. All transactions are posted to individual accounts. The accounting entries are made in accordance with the double-entry
